Filed with the Securities and Exchange Commission on April 27, 1998
Registration No. 333-08853 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. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 2
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 Executive 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, 1998, OR 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, 1998 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 of 1940
*The Prospectus contained in this Registration Statement also relates to annuity
contracts no longer being sold but for which additional Purchase Payments are
accepted and which are covered by earlier Registration Statement File Number
33-56770.
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Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2 of the Investment Company Act of
1940. The Rule 24f-2 Notice for Registrant's fiscal year 1997 was filed within
90 days of the close of the fiscal year. CHC2
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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, Operations of the
and Portfolio Companies Separate Accounts, The Company
6. Deductions Charges Assessed or Assessable Against the Annuity, Charges Assessed
Against 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 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
Sale of the Annuities
20. Underwriters Principal Underwriter
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(Continued)
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CROSS REFERENCE SHEET PURSUANT TO RULE 495(a)
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N-4 Item No. SAI Headings
21. Calculation of Performance Data Calculation of Performance Data
22. Annuity Payments Noted in Prospectus under Annuity Payments
23. Financial Statements Financial Statements for Separate
Account B (Class 2 Sub-accounts)
Part C Heading
24. Financial Statements and Exhibits Financial Statements
and Exhibits
25. Directors and Officers of the Depositor Noted in Prospectus under Executive
Officers and Directors
26. Persons Controlled by or Under Persons Controlled By or
Common Control with the Under Common Control with the
Depositor or Registrant 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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This Prospectus describes a type of annuity (the "Annuity") being offered by
American Skandia Life Assurance Corporation ("we", "our" or "us"), One Corporate
Drive, Shelton, Connecticut, 06484. This flexible premium Annuity may be offered
as individual annuity contracts or as interests in a group annuity. The Table of
Contents is on Page 4. Definitions applicable to this Prospectus are on Page 6.
The highlights of this offering are described beginning on Page 8. This
Prospectus contains a detailed discussion of matters you should consider before
purchasing this Annuity. A Statement of Additional Information has been filed
with the Securities and Exchange Commission and is available from us without
charge upon request. The contents of the Statement of Additional Information are
described on Page 46. The Annuity or certain of its investment options may not
be available in all jurisdictions. Various rights and benefits may differ
between jurisdictions to meet applicable laws and/or regulations.
A Purchase Payment for this Annuity is assessed any applicable tax charge (see
"Tax Charges"). It is then allocated to the investment options you select,
except in certain jurisdictions, where allocations of Purchase Payments we
receive during the "free-look" period that you direct to any Sub-accounts are
temporarily allocated to a money-market type Sub-account (see "Allocation of Net
Purchase Payments"). You may transfer Account Value between investment options
(see "Investment Options" and "Transfers"). Account Value may be distributed as
periodic annuity payments in a "payout phase". Such annuity payments can be
guaranteed for life (see "Annuity Payments"). During the "accumulation phase"
(the period before any payout phase), you may surrender the Annuity for its
Account Value or make withdrawals (see "Distributions"). Such distributions may
be subject to tax, including a tax penalty (see "Certain Tax Considerations").
Account Value in the variable investment options increases or decreases daily to
reflect investment performance and the deduction of charges. No minimum amount
is guaranteed (see "Account Value in the Sub-accounts"). The variable investment
options are Class 2 Sub-accounts of American Skandia Life Assurance Corporation
Variable Account B ("Separate Account B")(see "Separate Accounts" and "Separate
Account B"). Each Sub-account invests exclusively in one portfolio of an
underlying mutual fund or in an underlying mutual fund. As of the date of this
Prospectus, the underlying mutual funds (and the portfolios of such underlying
mutual funds in which Sub-accounts offered pursuant to this Prospectus invest)
are: (a) American Skandia Trust (portfolios - JanCap Growth, AST Janus Overseas
Growth, Lord Abbett Growth and Income, Lord Abbett Small Cap Value,
Neuberger&Berman Mid-Cap Value, Federated High Yield, AST Money Market, T. Rowe
Price Asset Allocation, T. Rowe Price International Equity, T. Rowe Price
Natural Resources, T. Rowe Price International Bond, T. Rowe Price Small Company
Value, Founders Capital Appreciation, Founders Passport, INVESCO Equity Income,
PIMCO Total Return Bond, PIMCO Limited Maturity Bond, Neuberger&Berman Mid-Cap
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, Cohen & Steers Realty, Stein
Roe Venture, Bankers Trust Enhanced 500, Marsico Capital Growth); (b) The Alger
American Fund (portfolios - Growth, Small Capitalization, MidCap Growth); (c)
Neuberger&Berman Advisers Management Trust (portfolio - Partners); (d)
Montgomery Variable Series (portfolio - Emerging Markets); and (e) Life &
Annuity Trust (portfolio - WF Equity Value).
As of the date of this Prospectus, the Partners Portfolio of the
Neuberger&Berman Advisers Management Trust is no longer being offered as an
investment option under the Annuity. We are currently requesting the necessary
regulatory approvals to substitute shares of the Neuberger&Berman Mid-Cap Value
portfolio of American Skandia Trust ("AST") for shares of the Partners portfolio
of the Neuberger&Berman Advisers Management Trust, which is no longer being
offered. (See "Investment Options -Variable Investment Options")
In most jurisdictions, Account Value may be allocated to a fixed investment
option during the accumulation phase. Account Value so allocated earns a fixed
rate of interest for a specified period of time referred to as a Guarantee
Period. Guarantee Periods of different durations may be offered (see "Fixed
Investment Options"). Such an allocation and the interest earned is guaranteed
by us only if held to its Maturity Date. You are cautioned that with respect to
the fixed investment options during the accumulation phase, we do not guarantee
any minimum amount, because the value may be increased or decreased by a market
value adjustment (see "Account Value of the Fixed Allocations"). Assets
supporting such allocations in the accumulation phase are held in American
Skandia Life Assurance Corporation Separate Account D ("Separate Account D")
(see "Separate Accounts" and "Separate Account D").
(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, 1998
Statement of Additional Information Dated: May 1, 1998
CHC2 PROS (05/98)
We guarantee fixed annuity payments. We also guarantee any adjustable annuity
payments we may make available (see "Annuity Payments").
This Annuity is designed for use in connection with investment allocation
services provided by an Advisor. Before we issue an Annuity, we may require
evidence satisfactory to us that you have engaged the services of an Advisor.
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...........................................................................................................10
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................................................................10
CONTRACT EXPENSE SUMMARY........................................................................................................10
EXPENSE EXAMPLES................................................................................................................12
CONDENSED FINANCIAL INFORMATION.................................................................................................13
Unit Prices And Numbers of Units.......................................................................................13
INVESTMENT OPTIONS..............................................................................................................17
Variable Investment Options............................................................................................17
Fixed Investment Options...............................................................................................19
OPERATIONS OF THE SEPARATE ACCOUNTS.............................................................................................20
Separate Accounts......................................................................................................20
Separate Account B.....................................................................................................20
Separate Account D.....................................................................................................21
INSURANCE ASPECTS OF THE ANNUITY................................................................................................22
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY..............................................................................22
Maintenance Fee........................................................................................................22
Tax Charges............................................................................................................22
Transfer Fee...........................................................................................................22
Allocation Of Annuity Charges..........................................................................................22
CHARGES ASSESSED AGAINST THE ASSETS.............................................................................................22
Administration Charge..................................................................................................22
Mortality and Expense Risk Charges.....................................................................................23
CHARGES OF THE UNDERLYING MUTUAL FUNDS..........................................................................................23
PURCHASING ANNUITIES............................................................................................................23
Uses Of The Annuity....................................................................................................23
Application And Initial Payment........................................................................................23
Periodic Purchase Payments.............................................................................................24
Right to Return the Annuity............................................................................................24
Allocation of Net Purchase Payments....................................................................................24
Balanced Investment Program............................................................................................24
Ownership, Annuitant and Beneficiary Designations......................................................................25
ACCOUNT VALUE AND SURRENDER VALUE...............................................................................................25
Account Value in the Sub-accounts......................................................................................25
Account Value of the Fixed Allocations.................................................................................26
RIGHTS, BENEFITS AND SERVICES...................................................................................................26
Additional Purchase Payments...........................................................................................27
Changing Revocable Designations........................................................................................27
Allocation Rules.......................................................................................................27
Transfers..............................................................................................................27
Renewals...............................................................................................................28
Dollar Cost Averaging..................................................................................................28
Rebalancing............................................................................................................29
Distributions..........................................................................................................29
Surrender..............................................................................................................30
Partial Withdrawals....................................................................................................30
Systematic Withdrawals.................................................................................................30
Minimum Distributions..................................................................................................31
Death Benefit..........................................................................................................31
Annuity Payments.......................................................................................................32
Qualified Plan Withdrawal Limitations..................................................................................33
Pricing of Transfers and Distributions.................................................................................34
Voting Rights..........................................................................................................34
Transfers, Assignments or Pledges......................................................................................34
Reports to You.........................................................................................................35
SALE OF THE ANNUITIES...........................................................................................................35
Distribution...........................................................................................................35
Advertising............................................................................................................35
CERTAIN TAX CONSIDERATIONS......................................................................................................36
Our Tax Considerations.................................................................................................36
Tax Considerations Relating to Your Annuity............................................................................36
Non-natural Persons....................................................................................................36
Natural Persons........................................................................................................36
Distributions..........................................................................................................36
Loans, Assignments and Pledges.........................................................................................37
Gifts..................................................................................................................37
Penalty on Distributions...............................................................................................37
Annuity Payments.......................................................................................................38
Tax Free Exchanges.....................................................................................................38
Transfers Between Investment Options...................................................................................38
Estate and Gift Tax Considerations.....................................................................................38
Generation-Skipping Transfers..........................................................................................38
Diversification........................................................................................................38
Federal Income Tax Withholding.........................................................................................38
Tax Considerations When Using Annuities in Conjunction with Qualified Plans............................................38
Individual Retirement Programs.........................................................................................39
Tax Sheltered Annuities................................................................................................39
Corporate Pension and Profit-sharing Plans.............................................................................39
H.R. 10 Plans..........................................................................................................39
Tax Treatment of Distributions from Qualified Annuities................................................................39
Section 457 Plans......................................................................................................39
OTHER MATTERS...................................................................................................................40
Deferral of Transactions...............................................................................................40
Resolving Material Conflicts...........................................................................................40
Modification...........................................................................................................40
Misstatement of Age or Sex.............................................................................................41
Ending the Offer.......................................................................................................41
Indemnification........................................................................................................41
Legal Proceedings......................................................................................................41
THE COMPANY.....................................................................................................................41
Lines of Business......................................................................................................41
Selected Financial Data................................................................................................41
Management's Discussion and Analysis of Financial Condition and Results of Operations..................................42
Reserves...............................................................................................................45
Competition............................................................................................................45
Employees..............................................................................................................45
Regulation.............................................................................................................45
Executive Officers and Directors.......................................................................................46
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.............................................................................48
FINANCIAL STATEMENTS............................................................................................................48
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION................................................49
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES.....................49
APPENDIX C PRIOR CONTRACT......................................................................................................49
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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 or a Fixed
Allocation prior to the Annuity Date, plus any earnings, and/or less any losses,
distributions and charges thereon, before assessment of any applicable
maintenance fee. Account Value is determined separately for each Sub-account and
for each Fixed Allocation, and then totaled to determine Account Value for your
entire Annuity. Account Value of each Fixed Allocation on other than such Fixed
Allocation's Maturity Date may be calculated using a market value adjustment.
ADVISOR is a person or entity: (a) registered under the Investment Advisers Act
of 1940, as amended, and, where applicable, under equivalent state law or
regulation regarding the registration 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, your individual Annuity, or with respect to a group Annuity,
the certificate evidencing your participation in a group Annuity. It also
represents an account we set up and maintain to track our obligations to you.
ANNUITY DATE is the date annuity payments are to commence.
ANNUITY YEARS are continuous 12-month periods commencing on the Issue Date and
each anniversary of the Issue Date.
APPLICATION is the enrollment form or application form we may require you to
submit for an Annuity.
BENEFICIARY is a person designated as the recipient of the death benefit.
CODE is the Internal Revenue Code of 1986, as amended from time to time.
CONTINGENT ANNUITANT is the person named to become the Annuitant on the
Annuitant's death prior to the Annuity Date.
CURRENT RATES are the interest rates we offer to credit to Fixed Allocations for
the duration of newly beginning Guarantee Periods under this Annuity. Current
Rates are contained in a schedule of rates established by us from time to time
for the Guarantee Periods then being offered. We may establish different
schedules for different classes and for different annuities.
FIXED ALLOCATION is an allocation of Account Value that is to be credited a
fixed rate of interest for a specified Guarantee Period during the accumulation
phase and is to be supported by assets in Separate Account D.
GUARANTEE PERIOD is a period of time during the accumulation phase during which
we credit a fixed rate of interest on a Fixed Allocation.
IN WRITING is in a written form satisfactory to us and filed at the Office.
INTERIM VALUE is, as of any particular date, the initial value of a Fixed
Allocation plus all interest credited thereon, less the sum of all previous
transfers and withdrawals of any type from such Fixed Allocation of such Interim
Value and interest thereon from the date of each withdrawal or transfer.
ISSUE DATE is the effective date of your Annuity.
MVA is a market value adjustment used in the determination of Account Value of
each Fixed Allocation as of a date other than such Fixed Allocation's Maturity
Date, and, where required by law, the 30 days prior to the Maturity Date.
MATURITY DATE is the last day in a Guarantee Period.
MINIMUM DISTRIBUTIONS are a specific type of Systematic Withdrawal such that the
amounts payable are not less than the minimum amounts that must be distributed
each year from an Annuity if used in relation to certain qualified plans under
the Code.
NET PURCHASE PAYMENT is a Purchase Payment less any applicable charge for taxes.
OFFICE is our business office, American Skandia Life Assurance Corporation, One
Corporate Drive, P.O. Box 883, Shelton, Connecticut 06484.
OWNER is either an eligible entity or person named as having ownership rights in
relation to an Annuity issued as an individual contract. An Annuity may be
issued as a certificate evidencing interest in a group annuity contract. If so,
the rights, benefits and requirements of and the events relating to an Owner, as
described in this Prospectus, will be the rights, benefits and requirements of
and events relating to the person or entity designated as the participant in
such certificate.
PURCHASE PAYMENT is a cash consideration you give to us for certain rights,
privileges and benefits provided under an Annuity according to its terms.
SUB-ACCOUNT is a division of Separate Account B. We use Sub-accounts to
calculate variable benefits under this Annuity.
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 variable and, in
most jurisdictions, fixed investment options.
During the accumulation phase, we currently offer a number of variable
investment options. Each of these investment options is a Class 2 Sub-account of
Separate Account B. Each Sub-account invests exclusively in one underlying
mutual fund, or a portfolio of an underlying mutual fund. The underlying mutual
fund portfolios are managed by various investment advisors, and in certain
cases, various sub-advisors. A short description of the investment objectives
and policies is found in Appendix B. Certain variable investment options may not
be available in all jurisdictions.
As of the date of this Prospectus, the underlying mutual funds (and the
portfolios of such underlying mutual funds in which Sub-accounts offered
pursuant to this Prospectus invest) are: (a) American Skandia Trust (portfolios
- - JanCap Growth, AST Janus Overseas Growth, Lord Abbett Growth and Income, Lord
Abbett Small Cap Value, Neuberger&Berman Mid-Cap Value, Federated High Yield,
AST Money Market, T. Rowe Price Asset Allocation, T. Rowe Price International
Equity, T. Rowe Price Natural Resources, T. Rowe Price International Bond, T.
Rowe Price Small Company Value, Founders Capital Appreciation, Founders
Passport, INVESCO Equity Income, PIMCO Total Return Bond, PIMCO Limited Maturity
Bond, Neuberger&Berman Mid-Cap 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, Cohen & Steers Realty, Stein Roe Venture, Bankers Trust Enhanced 500,
Marsico Capital Growth); (b) The Alger American Fund (portfolios - Growth, Small
Capitalization, MidCap Growth); (c) Neuberger&Berman Advisers Management Trust
(portfolio - Partners); (d) Montgomery Variable Series (portfolio - Emerging
Markets); and (e) Life & Annuity Trust (portfolio - WF Equity Value).
As of the date of this Prospectus, the Partners Portfolio of the
Neuberger&Berman Advisers Management Trust is no longer being offered as an
investment option under the Annuity. Contract Owners with Account Value
allocated to the N&B Partners Sub-account on May 1, 1998 may remain in the
Sub-account until the earlier of: (1) the date they transfer Account Value out
of the N&B Partners Sub-account; or (2) the date the proposed substitution is
completed. However, no new allocations may be made to the N&B Partners
Sub-account on or after May 1, 1998. Contract Owners who have a dollar-cost
averaging, bank drafting, rebalancing or asset allocation program in effect that
includes the N&B Partners Sub-account as of May 1, 1998 will be able to continue
such pre-scheduled transactions until the date the proposed substitution is
completed. (See "Investment Options - Variable Investment Options")
In most jurisdictions, we also offer the option during the accumulation phase of
earning one or more fixed rates of interest on all or a portion of your Account
Value. As of the date of this Prospectus, we offered the option to make
allocations at interest rates that could be guaranteed for 1, 2, 3, 5, 7 and 10
years. Each such Fixed Allocation earns the fixed interest rate applicable as of
the date of such allocation. The interest rate credited to a Fixed Allocation
does not change during its Guarantee Period. You may maintain multiple Fixed
Allocations. From time-to-time we declare Current Rates for Fixed Allocations
beginning a new Guarantee Period. The rates we declare are subject to a minimum,
but we may declare higher rates. The minimum is determined in relation to an
index that we do not control.
The end of a Guarantee Period for a specific Fixed Allocation is called its
Maturity Date. At that time, the Guarantee Period normally "renews" and we begin
crediting interest for a new Guarantee Period lasting the same amount of time as
the one just ended. That Fixed Allocation then earns interest during the new
Guarantee Period at a rate that is not less than the one then being earned by
Fixed Allocations for that Guarantee Period by new Annuity purchasers in the
same class. You also may choose a different Guarantee Period from among those we
are then currently making available or you may transfer that Account Value to a
variable Sub-account.
In the payout phase, you may elect fixed annuity payments based on our then
current annuity rates. We also may make available adjustable annuity rates.
For more information, see the section entitled "Investment Options", including
the following subsections: (a) Variable Investment Options; and (b) Fixed
Investment Options.
(2) Operations of the Separate Accounts: In the accumulation phase, the
assets supporting guarantees we make in relation to Fixed Allocations are held
in our Separate Account D. This is a "non-unitized" separate account. However,
values and benefits calculated on the basis of Fixed Allocations are guaranteed
by our general account. In the payout phase, fixed annuity payments and any
adjustable annuity payments we may make available are also guaranteed by our
general account, but the assets supporting such payments are not held in
Separate Account D.
In the accumulation phase, the assets supporting the Account Values maintained
in the Sub-accounts are held in our Separate Account B. These are Class 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 funds or fund portfolios, as applicable.
For more information, see the section entitled "Operations of the Separate
Accounts", including the following subsections: (a) Separate Accounts; (b)
Separate Account B; and (c) Separate Account D.
(3) Insurance Aspects of the Annuity: There are insurance risks which
we bear in relation to the Annuity. For more information, see the section
entitled "Insurance Aspects of the Annuity".
(4) Charges Assessed or Assessable Against the Annuity: The Annuity
charges which are assessed or may be assessable under certain circumstances are
the maintenance fee, a charge for taxes and a transfer fee. These charges are
allocated according to our rules. We may also charge for certain special
services. For more information, see the section entitled "Charges Assessed or
Assessable Against the Annuity", including the following subsections: (a)
Maintenance Fee; (b) Tax Charges; (c) Transfer Fee; and (d) Allocation of
Annuity Charges.
(5) Charges Assessed Against the Assets: The charges assessed against
assets in the Sub-accounts are the administration charge and the mortality and
expense risk charges. There are no charges deducted from the assets supporting
Fixed Allocations. For more information, see the section entitled "Charges
Assessed Against the Assets", including the following subsections: (a)
Administration Charge; and (b) Mortality and Expense Risk Charges.
(6) Charges of the Underlying Mutual Funds: Each underlying mutual fund
assesses various charges, including charges for investment management and
investment advisory fees. These charges generally differ between portfolios
within the same underlying mutual fund. You will find additional details in each
fund prospectus and its statement of additional information.
(7) Purchasing Annuities: Annuities are available for multiple uses,
including as a funding vehicle for various retirement programs which qualify for
special treatment under the Code. We may require a properly completed
Application, an acceptable Purchase Payment, evidence that you have engaged the
services of an Advisor (e.g. a properly registered investment advisory firm or
bank) and any other materials under our underwriting rules before we agree to
issue an Annuity. You have the right to return an Annuity within a "free-look"
period if you are not satisfied with it. In most jurisdictions, the initial
Purchase Payment and any Purchase Payments received during the "free-look"
period are allocated according to your instructions. In jurisdictions that
require a "free-look" provision such that, if the Annuity is returned under that
provision, we must return at least your Purchase Payments less any withdrawals,
we temporarily allocate such Purchase Payments to the AST Money Market
Sub-account. Where permitted by law in such jurisdictions, we will allocate such
Purchase Payments according to your instructions, without any temporary
allocation to the AST Money Market Sub-account, if you execute a return waiver.
We offer a balanced investment program in relation to your initial Purchase
Payment. Certain designations must be made, including an Owner and an Annuitant.
You may also make certain other designations that apply to the Annuity if
issued. These designations include a contingent Owner, a Contingent Annuitant
(Contingent Annuitants may be required in conjunction with certain uses of the
Annuity), a Beneficiary, and a contingent Beneficiary. See the section entitled
"Purchasing Annuities", including the following subsections: (a) Uses of the
Annuity; (b) Application and Initial Payment; (c) Periodic Purchase Payments;
(d) Right to Return the Annuity; (e) Allocation of Net Purchase Payments; (f)
Balanced Investment Program; and (g) Ownership, 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 and in each Fixed Allocation. To
determine your Account Value in each Sub-account we multiply the Unit Price as
of the Valuation Period for which the calculation is being made times the number
of Units attributable to you in that Sub-account as of that Valuation Period. We
also determine your Account Value separately for each Fixed Allocation. A Fixed
Allocation's Account Value as of a particular date is determined by multiplying
its then current Interim Value times the MVA. No MVA applies to a Fixed
Allocation as of its Maturity Date. Upon surrender, the Account Value payable
from any Sub-accounts is reduced by the maintenance fee. For more information,
see the section entitled "Account Value", including the following subsections:
(a) Account Value in the Sub-accounts; and (b) Account Value of Fixed
Allocations.
(9) Rights, Benefits and Services: You have a number of rights and
benefits under an Annuity once issued. We also currently provide a number of
services to Owners. These rights, benefits and services are subject to a number
of rules and conditions. These rights, benefits and services include, but are
not limited to, those described in this Prospectus. We accept additional
Purchase Payments during the accumulation phase. We support certain Periodic
Purchase Payment programs subject to our rules. You may change revocable
designations. You may transfer Account Values between investment options.
Transfers in excess of 12 per Annuity Year are subject to a fee. We offer dollar
cost averaging and rebalancing during the accumulation phase. During the
accumulation phase, surrender 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) Changing Revocable Designations; (c) Allocation Rules; (d) Transfers; (e)
Renewals; (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
and the following subsections: (a) Lines of Business; (b) Selected Financial
Data; (c) Management's Discussion and Analysis of Financial Condition and
Results of Operations (including: (i) Results of Operations; (ii) Liquidity and
Capital Resources; and (iii) Segment Information); (d) Reinsurance; (e)
Reserves; (f) Competition; (g) Employees; (h) Regulation; and (i) Executive
Officers and Directors.
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 is part of the registration statements we filed
with the Securities and Exchange Commission ("SEC") regarding this offering.
Additional information on us and this offering is available in those
registration statements and the exhibits thereto. You may obtain copies of these
materials at the prescribed rates from the SEC's Public Reference Section, 450
Fifth Street N.W., Washington, D.C., 20549. You may inspect and copy those
registration statements and the exhibits thereto at the SEC's public reference
facilities at the above address, Rm. 1024, and at the SEC's Regional Offices, 7
World Trade Center, New York, NY, and the Everett McKinley Dirksen Building, 219
South Dearborn Street, Chicago, IL. These documents, as well as documents
incorporated by reference, may also be obtained through the SEC's Internet
Website (http://www.sec.gov) for this registration statement as well as for
other registrants that file electronically with the SEC.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE: The Annual Report on Form 10-K
for the year ended December 31, 1997 heretofore filed by the Company with the
SEC under the Securities Exchange Act of 1934 is incorporated by reference in
this Prospectus.
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 funds and their portfolios may be found either in the
prospectuses for such mutual funds or in the annual reports of such mutual
funds. The expenses of our Sub-accounts (not those of the underlying mutual fund
portfolios in which our Sub-accounts invest) are the same no matter which
Sub-account you choose. Therefore, these expenses are only shown once below. In
certain states, premium taxes may be applicable.
<TABLE>
<CAPTION>
Your Transaction Expenses
<S> <C> <C> <C>
Sales Charge None
Annual Maintenance Fee Smaller of $35.00 or 2% of Account Value
Tax Charges Dependent on the requirements of the applicable jurisdiction
Transfer Fee $10.00 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)*
Mortality and Expense Risk Charges 0.50%
Administration Charge 0.15%
-----
Total Annual Expenses of the Sub-accounts 0.65%
*Prior to July 1, 1994, Class 2 Sub-accounts of Separate Account B were assessed
total annual expenses of 1.90%, including an investment allocation service
charge of 1.0% and 0.90% for the combination of mortality, expense risk as well
as administration charges. Effective July 1, 1994, the investment allocation
services charge was no longer assessed against the Sub-accounts. Therefore,
total annual expenses were 0.90%. As of the date of this Prospectus, total
annual expenses are as indicated above.
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, 1997. "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 applicable applicable waiver or waiver or
waiver waiver reimbursement reimbursement reimbursement reimbursement
- ------------------------------------------------------------------------------------------------------------------------------------
American Skandia Trust
<S> <C> <C> <C> <C> <C> <C>
Lord Abbett Growth and Income N/A 0.75% N/A 0.18% N/A 0.93%
Lord Abbett Small Cap Value(1) N/A 0.95% N/A 0.39% N/A 1.34%
JanCap Growth 0.88% 0.90% N/A 0.18% 1.06% 1.08%
AST Janus Overseas Growth N/A 1.00% N/A 0.35% N/A 1.35%
AST Money Market 0.45% 0.50% 0.15% 0.19% 0.60% 0.69%
Federated High Yield N/A 0.75% N/A 0.23% N/A 0.98%
T. Rowe Price Asset Allocation N/A 0.85% N/A 0.28% N/A 1.13%
T. Rowe Price International Equity N/A 1.00% N/A 0.26% N/A 1.26%
T. Rowe Price Natural Resources N/A 0.90% N/A 0.26% N/A 1.16%
T. Rowe Price International Bond N/A 0.80% N/A 0.31% N/A 1.11%
T. Rowe Price Small Company Value N/A 0.90% N/A 0.26% N/A 1.16%
Founders Capital Appreciation N/A 0.90% N/A 0.23% N/A 1.13%
Founders Passport N/A 1.00% N/A 0.35% N/A 1.35%
INVESCO Equity Income N/A 0.75% N/A 0.20% N/A 0.95%
PIMCO Total Return Bond N/A 0.65% N/A 0.21% N/A 0.86%
PIMCO Limited Maturity Bond N/A 0.65% N/A 0.23% N/A 0.88%
Robertson Stephens Value + Growth N/A 1.00% N/A 0.23% N/A 1.23%
Twentieth Century International Growth N/A 1.00% N/A 0.75% N/A 1.75%
Twentieth Century Strategic Balanced N/A 0.85% 0.40% 0.50% 1.25% 1.35%
AST Putnam Value Growth & Income N/A 0.75% N/A 0.48% N/A 1.23%
AST Putnam International Equity N/A 0.88% N/A 0.27% N/A 1.15%
AST Putnam Balanced N/A 0.74% N/A 0.29% N/A 1.03%
Cohen & Steers Realty(1) N/A 1.00% N/A 0.40% N/A 1.40%
Stein Roe Venture(1) N/A 0.95% N/A 0.39% N/A 1.34%
Bankers Trust Enhanced 500(1) N/A 0.60% 0.20% 0.57% 0.80% 1.17%
Marsico Capital Growth(2) N/A 0.90% N/A 0.38% N/A 1.28%
Neuberger&Berman Mid-Cap Value(3) N/A 0.90% N/A 0.25% N/A 1.15%
Neuberger&Berman Mid-Cap Growth(4) N/A 0.90% N/A 0.24% N/A 1.14%
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 0.04% N/A 0.89%
MidCap Growth N/A 0.80% N/A 0.04% N/A 0.84%
Neuberger&Berman Advisers
Management Trust
Partners N/A 0.80% N/A 0.06% N/A 0.86%
Montgomery Variable Series
Emerging Markets N/A 1.25% 0.50% 0.56% 1.75% 1.81%
Life & Annuity Trust
WF Equity Value(5) N/A 0.60% 0.50% 0.63% 1.10% 1.23%
</TABLE>
(1) These Portfolios commenced operations in January 1998. "Other Expenses"
shown are based on estimated amounts for the current fiscal year.
(2) This Portfolio commenced operations in December 1997. "Other Expenses" shown
are based on estimated amounts for the current fiscal year.
(3) Prior to May 1, 1998, the Investment Manager had engaged Federated
Investment Counseling as Sub-advisor for the Portfolio (formerly, the Federated
Utility Income portfolio), for a total Investment Management fee payable at the
annual rate of .75% of the first $50 million of the average daily net assets of
the Portfolio, plus .60% of the Portfolio's average daily net assets in excess
of $50 million. As of May 1, 1998, the Investment Manager engaged
Neuberger&Berman Management Incorporated as Sub-advisor for the Portfolio, for a
total Investment Management fee payable at the annual rate of 0.90% of the first
$1 billion of the average daily net assets of the Portfolio plus .85% of the
Portfolio's average daily net assets in excess of $1 billion. The Management Fee
in the above chart reflects the current Investment Management fee payable to the
Investment Manager.
(4) Prior to May 1, 1998, the Investment Manager had engaged Berger Associates,
Inc. as Sub-advisor for the Portfolio (formerly, the Berger Capital Growth
portfolio), for a total Investment Management fee payable at the annual rate of
.75% of the average daily nets assets of the Portfolio. As of May 1, 1998, the
Investment Manager engaged Neuberger&Berman Management Incorporated as
Sub-advisor for the Portfolio, for a total Investment Management fee payable at
the annual rate of 0.90% of the first $1 billion of the average daily net assets
of the Portfolio plus .85% of the Portfolio's average daily net assets in excess
of $1 billion. The Management Fee in the above chart reflects the current
Investment Management fee payable to the Investment Manager.
(5) This Portfolio commenced operations in May 1998. "Other Expenses" shown are
based on estimated amounts for the current fiscal year.
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 will bear directly or
indirectly if you maintain Account Value in the Sub-accounts. The examples
reflect expenses of our Sub-accounts, as well as those for the underlying mutual
fund portfolios.
The examples shown assume that: (a) all your Account Value is maintained only in
Sub-accounts; (b) fees and expenses remain constant; (c) there are no
withdrawals of Account Value during the period shown; (d) there are no transfers
or other transactions subject to a fee during the period shown; (e) no tax
charge applies; (f) the $35 Annual Maintenance Fee is represented as a .15%
charge based on our assumed average contract size; and (g) the expenses
throughout the period for the underlying mutual fund portfolios will be the
lower of the expenses without any applicable reimbursement or expenses after any
applicable reimbursement, as shown above in the section entitled "Contract
Expense Summary."
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. The
Sub-accounts are referred to below by their specific names.
Examples (amounts shown are rounded to the nearest dollar)
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 $1,000.00 investment, assuming 5% annual return on
assets:
<TABLE>
<CAPTION>
After:
1 yr. 3 yrs. 5 yrs. 10 yrs.
Sub-accounts
<S> <C> <C> <C> <C>
LA Growth and Income 2 18 55 94 202
LA Small Cap Value 2 22 67 115 247
JanCap Growth 2 19 59 101 218
AST Janus Overseas Growth 2 22 68 116 248
AST Money Market 2 14 44 76 165
Fed High Yield 2 18 56 96 208
T. Rowe Price Asset Allocation 2 20 61 104 224
T. Rowe Price International Equity 2 21 65 111 238
T. Rowe Price Natural Resources 2 20 62 106 228
T. Rowe Price International Bond 2 20 61 104 222
T. Rowe Price Small Company Value 2 20 62 106 228
Founders Capital Appreciation 2 20 61 104 224
Founders Passport 2 22 68 116 248
INVESCO Equity Income 2 18 55 95 205
PIMCO Total Return Bond 2 17 52 90 195
PIMCO Limited Maturity Bond 2 17 53 91 197
RS Value + Growth 2 21 64 109 234
Twentieth Century International Growth 2 26 80 136 288
Twentieth Century Strategic Balanced 2 21 65 111 238
AST Putnam Value Growth & Income 2 21 64 109 234
AST Putnam International Equity 2 20 61 105 226
AST Putnam Balanced 2 19 58 99 213
Cohen & Steers Realty 2 23 70 119 254
Stein Roe Venture 2 22 67 115 247
Bankers Trust Enhanced 500 2 16 50 86 187
Marsico Capital Growth 2 21 65 112 240
N&B Mid-Cap Value 2 20 61 105 226
N&B Mid-Cap Growth 2 20 61 105 225
AA Growth 2 16 50 86 186
AA Small Capitalization 2 17 53 91 198
AA MidCap Growth 2 17 52 89 192
N&B Partners 2 17 52 90 195
MV Emerging Markets 2 26 80 136 288
WF Equity Value 2 19 60 103 221
</TABLE>
CONDENSED FINANCIAL INFORMATION: The Unit Prices and number of Units the
Sub-accounts that commenced operations prior to January 1, 1998 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 another variable annuity we offered pursuant to a different prospectus.
Unit Prices and Numbers of Units: The following table shows: (a) the Unit
Price as of the dates shown for Units in each of the Class 2 Sub-accounts of
Separate Account B that commenced operations prior to January 1, 1998; 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.
The total annual expenses of the Class 2 Sub-accounts from July 1, 1994 until
the Valuation Date immediately prior to the date of this Prospectus were 0.90%.
Prior to July 1, 1994, the total annual expenses included an investment
allocation services charge of 1.00%, so the total annual expenses were 1.90%. As
of the date of this Prospectus, such total annual expenses were reduced to
0.65%. Therefore, Unit Prices as of the dates shown reflect the actual total
annual expenses assessed against the Class 2 Sub-accounts.
Sub-Account and the Year Sub-Account Operations Commenced
<TABLE>
<CAPTION>
LA AST
Growth Putnam AST N&B
JanCap and International Founders Money Mid-Cap
Growth 2 Income 2 Equity 2 Passport 2 Market 2 Value 21
(1993) (1993) (1993) (1995) (1993) (1993)
------ ------ ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/97 666,835 700,150 477,264 203,237 1,518,310 260,929
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 12/31/97 $21.18 $18.84 $14.38 $11.63 $11.63 $16.07
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>
Sub-Account and the Year Sub-Account Operations Commenced
<TABLE>
<CAPTION>
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 12/31/97 595,692 211,541 99,319 955,465 114,880 266,136
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 12/31/97 $14.37 $15.57 $15.78 $11.88 $14.68 $10.65
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>
Sub-Account and the Year Sub-Account Operations Commenced
<TABLE>
<CAPTION>
PIMCO PIMCO
Founders INVESCO Total Limited N&B
Capital Equity Return Maturity Mid-Cap AA
Appreciation 2 Income 2 Bond 2 Bond 2 Growth 22 Growth 2
(1993) (1993) (1993) (1995) (1993) (1993)
------ ------ ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/97 399,262 287,286 1,523,587 469,686 104,340 345,362
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 12/31/97 $17.57 $17.60 $12.65 $11.42 $16.38 $19.43
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>
Sub-Account and the Year Sub-Account Operations Commenced
<TABLE>
<CAPTION>
AA AA Robertson Montgomery AST Janus
Small MidCap N&B Stephens Emerging Overseas
Cap 2 Growth 2 Partners 2 Value + Growth 2 Markets 2 Growth 2
(1993) (1993) (1995) (1996) (1996) (1997)
----- ------ ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C> <C>
as of 12/31/97 454,258 290,286 489,518 199,511 305,775 235,801
as of 12/31/96 462,016 315,296 425,664 119,830 39,355 0
as of 12/31/95 321,334 204,227 230,034 0 0 0
as of 12/31/94 187,387 61,104 0 0 0 0
as of 12/31/93 17,264 3,255 0 0 0 0
Unit Price
as of 12/31/97 $16.23 $18.76 $20.21 $12.45 $10.15 $11.78
as of 12/31/96 $14.68 $16.44 $15.52 $10.92 $10.29 0
as of 12/31/95 14.22 14.82 12.09 0 0 0
as of 12/31/94 9.94 10.36 0 0 0 0
as of 12/31/93 10.55 10.67 0 0 0 0
</TABLE>
Sub-Account and the Year Sub-Account Operations Commenced
<TABLE>
<CAPTION>
AST Twentieth Century Twentieth Century T. Rowe Price
Putnam Value Strategic International Small Company Marsico Capital
Growth & Income 2 Balanced 2 Growth 2 Value 2 Growth 2
(1997) (1997) (1997) (1997) (1997)
----- ------ ------ ------ ------
No. of Units
<S> <C> <C> <C> <C> <C>
as of 12/31/97 104,567 3,720 43,776 771,770 12,993
as of 12/31/96 0 0 0 0 0
as of 12/31/95 0 0 0 0 0
as of 12/31/94 0 0 0 0 0
as of 12/31/93 0 0 0 0 0
Unit Price
as of 12/31/97 $12.14 $11.25 $11.42 $12.78 $10.03
as of 12/31/96 0 0 0 0 0
as of 12/31/95 0 0 0 0 0
as of 12/31/94 0 0 0 0 0
as of 12/31/93 0 0 0 0 0
</TABLE>
1 The Neuberger&Berman Mid-Cap Value Portfolio was formerly called the Federated
Utility Income Portfolio. The portfolio name, investment objective and policies
were changed pursuant to a shareholder vote on April 29, 1998.
2 The Neuberger&Berman Mid-Cap Growth Portfolio was formerly called the Berger
Capital Growth Portfolio. The portfolio name, investment objective and policies
were changed pursuant to a shareholder vote on April 29, 1998.
Information is not shown above for Sub-accounts that had not commenced
operations prior to January 1, 1998.
The financial statements of the Sub-accounts being offered to you are found in
the Statement of Additional Information.
Yields on Money Market Sub-account: Shown below are the current and
hypothetical yields for a hypothetical contract. The yield is calculated based
on the hypothetical performance of the AST Money Market 2 Sub-account, assuming
total annual expenses of 0.65%, 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 and
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 4.65% 4.76%
INVESTMENT OPTIONS: We offer a range of variable and fixed options as ways to
invest your Account Value.
Variable Investment Options: During the accumulation phase, we offer a
number of Sub-accounts as variable 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 a portfolio of an underlying mutual fund. As of the
date of this Prospectus, our Sub-accounts and the underlying mutual funds or
portfolios in which they invest are as follows:
<TABLE>
<CAPTION>
Underlying Mutual Fund: American Skandia Trust
<S> <C> <C> <C>
Sub-account Underlying Mutual Fund Portfolio
LA Growth and Income 2 Lord Abbett Growth and Income
LA Small Cap Value 2 Lord Abbett Small Cap Value
JanCap Growth 2 JanCap Growth
AST Janus Overseas Growth 2 AST Janus Overseas Growth
AST Money Market 2 AST Money Market
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
RS Value + Growth 2 Robertson Stephens Value + Growth
Twentieth Century Strategic Balanced 2 Twentieth Century Strategic Balanced
Twentieth Century International Growth 2 Twentieth Century International 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
Cohen & Steers Realty 2 Cohen & Steers Realty
Stein Roe Venture 2 Stein Roe Venture
Bankers Trust Enhanced 500 2 Bankers Trust Enhanced 500
Marsico Capital Growth 2 Marsico Capital Growth
N&B Mid-Cap Value 2 Neuberger&Berman Mid-Cap Value
N&B Mid-Cap Growth 2 Neuberger&Berman Mid-Cap Growth
Underlying Mutual Fund: The Alger American Fund
Sub-account Underlying Mutual Fund Portfolio
AA Growth 2 Growth
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
N&B Partners 2 Partners
Underlying Mutual Fund: Montgomery Variable Series
Sub-account Underlying Mutual Fund Portfolio
MV Emerging Markets 2 Emerging Markets
Underlying Mutual Fund: Life & Annuity Trust
Sub-account Underlying Mutual Fund Portfolio
WF Equity Value 2 Equity Value
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We have filed an application with the Securities and Exchange Commission to
substitute shares of the Neuberger&Berman Mid-Cap Value portfolio of American
Skandia Trust for shares of the Partners portfolio of the Neuberger&Berman
Advisers Management Trust. As of the date of this Prospectus, the Partners
Portfolio of the Neuberger&Berman Advisers Management is no longer being offered
as an investment option in the Annuity. Contract Owners with Account Value
allocated to the N&B Partners Sub-account on May 1, 1998 may remain in the
Sub-account until the earlier of: (1) the date they transfer Account Value out
of the N&B Partners Sub-account; or (2) the date the proposed substitution is
completed. However, no new allocations may be made to the N&B Partners
Sub-account on or after May 1, 1998. Contract Owners who have a dollar-cost
averaging, bank drafting, rebalancing or asset allocation program in effect that
includes the N&B Partners Sub-account as of May 1, 1998 will be able to continue
such pre-scheduled transactions until the date the proposed substitution is
completed.
Under the proposed substitution, for a period of 30 days prior to the
substitution, Contract Owners will be allowed to transfer Account Value out of
the N&B Partners Sub-account to any other investment option available under the
Annuity without being charged any applicable transfer fee. Any such transfer
will not be counted when determining if the number of free transfers has been
exceeded. On the date the substitution is completed and Account Value is
automatically transferred to the Neuberger&Berman Mid-Cap Value portfolio,
Contract Owners will not be charged a transfer fee, nor will the transfer be
included when determining whether the number of free transfers has been
exceeded. The proposed substitution will not affect your rights or our
obligations under the Annuity.
The terms and conditions of our application are subject to change and any SEC
exemptive order, if and when granted, may differ from the proposed substitution.
Certain Sub-accounts may not be available in all jurisdictions.
We may make other underlying mutual funds available by creating new
Sub-accounts. Additionally, new portfolios may be made available by the creation
of new Sub-accounts from time to time. Such a new portfolio of an underlying
mutual fund may be disclosed in its prospectus. However, addition of a portfolio
does not require us to create a new Sub-account to invest in that portfolio. We
may take other actions in relation to the Sub-accounts and/or Separate Account B
(see "Modifications").
Each underlying mutual fund is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment company.
Each underlying mutual fund or portfolio thereof may or may not be diversified
as defined in the 1940 Act. As of the date of this Prospectus, the portfolios in
which Sub-accounts offered pursuant to this Prospectus invest are those shown
above. A summary of the investment objectives and policies of such underlying
mutual fund portfolios is found in Appendix B. The trustees or directors, as
applicable, of an underlying mutual fund may add, eliminate or substitute
portfolios from time to time. Generally, each portfolio issues a separate class
of shares. Shares of the underlying mutual fund portfolios are available to
separate accounts of life insurance companies offering variable annuity and
variable life insurance products. The shares may also be made available, subject
to obtaining all required regulatory approvals, for direct purchase by various
pension and retirement savings plans that qualify for preferential tax treatment
under the Code.
The investment objectives, policies, charges, operations, the attendant risks
and other details pertaining to each underlying mutual fund portfolio are
described in the prospectus of each underlying mutual fund and the statements of
additional information for such underlying mutual fund. Also included in such
information is the investment policy of each mutual fund or portfolio regarding
the acceptable ratings by recognized rating services for bonds and other debt
obligations. There can be no guarantee that any underlying mutual fund or
portfolio will meet its investment objectives.
Shares of the underlying mutual funds may be available to variable life
insurance and variable annuity separate accounts of other insurance companies.
Possible consequences of this multiple availability are discussed in the
subsection entitled Resolving Material Conflicts.
The prospectus for any underlying mutual fund or funds being considered by you
should be read in conjunction herewith. A copy of each prospectus may be
obtained without charge from us by calling our Concierge Desk, 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].
Fixed Investment Options: For the payout phase you may elect fixed
annuity payments based on our then current annuity rates. The discussion below
describes the fixed investment options in the accumulation phase.
As of the date of this Prospectus we offer in most jurisdictions in which the
Annuity is available Fixed Allocations with Guarantee Periods of 1, 2, 3, 5, 7
and 10 years. Each such Fixed Allocation is accounted for separately. Each Fixed
Allocation earns a fixed rate of interest throughout a set period of time called
a Guarantee Period. Multiple Fixed Allocations are permitted, subject to our
allocation rules. The duration of a Guarantee Period may be the same or
different from the duration of the Guarantee Periods of any of your prior Fixed
Allocations.
We may or may not be able to obtain approval in the future in certain
jurisdictions of endorsements to individual or group annuities that include the
type of Fixed Allocations offered pursuant to this Prospectus. If such approval
is obtained, we may take those steps needed to make such Fixed Allocations
available to purchasers to whom Annuities were issued prior to the date of such
approval.
To the extent permitted by law, we reserve the right at any time to offer
Guarantee Periods with durations that differ from those which were available
when your Annuity was issued. We also reserve the right at any time to stop
accepting new allocations, transfers or renewals for a particular Guarantee
Period. Such an action may have an impact on the MVA (see "Account Value of the
Fixed Allocations").
A Guarantee Period for a Fixed Allocation begins: (a) when all or part of a Net
Purchase Payment is allocated for that particular Guarantee Period; (b) upon
transfer of any of your Account Value to a Fixed Allocation for that particular
Guarantee Period; or (c) when a Guarantee Period attributable to a Fixed
Allocation "renews" after its Maturity Date.
We declare the rates of interest applicable during the various Guarantee Periods
offered. Declared rates are effective annual rates of interest. The rate of
interest applicable to a Fixed Allocation is the one in effect when its
Guarantee Period begins. The rate is guaranteed throughout the Guarantee Period.
We inform you of the interest rate applicable to a Fixed Allocation, as well as
its Maturity Date, when we confirm the allocation. We declare interest rates
applicable to new Fixed Allocations from time-to-time. Any new Fixed Allocation
in an existing Annuity is credited interest at a rate not less than the rate we
are then crediting to Fixed Allocations for the same Guarantee Period selected
by new Annuity purchasers in the same class.
The interest rates we credit are subject to a minimum. We may declare a higher
rate. The minimum is based on both an index and a reduction to the interest rate
determined according to the index.
The index is based on the published rate for certificates of indebtedness
(bills, notes or bonds, depending on the term of indebtedness) of the United
States Treasury at the most recent Treasury auction held at least 30 days prior
to the beginning of the applicable Fixed Allocation's Guarantee Period. The term
(length of time from issuance to maturity) of the certificates of indebtedness
upon which the index is based is the same as the duration of the Guarantee
Period. If no certificates of indebtedness are available for such term, the next
shortest term is used. If the United States Treasury's auction program is
discontinued, we will substitute indexes which in our opinion are comparable. If
required, implementation of such substitute indexes will be subject to approval
by the Securities and Exchange Commission and the Insurance Department of the
jurisdiction in which your Annuity was delivered. (For Annuities issued as
certificates of participation in a group contract, it is our expectation that
approval of only the jurisdiction in which such group contract was delivered
applies.)
The reduction used in determining the minimum interest rate is one and one half
percent of interest (1.50%).
Where required by the laws of a particular jurisdiction, a specific minimum
interest rate, compounded yearly, will apply should the index less the reduction
be less than the specific minimum interest rate applicable to that jurisdiction.
WE MAY CHANGE THE INTEREST RATES WE CREDIT NEW FIXED ALLOCATIONS AT ANY TIME.
Any such change does not have an impact on the rates applicable to Fixed
Allocations with Guarantee Periods that began prior to such change.
We have no specific formula for determining the interest rates we declare. Rates
may differ between classes and between types of annuities we offer, even for
guarantees of the same duration starting at the same time. We expect our
interest rate declarations for Fixed Allocations to reflect the returns
available on the type of investments we make to support the various classes of
annuities supported by the assets in Separate Account D. However, we may also
take into consideration in determining rates such factors including, but not
limited to, the durations offered by the annuities supported by the assets in
Separate Account D, regulatory and tax requirements, the liquidity of the
secondary markets for the type of investments we make, commissions,
administrative expenses, investment expenses, our mortality and expense risks in
relation to Fixed Allocations, general economic trends and competition. OUR
MANAGEMENT MAKES THE FINAL DETERMINATION AS TO INTEREST RATES TO BE CREDITED. WE
CANNOT PREDICT THE RATES WE WILL DECLARE IN THE FUTURE.
OPERATIONS OF THE SEPARATE ACCOUNTS: The assets supporting our obligations under
the Annuities may be held in various accounts, depending on the obligation being
supported. In the accumulation phase, assets supporting Account Values are held
in separate accounts established under the laws of the State of Connecticut. In
the payout phase, assets supporting fixed annuity payments and any adjustable
annuity payments we make available are held in our general account.
Separate Accounts: We are the legal owner of assets in the separate
accounts. Income, gains and losses, whether or not realized, from assets
allocated to these separate accounts, are credited to or charged against each
such separate account in accordance with the terms of the annuities supported by
such assets without regard to our other income, gains or losses or to the
income, gains or losses in any other of our separate accounts. We will maintain
assets in each separate account with a total market value at least equal to the
reserve and other liabilities we must maintain in relation to the annuity
obligations supported by such assets. These assets may only be charged with
liabilities which arise from such annuities. This may include Annuities offered
pursuant to this Prospectus or certain other annuities we may offer. The
investments made by separate accounts are subject to the requirements of
applicable state laws. These investment requirements may differ between those
for separate accounts supporting variable obligations and those for separate
accounts supporting fixed obligations.
Separate Account B: In the accumulation phase, the assets supporting
obligations based on allocations to the variable investment options are held in
our Separate Account B. Separate Account B consists of multiple Sub-accounts.
Separate Account B was established by us pursuant to Connecticut law. Separate
Account B also holds assets of other annuities issued by us with values and
benefits that vary according to the investment performance of Separate Account
B.
The Sub-accounts offered pursuant to this Prospectus are all Class 2
Sub-accounts of Separate Account B. Each class of Sub-accounts in Separate
Account B have a different level of charges assessed against such Sub-accounts.
From the date Class 2 operations commenced, November 16, 1993, until June 30,
1994, the annualized expenses charged against the Class 2 Sub-accounts totaled
1.90%. This included 1.00% as an investment allocation services charge and 0.90%
for the combination of mortality and expense risk, as well as administration
charges. Starting on July 1, 1994, the 1.00% investment allocation services
charge was no longer assessed against the Sub-accounts, so that the total
annualized charges were 0.90%. As of the date of this Prospectus, the total
annualized charges were reduced to 0.65%.
The amount of our obligations in relation to allocations to the Sub-accounts is
based on the investment performance of such Sub-accounts. However, the
obligations themselves are our general corporate obligations.
Separate Account B is registered with the SEC under the 1940 Act as a unit
investment trust, which is a type of investment company. This does not involve
any supervision by the SEC of the investment policies, management or practices
of Separate Account B. Each Sub-account invests only in a single mutual fund or
mutual fund portfolio.
The only Sub-accounts available for allocation of your Account Value are those
offered pursuant to this Prospectus. Persons interested in our other annuities
may be offered the same or different Sub-accounts of Separate Account B or any
of our other separate accounts. Such sub-accounts may invest in some or all of
the same underlying mutual funds or portfolios of such underlying mutual funds
as the Sub-accounts offered pursuant to this Prospectus. As of the date of this
Prospectus, the Annuities offered pursuant to this Prospectus and annuities
offered pursuant to a number of other prospectuses maintained assets in Class 2
Sub-accounts. We may offer additional annuities that maintain assets in Class 2
Sub-accounts. In addition, 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 these underlying mutual funds and
portfolios in the prospectuses for such funds. Portfolios added to the
underlying mutual funds may or may not be offered through added Sub-accounts.
Sub-accounts are permitted to invest in underlying mutual funds or portfolios
that we consider suitable. We also reserve the right to add Sub-accounts,
eliminate Sub-accounts, to combine Sub-accounts, or to substitute underlying
mutual funds or portfolios of underlying mutual funds.
Values and benefits based on allocations to the Sub-accounts will vary with the
investment performance of the underlying mutual funds or fund portfolios, as
applicable. We do not guarantee the investment results of any Sub-account, nor
is there any assurance that the Account Value allocated to the Sub-accounts will
equal the amounts allocated to the Sub-accounts as of any time other than the
Valuation Period of such allocation. You bear the entire investment risk.
Separate Account D: In the accumulation phase, assets supporting our
obligations based on Fixed Allocations are held in Separate Account D, which is
a "non-unitized" separate account. Such obligations are based on the interest
rates we credit to Fixed Allocations and the terms of the Annuities. These
obligations do not depend on the investment performance of the assets in
Separate Account D. Separate Account D was established by us pursuant to
Connecticut law.
There are no discrete units in Separate Account D. No party with rights under
any annuity nor any group contract owner participates in the investment gain or
loss from assets belonging to Separate Account D. Such gain or loss accrues
solely to us. We retain the risk that the value of the assets in Separate
Account D may drop below the reserves and other liabilities we must maintain.
Should the value of the assets in Separate Account D drop below the reserve and
other liabilities we must maintain in relation to the annuities supported by
such assets, we will transfer assets from our general account to Separate
Account D to make up the difference. We have the right to transfer to our
general account any assets of Separate Account D in excess of such reserves and
other liabilities. We maintain assets in Separate Account D supporting a number
of annuities we offer.
If you surrender, withdraw or transfer Account Value from a Fixed Allocation
before the end of its Guarantee Period, you bear the risk inherent in the MVA
(see "Account Value of the Fixed Allocations"). The Account Value of a Fixed
Allocation is guaranteed on its Maturity Date to be its then current Interim
Value.
We operate Separate Account D in a fashion designed to meet the obligations
created by Fixed Allocations. Factors affecting these operations include the
following:
(1) The State of New York, which is one of the jurisdictions in which
we are licensed to do business, requires that we meet certain "matching"
requirements. These requirements address the matching of the durations of the
assets with the durations of obligations supported by such assets. We believe
these matching requirements are designed to control an insurer's ability to risk
investing in long-term assets to support short term interest rate guarantees. We
also believe this limitation controls an insurer's ability to offer unrealistic
rate guarantees.
(2) We employ an investment strategy designed to limit the risk of
default. Some of the guidelines of our current investment strategy for Separate
Account D include, but are not limited to, the following:
(a) Investments may include cash; debt securities issued by
the United States Government or its agencies and instrumentalities; money market
instruments; short, intermediate and long-term corporate obligations;
asset-backed obligations; and municipal bonds.
(b) At the time of purchase, fixed income securities will be
in one of the top four generic lettered rating classifications as established by
a nationally recognized statistical rating organization ("NRSRO") such as
Standard & Poor's or Moody's Investor Services, Inc.
We are not obligated to invest according to the aforementioned guidelines or any
other strategy except as may be required by Connecticut and other state
insurance laws.
(3) We have the sole discretion to employ investment managers that we
believe are qualified, experienced and reputable to manage Separate Account D.
We currently employ investment managers for Separate Account D including, but
not limited to, J.P. Morgan Investment Management Inc. Each manager is
responsible for investment management of different portions of Separate Account
D. From time to time additional investment managers may be employed or
investment managers may cease being employed. We are under no obligation to
employ or continue to employ any investment manager(s).
(4) The assets in Separate Account D are accounted for at their market
value, rather than at book value.
(5) We are obligated by law to maintain our capital and surplus, as
well as our reserves, at the levels required by applicable state insurance law
and regulation.
INSURANCE ASPECTS OF THE ANNUITY: As an insurance company we bear the insurance
risk inherent in the Annuity. This includes the risks that mortality and
expenses exceed our expectations, and the investment and re-investment risks in
relation to the assets supporting obligations not based on the investment
performance of a separate account. We are subject to regulation that requires
reserving and other practices in a manner that minimizes the insurance risk (see
"Regulation").
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY: The Annuity charges which
are assessed or may be assessable under certain circumstances are the
maintenance fee, a charge for taxes and a transfer fee. These charges are
allocated according to our rules. The maintenance fee and transfer charge are
not assessed if no Account Value is maintained in the Sub-accounts at the time
such fee or charge is payable. However, we make certain assumptions regarding
maintenance and transfer expenses as part of the overall expense assumptions
used in determining the interest rates we credit to Fixed Allocations. Charges
are also assessed against the Sub-accounts and the underlying mutual funds. We
also may charge you for special services, such as dollar cost averaging,
rebalancing, Systematic Withdrawals, Minimum Distributions, and additional
reports. As of the date of this Prospectus, we do not charge you for any special
services.
Maintenance Fee: A maintenance fee equaling the smaller of $35.00 or 2%
of your then current Account Value is deducted from the Account Values in the
Sub-accounts annually and upon surrender. The fee is limited to the Account
Values in the Sub-accounts as of the Valuation Period such fee is due.
Tax Charges: In several states a tax is payable. We will deduct the
amount of tax payable, if any, from your Purchase Payments if the tax is then
incurred or from your Account Value when applied under an annuity option if the
tax is incurred at that time. The amount of the tax varies from jurisdiction to
jurisdiction. It may also vary depending on whether the Annuity qualifies for
certain treatment under the Code. In each jurisdiction, the state legislature
may change the amount of any current tax, may decide to impose the tax,
eliminate it, or change the time it becomes payable. In those jurisdictions
imposing such a tax, the tax rates currently in effect range up to 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
each Annuity Year. However, the fee is only charged if there is Account Value in
at least one Sub-account immediately subsequent to such transfer.
Allocation Of Annuity Charges: The transfer fee is assessed against the
Sub-accounts in which you maintain Account Value immediately subsequent to such
transfer. The transfer fee is allocated on a pro-rata basis in relation to the
Account Values in such Sub-accounts as of the Valuation Period for which we
price the applicable transfer. No fee is assessed if there is no Account Value
in any Sub-account at such time. Tax charges are assessed against the entire
Purchase Payment or Account Value as applicable. The maintenance fee is assessed
against the Sub-accounts on a pro-rata basis in relation to the Account Values
in each Sub-account as of the Valuation Period for which we price the fee.
CHARGES ASSESSED AGAINST THE ASSETS: There are charges assessed against assets
in the Sub-accounts. These charges are described below. There are no charges
deducted from the Fixed Allocations. The factors we use in determining the
interest rates we credit Fixed Allocations are described above in the subsection
entitled Fixed Investment Options. No charges are deducted from assets
supporting fixed or adjustable annuity payments. The factors we use in
determining fixed or adjustable annuity payments include, but are not limited
to, our expected investment returns, costs, risks and profit targets. We reserve
the right to assess a charge against the Sub-accounts and the Fixed Allocations
equal to any taxes which may be imposed upon the separate accounts.
Administration Charge: We assess each Class 2 Sub-account, on a daily
basis, an administration charge. The charge is 0.15% per year of the average
daily total value of such Sub-account.
The administration charge and maintenance fee can be increased only for
Annuities issued subsequent to the effective date of any such change.
From time to time we may reduce the amount of the maintenance fee and/or the
administration charge. We may do so when Annuities are sold to individuals or a
group of individuals in a manner that reduces maintenance and/or administrative
expenses. We would consider such factors as: (a) the size and type of group; (b)
the number of Annuities purchased by an Owner; (c) the amount of Purchase
Payments; and/or (d) other transactions where maintenance and/or administration
expenses are likely to be reduced.
Any elimination of the maintenance fee and/or the administration charge or any
reduction of such charges will not discriminate unfairly between Annuity
purchasers. We will not make any changes to these charges where prohibited by
law.
Mortality and Expense Risk Charges: For Class 2 Sub-accounts, the
mortality risk charge is 0.25% per year and the expense risk charge is 0.25% per
year. These charges are assessed in combination each day against each
Sub-account at the rate of 0.50% per year of the average daily total value of
each Sub-account.
With respect to the mortality risk charge, we assume the risk that the mortality
experience under the Annuities may be less favorable than our assumptions. This
could arise for a number of reasons, such as when persons upon whose lives
annuity payments are based live longer than we anticipated, or when the
Sub-accounts decline in value resulting in losses in paying death benefits. If
our mortality assumptions prove to be inadequate, we will absorb any resulting
loss. Conversely, if the actual experience is more favorable than our
assumptions, then we will benefit from the gain. We also assume the risk that
the administration charge may be insufficient to cover our administration costs.
CHARGES OF THE UNDERLYING MUTUAL FUNDS: Each underlying mutual fund assesses
various charges for investment management and investment advisory fees. These
charges generally differ between portfolios within the same underlying mutual
fund. You will find additional details in the fund prospectuses and the
statements of additional information.
PURCHASING ANNUITIES: You may purchase an Annuity for various purposes. You must
meet our requirements before we issue an Annuity and it takes effect. Certain
benefits may be available to certain classes of purchasers. You have a
"free-look" period during which you may return your Annuity for a refund amount
which may be less or more than your Purchase Payment, except in specific
circumstances.
Uses Of The Annuity: The Annuity may be issued in connection with or
purchased as a funding vehicle for certain retirement plans designed to meet the
requirements of various sections of the Code. These include, but are not limited
to: (a) Section 401(a) (defined benefit plans and defined contribution plans
such as 401(k), profit sharing and money purchase plans); (b) Section 403(b)
(tax-sheltered annuities available to employees of certain qualifying
employers); (c) Section 408 (individual retirement accounts and individual
retirement annuities - "IRAs"; and Simplified Employee Pensions "SEPs"; and (d)
Section 408A (Roth IRAs). 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. 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. Where permitted
by law, we may issue an Annuity without completion of an Application for certain
classes of Annuities.
This Annuity is designed for use in connection with services, such as investment
allocation services, provided by an Advisor. Before we issue an Annuity, we may
require evidence satisfactory to us that you have engaged the services of an
Advisor.
The minimum initial Purchase Payment we accept is $10,000 unless you are
participating in a program of periodic Purchase Payments that we accept (see
"Periodic Purchase Payments"). The minimum initial Purchase Payment allowable
under such a program is lower if the total Purchase Payments in the first
Annuity Year are scheduled to equal at least $10,000. We may require that the
initial Purchase Payment be a check or a wire transfer. 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.
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").
The minimum initial Purchase Payment is $1,000 on any group annuity contract or
any Annuity issued pursuant to this Prospectus that 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, officer or trustee of any underlying mutual fund; (d) a director,
officer or employee of any investment manager, sub-advisor, transfer agent,
custodian, auditing, legal or administrative services provider that is providing
investment management, advisory, transfer agency, custodianship, auditing, legal
and/or administrative services to an underlying mutual fund or any affiliate of
such firm; (e) a director, officer, employee or registered representative of a
broker-dealer or insurance agency that has a then current selling agreement with
us and/or with American Skandia Marketing, Incorporated; (f) a director,
officer, employee or authorized representative of any firm providing us or our
affiliates with regular legal, actuarial, auditing, underwriting, claims,
administrative, computer support, marketing, office or other services; (g) the
then current spouse of any such person noted in (b) through (f), above; (h) the
parents of any such person noted in (b) through (g), above; (i) such person's
child(ren) or other legal dependent under the age of 21; and (j) the siblings of
any such persons noted in (b) through (h) above.
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.
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 or automatic periodic
transfers to us from a bank account ("bank drafting"). 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 or bank drafting
program and we agree to accept Purchase Payments on this basis; (b) the
allocations are only to variable investment options or the frequency and number
of allocations to fixed investment options is limited in accordance with our
rules; and (c) the total amount of Purchase Payments in the first Annuity Year
is scheduled to equal at least our then current minimum requirements. We may
also require an initial Purchase Payment to be submitted by check or wire before
agreeing to such a program. Our minimum requirements may differ based on the
usage of the Annuity, such as whether it is being used in conjunction with
certain retirement plans. We reserve the right to suspend or cancel bank
drafting privileges if sufficient funds are not available from the applicable
financial institution on any date that a transaction is scheduled to occur.
Right to Return the Annuity: You have the right to return the Annuity
within a specified period of time known as a "free-look" period. Depending on
the applicable legal and regulatory requirements, this period may be within ten
days of receipt, twenty-one days of receipt or longer. To exercise your right to
return the Annuity during the "free-look" period, you must return the Annuity.
The amount to be refunded is the then current Account Value plus any tax charge
deducted. This is the "standard refund". If necessary to meet Federal
requirements for IRAs or certain state law requirements, we return the greater
of the "standard refund" or the Purchase Payments received less any withdrawals
(see "Allocation of Net Purchase Payments"). We tell you how we determine the
amount payable under any such right at the time we issue your Annuity. Upon the
termination of the "free-look" period, if you surrender your Annuity, you may be
assessed the maintenance fee (see "Maintenance Fee").
Allocation of Net Purchase Payments: All allocations of Net Purchase
Payments are subject to our allocation rules (see "Allocation Rules").
Allocation of the portion of the initial Net Purchase Payment and any Net
Purchase Payments received during the free-look period that you wish to allocate
to any Sub-accounts are subject to an additional allocation rule if state law
requires return of at least your Purchase Payments should you return the Annuity
under such free-look provision. If such state law applies to your Annuity: (a)
we allocate any portion of any such Net Purchase Payments that you indicate you
wish to go into the Sub-accounts to the AST Money Market Sub-account; and (b) at
the end of such free-look period we reallocate Account Value according to your
then most recent allocation instructions to us, subject to our allocation rules.
However, where permitted by law in such jurisdictions, we will allocate such Net
Purchase Payments according to your instructions, without any temporary
allocation to the AST Money Market Sub-account, if you execute a return waiver
("Return Waiver"). Under the Return Waiver, you waive your right to the return
of the greater of the "standard refund" or the Purchase Payments received less
any withdrawals. Instead, you only are entitled to the return of the "standard
refund" (see "Right to Return the Annuity").
Your initial Purchase Payment, as well as other Purchase Payments will be
allocated in accordance with the then current requirements of any rebalancing,
asset allocation or market timing program which you have authorized or have
authorized an independent third party to use in connection with your Annuity
(see "Allocation Rules"). You must provide us with allocation instructions In
Writing if you wish to change your current allocations when making subsequent
Purchase Payments.
Balanced Investment Program: We offer a balanced investment program in
relation to your Purchase Payments, if Fixed Allocations are available under
your Annuity. If you choose this program, we commit a portion of your Net
Purchase Payments as a Fixed Allocation for the Guarantee Period you select.
This Fixed Allocation will have grown pre-tax to equal the exact amount of your
entire Purchase Payments at the end of its initial Guarantee Period if no
amounts are transferred or withdrawn from such Fixed Allocation. The rest of
your Net Purchase Payments are invested in the variable investment options you
select.
Ownership, Annuitant and Beneficiary Designations: You make certain
designations that apply to the Annuity if issued. These designations are subject
to our rules and to various regulatory or statutory requirements depending on
the use of the Annuity. These designations include an Owner, a contingent Owner,
an Annuitant, a Contingent Annuitant, a Beneficiary, and a contingent
Beneficiary. Certain designations are required, as indicated below. Such
designations will be revocable unless you indicate otherwise or we endorse your
Annuity to indicate that such designation is irrevocable to meet certain
regulatory or statutory requirements. Changing the Owner or Annuitant
designations may affect the minimum death benefit (see " Death Benefits").
Some of the tax implications of various designations are discussed in the
section entitled "Certain Tax Considerations". However, there are other tax
issues than those addressed in that section, including, but not limited to,
estate and inheritance tax issues. You should consult with a competent tax
counselor regarding the tax implications of various designations. You should
also consult with a competent legal advisor as to the implications of certain
designations in relation to an estate, bankruptcy, community property, where
applicable, and other matters.
An Owner must be named. You may name more than one Owner. If you do, all rights
reserved to Owners are then held jointly. We require the consent In Writing of
all joint Owners for any transaction for which we require the written consent of
Owners. Where required by law, we require the consent In Writing of the spouse
of any person with a vested interest in an Annuity. Naming someone other than
the payor of any Purchase Payment as Owner may have gift, estate or other tax
implications.
Where allowed by law, you may name a contingent Owner. However, this designation
takes effect only on or after the Annuity Date.
You must name an Annuitant. We do not accept a designation of joint Annuitants
during the accumulation phase. Where allowed by law, you may name one or more
Contingent Annuitants.
There may be adverse tax consequences if a Contingent Annuitant succeeds an
Annuitant and the Annuity is owned by a trust that is neither tax exempt nor
qualifies for preferred treatment under certain sections of the Code, such as
Section 401 (a "non-qualified" trust). In general, the Code is designed to
prevent the benefit of tax deferral from continuing for long periods of time on
an indefinite basis. Continuing the benefit of tax deferral by naming one or
more Contingent Annuitants when the Annuity is owned by a non-qualified trust
might be deemed an attempt to extend the tax deferral for an indefinite period.
Therefore, adverse tax treatment may depend on the terms of the trust, who is
named as Contingent Annuitant, as well as the particular facts and
circumstances. You should consult your tax advisor before naming a Contingent
Annuitant if you expect to use an Annuity in such a fashion.
Where allowed by law, you must name Contingent Annuitants according to our rules
when an Annuity is used as a funding vehicle for certain retirement plans
designed to meet the requirements of Section 401 of the Code.
You may name more than one primary and more than one contingent Beneficiary, and
if you do, the proceeds will be paid in equal shares to the survivors in the
appropriate beneficiary class, unless you have requested otherwise In Writing.
If the primary Beneficiary dies before death proceeds become payable, the
proceeds will become payable to the contingent Beneficiary. If no Beneficiary is
alive when death proceeds become payable or in the absence of any Beneficiary
designation, the proceeds will vest in you or your estate.
If an Owner's spouse is designated as the sole primary Beneficiary of the
Annuity and the Owner dies prior to the Annuity Date, the Owner's Spouse, as
Beneficiary, may elect to be treated as Owner and continue the Annuity at its
current Account Value, subject to its terms and conditions. If the Annuity is
owned jointly by both spouses, and the primary Beneficiary is designated as
"surviving spouse", each spouse named individually, or a designation of similar
intent, then upon the death of either Owner, the surviving spouse may elect to
be treated as Owner.
ACCOUNT VALUE AND SURRENDER VALUE: In the accumulation phase your Annuity has an
Account Value. Your total Account Value is the sum of your Account Value in each
investment option. However, upon surrender, the amount payable is the Account
Value less any applicable maintenance fee.
Account Value in the Sub-accounts: We determine your Account Value
separately for each Sub-account. To determine the Account Value in each
Sub-account we multiply the Unit Price as of the Valuation Period for which the
calculation is being made times the number of Units attributable to you in that
Sub-account as of that Valuation Period. The method we use to determine Unit
Prices is shown in the Statement of Additional Information.
The number of Units attributable to you in a Sub-account is the number of Units
you purchased less the number transferred or withdrawn. We determine the number
of Units involved in any transaction specified in dollars by dividing the dollar
value of the transaction by the Unit Price of the effected Sub-account as of the
Valuation Period applicable to such transaction.
Account Value of the Fixed Allocations: We determine the Account Value
of each Fixed Allocation separately. A Fixed Allocation's Account Value as of a
particular date is determined by multiplying its then current Interim Value
times the MVA.
A formula is used to determine the MVA. The formula is applied separately to
each Fixed Allocation. Values and time durations used in the formula are as of
the date for which the Account Value is being determined. The formula is:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate for your class of annuities for new
Fixed Allocations with Guarantee Periods of durations equal to
the number of years (rounded to the next higher integer when
occurring on other than an anniversary of the beginning of the
Fixed Allocation's Guarantee Period) remaining in such
Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if amounts are surrendered pursuant to the right to
return the Annuity is [(1+I)/(1+J)]N/12.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date, and, where required by law, the 30 days prior to the Maturity Date. If we
are not offering a Guarantee Period with a duration equal to the number of years
remaining in a Fixed Allocation's Guarantee Period, we calculate a rate for "J"
above using a specific formula. This formula is described in the Statement of
Additional Information.
Our Current Rates are expected to be sensitive to interest rate fluctuations,
thereby making each MVA equally sensitive to such changes. There would be a
downward adjustment when the applicable Current Rate plus 0.10 percent of
interest exceeds the rate credited to the Fixed Allocation and an upward
adjustment when the applicable Current Rate is more than 0.10 percent of
interest lower than the rate being credited to the Fixed Allocation. See the
Statement of Additional Information for an illustration of how the MVA works.
We reserve the right, from time to time, to determine the MVA using an interest
rate lower than the Current Rate for all transactions applicable to a class of
Annuities. We may do so at our sole discretion. This would benefit all such
Annuities if transactions to which the MVA applies occur while we use such lower
interest rate.
RIGHTS, BENEFITS AND SERVICES: The Annuity provides various rights, benefits and
services subsequent to its issuance and your decision to keep it beyond the
free-look period. A number of these rights, benefits and services, as well as
some of the rules and conditions to which they are subject, are described below.
These rights, benefits and services include, but are not limited to: (a) making
additional Purchase Payments; (b) changing revocable designations; (c)
transferring Account Values between investment options; (d) receiving lump sum
payments, Systematic Withdrawals or Minimum Distributions, annuity payments and
death benefits; (e) transferring or assigning your Annuity; (f) exercising
certain voting rights in relation to the underlying mutual funds in which the
Sub-accounts invest; and (g) receiving reports. These rights, benefits and
services may be limited, eliminated or altered when an Annuity is purchased in
conjunction with a qualified plan. We may require presentation of proper
identification, including a personal identification number ("PIN") issued by us,
prior to accepting any instruction by telephone or other electronic means. We
forward your PIN to you shortly after your Annuity is issued. To the extent
permitted by law or regulation, neither we nor any person authorized by us will
be responsible for any claim, loss, liability or expense in connection with a
telephonic or electronic transfer if we or such other person acted on such
transfer instructions in good faith in reliance on your authorization of
telephone and/or electronic transfers and on reasonable procedures to identify
persons so authorized through verification methods which may include a request
for your Social Security number or a personal identification number (PIN) as
issued by us. We may be liable for losses due to unauthorized or fraudulent
instructions should we not follow such reasonable procedures.
Additional Purchase Payments: The minimum for any additional Purchase
Payment is $100.00 unless we authorize lower payments pursuant to a periodic
Purchase Payment program (see "Periodic Purchase Payments"), or less where
required by law. Additional Purchase Payments may be paid at any time before the
Annuity Date. Subject to our allocation rules, we allocate additional Net
Purchase Payments according to your written allocation instructions. Should no
written instructions be received with an additional Purchase Payment, we shall
return your additional Purchase Payment.
Changing Revocable Designations: Unless you indicated that a prior
choice was irrevocable or your Annuity has been endorsed to limit certain
changes, you may request to change Owner, Annuitant and Beneficiary designations
by sending a request In Writing. Where allowed by law, such changes will be
subject to our acceptance. Some of the changes we will not accept include, but
are not limited to: (a) a new Owner subsequent to the death of the Owner or the
first of any joint Owners to die, except where a spouse-Beneficiary has become
the Owner as a result of an Owner's death; (b) a new Annuitant subsequent to the
Annuity Date if the annuity option selected includes a life contingency; and (c)
a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity.
Allocation Rules: As of the date of this Prospectus, during the
accumulation phase, you may currently maintain Account Value in multiple
Sub-accounts and an unlimited number of Fixed Allocations. We reserve the right,
to the extent permitted by law, to limit the number of Sub-accounts or the
amount you may allocate to any Fixed Allocation. As of the date of this
Prospectus, we limited the number of Sub-accounts available at any one time to
ten. Should you request a transaction that would leave less than any minimum
amount we then require in an investment option, we reserve the right, to the
extent permitted by law, to add the balance of your Account Value in the
applicable Sub-account or Fixed Allocation to the transaction and close out your
balance in that investment option. We also reserve the right to limit the amount
you may allocate to any Fixed Allocation.
Should you either: (a) request rebalancing services (see "Rebalancing"); (b)
authorize an independent third party to transact transfers on your behalf and
such third party arranges for rebalancing of any portion of your Account Value
in accordance with any asset allocation strategy; or (c) authorize an
independent third party to transact transfers in accordance with a market timing
strategy; then all Purchase Payments, including the initial Purchase Payment,
received while your Annuity is subject to such an arrangement are allocated to
the same investment options and in the same proportions as then required
pursuant to the applicable rebalancing, asset allocation or market timing
program, unless we have received alternate instructions. Such allocation
requirements terminate simultaneous to the termination of an authorization for
rebalancing or any authorization to a third party to transact transfers on your
behalf. Upon termination of any of the above arrangements, you must provide us
with allocation instructions In Writing for all subsequent Purchase Payments.
Withdrawals of any type are taken pro-rata from the investment options based on
the then current Account Values in such investment options unless we receive
instructions from you prior to such withdrawal. For this purpose only, the
Account Value in all your then current Fixed Allocations is deemed to be in one
investment option. If you transfer or withdraw Account Value from multiple Fixed
Allocations and do not provide instructions indicating the Fixed Allocations
from which Account Value should be taken: (a) we transfer Account Value first
from the Fixed Allocation with the shortest amount of time remaining to the end
of its Guarantee Period, and then from the Fixed Allocation with the next
shortest amount of time remaining to the end of its Guarantee Period, etc.; and
(b) if there are multiple Fixed Allocations with the same amount of time left in
each Guarantee Period, as between such Fixed Allocations we first take Account
Value from the Fixed Allocation that had the shorter Guarantee Period.
Transfers: In the accumulation phase you may transfer Account Value
between investment options, subject to our allocation rules (see "Allocation
Rules"). Transfers are not subject to taxation (see "Transfers Between
Investment Options"). We charge $10.00 for each transfer after the twelfth in
each Annuity Year, including transfers transacted as part of any rebalancing,
market timing, asset allocation or similar program which you employ or you
authorize to be employed on your behalf. Transfers transacted as part of a
dollar cost averaging program are not counted in determining the applicability
of the transfer fee. Renewals or transfers of Account Value from a Fixed
Allocation at the end of its Guarantee Period are not subject to the transfer
charge and are not counted in determining whether other transfers may be subject
to the transfer charge (see "Renewals"). Your transfer request must be In
Writing or meet our requirements for accepting instructions we receive over the
phone or through means such as electronic mail 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 an Owner or
certain Owners if we believe that: (a) excessive trading by such Owner or Owners
or a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the underlying mutual
funds; or (b) we are informed by one or more of the underlying mutual funds that
the purchase or redemption of shares is to be restricted because of excessive
trading or a specific transfer or group of transfers is deemed to have a
detrimental effect on share prices of affected underlying mutual funds.
To the extent permitted by law, we may require up to 2 business days' notice of
any transfer into or out of a Fixed Allocation if the market value of such
transfer is at least $1,000,000.00.
In order to help you determine whether you wish to transfer Account Values to a
Fixed Allocation, you may obtain our Current Rates by writing us or calling us
at 1-800-766-4530 or contact our customer service department electronically at
[email protected]. When calling us by phone, please have readily
available your Annuity number and your PIN number. When contacting us
electronically, please provide your PIN number, social security or tax I.D.
number and the Annuity contract number.
Where permitted by law, we may accept your authorization of a third party to
transfer Account Values on your behalf, subject to our rules. We may suspend or
cancel such acceptance at any time. We notify you of any such suspension or
cancellation. We may restrict the investment options that will be available for
transfers or allocations of Net Purchase Payments during any period in which you
authorize such third party that provides market timing services to act on your
behalf. We give the third party you authorize prior notification of any such
restrictions. However, we will not enforce such a restriction if we are provided
evidence satisfactory to us that: (a) such third party has been appointed by a
court of competent jurisdiction to act on your behalf; or (b) such third party
has been appointed by you to act on your behalf for all your financial affairs.
We or an affiliate of ours may provide administrative or other support services
to an independent Advisor 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 Advisor may employ, or transferring Account Values between investment
options in accordance with market timing strategies employed by such Advisor.
Such Advisors may or may not be appointed our agents for the sale of Annuities.
However, we do not engage any Advisors 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 Advisors or any investment allocation
recommendations made by such Advisors. We do not currently charge you or your
Advisor extra for providing these support services.
Renewals: A renewal is a transaction that occurs automatically as of
the last day of a Fixed Allocation's Guarantee Period unless we receive
alternative instructions. This day as to each Fixed Allocation is called its
Maturity Date. As of the end of a Maturity Date, the Fixed Allocation's
Guarantee Period "renews" and a new Guarantee Period of the same duration as the
one just completed begins. However, the renewal will not occur if the Maturity
Date is on the date we apply your Account Value to determine the annuity
payments that begin on the Annuity Date (see "Annuity Payments").
As an alternative to a renewal, you may transfer all or part of that Fixed
Allocation's Account Value to a different Fixed Allocation or you may transfer
such Account Value to one or more Sub-accounts, subject to our allocation rules.
To accomplish this, we must receive instructions from you In Writing at least
two business days before the Maturity Date. No MVA applies to transfers of a
Fixed Allocation's Account Value occurring as of its Maturity Date. An MVA will
apply in determining the Account Value of a Fixed Allocation at the time annuity
payments are determined, unless the Maturity Date of such Fixed Allocation is
the 15th day before the Annuity Date (see "Annuity Payments").
At least 30 days prior to a Maturity Date, or earlier if required by law or
regulation, we inform you of the Guarantee Periods available as of the date of
such notice. We do not provide a similar notice if the Fixed Allocation's
Guarantee Period is of less than a year's duration. Such notice may include an
example of the rates we are then crediting new Fixed Allocations as of the date
such notice is prepared. The rates actually credited to a Fixed Allocation as of
the date of any renewal or transfer immediately subsequent to the Maturity Date
may be more or less than any rates quoted in such notice.
If your Fixed Allocation's then ending Guarantee Period is no longer available
for new allocations and renewals or you choose a different Guarantee Period that
is no longer available on the date following the Maturity Date, we will try to
reach you so you may make another choice. If we cannot reach you, we will assign
the next shortest Guarantee Period then currently available for new allocations
and renewals to that Fixed Allocation.
Dollar Cost Averaging: We offer dollar cost averaging in the
accumulation phase. Dollar cost averaging is a program designed to provide for
regular, approximately level investments over time. You may choose to transfer
earnings only, principal plus earnings or a flat dollar amount. We make no
guarantee that a dollar cost averaging program will result in a profit or
protect against a loss in a declining market. You may select this program by
submitting to us a request In Writing. You may cancel your participation in this
program In Writing or by phone if you have previously authorized our acceptance
of such instructions.
Dollar cost averaging is available from any of the investment options we choose
to make available for such a program. Your Annuity must have an Account Value of
not less than $10,000.00 at the time we accept your request for a dollar cost
averaging program. Transfers under a dollar cost averaging program are not
counted in determining the applicability of the transfer fee (see "Transfers").
We reserve the right to limit the investment options into which Account Value
may be transferred as part of a dollar cost averaging program. We currently do
not permit dollar cost averaging programs where Account Value is transferred to
Fixed Allocations. We also reserve the right to charge a processing fee for this
service. Should we suspend or cancel the offering of this service, such
suspension or cancellation will not affect any dollar cost averaging programs
then in effect. Dollar cost averaging is not available while a rebalancing,
asset allocation or market timing type of program is used in connection with
your Annuity.
Dollar cost averaging from Fixed Allocations is subject to the following rules:
(a) you may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3
years; (b) such a program may only be selected in conjunction with and
simultaneous to a new or renewing Fixed Allocation; (c) only averaging of
earnings only or principal plus earnings is permitted; (d) a program averaging
principal plus earnings from a Fixed Allocation must be designed to last that
Fixed Allocation's entire current Guarantee Period; (e) dollar cost averaging
transfers from a Fixed Allocation are not subject to the MVA; (f) dollar cost
averaging may be done on a monthly basis only; and (g) you may not
simultaneously use Account Value in any Fixed Allocation to participate in
dollar cost averaging and receive Systematic Withdrawals or Minimum
Distributions from such Fixed Allocation (see "Systematic Withdrawals" and
"Minimum Distributions").
Rebalancing: We offer, during the accumulation phase, automatic
quarterly, semi-annual or annual rebalancing among the variable investment
options of your choice. This provides the convenience of automatic rebalancing
without having to provide us instructions on a periodic basis. Failure to choose
this option does not prevent you from providing us with transfer instructions
from time-to-time that have the effect of rebalancing. It also does not prevent
other requested transfers from being transacted.
Under this program, Account Values in variable investment options are rebalanced
quarterly, semi-annually or annually, as applicable, to the percentages you
request. The rebalancing may occur quarterly, semi-annually or annually based
upon the Issue Date. If a transfer is requested involving any investment option
participating in an automatic rebalancing program, we automatically alter the
rebalancing percentages going forward (unless we receive alternate instructions)
to the ratios between Account Values in the variable investment options as of
the effective date of such requested transfer once it has been processed.
Automatic rebalancing is delayed one quarter if Account Value is being
maintained in the AST Money Market Sub-account for the duration of your
Annuity's "free-look" period and rebalancing would otherwise occur during such
period (see "Allocation of Net Purchase Payments").
You may change the percentage allocable to each variable investment option at
any time. However, you may not choose to allocate less than 5% of Account Value
to any variable investment option.
We do not offer automatic rebalancing in connection with Fixed Allocations. The
Account Value of your Annuity must be at least $10,000.00 when we receive your
automatic rebalancing request. We may require that all variable investment
options in which you maintain Account Value must be used in the rebalancing
program. You may maintain Account Value in at least two and not more than ten
variable investment options when using a rebalancing program. You may not
simultaneously participate in rebalancing and dollar cost averaging. Rebalancing
also is not available when a program of Systematic Withdrawals of earnings or
earnings plus principal is in effect.
For purposes of determining the number of transfers made in any Annuity Year,
all rebalancing transfers made on the same day are treated as one transfer. We
reserve the right to charge a processing fee for signing up for this service.
To elect to participate or to terminate participation in automatic rebalancing,
we may require instructions In Writing at our Office in a form satisfactory to
us.
Distributions: Distributions available from your Annuity during the
accumulation phase include surrender, 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 is permitted during the
accumulation phase. The amount payable is the then current Account Value less
any applicable maintenance fee. We reserve the right to require that your
Annuity accompany your surrender request.
Partial Withdrawals: You may withdraw part of your Account Value. The
minimum partial withdrawal is $100.00. The Account Value that must remain in the
Annuity as of the date of this transaction is $1,000.00. 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 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 requirements of Sections 401, 403 or
408 of the Code); and (b) in relation to plans pursuant to Section 403 or 408,
you and your Advisor provide representations In Writing acceptable to us
limiting the source of the Advisor's compensation to the assets of an applicable
qualified retirement plan, and making certain other representations.
Systematic Withdrawals: We offer Systematic Withdrawals of earnings
only, principal plus earnings or a flat dollar amount. Generally, Systematic
Withdrawals from Fixed Allocations are limited to earnings accrued after the
program of Systematic Withdrawals begins, or payments of fixed dollar amounts
that do not exceed such earnings. However, we will permit Systematic Withdrawals
from Fixed Allocations of principal plus earnings in connection with a program
of "substantially equal periodic payments" designed to meet the requirements of
Section 72(t) of the Code, as described in more detail below. A program of
Systematic Withdrawals begins on the date we accept, at our Office, your request
for such a program.
A Systematic Withdrawal from a Fixed Allocation is not subject to the MVA unless
it is part of a program of withdrawals of principal plus earnings which we allow
in conjunction with a program of "substantially equal periodic payments"
designed to meet the requirements of Section 72(t) of the Code. We calculate the
Fixed Allocation's credited interest since the prior withdrawal as A minus B,
plus C, where:
A is the Interim Value of the applicable Fixed Allocation as of the
date of the Systematic Withdrawal;
B is the Interim Value of the applicable Fixed Allocation as of
the later of the beginning of its then current Guarantee
Period or the beginning of the Systematic Withdrawal program;
and
C is the total of all partial or free withdrawals and any
transfers from such Fixed Allocation since the later of the
beginning of its then current Guarantee Period or the
beginning of the Systematic Withdrawal program.
Systematic Withdrawals are available on a monthly, quarterly, semi-annual or
annual basis. You may not simultaneously receive Systematic Withdrawals from a
Fixed Allocation and participate in a dollar cost averaging program under which
Account Value is transferred from the same Fixed Allocation (see "Dollar Cost
Averaging"). Systematic Withdrawals are not concurrently available while you are
taking any Minimum Distributions (see "Minimum Distributions"). Systematic
Withdrawals of earnings or earnings plus principal are not available while any
rebalancing or asset allocation program is in effect in relation to your
Annuity.
The Account Value of your Annuity must be at least $20,000.00 when we accept
your request for a program of Systematic Withdrawals. The minimum for each
Systematic Withdrawal is $100.00. For any scheduled Systematic Withdrawal other
than the last that does not meet this minimum, we reserve the right to defer
such a withdrawal and add the amount that would have been withdrawn to the
amount that is to be withdrawn at the next Systematic Withdrawal.
If your Annuity is used as a funding vehicle for certain retirement plans that
receive special tax treatment under Sections 401, 408, or 403(b) of the Code,
Section 72(t) of the Code may provide an exception to the 10% penalty tax on
distributions made prior to age 59 1/2 if you elect to receive distributions as
a series of "substantially equal periodic payments". Distributions in any
Annuity Year received under this provision that exceed the maximum amount
available as a free withdrawal are subject to contingent deferred sales charges.
If distributions are to be taken from Fixed Allocations pursuant to a program
based on payments of principal and earnings, such amounts will be subject to the
MVA. To receive distributions in the form of "substantially equal periodic
payments" in accordance with the exception to the 10% penalty tax found in
Section 72(t) of the Code, you must provide us with certain required information
In Writing on a form acceptable to us.
We reserve the right to charge a processing fee for this service. Should we
suspend or cancel offering Systematic Withdrawals, such suspension or
cancellation will not affect any Systematic Withdrawal programs then in effect.
Minimum Distributions: Minimum Distributions are a specific type of
Systematic Withdrawal program. Minimum Distributions are subject to all the
rules applicable to Systematic Withdrawals unless we specifically indicate that
one or more of such rules do not apply. In addition, certain rules apply only to
Minimum Distributions.
You may elect to have us calculate Minimum Distributions annually if your
Annuity is being used for certain qualified purposes under the Code. Requests to
calculate a Minimum Distribution amount must be made three (3) days prior to the
date that your Minimum Distribution payment is processed to allow for
calculation and processing of the required amount. We calculate such amounts
assuming the Minimum Distribution amount is based solely on the value of your
Annuity. The required Minimum Distribution amounts applicable to your particular
situation may depend on other annuities, savings or investments of which we are
unaware, so that the required amount may be greater than the Minimum
Distribution amount we calculate based on the value of your Annuity. We reserve
the right to charge a fee for each annual calculation. Minimum Distributions are
not concurrently available with any other programs of Systematic Withdrawals.
You may elect to have Minimum Distributions paid out monthly, quarterly,
semi-annually or annually. The $100 minimum for Systematic Withdrawals does not
apply to Minimum Distributions.
Each Minimum Distribution will be taken from the investment options you select.
However, the portion of any Minimum Distribution that can be taken from any
Fixed Allocations may not exceed the then current ratio between your Account
Value in all Fixed Allocations you maintain and your total Account Value. No MVA
applies to any portion of Minimum Distributions taken from Fixed Allocations.
Minimum Distributions are not available from any Fixed Allocation if such Fixed
Allocation is being used in a dollar cost averaging program (see "Dollar Cost
Averaging"). Minimum Distributions from Fixed Allocations are not subject to the
limitation on Systematic Withdrawals that limits a program of Systematic
Withdrawals from Fixed Allocations only to earnings accrued after program
inception.
Death Benefit: In the accumulation phase, a death benefit is payable.
If the Annuity is owned by one or more natural persons, it is payable upon the
first death of such Owners. If the Annuity is owned by an entity, the death
benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. If a Contingent Annuitant was designated before the Annuitant's death
and the Annuitant dies, the Contingent Annuitant then becomes the Annuitant.
There may be adverse tax consequences for certain entity Owners if they name a
Contingent Annuitant (see "Ownership, Annuitant and Beneficiary Designations").
The person upon whose death the death benefit is payable is referred to below as
the "decedent". For purposes of this death benefit provision, "withdrawals"
means withdrawals of any type (partial withdrawals, Systematic Withdrawals,
Minimum Distributions) after any applicable MVA. For purposes of this provision,
persons named Owner or Annuitant within 60 days of the Issue Date are treated as
if they were an Owner or Annuitant on the Issue Date.
The death benefit is as follows, and is subject to the conditions described in
(1), (2) and (3) below:
(1) If death occurs before the decedent's age 85: the death benefit is
the greater of (a) or (b), where:
(a) is your Account Value in Sub-accounts plus the Interim
Value of any Fixed Allocations; or
(b) the minimum death benefit ("Minimum Death Benefit"). The
Minimum Death Benefit is the sum of all Purchase Payments less the sum of all
withdrawals.
(2) If death occurs on or after the decedent's age 85: the death
benefit is your Account Value.
(3) If a decedent was not named an Owner or Annuitant as of the Issue
Date and did not become such as a result of a prior Owner's or Annuitant's
death: the Minimum Death Benefit is suspended as to that person for a two year
period from the date he or she first became an Owner or Annuitant. After the
suspension period is completed, the death benefit is the same as if such person
had been an Owner or Annuitant on the Issue Date. During the suspension period:
(a) If that person's death occurs before the decedent's age
85, the death benefit is your Account Value in the Sub-accounts plus the Interim
Value of any Fixed Allocation.
(b) If that person's death occurs on or after the decedent's
age 85, the death benefit is your Account Value.
The amount of the death benefit is determined as of the date we receive In
Writing: (a) "due proof of death"; (b) all representations we require or which
are mandated by applicable law or regulation in relation to the death claim and
the payment of death proceeds; and (c) any applicable election of the mode of
payment of the death benefit, if not previously elected by the Owner. The death
benefit is reduced by any annuity payments made prior to the date we receive In
Writing such due proof of death. The following constitutes "due proof of death":
(a) a certified copy of a death certificate; (b) a certified copy of a decree of
a court of competent jurisdiction as to the finding of death; or (c) any other
proof satisfactory to us.
If the death benefit becomes payable prior to the Annuity Date due to the death
of the Owner and the Beneficiary is the Owner's spouse, then in lieu of
receiving the death benefit, such Owner's spouse may elect to be treated as an
Owner and continue the Annuity at its current Account Value, subject to its
terms and conditions. An Owner's spouse may only assume ownership of the Annuity
if such spouse is designated as the sole primary Beneficiary.
In the event of your death, the benefit must be distributed within: (a) five
years of the date of death; or (b) over a period not extending beyond the life
expectancy of the Beneficiary or over the life of the Beneficiary. Distribution
after your death to be paid under (b) above, must commence within one year of
the date of death.
If the Annuitant dies before the Annuity Date, the Contingent Annuitant will
become the Annuitant. Where allowed by law, if the Annuity is owned by one or
more natural persons, the oldest of any such Owners not named as the Annuitant
immediately becomes the Contingent Annuitant if: (a) the Contingent Annuitant
predeceases the Annuitant; or (b) if you do not designate a Contingent
Annuitant.
In the payout phase, we continue to pay any "certain" payments (payments not
contingent on the continuance of any life) to the Beneficiary subsequent to the
death of the Annuitant.
Annuity Payments: Annuity payments can be guaranteed for life, for a
certain period, or for a certain period and life. We make available fixed
payments, and as of the date of this Prospectus, adjustable payments (payments
which may or may not be changed on specified adjustment dates based on annuity
purchase rates we are then making available to annuities of the same class). We
may or may not be making adjustable annuities available on the Annuity Date. To
the extent there is any tax basis in the annuity, a portion of each annuity
payment is treated for tax purposes as a return of such basis until such tax
basis is exhausted. The amount deemed such a return of basis is determined in
accordance with the requirements of the Code (see "Certain Tax Considerations").
You may choose an Annuity Date, an annuity option and the frequency of annuity
payments when you purchase an Annuity, or at a later date. Your choice of
Annuity Date and annuity option may be limited depending on your use of the
Annuity and the applicable jurisdiction. Subject to our rules, you may choose an
Annuity Date, option and frequency of payments suitable to your needs and
circumstances. You should consult with competent tax and financial advisors as
to the appropriateness of any such choice. Should Annuities subject to New York
law be made available, the Annuity Date for such Annuities may not exceed the
first day of the calendar month following the Annuitant's 85th birthday. Other
jurisdictions may impose similar requirements.
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. Should
Annuities subject to New York law be made available, for such Annuities, in the
absence of an election In Writing: (a) the Annuity Date is the first day of the
calendar month following the Annuitant's 85th birthday; and (b) fixed monthly
payments will commence under Option 2, described below, with 10 years certain.
Other jurisdictions may impose similar requirements. The amount to be applied is
your Annuity's Account Value 15 business days prior to the Annuity Date. In
determining your annuity payments, we credit interest using our then current
crediting rate for this purpose, which is not less than 3% of interest per year,
between the date Account Value is applied to an annuity option and the Annuity
Date. Annuity options in addition to those shown are available with our consent.
The minimum initial amount payable is the minimum initial annuity amount we
allow under our then current rules. Should you wish to receive a lump sum
payment, you must request to surrender your Annuity prior to the Annuity Date
(see "Surrender").
You may elect to have any amount of the proceeds due to the Beneficiary applied
under any of the options described below, but only to the extent selecting such
an option does not alter the tax status of the Annuity. Except where a lower
amount is required by law, the minimum monthly annuity payment is $100.00.
If you have not made an election prior to proceeds becoming due, the Beneficiary
may elect to receive the death benefit under one of the annuity options.
However, if you made an election, the Beneficiary may not alter such election.
For purposes of the annuity options described below, the term "key life" means
the person or persons upon whose life any payments dependent upon the
continuation of life are based.
(1) Option 1 - Payments for Life: Under this option, income is payable
periodically prior to the death of the key life, terminating with the last
payment due prior to such death. Since no minimum number of payments is
guaranteed, this option offers the maximum level of periodic payments of the
life contingent annuity options. It is possible that only one payment will be
payable if the death of the key life occurs before the date the second payment
was due, and no other payments nor death benefits would be payable.
(2) Option 2 - Payments for Life with 10, 15, or 20 Years Certain:
Under this option, income is payable periodically for 10, 15, or 20 years, as
selected, and thereafter until the death of the key life. Should the death of
the key life occur before the end of the period selected, the remaining payments
are paid to the Beneficiary to the end of such period.
(3) Option 3 - Payments Based on Joint Lives: Under this option, income
is payable periodically during the joint lifetime of two key lives, and
thereafter during the remaining lifetime of the survivor, ceasing with the last
payment prior to the survivor's death. No minimum number of payments is
guaranteed under this option. It is possible that only one payment will be
payable if the death of all the key lives occurs before the date the second
payment was due, and no other payments nor death benefits would be payable.
(4) Option 4 - Payments for a Certain Period: Under this option, income
is payable periodically for a specified number of years. The number of years is
subject to our then current rules. Should the payee die before the end of the
specified number of years, the remaining payments are paid to the Beneficiary to
the end of such period. Note that under this option, payments are not based on
how long we expect any key life to live. Therefore, that portion of the
mortality risk charge assessed to cover the risk that key lives outlive our
expectations provides no benefit to an Owner selecting this option.
The first payment varies according to the annuity options and payment frequency
selected. The first periodic payment is determined by multiplying the Account
Value (expressed in thousands of dollars) as of the close of business on the
fifteenth day preceding the Annuity Date, plus interest at not less than 3% per
year from such date to the Annuity Date, by the amount of the first periodic
payment per $1,000.00 of value obtained from our annuity rates for that type of
annuity and for the frequency of payment selected. Our rates will not be less
than our guaranteed minimum rates. These guaranteed minimum rates are derived
from the 1983a Individual Annuity Mortality Table with ages set back one year
for males and two years for females and with an assumed interest rate of 3% per
annum. Where required by law or regulation, such annuity table will have rates
that do not differ according to the gender of the key life. Otherwise, the rates
will differ according to the gender of the key life.
Qualified Plan Withdrawal Limitations: The Annuities are endorsed such
that there are surrender or withdrawal limitations when used in relation to
certain retirement plans for employees which are designed to qualify under
various sections of the Code. These limitations do not affect certain roll-overs
or exchanges between qualified plans. Distribution of amounts attributable to
contributions made pursuant to a salary reduction agreement (as defined in Code
section 403(b)), or attributable to transfers to a tax sheltered annuity from a
custodial account (as defined in Code section 403(b)(7)), is restricted to the
employee's: (a) separation from service; (b) death; (c) disability (as defined
in Section 72(m)(7) of the Code); (d) reaching age 59 1/2; or (e) hardship.
Hardship withdrawals are restricted to amounts attributable to salary reduction
contributions, and do not include investment results. In the case of tax
sheltered annuities, these limitations do not apply to certain salary reduction
contributions made and investment results earned prior to dates specified in the
Code. In addition, the limitation on hardship withdrawals does not apply to
salary reduction contributions made and investment results earned prior to dates
specified in the Code which have been transferred from custodial accounts.
Rollovers from the types of plans noted to another qualified plan or to an
individual retirement account or individual retirement annuity are not subject
to the limitations noted. Certain distributions, including rollovers, that are
not transferred directly to the trustee of another qualified plan, the custodian
of an individual retirement account or the issuer of an individual retirement
annuity may be subject to automatic 20% withholding for Federal income tax. This
may also trigger withholding for state income taxes (see "Certain Tax
Considerations").
We may make annuities available through the Texas Optional Retirement Program
subsequent to receipt of the required regulatory approvals and implementation.
In addition to the restrictions required for such Annuities to qualify under
Section 403(b) of the Code, Annuities issued in the Texas Optional Retirement
Program are amended as follows: (a) no benefits are payable unless you die
during, or are retired or terminated from, employment in all Texas institutions
of higher education; and (b) if a second year of participation in such program
is not begun, the total first year State of Texas' contribution will be
returned, upon its request, to the appropriate institute of higher education.
With respect to the restrictions on withdrawals set forth above, we are relying
upon: (1) a no-action letter dated November 28, 1988 from the staff of the
Securities and Exchange Commission to the American Council of Life Insurance
with respect to annuities issued under Section 403(b) of the Code, the
requirements of which have been complied with by the us; and (2) Rule 6c-7 under
the 1940 Act with respect to annuities made available through the Texas Optional
Retirement Program, the requirements of which have been complied with by the us.
Pricing of Transfers and Distributions: We "price" transfers and
distributions on the dates indicated below.
(1) We price "scheduled" transfers and distributions as of the date
such transactions are so scheduled. However, if a transaction is "scheduled" to
occur on a day other than a Valuation Day, such transaction will be processed
and priced on the last Valuation Day prior to the scheduled transaction.
"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
date we receive at our Office the request for such transactions. "Unscheduled"
transfers include any transfers processed in conjunction with any market timing
program, or transfers not previously scheduled with us at our Office pursuant to
any rebalancing, asset allocation or similar program which you employ or you
authorize to be employed on your behalf. "Unscheduled" transfers received
pursuant to an authorization to accept transfers using voice or data
transmission over the phone are priced as of the Valuation Period we receive the
request at our Office for such transactions.
(3) We price surrenders and death benefits as of the date we receive at
our Office all materials we require for such transactions and such materials are
satisfactory to us (see "Surrenders" and "Death Benefits").
The pricing of transfers and distributions involving Sub-accounts includes the
determination of the applicable Unit Price for the Units transferred or
distributed. The pricing of transfers and distributions involving Fixed
Allocations includes the determination of any applicable MVA. Any applicable MVA
alters the amount available when all the Account Value in a Fixed Allocation is
being transferred or distributed. Any applicable MVA alters the amount of
Interim Value needed when only a portion of the Account Value is being
transferred or distributed. Unit Prices may change each Valuation Period to
reflect the investment performance of the Sub-accounts. The MVA applicable to
each Fixed Allocation changes once each month and also each time we declare a
different rate for new Fixed Allocations. Payment is subject to our right to
defer transactions for a limited period (see "Deferral of Transactions").
Voting Rights: You have voting rights in relation to Account Value
maintained in the Sub-accounts. You do not have voting rights in relation to
Account Value maintained in any Fixed Allocations or in relation to fixed or
adjustable annuity payments.
We will vote shares of the underlying mutual funds or portfolios in which the
Sub-accounts invest in the manner directed by Owners. Owners give instructions
equal to the number of shares represented by the Sub-account Units attributable
to their Annuity. We will vote the shares attributable to assets held in the
Sub-accounts solely for us rather than on behalf of Owners, or any share as to
which we have not received instructions, in the same manner and proportion as
the shares for which we have received instructions. We will do so separately for
each Sub-account from various classes that may invest in the same underlying
mutual fund portfolio.
The number of votes for an underlying mutual fund or portfolio will be
determined as of the record date for such underlying mutual fund or portfolio as
chosen by its board of trustees or board of directors, as applicable. We will
furnish Owners with proper forms and proxies to enable them to instruct us how
to vote.
You may instruct us how to vote on the following matters: (a) changes to the
board of trustees or board of directors, as applicable; (b) changing the
independent accountant; (c) approval of changes to the investment advisory
agreement or adoption of a new investment advisory agreement; (d) any change in
the fundamental investment policy; and (e) any other matter requiring a vote of
the shareholders.
With respect to approval of changes to the investment advisory agreement,
approval of a new investment advisory agreement or any change in fundamental
investment policy, only Owners maintaining Account Value as of the record date
in a Sub-account investing in the applicable underlying mutual fund portfolio
will instruct us how to vote on the matter, pursuant to the requirements of Rule
18f-2 under the 1940 Act.
Transfers, Assignments or Pledges: Generally, your rights in an Annuity
may be transferred, assigned or pledged for loans at any time. However, these
rights may be limited depending on your use of the Annuity. These transactions
may be subject to income taxes and certain penalty taxes (see "Certain Tax
Considerations"). You may transfer, assign or pledge your rights to another
person at any time, prior to any death upon which the death benefit is payable.
You must request a transfer or provide us a copy of the assignment In Writing. A
transfer or assignment is subject to our acceptance. Prior to receipt of this
notice, we will not be deemed to know of or be obligated under any assignment
prior to our receipt and acceptance thereof. We assume no responsibility for the
validity or sufficiency of any assignment. Transfer of all or a portion of
ownership rights may affect the minimum death benefit (see "Death Benefits").
Reports to You: We send any statements and reports required by
applicable law or regulation to you at your last known address of record. Owners
should therefore give us prompt notice of any address change. We reserve the
right, to the extent permitted by law and subject to your prior consent, to
provide any prospectus, prospectus supplements, confirmations, statements and
reports required by applicable law or regulation to you through our Internet
Website at http://www.americanskandia.com or any other electronic means,
including diskettes or CD ROMs. We send a confirmation statement to you each
time a transaction is made affecting Account Value, such as making additional
Purchase Payments, transfers, exchanges or withdrawals. We also send quarterly
statements detailing the activity affecting your Annuity during the calendar
quarter. You may request additional reports. We reserve the right to charge up
to $50.00 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 that are confirmed immediately, 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 an annual report and a semi-annual
report containing financial statements for the applicable Sub-accounts, as of
December 31 and June 30, respectively, to Owners or, with your prior consent,
make such documents available electronically through our Internet Website of
other electronic means.
SALE OF THE ANNUITIES: American Skandia Marketing, Incorporated ("ASM, Inc."), a
wholly-owned subsidiary of American Skandia Investment Holding Corporation, acts
as the principal underwriter of the Annuities. ASM, Inc.'s principal business
address is One Corporate Drive, Shelton, Connecticut 06484. ASM, Inc. is a
member of the National Association of Securities Dealers, Inc.
("NASD").
Distribution: ASM, Inc. will enter into distribution agreements with
certain broker-dealers registered under the Securities and Exchange Act of 1934
or with entities which may otherwise offer the Annuities that are exempt from
such registration. Under such distribution agreements such broker-dealers or
entities may offer Annuities to persons who have established an account with the
broker-dealer or entity. In addition, ASM, Inc. may offer Annuities directly to
potential purchasers. Concessions may be paid based on Account Value. The
maximum concession to be paid in connection with the sale is 0.30% per year of
the Account Value. We reserve the right to base concessions from time-to-time on
the investment options chosen by Annuity Owners, including investment options
that may be deemed our "affiliates" or "affiliates" of ASM, Inc. under the
Investment Company Act of 1940.
Advertising: We may advertise certain information regarding the
performance of the investment options. Details on how we calculate performance
measures for the Sub-accounts are found in the Statement of Additional
Information. This performance information may help you review the performance of
the investment options and provide a basis for comparison with other annuities.
This information may be less useful when comparing the performance of the
investment options with other savings or investment vehicles. Such other
investments may not provide some of the benefits of annuities, or may not be
designed for long-term investment purposes. Additionally other savings or
investment vehicles may not be treated like annuities under the Code.
The information we may advertise regarding the Fixed Allocations may include the
then current interest rates we are crediting to new Fixed Allocations.
Information on Current Rates will be as of the date specified in such
advertisement. Given that the actual rates applicable to any Fixed Allocation
are as of the date of any such Fixed Allocation's Guarantee Period begins, the
rate credited to a Fixed Allocation may be more or less than those quoted in an
advertisement.
Performance information on the Sub-accounts is based on past performance only
and is no indication of future performance. Performance of the Sub-accounts
should not be considered a representation of the performance of such
Sub-accounts in the future. Performance of the Sub-accounts is not fixed. Actual
performance will depend on the type, quality and, for some of the Sub-accounts,
the maturities of the investments held by the underlying mutual funds or
portfolios and upon prevailing market conditions and the response of the
underlying mutual funds to such conditions. Actual performance will also depend
on changes in the expenses of the underlying mutual funds or portfolios. Such
changes are reflected, in turn, in the Sub-accounts which invests in such
underlying mutual fund or portfolio. In addition, the amount of charges assessed
against each Sub-account will affect performance.
Some of the underlying mutual fund portfolios existed prior to the inception of
these Sub-accounts. Performance quoted in advertising regarding such
Sub-accounts may indicate periods during which the Sub-accounts have been in
existence but prior to the initial offering of the Annuities, or periods during
which the underlying mutual fund portfolios have been in existence, but the
Sub-accounts have not. Such hypothetical performance is calculated using the
same assumptions employed in calculating actual performance since inception of
the Sub-accounts.
Advertisements we distribute may also compare the performance of our
Sub-accounts with: (a) certain unmanaged market indices, including but not
limited to the Dow Jones Industrial Average, the Standard & Poor's 500, the
Shearson Lehman Bond Index, the Frank Russell non-U.S. Universal Mean, the
Morgan Stanley Capital International Index of Europe, Asia and Far East Funds,
and the Morgan Stanley Capital International World Index; and/or (b) other
management investment companies with investment objectives similar to the mutual
fund or portfolio underlying the Sub-accounts being compared. This may include
the performance ranking assigned by various publications, including but not
limited to the Wall Street Journal, Forbes, Fortune, Money, Barron's, Business
Week, USA Today and statistical services, including but not limited to Lipper
Analytical Services Mutual Funds Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, SEI, the Morningstar Mutual Fund
Sourcebook and the Morningstar Variable Annuity/Life Sourcebook.
American Skandia Life Assurance Corporation may advertise its rankings and/or
ratings by independent financial ratings services. Such rankings may help you in
evaluating our ability to meet our obligations in relation to Fixed Allocations,
pay minimum death benefits, pay annuity payments or administer Annuities. Such
rankings and ratings do not reflect or relate to the performance of Separate
Account B.
CERTAIN TAX CONSIDERATIONS: The following is a brief summary of certain Federal
income tax laws as they are currently interpreted. No one can be certain that
the laws or interpretations will remain unchanged or that agencies or courts
will always agree as to how the tax law or regulations are to be interpreted.
This discussion is not intended as tax advice. You may wish to consult a
professional tax advisor for tax advice as to your particular situation.
Our Tax Considerations: We are taxed as a life insurance company under
Part I, subchapter L, of the Code.
Tax Considerations Relating to Your Annuity: Section 72 of the Code
governs the taxation of annuities in general. Taxation of an annuity is largely
dependent upon: (a) whether it is used in a qualified pension or profit sharing
plan or other retirement arrangement eligible for special treatment under the
Code; and (b) the status of the beneficial owner as either a natural or
non-natural person (when the annuity is not used in a retirement plan eligible
for special tax treatment). Non-natural persons include corporations, trusts,
and partnerships, except where these entities own an annuity 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 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. With respect to
Roth IRAs only, distributions are not subject to federal income tax or the 10%
penalty tax if five (5) tax years have passed since the first contribution was
made or any conversion from a traditional IRA was made, and the distribution is
made (a) once the taxpayer is age 59 1/2 or older, (b) upon the death or
disability of the taxpayer, or (c) for qualified first-time home buyer expenses,
subject to certain limitations. Distributions from a Roth IRA that are not
"qualified" as described above may be subject to a penalty tax.
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 estate and 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
generation-skipping transfers generally include those subject to federal estate
or gift tax rules. There is an aggregate $1 million exemption from taxes for all
such transfers. We may be required to determine whether a transaction is 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 of tax we are required to pay.
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. Such persons may also maintain a form of IRA called a "Roth IRA".
Contributions to a Roth IRA are not deductible but, under certain circumstances,
distributions from such an account are tax-free. Purchasers of IRAs and Roth
IRAs will 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 qualified plans may be
rolled over or transferred into an IRA on a tax-deferred basis and the
conditions under which distributions from traditional IRAs may be rolled over
to, or the traditional IRA itself may be converted into a Roth IRA. Eligible
employers that meet specified criteria may establish Simplified Employee
Pensions using the employees' IRAs. These arrangements are known as SEP IRAs.
Employer contributions that may be made to SEP 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) and (g) do not apply to IRAs.
Section 457 Plans: Under Section 457 of the Code, deferred compensation
plans established by governmental and certain other tax exempt employers for
their employees may invest in annuity contracts. The Code limits contributions
and distributions, and imposes eligibility requirements as well. Contributions
are not taxable to employees until distributed from the plan. However, plan
assets remain the property of the employer and are subject to the claims of the
employer's general creditors until such assets are made available to
participants or their beneficiaries.
OTHER MATTERS: Outlined below are certain miscellaneous matters you should know
before investing in an Annuity.
Deferral of Transactions: We may defer any distribution or transfer
from a Fixed Allocation or an annuity payout for a period not to exceed the
lesser of 6 months or the period permitted by law. If we defer a distribution or
transfer from any Fixed Allocation or any annuity payout for more than thirty
days, or less where required by law, we pay interest at the minimum rate
required by law but not less than 3%, or at least 4% if required by your
contract, per year on the amount deferred. We may defer payment of proceeds of
any distribution from any Sub-account or any transfer from a Sub-account for a
period not to exceed 7 calendar days from the date the transaction is effected.
Any deferral period begins on the date such distribution or transfer would
otherwise have been transacted (see "Pricing of Transfers and Distributions").
All procedures, including payment, based on the valuation of the Sub-accounts
may be postponed during the period: (1) the New York Stock Exchange is closed
(other than customary holidays or weekends) or trading on the New York Stock
Exchange is restricted as determined by the SEC; (2) the SEC permits
postponement and so orders; or (3) the SEC determines that an emergency exists
making valuation or disposal of securities not reasonably practical.
Resolving Material Conflicts: Underlying mutual funds or portfolios may
be available to registered separate accounts offering either or both life and
annuity contracts of insurance companies not affiliated with us. We also may
offer life insurance and/or annuity contracts that offer different variable
investment options from those offered under this Annuity, but which invest in
the same underlying mutual funds or portfolios. It is possible that differences
might arise between our Separate Account B and one or more accounts of other
insurance companies which participate in a portfolio. It is also possible that
differences might arise between a Sub-account offered under this Annuity and
variable investment options offered under different life insurance policies or
annuities we offer, even though such different variable investment options
invest in the same underlying mutual fund or portfolio. In some cases, it is
possible that the differences could be considered "material conflicts". Such a
"material conflict" could also arise due to changes in the law (such as state
insurance law or Federal tax law) which affect either these different life and
annuity separate accounts or differing life insurance policies and annuities. It
could also arise by reason of differences in voting instructions of persons with
voting rights under our policies and/or annuities and those of other companies,
persons with voting rights under annuities and those with rights under life
policies, or persons with voting rights under one of our life policies or
annuities with those under other life policies or annuities we offer. It could
also arise for other reasons. We will monitor events so we can identify how to
respond to such conflicts. If such a conflict occurs, we will take the necessary
action to protect persons with voting rights under our life policies or
annuities vis-a-vis those with rights under life policies or annuities offered
by other insurance companies. We will also take the necessary action to treat
equitably persons with voting rights under this Annuity and any persons with
voting rights under any other life policy or annuity we offer.
Modification: We reserve the right to any or all of the following: (a)
combine a Sub-account with other Sub-accounts; (b) combine Separate Account B or
a portion thereof with other "unitized" separate accounts; (c) terminate
offering certain Guarantee Periods for new or renewing Fixed Allocations; (d)
combine Separate Account D with other "non-unitized" separate accounts; (e)
deregister Separate Account B under the 1940 Act; (f) operate Separate Account B
as a management investment company under the 1940 Act or in any other form
permitted by law; (g) make changes required by any change in the Securities Act
of 1933, the Exchange Act of 1934 or the 1940 Act; (h) make changes that are
necessary to maintain the tax status of your Annuity under the Code; (i) make
changes required by any change in other Federal or state laws relating to
retirement annuities or annuity contracts; and (j) 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 "unitized" separate account. We also reserve the right to
transfer assets of Separate Account D which we determine to be associated with
the class of contracts to which your annuity belongs, to another "non-unitized"
separate account. We notify you (and/or any payee during the payout phase) of
any modification to your Annuity. We may endorse your Annuity to reflect the
change.
Misstatement of Age or Sex: If there has been a misstatement of the age
and/or sex of any person upon whose life annuity payments or the minimum death
benefit are based, we make adjustments to conform to the facts. As to annuity
payments: (a) any underpayments by us will be remedied on the next payment
following correction; and (b) any overpayments by us will be charged against
future amounts payable by us under your Annuity.
Ending the Offer: We may limit or discontinue offering Annuities.
Existing Annuities will not be affected by any such action.
Indemnification: Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is therefore unenforceable.
Legal Proceedings: As of the date of this Prospectus, neither we nor
ASM, Inc. were involved in any litigation outside of the ordinary course of
business, and know of no material claims.
THE COMPANY: American Skandia Life Assurance Corporation (the "Company") is a
stock life insurance company domiciled in Connecticut with licenses in all 50
states. It is a wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"), 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.
In addition, the Company has 99.9% ownership in Skandia Vida, S.A. de C.V.
which is a life insurance company domiciled in Mexico. This Mexican life insurer
is a start up company with expectations of selling long-term savings products
within Mexico. The Company's investment in Skandia Vida, S.A. de C.V. is $1.5
million at December 31,1997.
Lines of Business: 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; c) certain group
variable annuities that are not registered with the Securities and Exchange
Commission that serve as funding vehicles for various types of qualified pension
and profit sharing plans; and d) fixed and adjustable immediate annuities.
Selected Financial Data: The following selected financial data is
qualified by reference to, and should be read in conjunction with, the financial
statements, including related notes thereto, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The selected financial data as of and for each of the years
ended December 31, 1997, 1996, 1995, 1994 and 1993 has not been audited. The
selected financial data has been derived from the full financial statements for
the years ended December 31, 1997, 1996, 1995, 1994 and 1993 which were
presented in conformity with generally accepted accounting principles and which
were audited by Ernst & Young LLP, independent auditors, with respect to the
year ended December 31, 1997 and Deloitte & Touche LLP, independent auditors,
with respect to the years ended December 31, 1996 and 1995, whose respective
reports on the Company's consolidated financial statements as of December 31,
1997 and 1996, and for the three years in the period ended December 31, 1997,
are included herein.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Income Statement Data:
Revenues:
Annuity charges and fees* $ 121,157,846 $ 69,779,522 $ 38,837,358 $ 24,779,785 $ 11,752,984
Fee income 27,587,231 16,419,690 6,205,719 2,111,801 938,336
Net investment income 8,181,073 1,585,819 1,600,674 1,300,217 692,758
Annuity premium income
and other revenues 1,088,144 265,103 45,524 92,608 432,936
--------------- -------------- -------------- -------------- --------------
Total revenues $ 158,014,294 $ 88,050,134 $ 46,689,275 $ 28,284,411 $ 13,817,014
=============== ============== ============== ============== ==============
Benefits and Expenses:
Annuity benefits 2,033,275 613,594 555,421 369,652 383,515
Increase/(decrease) in annuity
policy reserves 37,270 634,540 (6,778,756) 5,766,003 1,208,454
Cost of minimum death benefit
reinsurance 4,544,697 2,866,835 2,056,606 - -
Return credited
to contractowners (2,018,635) 672,635 10,612,858 (516,730) 252,132
Underwriting, acquisition and
other insurance expenses 90,496,952 49,887,147 35,914,392 18,942,720 9,547,951
Interest expense 24,895,456 10,790,716 6,499,414 3,615,845 187,156
--------------- -------------- -------------- -------------- --------------
Total benefits and expenses $ 119,989,015 $ 65,465,467 $ 48,859,935 $ 28,177,490 $ 11,579,208
=============== ============== ============== ============== ==============
Income tax (benefit) expense $ 10,477,746 $ (4,038,357) $ 397,360 $ 247,429 $ 182,965
=============== ============== ============== ============== ==============
Net income (loss) $ 27,547,533 $ 26,623,024 $ (2,568,020) $ (140,508) $ 2,054,841
=============== ============== ============== ============== ==============
Balance Sheet Data:
Total Assets $12,972,416,108 $8,347,695,595 $5,021,012,890 $2,864,416,329 $1,558,548,537
=============== ============== ============== ============== ==============
Future fees payable
to parent $ 233,033,818 $ 47,111,936 $ 0 $ 0 $ 0
=============== ============== ============== ============== ==============
Surplus Notes $ 213,000,000 $ 213,000,000 $ 103,000,000 $ 69,000,000 $ 20,000,000
=============== ============== ============== ============== ==============
Shareholder's Equity $ 184,421,044 $ 126,345,031 $ 59,713,000 $ 52,205,524 $ 52,387,687
=============== ============== ============== ============== ==============
</TABLE>
* On annuity sales of $3,697,990,000, $2,795,114,000, $1,628,486,000,
$1,372,874,000 and $890,640,000 during the years ended December 31, 1997,
1996, 1995, 1994, and 1993, respectively, with contractowner assets under
management of $12,119,191,000, $7,764,891,000, $4,704,044,000,
$2,661,161,000 and $1,437,554,000 as of December 31, 1997, 1996, 1995,
1994 and 1993, respectively.
The above selected financial data should be read in conjunction with the
financial statements and the notes thereto.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS The Company's long term business plan was developed
reflecting the current sales and marketing approach. Annuity sales increased
32%, 72% and 19% in 1997, 1996 and 1995, respectively. The Company continues to
show significant growth in sales volume and increased market share within the
variable annuity industry. This growth is a result of innovative product
development activities, expansion of distribution channels and a focused effort
on customer orientation.
The Company primarily offers and sells a wide range of deferred
annuities through three focused marketing, sales and service teams.
Each team specializes in addressing one of the Company's primary
distribution channels: (a) financial planning firms; (b) broker-dealers
that generally are members of the New York Stock Exchange, including
"wirehouse" and regional broker-dealer firms; and (c) broker-dealers
affiliated with banks or which specialize in marketing to customers of
banks. The Company also offers a number of specialized products
distributed by select, large distributors. In 1995 and 1996, the
Company restructured its internal operations to better support the
specialized marketing, sales and service needs of the primary
distribution channels and of the select distributors of specialized
products. There has been continued growth and success in expanding the
number of selling agreements in the primary distribution channels.
There has also been increased success in enhancing the relationships
with the registered representatives/insurance agents of all the selling
firms.
<PAGE>
Total assets grew 55%, 66% and 75% in 1997, 1996 and 1995,
respectively. These increases were a direct result of the
substantial sales volume increasing separate account assets and
deferred acquisition costs as well as 1997 and 1996 growth in
fixed maturity investments in support of the Company's risk based
capital requirements. Liabilities grew 56%, 65%, and 76% in 1997,
1996 and 1995, respectively, as a result of the reserves required
for the increased sales activity along with borrowings during
these periods. The borrowings are needed to fund the acquisition
costs of the Company's variable annuity business.
The Company experienced a net gain after tax in 1997 and 1996 and
a net loss after tax in 1995. The 1997 and 1996 results were
related to the strong sales volume, favorable market climate,
expense savings relative to sales volume and recognition of
certain tax benefits.
The 1995 result was related to higher than anticipated expense
levels and additional reserving requirements on our market value
adjusted annuities. The increase in expenses was primarily
attributable to improving our service infrastructure and
marketing related costs, which was in part responsible for the
strong sales and financial performance in 1996.
Increasing volume of annuity sales results in higher assets under
management. The fees realized on assets under management have
resulted in annuity charges and fees increasing 74%, 80% and 57%
in 1997, 1996 and 1995, respectively.
Fee income has increased 68%, 165% and 194% in 1997, 1996 and
1995, respectively, as a result of income from transfer agency
type activities. These increases are also as a result of
increases in assets under management.
Net investment income increased 416% in 1997, decreased 1% in
1996 and increased 23% in 1995. The increase in 1997 was a direct
result of increased bond holdings in support of the Company's
risk based capital. The level net investment income in 1996 was a
result of the consistent investment holdings throughout most of
the year. The increase in 1995 was a result of a higher average
level of Company bonds and short-term investments.
Annuity premium income represents premiums earned on sales of
immediate annuities with life contingencies and supplementary
contracts with life contingencies.
Annuity benefits represent payments on annuity contracts with
mortality risks, these being immediate annuity contracts with
life contingencies and supplementary contracts with life
contingencies.
Increase/(decrease) in annuity policy reserves represents changes
in reserves for the immediate annuity with life contingencies,
supplementary contracts with life contingencies and guaranteed
minimum death benefits. During 1995, the Company entered into an
agreement to reinsure the guaranteed minimum death benefit
exposure on most of the variable annuity contracts. The costs
associated with reinsuring the guaranteed minimum death benefit
reserve exceeded the change in the guaranteed minimum death
benefit reserve during 1997 and 1996 as a result of minimum
required premiums within the reinsurance contract. The costs
associated with reinsuring the guaranteed minimum death benefit
reserve approximate the change in the guaranteed minimum death
benefit reserve during 1995, thereby having no significant effect
on the statement of operations.
Return credited to contractowners represents revenues on the
variable and market value adjusted annuities offset by the
benefit payments and change in reserves required on this
business. Also included are the benefit payments and change in
reserves on immediate annuity contracts without significant
mortality risks. The 1997 return credited to contractowners in
the amount of ($2.0) millions represents a break-even year for
our market value adjusted product line for the year. The 1996
return credited to contractowners in the amount of $0.7 million
represents a favorable investment return on the market value
adjusted contracts relating to the benefits and required
reserves, offset by the effect of bond market fluctuations on
December 31, 1996 in the amount of $1.8 million. While the
assets relating to the market value adjusted contracts reflect
the market interest rate fluctuations which occurred on December
31, 1996, the liabilities are based on the interest rates set
for new contracts which are generally based on the prior day's
interest rates. During the first week of January 1997, interest
rates were established for new contracts, thereby bringing the
liabilities relating to the market value adjusted contracts in
line with the related assets. Consequently, the gain realized in
1997 was a result of this liability shift.
In 1995, the Company earned a lower than anticipated separate
account investment return on the market value adjusted contracts
in support of the benefits and required reserves. In addition,
the 1995 result includes an increase in the required reserves
associated with this product.
Underwriting, acquisition and other insurance expenses for 1997
were made up of $186.9 million of commissions and $94.5 million
of general expenses offset by the net capitalization of deferred
acquisition costs totaling $191.1 million. This compares to the
same period last year of $140.4 million of commissions and $63.2
million of general expenses offset by the net capitalization of
deferred acquisition costs totaling $153.9 million.
Underwriting, acquisition and other insurance expenses for 1995
is made up of $62.8 million of commissions and $42.2 million of
general expenses offset by the net capitalization of deferred
acquisition costs totaling $69.2 million.
Interest expense increased $14.1 million, $4.3 million and $2.9
million in 1997, 1996 and 1995, respectively, as a result of
Surplus Notes totaling $213 million, $213 million and $103
million, at December 31, 1997, 1996 and 1995, respectively, along
with interest on Securitization (future fees payable to Parent)
transactions for the year 1997.
Income tax reflected an expense of $10.5 million for the year
ended December 31, 1997, a benefit of $4 million for the year
ended December 31, 1996 and an expense of $0.4 million for the
year ended December 31, 1995. The 1997 income tax expense is a
net result of applying the federal income tax rate of 35% to
pre-tax earnings reduced by permanent differences, with the most
significant item being the dividend received deduction. The 1996
benefit is related to management's release of the deferred tax
valuation allowance of $9.3 million, established prior to 1996.
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 future
to realize its deferred tax assets. Income tax expense in 1995
relates principally to an increase in the deferred tax valuation
allowance of $1.7 million, as well as, the Company being in an
Alternative Minimum Tax position for the year.
Liquidity and Capital Resources: The liquidity requirement of the
Company was met by cash from insurance operations, investment
activities, borrowings from its Parent and sale of rights to
future fees and charges to its Parent.
As previously stated, the Company continued to have significant
growth during 1997. The sales volume of $3.698 billion was
primarily (approximately 94%) variable annuities, most of which
carry a contingent deferred sales charge. This type of product
causes a temporary cash strain in that 100% of the proceeds are
invested in separate accounts supporting the product leaving a
cash (but not capital) strain caused by the acquisition cost for
the new business. This cash strain required the Company to look
beyond the cash made available by insurance operations and
investments of the Company. During 1996, the Company borrowed an
additional $110 million from its Parent in the form of Surplus
Notes. Also, during 1997 and 1996, the Company extended its
reinsurance agreements (which were initiated in 1993, 1994 and
1995). The reinsurance agreements are modified coinsurance
arrangements where the reinsurer shares in the experience of a
specific book of business. The income and expense items presented
above are net of reinsurance.
In addition, 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
(Transaction 1996-1). Also, the Company entered into the
following similar transactions during 1997.
Closing Effective Contract Issue
Transaction Date Date Period
----------- ------- --------- --------------
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
In connection with these transactions, the Parent, through a
trust, 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 Agreements, the rights sold
provide for the Parent to receive 80% (100% for Transaction
1997-3) of future mortality and expense charges and contingent
deferred sales charges, after reinsurance where applicable,
expected to be realized over the remaining surrender charge
period of the designated contracts (6 to 8 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 sales 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 of the transactions (discounted at 7.5%) of future fees as
of the respective Effective Date was as follows (amounts in
millions):
Present
Transaction Value
----------- -------
1996-1 $50.2
1997-1 58.8
1997-2 77.6
1997-3 58.2
<PAGE>
The Company expects to use borrowing, reinsurance and the sale of
future fee revenues to fund the cash strain anticipated from the
acquisition costs on the coming years' sales volume.
The tremendous growth of this young organization has depended on
capital support from its Parent. During December 1997, the
Company received $27.7 million from its Parent to support the
capital needs of its increased business during 1997 and the
anticipated 1998 growth in business.
As of December 31, 1997 and 1996, shareholder's equity was $184.4
million and $126.3 million, respectively, which includes the
carrying value of state insurance licenses in the amount of $4.6
million and $4.7 million, respectively.
ASLAC has long term surplus notes with its Parent and a
short-term borrowing with an affiliate. No dividends have been
paid to its parent company.
Year 2000 Compliance: The Company is a relatively young company
whose internally developed systems were designed from the start
with the correct four digit date fields. As a result, the
Company anticipates few technical problems related to the year
2000. However, we take this matter seriously and continue to
take precautions to ensure year 2000 compliance.
Steps taken to date include:
1. Any new, externally developed software is evaluated for year
2000 compliance before purchase. We also evaluate all new
service providers.
2. An external specialist had been engaged to perform a complete
assessment ofthe Company's operating systems and internally
developed software.
3. The Company is working with external business partners and
software providers to request and review their year 2000
compliance status and plans.
We anticipate full internal compliance by September 1998,
followed by continuous evaluation of internal systems, external
business partners and software providers until the year 2000.
Reserves: We are obligated to carry on our statutory books, as
liabilities, actuarial reserves to meet our obligations on outstanding annuity
or life insurance contracts. This is required by the life insurance laws and
regulations in the jurisdictions in which we do business. Such reserves are
based on mortality and/or morbidity tables in general use in the United States.
In general, reserves are computed amounts that, with additions from premiums to
be received, and with interest on such reserves compounded at certain assumed
rates, are expected to be sufficient to meet our policy obligations at their
maturities if death occurs in accordance with the mortality tables employed. In
the accompanying Financial Statements these reserves for policy obligations are
determined in accordance with generally accepted accounting principles and are
included in the liabilities of our separate accounts and the general account
liabilities for future benefits of annuity or life insurance contracts we issue.
Competition: We are engaged in a business that is highly competitive
due to the large number of insurance companies and other entities competing in
the marketing and sale of insurance products. There are approximately 2300
stock, mutual and other types of insurers in the life insurance business in the
United States.
Employees: As of December 31, 1997, we had 456 direct salaried
employees. An affiliate, American Skandia Information Services and Technology
Corporation, which provides services almost exclusively to us, had 79 direct
salaried employees.
Regulation: We are organized as a Connecticut stock life insurance
company, and are subject to Connecticut law governing insurance companies. We
are regulated and supervised by the Connecticut Commissioner of Insurance. By
March 1 of every year, we must prepare and file an annual statement, in a form
prescribed by the Connecticut Insurance Department, which covers our operations
for the preceding calendar year, and must prepare and file our statement of
financial condition as of December 31 of such year. The Commissioner and his or
her agents have the right at all times to review or examine our books and
assets. A full examination of our operations will be conducted periodically
according to the rules and practices of the National Association of Insurance
Commissioners ("NAIC"). We are subject to the insurance laws and various federal
and state securities laws and regulations and to regulatory agencies, such as
the Securities and Exchange Commission (the "SEC") and the Connecticut Banking
Department, which administer those laws and regulations.
We can be assessed up to prescribed limits for policyholder losses incurred by
insolvent insurers under the insurance guaranty fund laws of most states. We
cannot predict or estimate the amount any such future assessments we may have to
pay. However, the insurance guaranty laws of most states provide for deferring
payment or exempting a company from paying such an assessment if it would
threaten such insurer's financial strength.
Several states, including Connecticut, regulate insurers and their affiliates
under insurance holding company laws and regulations. This applies to us and our
affiliates. Under such laws, inter-company transactions, such as dividend
payments to parent companies and transfers of assets, may be subject to prior
notice and approval, depending on factors such as the size of the transaction in
relation to the financial position of the companies.
Currently, the federal government does not directly regulate the business of
insurance. However, federal legislative, regulatory and judicial decisions and
initiatives often have significant effects on our business. Types of changes
that are most likely to affect our business include changes to: (a) the taxation
of life insurance companies; (b) the tax treatment of insurance products; (c)
the securities laws, particularly as they relate to insurance and annuity
products; (d) the "business of insurance" exemption from many of the provisions
of the anti-trust laws; (e) the barriers preventing most banks from selling or
underwriting insurance: and (f) any initiatives directed toward improving the
solvency of insurance companies. We would also be affected by federal
initiatives that have impact on the ownership of or investment in United States
companies by foreign companies or investors.
<TABLE>
<CAPTION>
Executive Officers and Directors:
Our executive officers, directors and certain significant employees, their ages,
positions with us and principal occupations are indicated below. The immediately
preceding work experience is provided for officers that have not been employed
by us or an affiliate for at least five years as of the date of this Prospectus.
<S> <C> <C> <C>
Name/ Position with American Skandia
Age Life Assurance Corporation Principal Occupation
Gordon C. Boronow* Deputy Chief Executive Deputy Chief Executive
45 Officer and President Officer and President:
Director (since July, 1991) American Skandia Life
Assurance Corporation
Nancy F. Brunetti Director (since February, 1996) Executive Vice President and
36 Chief Operating Officer:
American Skandia Information
Services and Technology Corporation
Malcolm M. Campbell Director (since July, 1991) Director of Operations and
42 Chief Actuary, Assurance and
Financial Services Division:
Skandia Insurance Company Ltd.
Jan R. Carendi* Chief Executive Senior Executive Vice President and
53 Officer and Member of Executive Management Group:
Chairman of the Skandia Insurance Company Ltd.
Board of Directors
Director (since May, 1988)
Lincoln R. Collins Executive Vice President and Executive Vice President
37 Chief Operating Officer and Chief Operating Officer:
Director (since February, 1996) American Skandia Life
Assurance Corporation
Henrik Danckwardt Director (since July, 1991) Director of Finance
44 and Administration,
Assurance and Financial
Services Division:
Skandia Insurance Company Ltd.
Wade A. Dokken Director (since July, 1991) President and Deputy
38 Chief Executive Officer:
American Skandia Marketing, Incorporated
Brian L. Hirst Vice President, Vice President,
50 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,
46 Product Development Product Development:
American Skandia Life
Assurance Corporation
Thomas M. Mazzaferro Executive Vice President and Executive Vice President and
45 Chief Financial Officer, Chief Financial Officer:
Director (since September, 1994) American Skandia Life
Assurance Corporation
Gunnar J. Moberg Director (since October, 1994) Director - Marketing and Sales,
43 Assurances and Financial
Services Division:
Skandia Insurance Company Ltd.
David R. Monroe Vice President, Vice President,
36 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.
Rodney D. Runestad Vice President Vice President:
48 American Skandia Life
Assurance Corporation
Anders O. Soderstrom Executive Vice President and President and
38 Chief Information Officer Chief Information Officer:
Director (since September, 1994) American Skandia Information
Services and Technology Corporation
Amanda C. Sutyak Executive Vice President Vice President
40 Director (since July, 1991) American Skandia
Marketing, Incorporated
C. Ake Svensson Treasurer, Vice President, Corporate
47 Director (since December, 1994) Controller and Treasurer:
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 September, 1994) Senior Vice President,
50 National Sales Manager:
American Skandia
Marketing, Incorporated
Jeffrey M. Ulness Vice President, Vice President,
37 Product Management Product Management:
American Skandia Life
Assurance Corporation
Mr. Ulness joined us in 1994. He previously held the positions of Counsel at
North American Security Life Insurance Company from March, 1991 to July, 1994
and Associate at LeBoeuf, Lamb, Leiby, Green and MacRae from January, 1990 to
March 1991.
- --------
* Trustees of American Skandia Trust, one of the underlying mutual funds in
which the Sub-accounts offered pursuant to this Prospectus invest.
</TABLE>
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION: The following are the
contents of the Statement of Additional Information:
(1) General Information Regarding American Skandia Life Assurance
Corporation
(2) Principal Underwriter
(3) Calculation of Performance Data
(4) Unit Price Determinations
(5) Calculating the Market Value Adjustment
(6) Independent Auditors
(7) Legal Experts
(8) Appendix A - Financial Statements for Separate Account B (Class 2
Sub-accounts)
FINANCIAL STATEMENTS: The consolidated financial statements which follow in
Appendix A are those of American Skandia Life Assurance Corporation as of
December 31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997. Financial statements for the Class 2 Sub-accounts of Separate
Account B are found in the Statement of Additional Information.
<PAGE>
APPENDIXES
APPENDIX A FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
APPENDIX B SHORT DESCRIPTIONS OF THE UNDERLYING MUTUAL FUNDS' PORTFOLIO
INVESTMENT OBJECTIVES AND POLICIES
APPENDIX C PRIOR CONTRACT
<PAGE>
APPENDIX A
FINANCIAL STATEMENTS FOR AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the consolidated statement of financial condition of American
Skandia Life Assurance Corporation (the "Company" which is a wholly-owned
subsidiary of Skandia Insurance Company Ltd.) as of December 31, 1997, and the
related consolidated statements of operations, shareholder's equity, and cash
flows for the year then ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Skandia Life Assurance Corporation at December 31, 1997, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
- --------------------
Hartford, Connecticut
February 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying consolidated statement 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 the
related consolidated statements of operations, shareholder's equity, and cash
flows for each of the two 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 the results of
their operations and their cash flows for each of the two 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>
<S> <C> <C>
AS OF DECEMBER 31,
1997 1996
--------------- --------------
ASSETS
Investments:
Fixed maturities - at amortized cost $ 9,366,671 $ 10,090,369
Fixed maturities - at fair value 108,323,668 87,369,724
Investment in mutual funds - at fair value 6,710,851 2,637,731
Policy loans 687,267 159,482
--------------- --------------
Total investments 125,088,457 100,257,306
Cash and cash equivalents 81,974,204 45,332,131
Accrued investment income 2,441,671 1,958,546
Fixed assets 356,153 229,780
Deferred acquisition costs 628,051,995 438,640,918
Reinsurance receivable 3,120,221 2,167,818
Receivable from affiliates 1,910,895 691,532
Income tax receivable - current 1,047,493 -
Income tax receivable - deferred 26,174,369 17,217,582
State insurance licenses 4,562,500 4,712,500
Other assets 2,524,581 2,047,689
Separate account assets 12,095,163,569 7,734,439,793
--------------- --------------
Total Assets $12,972,416,108 $8,347,695,595
=============== ==============
LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES:
Reserve for future contractowner benefits $ 43,204,443 $ 36,245,936
Policy reserves 24,414,999 21,238,749
Income tax payable - 1,124,151
Drafts outstanding 19,277,706 13,032,719
Accounts payable and accrued expenses 71,190,019 65,471,294
Payable to affiliates 584,283 685,724
Future fees payable to parent 233,033,818 47,111,936
Payable to reinsurer 78,126,227 79,000,262
Short-term borrowing 10,000,000 10,000,000
Surplus notes 213,000,000 213,000,000
Separate account liabilities 12,095,163,569 7,734,439,793
--------------- --------------
Total Liabilities 12,787,995,064 8,221,350,564
--------------- --------------
SHAREHOLDER'S EQUITY:
Common stock, $80 par, 25,000 shares
authorized, issued and outstanding 2,000,000 2,000,000
Additional paid-in capital 151,527,229 122,250,117
Unrealized investment gains and losses, net 954,069 (319,631)
Foreign currency translation, net (286,038) (263,706)
Retained earnings 30,225,784 2,678,251
--------------- --------------
Total Shareholder's Equity 184,421,044 126,345,031
--------------- --------------
Total Liabilities and Shareholder's Equity $12,972,416,108 $8,347,695,595
=============== ==============
</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>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ -----------
REVENUES:
Annuity charges and fees $121,157,846 $69,779,522 $38,837,358
Fee income 27,587,231 16,419,690 6,205,719
Net investment income 8,181,073 1,585,819 1,600,674
Annuity premium income 920,042 125,000 -
Net realized capital gains 87,103 134,463 36,774
Other 80,999 5,640 8,750
------------ ----------- -----------
Total Revenues 158,014,294 88,050,134 46,689,275
------------ ----------- -----------
BENEFITS AND EXPENSES:
Benefits:
Annuity benefits 2,033,275 613,594 555,421
Increase/(decrease) in annuity policy reserves 37,270 634,540 (6,778,756)
Cost of minimum death benefit reinsurance 4,544,697 2,866,835 2,056,606
Return credited to contractowners (2,018,635) 672,635 10,612,858
------------ ----------- -----------
4,596,607 4,787,604 6,446,129
------------ ----------- -----------
Expenses:
Underwriting, acquisition and other insurance expenses 90,346,952 49,737,147 35,764,392
Amortization of state insurance licenses 150,000 150,000 150,000
Interest expense 24,895,456 10,790,716 6,499,414
------------ ----------- -----------
115,392,408 60,677,863 42,413,806
------------ ----------- -----------
Total Benefits and Expenses 119,989,015 65,465,467 48,859,935
------------ ----------- -----------
Income (loss) from operations
before income taxes 38,025,279 22,584,667 (2,170,660)
Income tax expense (benefit) 10,477,746 (4,038,357) 397,360
------------ ----------- -----------
Net income (loss) $ 27,547,533 $26,623,024 $(2,568,020)
============ =========== ===========
</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>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
------------ ------------ ------------
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 122,250,117 81,874,666 71,623,932
Additional contributions 29,277,112 40,375,451 10,250,734
------------ ------------ ------------
Balance at end of year 151,527,229 122,250,117 81,874,666
------------ ------------ ------------
Unrealized investment gains and losses:
Balance at beginning of year (319,631) 111,359 (41,655)
Change in unrealized investment gains and losses, net 1,273,700 (430,990) 153,014
------------ ------------ ------------
Balance at end of year 954,069 (319,631) 111,359
------------ ------------ ------------
Foreign currency translation:
Balance at beginning of year (263,706) (328,252) -
Change in foreign currency translation, net (22,332) 64,546 (328,252)
------------ ------------ ------------
Balance at end of year (286,038) (263,706) (328,252)
------------ ------------ ------------
Retained earnings (deficit):
Balance at beginning of year 2,678,251 (23,944,773) (21,376,753)
Net income (loss) 27,547,533 26,623,024 (2,568,020)
------------ ------------ ------------
Balance at end of year 30,225,784 2,678,251 (23,944,773)
------------ ------------ ------------
Total Shareholder's Equity $184,421,044 $126,345,031 $ 59,713,000
============ ============ ============
</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 CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31,
1997 1996 1995
--------------- --------------- --------------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income/(loss) $ 27,547,533 26,623,024 (2,568,020)
Adjustments to reconcile net income/(loss) to net cash
used in operating activities:
Increase/(decrease) in policy reserves 3,176,250 1,852,259 (4,667,765)
Amortization of bond discount 72,986 27,340 23,449
Amortization of insurance licenses 150,000 150,000 150,000
Change in receivable from/payable to affiliates (1,320,804) 540,484 (347,884)
Change in income tax receivable/payable (2,171,644) 1,688,001 (600,849)
Increase in other assets (603,265) (661,084) (372,120)
Increase in accrued investment income (483,125) (1,764,472) (20,420)
Increase in reinsurance receivable (952,403) (179,776) (1,988,042)
Increase in deferred acquisition costs, net (189,411,077) (168,418,535) (96,212,774)
Increase in income tax receivable - deferred (9,630,603) (16,903,477) -
Increase in accounts payable and accrued expenses 5,718,725 32,322,727 945,483
Increase in drafts outstanding 6,244,987 13,032,719 -
Change in foreign currency translation, net (34,356) (77,450) (328,252)
Realized gain on sale of investments (87,103) (134,463) (36,774)
--------------- --------------- --------------
Net cash used in operating activities (161,783,899) (111,902,703) (106,023,968)
--------------- --------------- --------------
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase of fixed maturity investments (28,905,493) (96,812,903) (614,289)
Proceeds from sale and maturity of fixed maturity investments 10,755,550 8,947,390 100,000
Purchase of shares in mutual funds (5,595,342) (2,160,347) (1,566,194)
Proceeds from sale of shares in mutual funds 1,415,576 1,273,640 867,744
Increase in policy loans (527,785) (104,427) (37,807)
Change in investments of separate account assets (3,691,031,470) (2,789,361,685) (1,609,415,439)
--------------- --------------- ---------------
Net cash used in investing activities (3,713,888,964) (2,878,218,332) (1,610,665,985)
--------------- --------------- ---------------
CASH FLOW FROM FINANCING ACTIVITIES:
Capital contributions from parent 29,277,112 40,375,451 10,250,734
Surplus notes - 110,000,000 34,000,000
Increase in future fees payable to parent 185,921,882 47,111,936 -
Increase/(decrease) in payable to reinsurer (874,035) 14,004,792 24,890,064
Proceeds from annuity sales 3,697,989,977 2,795,114,603 1,628,486,076
--------------- --------------- ---------------
Net cash provided by financing activities 3,912,314,936 3,006,606,782 1,697,626,874
--------------- --------------- ---------------
Net increase/(decrease) in cash and cash equivalents 36,642,073 16,485,747 (19,063,079)
--------------- --------------- ---------------
Cash and cash equivalents at beginning of year 45,332,131 28,846,384 47,909,463
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 81,974,204 45,332,131 28,846,384
=============== =============== ===============
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Income taxes paid $ 22,307,992 11,177,120 995,496
=============== =============== ===============
Interest paid $ 16,915,835 7,094,767 540,319
=============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements
December 31, 1997
1. ORGANIZATION AND OPERATION
American Skandia Life Assurance Corporation (the "Company") is a
wholly-owned subsidiary of American Skandia Investment Holding
Corporation (the "Parent"); whose ultimate parent is 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 has 99.9% ownership in Skandia Vida, S.A. de C.V. which is
a life insurance company domiciled in Mexico. This Mexican life
insurer is a start up company with expectations of selling long term
savings products within Mexico. Total shareholder's equity of Skandia
Vida, S.A. de C.V. is $1,509,146 as of December 31, 1997.
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.
Certain reclassifications have been made to prior year amounts to
conform with the current year presentation.
B. New Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") 130,
"Reporting Comprehensive Income", which is effective for fiscal
years beginning after December 15, 1997. SFAS 130 sets standards
for the reporting and display of comprehensive income and its
components in financial statements. Application of the new rules
will not impact the Company's financial position or net income. The
Company expects to adopt this pronouncement in the first quarter of
1998, which will include the presentation of comprehensive income
for prior periods presented for comparative purposes, as required
by SFAS 130. The primary element of comprehensive income applicable
to the Company is changes in unrealized gains and losses on
securities classified as available for sale.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
C. 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 fair 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 fair value and
changes in unrealized gains and losses are reported as a component
of shareholder's equity.
Policy loans are carried at their unpaid principal balances.
Realized gains and losses on disposal of investments are determined
by the specific identification method and are included in revenues.
D. Cash Equivalents
The Company considers all highly liquid time deposits, commercial
paper and money market mutual funds purchased with a maturity of
three months or less to be cash equivalents.
E. 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.
F. 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 $95,823 and $32,641 at December 31, 1997
and 1996, respectively. Depreciation expense for the years ended
December 31, 1997 and 1996 was $63,182 and $28,892, respectively.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
G. Recognition of Revenue and Contract Benefits
Annuity contracts without significant mortality risk, as defined by
SFAS 97, "Accounting and Reporting by Insurance Enterprises for
Certain Long-Duration Contracts", 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 for 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,
administration fees, surrender charges 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
changes 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, 1997 and 1996.
Annuity sales were $3,697,990,000, $2,795,114,000 and
$1,628,486,000 for the years ended December 31, 1997, 1996 and
1995, respectively. Annuity contract assets under management were
$12,119,191,000, $7,764,891,000 and $4,704,044,000 at December 31,
1997, 1996 and 1995, respectively.
H. 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. These costs include commissions, cost of contract
issuance, and certain selling expenses that vary with production.
These costs are being amortized generally in proportion to expected
gross profits from surrender charges, policy and asset based fees
and mortality and expense margins. This amortization is adjusted
retrospectively and prospectively when estimates of current and
future gross profits to be realized from a group of products are
revised.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Details of the deferred acquisition costs and related amortization
for the years ended December 31, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Balance at beginning of year $438,640,918 $270,222,383 $174,009,609
Acquisition costs deferred
during the year 262,257,543 190,995,588 106,063,698
Acquisition costs amortized
during the year 72,846,466 22,577,053 9,850,924
------------ ------------ ------------
Balance at end of year $628,051,995 $438,640,918 $270,222,383
============ ============ ============
</TABLE>
I. Separate Accounts
Assets and liabilities in Separate Accounts are shown as separate
captions in the consolidated statements of financial condition.
Separate Account assets consist principally of long term bonds,
investments in mutual funds and short-term securities, all of
which are carried at fair value.
Included in Separate Account liabilities are $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively, relating
to annuity contracts for which the contractholder is guaranteed a
fixed rate of return. Separate Account assets of $773,066,633 and
$644,233,883 at December 31, 1997 and 1996, respectively,
consisting of long term bonds, short term securities, transfers
due from general account and cash are held in support of these
annuity contracts, pursuant to state regulation.
J. Fair Values of Financial Instruments
The methods and assumptions used to determine the fair value of
financial instruments are as follows:
Fair values of fixed maturities with active markets are based on
quoted market prices. For fixed maturities that trade in less
active markets, fair values are obtained from an independent
pricing service.
Fair values of investments in mutual funds are based on quoted
market prices.
The carrying value of cash and cash equivalents approximates fair
value due to the short-term nature of these investments.
Fair values of certain financial instruments, such as future fees
payable to the parent and surplus notes are not readily
determinable and are excluded from fair value disclosure
requirements.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
K. Income Taxes
The Company is included in the consolidated federal income tax
return of Skandia U.S. Holding Corporation and its subsidiaries. In
accordance with the tax sharing agreement, the federal and state
income tax provision is computed on a separate return basis, as
adjusted for consolidated items, such as net operating loss
carryforwards.
Income taxes are provided in accordance with the SFAS 109,
"Accounting for Income Taxes", which requires the asset and
liability method of accounting for deferred taxes. The object of
this method is to recognize an asset and liability for the expected
future tax effects due to temporary differences between the
financial reporting and the tax basis of assets and liabilities,
based on enacted tax rates and other provisions of the tax law.
L. Translation of Foreign Currency
The financial position and results of operations of the Company's
Mexican subsidiary are measured using local currency as the
functional currency. Assets and liabilities of the subsidiary 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.
M. 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.
N. Reinsurance
The Company cedes reinsurance under modified co-insurance
arrangements. The reinsurance arrangements provide 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 also 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 fair
value of available-for-sale and held-to-maturity fixed maturities and
investments in mutual funds as of December 31, 1997 and 1996 are shown
below. All securities held at December 31, 1997 are publicly traded.
Investments in fixed maturities as of December 31, 1997 consisted of
the following:
Held-to-Maturity
----------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $3,789,498 $71,197 $ 8,517 $3,852,178
Obligations of State and
Political Subdivisions 50,000 - - 50,000
Corporate Securities 5,527,173 1,949 19,487 5,509,635
----------- ------- -------- -----------
Totals $9,366,671 $73,146 $28,004 $9,411,813
========== ======= ======= ==========
Available-for-Sale
------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $ 14,999,291 $ 201,664 - $15,200,955
Obligations of
State and Political
Subdivisions 202,224 318 - 202,542
Corporate
Securities 91,469,384 1,505,656 54,869 92,920,171
-------------- ----------- -------- ------------
Totals $106,670,899 $1,707,638 $54,869 $108,323,668
============ ========== ======= ============
</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 fair value of fixed maturities, by contractual
maturity, at December 31, 1997 are shown below.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity Available-for-Sale
---------------- ------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
Due in one year or less $1,049,977 $1,050,001 $ 2,990,584 $ 2,992,050
Due after one through five years 8,062,630 8,105,822 26,857,218 27,121,041
Due after five through ten years 254,064 255,990 76,823,097 78,210,577
---------- ---------- ------------ ------------
Total $9,366,671 $9,411,813 $106,670,899 $108,323,668
========== ========== ============ ============
</TABLE>
Investments in fixed maturities as of December 31, 1996 consisted of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Held-to-Maturity
----------------
Gross Gross
Amortized Unrealized Unrealized Fair
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 - 250,348
Corporate
Securities 5,540,447 - 62,660 5,477,787
----------- ---------- -------- -----------
Totals $10,090,369 $88,497 $85,597 $10,093,269
=========== ======= ======= ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
<TABLE>
<CAPTION>
Available for Sale
------------------
<S> <C> <C> <C> <C>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
U.S. Government
Obligations $14,508,780 - $ 79,745 $14,429,035
Obligations of
State and Political
Subdivisions 202,516 26 - 202,542
Other Government
Obligations 5,047,790 - 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>
Proceeds from sales of fixed maturities during 1997, 1996 and 1995 were
$5,055,550, $8,732,390 and $0, respectively. Proceeds from maturities
during 1997, 1996 and 1995 were $5,700,000, $215,000 and $100,000,
respectively.
The cost, gross unrealized gains (losses) and fair value of investments
in mutual funds at December 31, 1997 and 1996 are shown below:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Gross Gross
Unrealized Unrealized Fair
Cost Gains Losses Value
---- ---------- ---------- -----
1997 $6,895,821 $43,506 $228,476 $6,710,851
========== ======= ======== ==========
1996 $2,638,695 $59,278 $ 60,242 $2,637,731
========== ======= ========= ==========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
Net realized investment gains (losses) were as follows for the years
ended December 31:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed Maturities:
Gross gains $ 9,800 $ - $ -
Gross losses - - -
Investment in Mutual Funds:
Gross gains 115,824 139,814 65,236
Gross losses (38,521) (5,351) (28,462)
---------- ----------- --------
Totals $ 87,103 $134,463 $36,774
========= ======== =======
</TABLE>
4. NET INVESTMENT INCOME
The sources of net investment income for the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Fixed maturities $6,616,560 $ 836,591 $ 629,743
Cash and cash equivalents 1,153,790 684,653 986,932
Investment in mutual funds 553,864 143,737 59,895
Policy loans 28,243 5,274 4,025
---------- ---------- ----------
Total investment income 8,352,457 1,670,255 1,680,595
Investment expenses 171,384 84,436 79,921
---------- ---------- ----------
Net investment income $8,181,073 $1,585,819 $1,600,674
========== ========== ==========
</TABLE>
5. INCOME TAXES
The significant components of income tax expense (benefit) are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Current tax expense $20,108,348 $12,865,120 $397,360
Deferred tax benefit (9,630,602) (16,903,477) -
----------- ---------- --------
Total income tax expense (benefit) $10,477,746 $(4,038,357) $397,360
=========== ============ ========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The tax effects of significant items comprising the Company's deferred
tax balance as of December 31, 1997 and 1996, are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
1997 1996
---- ----
Deferred Tax (Liabilities):
Deferred acquisition costs ($159,765,795) ($103,072,477)
Payable to reinsurer (25,369,078) (23,025,326)
Policy fees (656,311) (491,640)
Unrealized investment gains and losses (513,731) 172,109
------------- --------------
Total (186,304,915) (126,417,334)
------------ ------------
Deferred Tax Assets:
Net separate account liabilities 175,872,109 121,092,798
Reserve for future contractowner benefits 15,121,555 12,686,078
Other reserve differences 10,534,160 4,527,886
Deferred compensation 7,186,789 4,392,526
Surplus notes interest 2,728,676 548,730
Foreign exchange translation 154,020 141,996
Other 881,975 244,902
------------- -------------
Total 212,479,284 143,634,916
------------ ------------
Net deferred tax balance $ 26,174,369 $ 17,217,582
============ ============
</TABLE>
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 future to realize its
deferred tax asset. As such, the Company released the deferred tax
valuation allowance of $9,324,853 in 1996.
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>
<CAPTION>
<S> <C> <C> <C>
1997 1996 1995
---- ---- ----
Income (loss) before taxes $38,025,279 $22,584,667 ($2,170,660)
Income tax rate 35% 35% 35%
----------- ----------- -----------
Tax expense at federal
statutory income tax rate 13,308,848 7,904,633 (759,731)
Tax effect of:
Change in valuation allowance - (9,324,853) 1,680,339
Dividend received deduction (4,585,000) (2,266,051) (477,139)
Other 866,973 (707,685) (48,821)
State income taxes 886,925 355,599 2,712
----------- ----------- -----------
Income tax expense (benefit) $10,477,746 ($ 4,038,357) $ 397,360
=========== =========== ===========
</TABLE>
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
6. RECEIVABLE FROM/PAYABLE TO AFFILIATES
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. The total cost to the Company for these items was
$5,572,404, $11,581,114 and $12,687,337 for the years ended December
31, 1997, 1996 and 1995, respectively. Income received for these items
was $3,224,645, $1,148,364 and $396,573 for the years ended December
31, 1997, 1996 and 1995, respectively. Amounts receivable from
affiliates under these arrangements were $548,887 and $548,792 as of
December 31, 1997 and 1996, respectively. Amounts payable to affiliates
under these arrangements were $263,742 and $619,089 as of December 31,
1997 and 1996, respectively.
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 from January 1,
1994 through June 30, 1996 (Transaction 1996-1). In addition, the
Company entered into the following similar transactions during 1997:
Closing Effective Contract Issue
Transaction Date Date Period
----------- ------- --------- --------------
1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97
1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96
1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97
In connection with these transactions, the Parent, through a trust,
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 Agreements, the rights sold provide for
the Parent to receive 80% (100% for Transaction 1997-3) 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 (6.0 to 8.0 years). The
Company did not sell the right to receive future fees and charges after
the expiration of the surrender charge period.
<PAGE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(a wholly-owned subsidiary of
Skandia Insurance Company Ltd.)
Notes to Consolidated Financial Statements (continued)
The proceeds from the sales 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 of
the transactions (discounted at 7.5%) as of the respective Effective
Date was as follows:
Present
Transaction Value
----------- -------
1996-1 $ 50,221,438
1997-1 58,766,633
1997-2 77,551,736
1997-3 58,193,264
Payments representing fees and charges realized during the period
January 1, 1997 through December 31, 1997 in the aggregate amount of
$22,250,158, were made by the Company to the Parent. Interest expense
of $6,842,469 has been included in the statement of operations.
Expected payments of future fees payable to Parent are as follows:
Year Ending
December 31, Amount
------------ ------
1998 $ 39,637,610
1999 41,845,736
2000 43,500,530
2001 40,738,800
2002 34,533,624
2003 22,835,020
2004 9,490,399
2005 452,099
--------------
Total $ 233,033,818
==============
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 1997, 1996 and 1995 was $2,427,502,
$1,583,391 and $1,218,806, respectively. Future minimum lease payments
per year and in aggregate as of December 31, 1997 are as follows:
1998 $ 2,371,509
1999 2,595,272
2000 2,753,324
2001 2,753,324
2002 2,753,324
2003 and thereafter 21,465,933
------------
Total $34,692,686
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
$3,756,572 and $3,766,564 as of December 31, 1997, and 1996,
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 $294,585,500, $275,835,076 and
$132,493,899 at December 31, 1997, 1996 and 1995, respectively.
The statutory basis net loss was $8,970,459, $5,405,179 and $7,183,003
for the years ended December 31, 1997, 1996 and 1995, respectively.
Under state insurance laws, the maximum amount of dividends that can be
paid to 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, 1997, 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. Under this plan, the Company contributes 3%
of salary for all participating employees and matches employee
contributions at a 50% level up to an additional 3% Company
contribution. Company contributions to this plan on behalf of the
participants were $1,220,214, $850,111 and $627,161 for the years ended
December 31, 1997, 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)
The Company and an affiliate cooperatively have a long-term incentive
plan under which 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 $15,720,067 and $9,212,369 as
of December 31, 1997 and 1996, respectively. Payments under this plan
were $1,118,803, $601,603 and $0 for the years ended December 31, 1997,
1996, and 1995, respectively.
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
$269,616 in 1997, $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, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997
<S> <C> <C> <C> <C>
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $144,417,045 $955,677 ($1,971,959)
Ceded 23,259,199 918,407 46,676
------------ --------- ----------
Net $121,157,846 $ 37,270 ($2,018,635)
============ ========= ==========
1996
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
=========== ======== ========
1995
Annuity Change in Annuity Return Credited
Charges and Fees Policy Reserves to Contractowners
---------------- ----------------- -----------------
Gross $50,334,280 ($4,790,714) $10,945,831
Ceded 11,496,922 1,988,042 332,973
----------- ---------- -----------
Net $38,837,358 ($6,778,756) $10,612,858
=========== ========== ===========
</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, 1997, 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
Interest for the
Years Ended December 31,
------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest
Issue Date Amount Rate 1997 1996 1995
---------- ------ ---- ---- ---- ----
December 29, 1993 $ 20,000,000 6.84% $ 1,387,000 $ 1,390,800 $1,387,000
February 18, 1994 10,000,000 7.28% 738,111 740,133 738,111
March 28, 1994 10,000,000 7.90% 800,972 803,167 800,972
September 30, 1994 15,000,000 9.13% 1,388,521 1,392,325 1,388,521
December 28, 1994 14,000,000 9.78% 1,388,217 1,392,020 1,392,008
December 19, 1995 10,000,000 7.52% 762,444 764,533 27,156
December 20, 1995 15,000,000 7.49% 1,139,104 1,142,225 37,450
December 22, 1995 9,000,000 7.47% 681,638 683,505 18,675
June 28, 1996 40,000,000 8.41% 3,410,722 1,747,411 -
December 30, 1996 70,000,000 8.03% 5,699,069 31,228 -
------------ ----------- ------------ ----------
Total $213,000,000 $17,395,798 $10,087,347 $5,789,893
============ =========== =========== ==========
</TABLE>
All surplus notes mature 7 years from the issue date.
Payment of interest and repayment of principal for these notes is
subject to certain conditions and require approval by the Insurance
Commissioner of the State of Connecticut. At December 31, 1997 and
1996, $7,796,218 and $1,567,800, respectively, of accrued interest on
surplus notes was not approved for payment under these criteria.
14. SHORT-TERM BORROWING
The Company has a $10,000,000 loan from the parent which matures on
March 10, 1998 and bears interest at 6.39%. The total interest expense
to the Company was $641,532, $642,886 and $709,521 and for the years
ended December 31, 1997, 1996 and 1995, respectively, of which $200,575
and $206,361 was payable as of December 31, 1997 and 1996,
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> <C>
1997 March 31 June 30 September 30 December 31
---- -------- ------- ------------ -----------
Premiums and other insurance
revenues $30,185,820 $34,055,549 $41,102,381 $44,402,368
Net investment income 1,368,683 2,626,776 2,031,187 2,154,427
Net realized capital gains 20,604 43,460 20,553 2,486
----------- ----------- ----------- -----------
Total revenues $31,575,107 $36,725,785 $43,154,121 $46,559,281
=========== =========== =========== ===========
Benefits and expenses $18,319,281 $30,465,338 $31,179,403 $40,024,993
=========== =========== =========== ===========
Net income $ 8,995,975 $ 3,646,787 $ 8,621,412 $ 6,283,359
============ ============ ============ ============
Three Months Ended
------------------
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
============ ============ ============ ===========
Three Months Ended
------------------
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>
As described in Note 5, the valuation allowance relating to deferred
income taxes was released during the three months ended December 31,
1996.
<PAGE>
APPENDIX B
SHORT DESCRIPTIONS OF THE
UNDERLYING MUTUAL FUNDS' PORTFOLIO INVESTMENT OBJECTIVES AND POLICIES
The investment objectives for each underlying mutual fund are in bold face.
Please refer to the prospectuses of each underlying mutual fund for more
complete details and risk factors applicable to certain portfolios.
American Skandia Trust
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.
Lord Abbett Small Cap Value Portfolio: The investment objective of the Lord
Abbett Small Cap Value Portfolio is to seek long-term capital appreciation. This
is a fundamental objective of the Portfolio. The Portfolio will seek its
objective through investments primarily in equity securities, which are believed
to be undervalued in the marketplace. The Portfolio seeks companies which are
primarily small-sized, based on the value of their outstanding stock. As a
result, under normal circumstances, at least 65% of the Portfolio's total assets
will be invested in common stocks issued by smaller, less well-known companies
(with market capitalizations of less than $1 billion) selected on the basis of
fundamental investment analysis. Smaller companies may carry more risk than
larger companies. Generally, small companies rely on limited product lines and
markets, financial resources, or other factors, and this may make them more
susceptible to setbacks or economic downturns. Small capitalized companies may
be more volatile in price, normally have fewer shares outstanding and trade less
frequently than large companies. The Portfolio may invest up to 35% of its total
assets in the securities of issuers without regard to their size or the market
capitalization of their common stock. Dividend and investment income is of
incidental importance, and the Portfolio may invest in securities, which do not
produce any income. Although the Portfolio typically will hold a large,
diversified number of securities identified through a quantitative, value-driven
investment strategy, it does entail above-average investment risk in comparison
to the overall U.S. stock market. The Portfolio also may invest in preferred
stocks and bonds, which have either attached warrants or a conversion privilege
into common stocks. In addition, the Portfolio may purchase options on stocks
that it holds as protection against a significant price decline; purchase and
sell stock index options and futures to hedge overall market risk and the
investment of cash flows; and write listed put and listed covered call options.
The Sub-advisor will use such techniques as market conditions warrant. The
Portfolio's ability to use these strategies may be limited by market conditions,
regulatory limitations and tax considerations and there can be no assurance that
any of these strategies will succeed. The Portfolio may purchase and sell stock
index futures, which are traded on a commodities exchange or board of trade for
certain hedging and risk management purposes, in accordance with regulations of
the Commodities Futures Trading Commission. The Portfolio may invest up to 35%
of its net assets (at the time of investment) in securities that are primarily
traded in foreign countries. The Portfolio may enter into forward foreign
currency contracts. The Portfolio also may purchase foreign currency put options
and write foreign currency call options on U.S. exchanges or U.S.
over-the-counter markets. The Portfolio may, on occasion, enter into repurchase
agreements whereby the seller of a security agrees to repurchase that security
at a mutually agreed-upon time and price. The Portfolio may purchase or sell
securities on a when-issued or delayed delivery basis. The Portfolio may invest
in (a) other investment companies to the extent permitted under applicable law,
and (b) straight bonds or other debt securities, including lower rated,
high-yield bonds.
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. 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.
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.
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.
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.
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 normally
will invest at least 65% of its total assets in common stocks of U.S. companies
with market capitalizations or annual revenues 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 normally will
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 portion 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 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 up to 100% 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.
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's securities 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.
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.
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.
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.
Cohen & Steers Realty Portfolio: The investment objective of the Cohen & Steers
Realty Portfolio is to maximize total return through investment in real estate
securities. This is a fundamental objective of the Portfolio. The Portfolio
pursues its investment objective of maximizing total return by seeking, with
approximately equal emphasis, capital appreciation (both realized and
unrealized) and current income. There can be no assurance that the Portfolio's
investment objective will be achieved. Under normal circumstances, the Portfolio
will invest substantially all of its assets in the equity securities of real
estate companies. Such equity securities will consist of (i) common stocks
(including shares in real estate investment trusts), (ii) rights or warrants to
purchase common stocks, (iii) securities convertible into common stocks where
the conversion feature represents, in the Sub-advisor's view, a significant
element of the securities' value, and (iv) preferred stocks. For purposes of the
Portfolio's investment policies, a "real estate company" is one that derives at
least 50% of its revenues from the ownership, construction, financing,
management or sale of commercial, industrial, or residential real estate or that
has at least 50% of its assets in such real estate. The Portfolio may invest
without limit in shares of real estate investment trusts ("REITs"). REITs pool
investors' funds for investment primarily in income producing real estate or
real estate related loans or interests. REITs can generally be classified as
Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest the
majority of their assets directly in real property, derive their income
primarily from rents. Mortgage REITs, which invest the majority of their assets
in real estate mortgages, derive their income primarily from interest payments.
Hybrid REITs combine the characteristics of both Equity REITs and Mortgage
REITs. The Portfolio will not invest in real estate directly, but only in
securities issued by real estate companies. However, the Portfolio may be
subject to risks similar to those associated with the direct ownership of real
estate (in addition to securities markets risks) because of its policy of
concentration in the securities of companies in the real estate industry. These
include declines in the value of real estate, risks related to general and local
economic conditions, dependency on management skill, heavy cash flow dependency,
possible lack of availability of mortgage funds, overbuilding, extended
vacancies of properties, increased competition, increases in property taxes and
operating expenses, changes in zoning laws, losses due to costs resulting from
the clean-up of environmental problems, liability to third parties for damages
resulting from environmental problems, casualty or condemnation losses,
limitations on rents, changes in neighborhood values, the appeal of properties
to tenants and changes in interest rates. The Portfolio may invest up to 10% of
its total assets in securities of foreign real estate companies. When, in the
judgment of the Portfolio's Sub-advisor, market or general economic conditions
justify a temporary defensive position, the Portfolio will deviate from its
investment objective and invest all or any portion of its assets in high-grade
debt securities, including corporate debt securities, U.S. government
securities, and short-term money market instruments, without regard to whether
the issuer is a real estate company. The Portfolio may also at any time invest
funds awaiting investment or funds held as reserves to satisfy redemption
requests or to pay dividends and other distributions to shareholders in
short-term money market instruments. The Portfolio will not invest more than 15%
of its net assets in illiquid securities. The Portfolio is classified as a
"non-diversified" investment company under the 1940 Act, which means the
Portfolio is not limited by the 1940 Act in the proportion of its assets that
may be invested in the securities of a single issuer. Because the Portfolio, as
a non-diversified investment company, may invest in a smaller number of issuers
than a diversified investment company, an investment in the Portfolio may
present greater risk to an investor than an investment in a diversified company.
The Portfolio may have higher portfolio turnover than other mutual funds with
similar objectives.
Stein Roe Venture Portfolio: The investment objective of the Stein Roe Venture
Portfolio is long-term capital appreciation. The Portfolio emphasizes
investments in financially strong small and medium-sized companies, based
principally on management appraisal and stock valuation. The Portfolio will
pursue its objective by investing primarily in a diversified portfolio of common
stocks and other equity-type securities (such as preferred stocks, securities
convertible or exchangeable for common stocks, and warrants or rights to
purchase common stocks) of entrepreneurially managed companies that the
Sub-advisor believes represent special opportunities. The Sub-advisor considers
"small" and "medium-sized" companies to be those with market capitalizations of
less than $1 billion and $1 to $3 billion, respectively. The Portfolio is
designed for long-term investors who want greater return potential than is
available from the stock market in general, and who are willing to tolerate the
greater investment risk and market volatility associated with investments in
small and medium-sized companies. Attractive company characteristics include
unit growth, favorable cost structures or competitive positions, and financial
strength that enables management to execute business strategies under difficult
conditions. Although the Portfolio does not attempt to reduce or limit risk
through wide industry diversification of investment, it usually allocates its
investments among a number of different industries rather than concentrating in
a particular industry or group of industries. The Portfolio will not invest more
than 25% of the total value of its assets (at the time of investment) in the
securities of companies in any one industry. In pursuing its investment
objective, the Portfolio may invest in debt securities of corporate and
governmental issuers. The Portfolio may invest up to 35% of its net assets in
debt securities, but does not expect to invest more than 5% of its net assets in
debt securities that are rated below investment grade (i.e., below the four
highest grades assigned by a nationally recognized statistical rating
organization). Securities that are rated below investment grade are considered
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal according to the terms of the obligation, and therefore
carry greater investment risk, including the possibility of issuer default and
bankruptcy. The Portfolio may invest in foreign securities. Other than American
Depositary Receipts (ADRs), foreign debt securities denominated in U.S. dollars,
and securities guaranteed by a U.S. person, the Portfolio is limited to
investing no more than 25% of its total assets in foreign securities. The
Portfolio also may enter into foreign currency contracts as a hedging technique
to limit or reduce exposure to currency fluctuations. In addition, the Portfolio
may use options and futures contracts to limit or reduce exposure to currency
fluctuations. Consistent with its objective, the Portfolio may invest in a broad
array of financial instruments and securities, including conventional
exchange-traded and non-exchange-traded options, futures contracts, futures
options, swaps, caps, floors, collars, securities collateralized by underlying
pools of mortgages or other receivables, floating rate instruments, and other
instruments that securitize assets of various types ("Derivatives"). In each
case, the value of the instrument or security is "derived" from the performance
of an underlying asset or a "benchmark" such as a security index, an interest
rate, or a currency. The Portfolio does not expect to invest more than 5% of its
net assets in any type of Derivative except for options, futures contracts, and
futures options.
Bankers Trust Enhanced 500 Portfolio: The investment objective of the Bankers
Trust Enhanced 500 Portfolio is to outperform the Standard & Poor's 500
Composite Stock Price Index (the "S&P 500(R)") through stock selection resulting
in different weightings of common stocks relative to the index. The Portfolio
will include the common stock of companies included in the S&P 500. The S&P 500
is an index of 500 common stocks, most of which trade on the New York Stock
Exchange Inc. The Sub-advisor believes that the S&P 500 is representative of the
performance of publicly traded common stocks in the U.S. in general. In seeking
to outperform the S&P 500, the Sub-advisor starts with a portfolio of stocks
representative of the holdings of the index. It then uses a set of quantitative
criteria that are designed to indicate whether a particular stock will
predictably generate returns that will exceed or be less than the performance of
the S&P 500. Based on these criteria, the Sub-advisor determines whether the
Portfolio should overweight, underweight or hold a neutral position in the stock
relative to the proportion of the S&P 500 that the stock represents. While the
majority of the issues held by the Portfolio will have neutral weightings to the
S&P 500, approximately 100 will be over or underweighted relative to the index.
In addition, the Sub-advisor may determine based on the quantitative criteria
that certain S&P 500 stocks should not be held by the Portfolio in any amount.
The Sub-advisor will not purchase the stock of its parent company, Bankers Trust
New York Corporation, which is included in the S&P 500. The Portfolio is not
managed according to traditional methods of "active" investment management,
which involve the buying and selling of securities based upon economic,
financial and market analysis and investment judgment. Instead, the Portfolio
utilizes a "quantitative" investment approach and attempts to outperform the S&P
500 through statistical procedures. Therefore, the Sub-advisor will not attempt
to judge the merits of any particular stock as an investment. The Portfolio
invests primarily for growth. The Portfolio may invest in the equity securities
of companies that are not included in the S&P 500, including securities of
companies that are the subject of publicly announced acquisitions or other major
corporate transactions. The Portfolio will not invest more than 15% of its total
assets in equity securities of companies not included in the S&P 500. No more
than 15% of the Portfolio's net assets may be invested in illiquid or not
readily marketable securities (including repurchase agreements and time deposits
with maturities of more than seven days). The Portfolio may maintain up to 25%
of its assets in short-term debt securities and money market instruments.
Short-term fixed income securities may be used to invest uncommitted cash
balances, to maintain liquidity to meet shareholder redemptions or to serve as
collateral for the obligations underlying the Portfolio's investment in
securities index futures or related options or warrants. The Portfolio may
invest in various instruments that are commonly known as derivatives. The
Portfolio will only use derivatives for hedging purposes. The Portfolio may
enter into securities index futures contracts and related options provided that
not more than 5% of its assets are required as a margin deposit for futures
contracts or options and provided that not more than 20% of the Portfolio's
assets are invested in futures and options at any time. The Portfolio may invest
in convertible securities, which are bonds or preferred stocks that may be
converted at a stated price within a specific period of time into a specified
number of shares of common stock of the same or different issuer. "Standard &
Poor's(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of
The McGraw-Hill Companies, Inc. and have been licensed for use by American
Skandia Investment Services, Incorporated and Bankers Trust. The Portfolio is
not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
Poor's makes no representation regarding the advisability of investing in the
Portfolio.
Marsico Capital Growth Portfolio: The investment objective of the Marsico
Capital Growth Portfolio is to seek capital growth. This is a fundamental
objective of the Portfolio. Income realization is not an investment objective
and any income realized on the Portfolio's investments, therefore, will be
incidental to the Portfolio's objective. The Portfolio will pursue its objective
by investing primarily in common stocks. Common stock investments will be in
industries and companies that the Sub-advisor believes are experiencing
favorable demand for their products and services, and which operate in a
favorable competitive and regulatory environment. The Sub-advisor expects that
the majority of the Portfolio's assets will be invested in the common stocks of
larger, more established companies. The Portfolio may also invest to a lesser
degree in preferred stocks, convertible securities, warrants, and debt
securities when the Portfolio perceives an opportunity for capital growth from
such securities or so that the Portfolio may receive a return on its idle cash.
Debt securities that the Portfolio may purchase include corporate bonds and
debentures, government securities, mortgage- and asset-backed securities,
zero-coupon bonds, indexed/structured notes, high-grade commercial paper,
certificates of deposit and repurchase agreements. The Portfolio will not invest
more than 5% of its total assets in bonds rated below investment grade or more
than 25% of its total assets in mortgage- and asset-backed securities. 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 company will be recognized and appreciate in value due to a specific
development, such as a technological breakthrough, management change or new
product at that company. Investment in "special situations" carries an
additional risk of loss in the event that the anticipated development does not
occur or does not attract the expected attention. The Portfolio may also
purchase securities of foreign issuers, including foreign equity and debt
securities and depositary receipts. Foreign securities are selected on a
stock-by-stock basis without regard to any defined allocation among countries or
geographic regions. The Portfolio may purchase and write options on securities,
financial indices, and 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 to hedge the Portfolio's
positions against potential adverse movements in securities prices, foreign
currency markets or interest rates. The Portfolio is permitted to enter into
reverse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date and
price. The Portfolio may purchase securities on a when-issued or delayed
delivery basis, which generally involves the purchase of a security with payment
and delivery due at some time in the future. The Portfolio does not earn
interest on such securities until settlement and bears the risk of market value
fluctuations between the purchase and settlement dates. The Portfolio may invest
no more than 5% of its net assets (at the time of investment) in high-yield/high
risk securities. 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. To a limited extent, the Portfolio may
also purchase individual securities in anticipation of relatively short-term
price gains, and the rate of portfolio turnover will not be a determining factor
in the sale of such securities. Although it is the general policy of the
Portfolio to purchase and hold securities for capital growth, changes in the
Portfolio will be made as the Sub-advisor deems advisable. For example,
portfolio changes may result from liquidity needs, securities having reached a
price objective, or by reason of developments not foreseen at the time of the
original investment decision. Portfolio changes may be effected for other
reasons. In such circumstances, investment income will increase and may
constitute a large portion of the return on the Portfolio and the Portfolio will
not participate in the market advances or declines to the extent that it would
if it were fully invested.
Neuberger&Berman Mid-Cap Value Portfolio: The investment objective of the
Neuberger&Berman Mid-Cap Value Portfolio is to seek capital growth. The
Portfolio seeks capital growth through an investment approach that is designed
to increase capital with reasonable risk. The Portfolio invests principally in
common stocks of medium to large capitalization established companies, using a
value-oriented investment approach. A value-oriented portfolio manager buys
stocks that are selling at a price that is lower than what the manager believes
they are worth. The Sub-advisor looks for securities believed to be undervalued
based on strong fundamentals, including a low price-to-earnings ratio,
consistent cash flow, and the company's track record through all parts of the
market cycle. The Sub-advisor believes that, over time, securities that are
undervalued are more likely to appreciate in price and be subject to less risk
of price decline than securities whose market prices have already reached their
perceived economic value. This approach also contemplates selling portfolio
securities when they are considered to have reached their potential.
In addition to investing in the stocks of medium capitalization companies
("mid-cap companies") and large capitalization companies ("large-cap
companies"), investments may be made in smaller, less well-known companies
("small-cap companies"). Investments in small- and mid-cap company stocks may
present greater opportunities for capital appreciation than investments in
stocks of large-cap companies. However, small- and mid-cap company stocks may
have higher risk and volatility.
Although the Portfolio ordinarily invests primarily in common stocks, when
market conditions warrant it may invest in preferred stocks, securities
convertible into or exchangeable for common stocks, U.S. Government and agency
securities, debt securities, or money market instruments, or may retain assets
in cash or cash equivalents. Up to 15% of the Portfolio's net assets, measured
at the time of investment, may be invested in corporate debt securities that are
below investment grade or in comparable unrated securities ("junk bonds"). Such
securities are considered to be predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
assets in cash or cash equivalents, U.S. Government and agency securities,
commercial paper and certain other money market instruments, as well as
repurchase agreements collateralized by the foregoing. To the extent that the
Portfolio is invested in these temporary defensive instruments, it will not be
pursuing its investment objective.
Neuberger&Berman Mid-Cap Growth Portfolio: The investment objective of the
Neuberger&Berman Mid-Cap Growth Portfolio is to seek capital appreciation The
Portfolio invests in a diversified portfolio of common stocks believed to have
the maximum potential for long-term above-average capital appreciation. Under
normal conditions, the Portfolio primarily invests in the common stocks of
medium capitalization companies ("mid-cap companies"). Companies with equity
market capitalizations from $300 million to $10 billion at the time of
investment are considered mid-cap companies, although this definition may be
revised based on market conditions. Investments may also be made in the
securities of larger, widely traded companies ("large-cap companies") as well as
smaller, less well-known companies ("small-cap companies"). Investments in
small- and mid-cap company stocks may present greater opportunities for capital
appreciation than investments in stocks of large-cap companies. However, small-
and mid-cap company stocks may have higher risk and volatility. The Portfolio
does not seek to invest in securities that pay dividends or interest, and any
such income is incidental.
The Portfolio is normally managed using a growth-oriented investment approach. A
growth approach seeks stocks of companies that the Sub-advisor projects will
grow at above-average rates and faster than others expect. In selecting equity
securities for the Portfolio, the Sub-advisor will consider, among other
factors, an issuer's financial strength, competitive position, projected future
earnings, management strength and experience, reasonable valuations, and other
investment criteria. The Portfolio diversifies its investments among companies
and industries.
Although equity securities are normally the Portfolio's primary investment, when
market conditions warrant it may invest in preferred stocks, securities
convertible into or exchangeable for common stocks, U.S. Government and Agency
Securities, investment grade and non-investment grade debt securities, or money
market instruments, or may retain assets in cash or cash equivalents. The
Portfolio may invest up to 20% of its net assets in securities of issuers
organized and doing business principally outside the United States. Up to 10% of
the Portfolio's net assets, measured at the time of investment, may be invested
in corporate debt securities that are below investment grade or in comparable
unrated securities ("junk bonds"). Such securities are considered to be
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations.
For temporary defensive purposes, the Portfolio may invest up to 100% of its
assets in cash or cash equivalents, U.S. Government and agency securities,
commercial paper and certain other money market instruments, as well as
repurchase agreements collateralized by the foregoing. To the extent that the
Portfolio is invested in these temporary defensive instruments, it will not be
pursuing its investment objective.
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 Alger
American MidCap Growth 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
As of the date of this Prospectus, the Partners Portfolio of the
Neuberger&Berman Advisers Management Trust is no longer being offered as an
investment option under the Annuity. Contract Owners with Account Value
allocated to the N&B Partners Sub-account on May 1, 1998 may remain in the
Sub-account until the earlier of: (1) the date they transfer Account Value out
of the N&B Partners Sub-account; or (2) the date the proposed substitution is
completed. However, no new allocations may be made to the N&B Partners
Sub-account on or after May 1, 1998. Contract Owners who have a dollar-cost
averaging, bank drafting, rebalancing or asset allocation program in effect that
includes the N&B Partners Sub-account as of May 1, 1998 will be able to continue
such pre-scheduled transactions until the date the proposed substitution is
completed.
(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 Portfolio: The investment objective of the Emerging Markets
Portfolio 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 Portfolio
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/Hong
Kong, India, Indonesia, Korea, Malaysia, Pakistan, the Philippines, Singapore,
Sri Lanka, Taiwan, Thailand, Vietnam); southern and eastern Europe (Czech
Republic, Greece, Hungary, Kazakstan, Poland, Portugal, Romania, Russia,
Slovakia, Slovenia, Turkey, and Ukraine); the Middle East (Israel, Jordan); and
Africa (Egypt, Ghana, Ivory Coast, Kenya, Morocco, Nigeria, South Africa,
Tunisia, Zimbabwe). In the future, the Portfolio may invest in other emerging
market countries.
This Portfolio uses a proprietary, quantitative asset allocation model created
by the Manager. This model employs mean-variance optimization, a process used in
developed markets based on modern portfolio theory and statistics. Mean-variance
optimization helps determine the percent of assets to invest in each country to
maximize expected returns for a given risk level. The Portfolio'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 Portfolio 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 Portfolio 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 Portfolio deems them to be equity derivative securities.
Life & Annuity Trust
WF Equity Value Portfolio: The investment objective of the Equity Value
Portfolio is to provide investors with long-term capital appreciation by
investing primarily in equity securities, including common stocks and may invest
in debt instruments that are convertible into common stocks of both domestic and
foreign companies. Income generation is a secondary consideration. The Portfolio
may invest in large, well-established companies and smaller companies with
market capitalization exceeding $50 million. The Portfolio may invest up to 25%
of its assets in American Depositary Receipts and similar instruments. The
Portfolio may purchase dividend paying stocks of particular issuers when the
issuer's dividend record may, in the opinion of Wells Fargo Bank ("Wells
Fargo"), the Portfolio's investment adviser, have a favorable influence on the
market value of the securities. The Portfolio also may purchase convertible
securities with the same characteristics as common stocks. There can be no
assurance that the Portfolio, which is a diversified portfolio, will achieve its
investment objective.
In selecting equity investments (which may include common stocks of both
domestic and foreign companies) for the Portfolio, Wells Fargo selects companies
for investment using both quantitative and qualitative analysis to identify
those issuers that, in the opinion of Wells Fargo, exhibit below-average
valuation multiples, above-average financial strength, a strong position in
their industry and a history of steady profit growth.
Wells Fargo also may select other equity securities in addition to common stocks
for investment by the Portfolio. Such other equity securities are preferred
stocks, high grade securities convertible into common stocks, and warrants.
The Portfolio also may hold short-term U.S. Government obligations, money market
instruments, repurchase agreements, securities issued by other investment
companies within the limits prescribed by the Investment Company Act of 1940 and
cash, pending investment, to meet anticipated redemption requests or if Wells
Fargo deems suitable investments for the Portfolio to be unavailable.
<PAGE>
APPENDIX C - PRIOR CONTRACT
Prior to July 31, 1997, the Company offered a variable annuity under the
marketing name Advisors Choice(R) which is no longer being offered ("AC" or
"Prior Contract"). Purchase Payments may continue to be made to the Prior
Contract. The Prior Contract was sold during the period from November 1993 until
July 31, 1997. Assets supporting the Prior Contracts are maintained in Class 2
of Separate Account B.
The principle differences between the contracts offered by this Prospectus under
the marketing name Advisors Choice(R) 2000 ("CHC2" or "Current Contract") and
the Prior Contract relate to the availability of fixed investment options under
the contract, charges made by the Company, and death benefit provisions.
DEFINITIONS
Some of the definitions used in the AC contract are slightly different from the
definitions used in CHC2 contract.
The definition of "Account Value" in the CHC2 prospectus is the same as the
definition of "Account Value" in the former AC prospectus, except for the
inclusion of disclosure related to fixed investment options. Fixed investment
options are not available in the Prior Contracts.
The following defined terms in the CHC2 prospectus relating to the fixed
investment options are not applicable to the Prior Contracts: "Current Rates,"
"Fixed Allocation," "Guarantee Period," "Interim Value," "MVA," and "Maturity
Date."
The definition of "Net Purchase Payment" in the CHC2 prospectus is the same as
the definition of "Net Purchase Payment" in the former AC prospectus, except for
the inclusion of any applicable sales charge, initial maintenance fee and/or
charge for taxes in the former AC contracts.
EXPENSE EXAMPLES
The Expense Examples for the Prior Contract are as follows:
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.
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>
LA Growth and Income 2 31 64 100 200
LA Small Cap Value 2 35 77 122 245
JanCap Growth 2 32 68 107 215
AST Janus Overseas Growth 2 35 77 122 245
AST Money Market 2 28 55 84 165
Fed High Yield 2 31 66 103 206
T. Rowe Price Asset Allocation 2 33 71 111 223
T. Rowe Price International Equity 2 34 74 117 235
T. Rowe Price Natural Resources 2 33 71 112 225
T. Rowe Price International Bond 2 33 70 109 219
T. Rowe Price Small Company Value 2 33 71 112 225
Founders Capital Appreciation 2 33 71 111 223
Founders Passport 2 35 77 122 245
INVESCO Equity Income 2 31 65 101 203
PIMCO Total Return Bond 2 30 62 96 193
PIMCO Limited Maturity Bond 2 30 63 98 196
RS Value + Growth 2 34 74 116 233
Twentieth Century International Growth 2 39 89 142 285
Twentieth Century Strategic Balanced 2 34 74 117 235
AST Putnam Value Growth & Income 2 34 74 116 233
AST Putnam International Equity 2 33 71 112 225
AST Putnam Balanced 2 32 68 106 213
Cohen & Steers Realty 2 36 79 125 251
Stein Roe Venture 2 35 77 122 245
Bankers Trust Enhanced 500 2 30 61 94 187
Marsico Capital Growth 2 34 75 118 238
N&B Mid-Cap Value 2 33 71 112 225
N&B Mid-Cap Growth 2 33 71 111 223
AA Growth 2 30 61 94 186
AA Small Capitalization 2 31 64 99 197
AA MidCap Growth 2 30 62 96 191
N&B Partners 2 30 62 96 193
MV Emerging Markets 2 39 89 142 285
WF Equity Value 2 33 70 109 219
</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>
LA Growth and Income 2 32 68 107 214
LA Small Cap Value 2 37 82 129 258
JanCap Growth 2 34 73 114 228
AST Janus Overseas Growth 2 37 82 129 259
AST Money Market 2 29 59 90 179
Fed High Yield 2 33 70 110 220
T. Rowe Price Asset Allocation 2 34 75 118 236
T. Rowe Price International Equity 2 36 79 124 249
T. Rowe Price Natural Resources 2 35 76 119 239
T. Rowe Price International Bond 2 34 74 116 233
T. Rowe Price Small Company Value 2 35 76 119 239
Founders Capital Appreciation 2 34 75 118 236
Founders Passport 2 37 82 129 259
INVESCO Equity Income 2 33 70 109 217
PIMCO Total Return Bond 2 32 67 104 207
PIMCO Limited Maturity Bond 2 32 67 104 208
RS Value + Growth 2 35 78 123 246
Twentieth Century International Growth 2 41 94 149 299
Twentieth Century Strategic Balanced 2 36 79 124 249
AST Putnam Value Growth & Income 2 35 78 123 246
AST Putnam International Equity 2 35 76 119 238
AST Putnam Balanced 2 33 72 113 225
Cohen & Steers Realty 2 37 83 132 264
Stein Roe Venture 2 37 82 129 258
Bankers Trust Enhanced 500 2 31 65 101 201
Marsico Capital Growth 2 36 80 126 253
N&B Mid-Cap Value 2 35 76 119 238
N&B Mid-Cap Growth 2 35 76 119 237
AA Growth 2 31 65 101 200
AA Small Capitalization 2 32 68 106 211
AA MidCap Growth 2 32 67 104 206
N&B Partners 2 32 67 104 207
MV Emerging Markets 2 41 94 149 299
WF Equity Value 2 34 74 116 233
</TABLE>
INVESTMENT OPTIONS
The Prior Contracts do not offer a fixed investment option. Therefore, to the
extent that the following provisions relate to the fixed investment options, the
descriptions in this Prospectus of the Fixed Investment Options, Separate
Accounts, Separate Account B, Separate Account D, Charges Assessed or Assessable
Against the Annuity, Charges Assessed Against the Assets, Periodic Purchase
Payments, Balanced Investment Program, Account Value of the Fixed Allocations,
Allocation Rules, Transfers, Renewals, Dollar Cost Averaging, Rebalancing,
Systematic Withdrawals, Minimum Distributions, Death Benefit, Pricing of
Transfers and Distributions, Voting Rights, Advertising, Deferral of
Transactions, and Modification are not applicable to the Prior Contracts.
CHARGES ASSESSED OR ASSESSABLE AGAINST THE ANNUITY:
Sales Charge: The Prior Contract provides for a sales charge in the amount of
1.5% of each Purchase Payment. Any applicable sales charge is deducted from 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, officer or trustee of
any underlying mutual fund; (d) a director, officer or employee of any
investment manager, sub-advisor, transfer agent, custodian, auditing, legal or
administrative services provider that is providing investment management,
advisory, transfer agency, custodianship, auditing, legal and/or administrative
services to an underlying mutual fund or any affiliate of such firm; (e) a
director, officer, employee or registered representative of a broker-dealer or
insurance agency that has a then current selling agreement with us and/or with
American Skandia Marketing, Incorporated; (f) a director, officer, employee or
authorized representative of any firm providing us or our affiliates with
regular legal, actuarial, auditing, underwriting, claims, administrative,
computer support, marketing, office or other services; (g) the then current
spouse of any such person noted in (b) through (f), above; (h) the parents of
any such person noted in (b) through (g), above; (i) such person's child(ren) or
other legal dependent under the age of 21; and (j) the siblings of any such
persons noted in (b) through (h) above.
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 for the Prior Contract 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.
PURCHASING ANNUITIES
Balanced Investment Program: The "Balanced Investment Program" is not available
under the Prior Contracts.
RIGHTS, BENEFITS AND SERVICES
Dollar Cost Averaging: Your AC 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.
Systematic Withdrawals: Your AC annuity must have an Account Value of
at least $25,000 at the time we accept your request for a program of Systematic
Withdrawals.
Death Benefit: The minimum death benefit for the AC contract 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 Payment received; and (B) is the total of all withdrawals of any type.
Currently, the specified rate at which the minimum death benefit increases is 5%
per year, compounded yearly.
Annuity Payments: The minimum monthly annuity payment for the AC
contract is $50.00, except where a lower amount is required by law.
Performance Information
The calculation of performance information is set forth in the CHC2
Statement of Additional Information. The Standard Total Return and the
Non-standard Total Return for the AC Sub-accounts are as follows:
<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>
LA Growth and Income 2 20.94% 21.82% 15.41% N/A 14.68%
JanCap Growth 2 25.56% 29.55% 17.75% N/A 18.30%
AST Janus Overseas Growth 2 15.85% N/A N/A N/A 15.68%
Fed High Yield 2 10.86% 13.78% N/A N/A 8.92%
T. Rowe Price Asset Allocation 2 15.55% 16.41% N/A N/A 11.53%
T. Rowe Price International Equity 2 -1.08% 7.08% N/A N/A 3.87%
T. Rowe Price Natural Resources 2 0.90% N/A N/A N/A 14.61%
T. Rowe Price International Bond 2 -5.75% 2.80% N/A N/A 1.14%
T. Rowe Price Small Company Value 2 25.71% N/A N/A N/A 25.52%
Founders Capital Appreciation 2 3.46% 17.22% N/A N/A 14.56%
Founders Passport 2 -0.42% N/A N/A N/A 5.05%
INVESCO Equity Income 2 20.36% 21.48% N/A N/A 14.61%
PIMCO Total Return Bond 2 7.22% 8.83% N/A N/A 5.50%
PIMCO Limited Maturity Bond 2 4.87% N/A N/A N/A 4.34%
RS Value + Growth 2 12.07% N/A N/A N/A 12.79%
Twentieth Century International Growth 2 12.34% N/A N/A N/A 12.17%
Twentieth Century Strategic Balanced 2 10.68% N/A N/A N/A 10.51%
AST Putnam Value Growth & Income 2 19.36% N/A N/A N/A 19.18%
AST Putnam International Equity 2 15.31% 10.82% 13.11% N/A 10.24%
AST Putnam Balanced 2 15.43% 15.48% N/A N/A 10.50%
Marsico Capital Growth 2 N/A N/A N/A N/A -1.37%
N&B Mid-Cap Value 2 23.38% 19.29% N/A N/A 11.57%
N&B Mid-Cap Growth 2 13.87% 17.26% N/A N/A 15.91%
AA Growth 2 22.72% 22.87% 17.57% N/A 17.97%
AA Small Capitalization 2 8.71% 16.93% 11.03% N/A 17.71%
AA MidCap Growth 2 12.23% 21.06% N/A N/A 20.30%
N&B Partners 2 28.09% N/A N/A N/A 22.33%
MV Emerging Markets 2 -2.98% N/A N/A N/A 1.37%
</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>
LA Growth and Income 2 21.12% 22.00% 15.58% N/A 14.86%
JanCap Growth 2 25.75% 29.74% 17.93% N/A 18.51%
AST Janus Overseas Growth 2 16.02% N/A N/A N/A 16.02%
Fed High Yield 2 11.02% 13.95% N/A N/A 9.09%
T. Rowe Price Asset Allocation 2 15.72% 16.59% N/A N/A 11.69%
T. Rowe Price International Equity 2 -0.93% 7.24% N/A N/A 4.03%
T. Rowe Price Natural Resources 2 1.05% N/A N/A N/A 14.80%
T. Rowe Price International Bond 2 -5.60% 2.96% N/A N/A 1.30%
T. Rowe Price Small Company Value 2 25.90% N/A N/A N/A 25.90%
Founders Capital Appreciation 2 3.61% 17.39% N/A N/A 14.74%
Founders Passport 2 -0.28% N/A N/A N/A 5.23%
INVESCO Equity Income 2 20.54% 21.66% N/A N/A 14.78%
PIMCO Total Return Bond 2 7.38% 9.00% N/A N/A 5.66%
PIMCO Limited Maturity Bond 2 5.03% N/A N/A N/A 4.52%
RS Value + Growth 2 12.23% N/A N/A N/A 12.99%
Twentieth Century International Growth 2 12.50% N/A N/A N/A 12.50%
Twentieth Century Strategic Balanced 2 10.84% N/A N/A N/A 10.84%
AST Putnam Value Growth & Income 2 19.54% N/A N/A N/A 19.54%
AST Putnam International Equity 2 15.48% 10.98% 13.28% N/A 10.42%
AST Putnam Balanced 2 15.60% 15.65% N/A N/A 10.67%
Marsico Capital Growth 2 N/A N/A N/A N/A -1.22%
N&B Mid-Cap Value 2 23.56% 19.47% N/A N/A 11.75%
N&B Mid-Cap Growth 2 14.04% 17.44% N/A N/A 16.12%
AA Growth 2 22.90% 23.06% 17.74% N/A 18.15%
AA Small Capitalization 2 8.87% 17.11% 11.20% N/A 17.90%
AA MidCap Growth 2 12.40% 21.24% N/A N/A 20.49%
N&B Partners 2 28.28% N/A N/A N/A 22.52%
MV Emerging Markets 2 -2.83% N/A N/A N/A 1.53%
</TABLE>
<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>
LA Growth and Income 2 22.96% 22.62% 15.93% N/A 15.17%
JanCap Growth 2 27.66% 30.40% 18.28% N/A 18.86%
AST Janus Overseas Growth 2 17.79% N/A N/A N/A 17.79%
Fed High Yield 2 12.71% 14.53% N/A N/A 9.50%
T. Rowe Price Asset Allocation 2 17.48% 17.18% N/A N/A 12.12%
T. Rowe Price International Equity 2 0.58% 7.78% N/A N/A 4.42%
T. Rowe Price Natural Resources 2 2.59% N/A N/A N/A 15.45%
T. Rowe Price International Bond 2 -4.17% 3.48% N/A N/A 1.72%
T. Rowe Price Small Company Value 2 27.81% N/A N/A N/A 27.81%
Founders Capital Appreciation 2 5.19% 17.98% N/A N/A 15.17%
Founders Passport 2 1.24% N/A N/A N/A 5.82%
INVESCO Equity Income 2 22.38% 22.28% N/A N/A 15.21%
PIMCO Total Return Bond 2 9.02% 9.54% N/A N/A 6.06%
PIMCO Limited Maturity Bond 2 6.63% N/A N/A N/A 5.11%
RS Value + Growth 2 13.94% N/A N/A N/A 14.02%
Twentieth Century International Growth 2 14.22% N/A N/A N/A 14.22%
Twentieth Century Strategic Balanced 2 12.53% N/A N/A N/A 12.53%
AST Putnam Value Growth & Income 2 21.36% N/A N/A N/A 21.36%
AST Putnam International Equity 2 17.24% 11.54% 13.63% N/A 10.61%
AST Putnam Balanced 2 17.36% 16.23% N/A N/A 11.03%
Marsico Capital Growth 2 N/A N/A N/A N/A 0.28%
N&B Mid-Cap Value 2 25.44% 20.07% N/A N/A 12.12%
N&B Mid-Cap Growth 2 15.78% 18.03% N/A N/A 16.67%
AA Growth 2 24.77% 23.68% 18.10% N/A 18.35%
AA Small Capitalization 2 10.53% 17.70% 11.53% N/A 18.10%
AA MidCap Growth 2 14.11% 21.86% N/A N/A 20.88%
N&B Partners 2 30.24% N/A N/A N/A 23.01%
MV Emerging Markets 2 -1.35% N/A N/A N/A 2.34%
</TABLE>
<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>
LA Growth and Income 2 22.78% 22.43% 15.75% N/A 14.99%
JanCap Growth 2 27.47% 30.20% 18.11% N/A 18.65%
AST Janus Overseas Growth 2 17.61% N/A N/A N/A 17.44%
Fed High Yield 2 12.54% 14.36% N/A N/A 9.34%
T. Rowe Price Asset Allocation 2 17.31% 17.00% N/A N/A 11.95%
T. Rowe Price International Equity 2 0.43% 7.62% N/A N/A 4.26%
T. Rowe Price Natural Resources 2 2.44% N/A N/A N/A 15.26%
T. Rowe Price International Bond 2 -4.31% 3.32% N/A N/A 1.56%
T. Rowe Price Small Company Value 2 27.62% N/A N/A N/A 27.43%
Founders Capital Appreciation 2 5.03% 17.81% N/A N/A 15.00%
Founders Passport 2 1.09% N/A N/A N/A 5.64%
INVESCO Equity Income 2 22.19% 22.10% N/A N/A 15.04%
PIMCO Total Return Bond 2 8.86% 9.38% N/A N/A 5.90%
PIMCO Limited Maturity Bond 2 6.47% N/A N/A N/A 4.94%
RS Value + Growth 2 13.77% N/A N/A N/A 13.81%
Twentieth Century International Growth 2 14.05% N/A N/A N/A 13.88%
Twentieth Century Strategic Balanced 2 12.36% N/A N/A N/A 12.19%
AST Putnam Value Growth & Income 2 21.18% N/A N/A N/A 21.00%
AST Putnam International Equity 2 17.06% 11.38% 13.46% N/A 10.44%
AST Putnam Balanced 2 17.19% 16.06% N/A N/A 10.85%
Marsico Capital Growth 2 N/A N/A N/A N/A 0.13%
N&B Mid-Cap Value 2 25.26% 19.89% N/A N/A 11.94%
N&B Mid-Cap Growth 2 15.61% 17.85% N/A N/A 16.45%
AA Growth 2 24.59% 23.49% 17.92% N/A 18.17%
AA Small Capitalization 2 10.36% 17.52% 11.37% N/A 17.91%
AA MidCap Growth 2 13.94% 21.67% N/A N/A 20.69%
N&B Partners 2 30.04% N/A N/A N/A 22.82%
MV Emerging Markets 2 -1.50% N/A N/A N/A 2.18%
</TABLE>
<PAGE>
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 PROSPECTUS CHC2 PROS
(05/98)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
-------------------------------------------------------
(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 at:
AMERICAN SKANDIA LIFE AMERICAN SKANDIA LIFE
ASSURANCE CORPORATION ASSURANCE CORPORATION
One Corporate Drive P.O. Box 883
Shelton, Connecticut 06484 Shelton, Connecticut 06484
Telephone: 1-800-752-6342 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 variable investment options under the annuity contracts, 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. The fixed
investment options thereunder, registered solely under the Securities Act of
1933, are issued by AMERICAN SKANDIA LIFE ASSURANCE CORPORATION and the assets
supporting such securities are maintained in AMERICAN SKANDIA LIFE ASSURANCE
CORPORATION SEPARATE ACCOUNT D.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. THE INFORMATION
CONTAINED HEREIN SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE
ANNUITIES 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, OR TELEPHONE 1-800-752-6342. OUR ELECTRONIC MAIL ADDRESS IS
[email protected].
Date of Prospectus: May 1, 1998
Date of Statement of Additional Information: May 1, 1998
<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 5
Calculating the Market Value Adjustment 5
Independent Auditors 7
Legal Experts 7
Appendix A Financial Statements for Separate Account B (Class 2 Sub-accounts) 8
</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 whose
indirect parent is Skandia 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 2 Sub-accounts of Separate
Account B invest in portfolios offered by American Skandia Trust.
CHC2 SAI (05/98)
<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. receives no
underwriting commissions.
CALCULATION OF PERFORMANCE DATA: We may advertise our Current Rates for new
Fixed Allocations.
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 a money
market-type Sub-account is calculated based upon a seven day period ending on
the date of calculation. The current yield of such a 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 such a 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.
We compute effective compound yield for a money market-type Sub-account
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 such a 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.
Many of the Sub-accounts offered as variable investment options for the
Annuities have been available as variable investment options in other annuities
we offer. In addition, 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 underlying
mutual fund portfolios have been in existence, but before the Annuities were
first offered. Such hypothetical performance is calculated using the same
assumptions employed in calculating actual performance since the Annuities were
first offered.
As described in the Prospectus, Annuities may be offered in certain situations
in which the administration charge and/or the maintenance fee may be eliminated
or reduced. Advertisements of performance in connection with the offer of such
Annuities will be based on the charges applicable to such Annuities.
Shown below are total return figures for the periods shown, ending as of
December 31, 1997, for the Sub-accounts that existed prior to the date of this
Statement of Additional Information. The "inception-to-date" figures shown below
are based on the inception date of an underlying mutual fund portfolio. Any
performance of such portfolios prior to the date Annuities were first offered is
provided by the underlying mutual funds. The total return for any Sub-account
reflecting performance prior to the date we started offering Annuities is based
on such information.
<TABLE>
<CAPTION>
Non-standard Total Return
(Assuming 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>
LA Growth and Income 2 22.93% 22.69% 16.15% N/A 15.36%
JanCap Growth 2 27.63% 30.47% 18.51% N/A 19.05%
AST Janus Overseas Growth 2 17.76% N/A N/A N/A 17.58%
Fed High Yield 2 12.69% 14.60% N/A N/A 9.71%
T. Rowe Price Asset Allocation 2 17.45% 17.25% N/A N/A 12.33%
T. Rowe Price International Equity 2 0.55% 7.85% N/A N/A 4.62%
T. Rowe Price Natural Resources 2 2.57% N/A N/A N/A 15.49%
T. Rowe Price International Bond 2 1 -4.19% 3.54% N/A N/A 1.82%
T. Rowe Price Small Company Value 2 27.78% N/A N/A N/A 27.59%
Founders Capital Appreciation 2 5.16% 18.05% N/A N/A 15.39%
Founders Passport 2 2 1.22% N/A N/A N/A 5.86%
INVESCO Equity Income 2 22.35% 22.35% N/A N/A 15.44%
PIMCO Total Return Bond 2 8.99% 9.61% N/A N/A 6.26%
PIMCO Limited Maturity Bond 2 6.60% N/A N/A N/A 5.15%
RS Value + Growth 2 13.91% N/A N/A N/A 14.01%
Twentieth Century International Growth 2 14.19% N/A N/A N/A 14.02%
Twentieth Century Strategic Balanced 2 12.50% N/A N/A N/A 12.33%
AST Putnam Value Growth & Income 2 21.33% N/A N/A N/A 21.15%
AST Putnam International Equity 2 3 17.21% 11.61% 13.84% N/A 10.77%
AST Putnam Balanced 2 4 17.34% 16.30% N/A N/A 11.23%
Marsico Capital Growth 2 5 N/A N/A N/A N/A 0.13%
N&B Mid-Cap Value 2 6 25.41% 20.15% N/A N/A 12.32%
N&B Mid-Cap Growth 2 7 15.75% 18.10% N/A N/A 16.70%
AA Growth 2 24.74% 23.75% 18.32% N/A 18.52%
AA Small Capitalization 2 10.50% 17.77% 11.74% `N/A 18.26%
AA MidCap Growth 2 14.09% 21.93% N/A N/A 21.11%
N&B Partners 2 30.20% N/A N/A N/A 23.18%
MV Emerging Markets 2 -1.37% N/A N/A N/A 2.37%
</TABLE>
<TABLE>
<CAPTION>
Non-standard Total Return
(Assuming no sales charge
and no maintenance fees)
Incep-
1 3 5 10 tion-to
Yr. Yr. Yr. Yr. -Date
<S> <C> <C> <C> <C> <C>
LA Growth and Income 2 23.12% 22.87% 16.32% N/A 15.55%
JanCap Growth 2 27.82% 30.67% 18.68% N/A 19.26%
AST Janus Overseas Growth 2 17.94% N/A N/A N/A 17.94%
Fed High Yield 2 12.86% 14.77% N/A N/A 9.88%
T. Rowe Price Asset Allocation 2 17.63% 17.42% N/A N/A 12.50%
T. Rowe Price International Equity 2 0.70% 8.01% N/A N/A 4.78%
T. Rowe Price Natural Resources 2 2.72% N/A N/A N/A 15.69%
T. Rowe Price International Bond 2 1 -4.05% 3.69% N/A N/A 1.99%
T. Rowe Price Small Company Value 2 27.97% N/A N/A N/A 27.97%
Founders Capital Appreciation 2 5.32% 18.23% N/A N/A 15.57%
Founders Passport 2 2 1.37% N/A N/A N/A 6.04%
INVESCO Equity Income 2 22.53% 22.54% N/A N/A 15.61%
PIMCO Total Return Bond 2 9.16% 9.78% N/A N/A 6.42%
PIMCO Limited Maturity Bond 2 6.76% N/A N/A N/A 5.33%
RS Value + Growth 2 14.09% N/A N/A N/A 14.22%
Twentieth Century International Growth 2 14.36% N/A N/A N/A 14.36%
Twentieth Century Strategic Balanced 2 12.67% N/A N/A N/A 12.67%
AST Putnam Value Growth & Income 2 21.52% N/A N/A N/A 21.52%
AST Putnam International Equity 2 3 17.39% 11.78% 14.01% N/A 10.94%
AST Putnam Balanced 2 4 17.51% 16.48% N/A N/A 11.41%
Marsico Capital Growth 2 5 N/A N/A N/A N/A 0.28%
N&B Mid-Cap Value 2 6 25.60% 20.33% N/A N/A 12.50%
N&B Mid-Cap Growth 2 7 15.92% 18.28% N/A N/A 16.92%
AA Growth 2 24.93% 23.94% 18.50% N/A 18.70%
AA Small Capitalization 2 10.67% 17.94% 11.91% N/A 18.45%
AA MidCap Growth 2 14.26% 22.11% N/A N/A 21.30%
N&B Partners 2 30.40% N/A N/A N/A 23.37%
MV Emerging Markets 2 -1.23% N/A N/A N/A 2.53%
</TABLE>
(1) Effective May 1, 1996, Rowe Price-Fleming International, Inc. became
Sub-advisor of the Portfolio. Prior to May 1, 1996, Scudder, Stevens & Clark,
Inc. served as the Sub-advisor of the Portfolio, then named the "AST Scudder
International Bond Portfolio." The performance information provided in the above
chart reflects that of the Portfolio as sub-advised by the prior Sub-advisor
from inception until May 1, 1996, and the current Sub-advisor from May 1, 1996
through December 31, 1997.
(2) Effective October 15, 1996, Founders Asset Management, Inc. became
Sub-advisor of the Portfolio. Prior to October 15, 1996, Seligman Henderson Co.
served as the Sub-advisor of the Portfolio, then named the "Seligman Henderson
International Small Cap Portfolio." The performance information provided in the
above chart reflects that of the Portfolio as sub-advised by the prior
Sub-advisor from inception until October 15, 1996, and the current Sub-advisor
from October 15, 1996 through December 31, 1997.
(3) Effective October 15, 1996, Putnam Investment Management, Inc. became
Sub-advisor of the Portfolio. Prior to October 15, 1996, Seligman Henderson Co.
served as the Sub-advisor of the Portfolio, then named the "Seligman Henderson
International Equity Portfolio." The performance information provided in the
above chart reflects that of the Portfolio as sub-advised by the prior
Sub-advisor from inception until October 15, 1996 and the current Sub-advisor
from October 15, 1996 through December 31, 1997.
(4) Effective October 15, 1996, Putnam Investment Management, Inc. became
Sub-advisor of the Portfolio. Prior to October 15, 1996, Phoenix Investment
Counsel, Inc. served as the Sub-advisor of the Portfolio, then named the "AST
Phoenix Balanced Asset Portfolio." The performance information provided in the
above chart reflects that of the Portfolio as sub-advised by the prior
Sub-advisor from inception until October 15, 1996, and the current Sub-advisor
from October 15, 1996 through December 31, 1997.
(5) The Portfolio commenced operations on December 22, 1997.
(6) During the periods shown, Federated Investment Counseling served as
Sub-advisor to the Portfolio, then named the "Federated Utility Income
Portfolio." Effective May 1, 1998, Neuberger&Berman Management, Inc. became
Sub-Advisor to the Portfolio. As of May 1, 1998 various changes have been made
to the Portfolio's investment objective and to its fundamental and
non-fundamental investment restrictions.
(7) During the periods shown, Berger Associates, Inc. served as Sub-advisor to
the Portfolio, then named the "Berger Capital Growth Portfolio." Effective May
1, 1998, Neuberger&Berman Management, Inc. became Sub-Advisor to the Portfolio.
As of May 1, 1998 various changes have been made to the Portfolio's investment
objective and to its fundamental and non-fundamental investment restrictions.
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 these 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 funds and upon prevailing market conditions and the response
of the underlying mutual funds to such conditions. Actual performance will also
depend on changes in the expenses of the underlying mutual funds. 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 Code.
UNIT PRICE DETERMINATIONS: 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. 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 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 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 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.
CALCULATING THE MARKET VALUE ADJUSTMENT: The market value adjustment ("MVA") is
used in determining the Account Value of each Fixed Allocation. The formula used
to determine the MVA is applied separately to each Fixed Allocation. Values and
time durations used in the formula are as of the date the Account Value is being
determined. Current Rates and available Guarantee Periods are those for the
class of Annuities you purchase pursuant to the Prospectus available in
conjunction with this Statement of Additional Information. The formula is:
[(1+I) / (1+J+0.0010)]N/12
where:
I is the interest rate being credited to the Fixed Allocation;
J is the interest rate (for your class of annuities) being
credited to new Fixed Allocations with Guarantee Period
durations equal to the number of years (rounded to the next
higher integer when occurring on other than an anniversary of
the beginning of the Fixed Allocation's Guarantee Period)
remaining in your Fixed Allocation Guarantee Period;
N is the number of months (rounded to the next higher integer
when occurring on other than a monthly anniversary of the
beginning of the Guarantee Period) remaining in such Guarantee
Period.
The formula that applies if amounts are surrendered pursuant to the right to
return the annuity is [(1 + I)/(1 + J)]N/12.
No MVA applies in determining a Fixed Allocation's Account Value on its Maturity
Date. The formula may be changed if Additional Amounts have been added to a
Fixed Allocation. For more information, see the section of the Prospectus
entitled "Additional Amounts in the Fixed Allocations."
Irrespective of the above, we apply certain formulas to determine "I" and "J"
when we do not offer Guarantee Periods with a duration equal to the Remaining
Period. These formulas are as follows:
(a) If we offer Guarantee Periods to your class of Annuities with
durations that are both shorter and longer than the Remaining Period, we
interpolate a rate for "J" between our then current interest rates for Guarantee
Periods with the next shortest and next longest durations then available for new
Fixed Allocations for your class of Annuities .
(b) If we no longer offer Guarantee Periods to your class of Annuities
with durations that are both longer and shorter than the Remaining Period, we
determine rates for "J" and, for purposes of determining the MVA only, for "I"
based on the Moody's Corporate Bond Yield Average - Monthly Average Corporates
(the "Average"), as published by Moody's Investor Services, Inc., its successor,
or an equivalent service should such Average no longer be published by Moody's.
For determining I, we will use the Average published on or immediately prior to
the start of the applicable Guarantee Period. For determining J, we will use the
Average for the Remaining Period published on or immediately prior to the date
the MVA is calculated.
The following examples show the effect of the MVA in determining Account Value.
The example assumes: (a) Account Value of $50,000 for the Fixed Allocation at
the beginning of its Guarantee Period; (b) a Guarantee Period of 5 years; (c) an
interest rate of 5%, which is an effective annual rate; and (d) the date of the
calculation is the end of the third year since the beginning of the Guarantee
Period. That means there are two exact years remaining to the end of the
Guarantee Period.
Example of Upward Adjustment: Assume that J = 3.5% and there have been no
transfers or withdrawals. At this point I = 5% (0.05) and N = 24 (number of
months remaining in the Guarantee Period). Then:
(a) MVA = [(1+I)/(I+J+0.0010)]N/12 = [1.05/1.036]2 = 1.027210; and
(b) Account Value = Interim Value X MVA = $59,456.20.
Example of Downward Adjustment: Assume that J = 6% and there have been no
transfers or withdrawals. At this point I = 5% (0.05) and N = 24, the number of
months remaining in the Guarantee Period. Then:
(a) MVA = [(1+I)/(1+J+0.0010)]N/12 = [1.05/1.061)]2 = 0.979372; and
(b) Account Value = Interim Value X MVA = $56,687.28.
INDEPENDENT AUDITORS: Ernst & Young LLP, Goodwin Square, 225 Asylum Street,
Hartford, Connecticut 06103, 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) with
respect to the year ended December 31, 1997. 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) with respect to the years ended December 31, 1996, 1995, 1994 and
1993. Audited consolidated statements of financial condition of American Skandia
Life Assurance Corporation as of December 31, 1997 and 1996, 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, 1997 are included in
the Prospectus. The audited statement of assets, liabilities and contractowner's
equity for Variable Account B (Class 2 Sub-accounts) as of December 31, 1997 and
the related statement of operations for the periods then ended and statements of
changes in net assets for the periods ended December 31, 1997 and 1996 are
included herein. The financial statements included herein and in the Prospectus
have been audited by Ernst & Young LLP and Deloitte & Touche LLP, independent
auditors, as set forth in their respective reports thereon appearing elsewhere
herein and in the Prospectus, and are included in reliance upon such reports
given upon the authority of each firm 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 in Appendix A are those of American Skandia
Life Insurance Corporation Variable Account B (Class 2 Sub-accounts) as of
December 31, 1997 and for the periods ended December 31, 1997 and 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].
Appendix A
Financial Statements for Separate Account B
(Class 2 Sub-accounts)
APPENDIX A
INDEPENDENT AUDITOR'S REPORT
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B - Class 2 and the
Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statement of assets and liabilities of the
twenty-nine sub-accounts of American Skandia Life Assurance Corporation Variable
Account B - Class 2, referred to in Note 1, as of December 31, 1997, and the
related statements of operations and changes in net assets for the year then
ended. 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 audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the financial position of the twenty-nine sub-accounts
of American Skandia Life Assurance Corporation Variable Account B - Class 2, as
referred to in Note 1, as of December 31, 1997, and the results of their
operations and changes in their net assets for the year then ended in conformity
with generally accepted accounting principles.
Ernst & Young LLP
/s/Ernst & Young LLP
Hartford, Connecticut
February 20, 1998
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Contractowners of
American Skandia Life Assurance Corporation
Variable Account B - Class 2 and the
Board of Directors and Shareholder of
American Skandia Life Assurance Corporation
Shelton, Connecticut
We have audited the accompanying statements of changes in net assets of the
sub-accounts of American Skandia Life Assurance Corporation Variable Account B -
Class 2, referred to in Note 1, for the year ended December 31, 1996. 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 audit.
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. Our procedures included
the 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 changes in net assets of the sub-accounts of American Skandia Life
Assurance Corporation Variable Account B - Class 2, referred to in Note 1, for
the year ended December 31, 1996 in conformity with generally accepted
accounting principles.
/s/Deloitte & Touche LLP
Deloitte & Touche LLP
New York, New York
February 24, 1997
American Skandia Life Assurance Corporation
Variable Account B --- Class 2
Statement of Assets, Liabilities, and Contractowner's Equity
As of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS
Investment in mutual funds at market value ( Note 2 ):
Neuberger & Berman Advisers Management Trust ( NBAMT ):
<S> <C>
Partners Portfolio - 480,288 shares ( cost $8,812,610 ) $ 9,893,927
The Alger American Fund ( AAF ):
Small Capitalization Portfolio - 168,473 shares ( cost $7,034,401 ) 7,370,703
Growth Portfolio - 156,913 shares ( cost $6,596,483 ) 6,709,615
MidCap Growth Portfolio - 225,196 shares ( cost $5,368,729 ) 5,445,228
American Skandia Trust ( AST ):
Putnam International Equity Portfolio - 322,573 shares ( cost $6,775,086 ) 6,864,355
Putnam Balanced Portfolio - 241,699 shares ( cost $3,029,337 ) 3,294,357
Putnam Value Growth & Income Portfolio - 103,767 shares ( cost $1,273,255 ) 1,269,064
Lord Abbett Growth and Income Portfolio - 642,397 shares ( cost $12,127,999 ) 13,188,411
JanCap Growth Portfolio - 609,983 shares ( cost $13,765,728 ) 14,121,106
Money Market Portfolio - 17,655,875 shares ( cost $17,655,876 ) 17,655,876
Federated Utility Income Portfolio - 276,707 shares ( cost $3,816,624 ) 4,192,108
Federated High Yield Portfolio - 652,756 shares ( cost $7,877,923 ) 8,557,630
T. Rowe Price Asset Allocation Portfolio - 103,621 shares ( cost $1,391,932 ) 1,567,783
T. Rowe Price International Equity Portfolio - 939,138 shares ( cost $11,716,032 ) 11,354,179
T. Rowe Price International Bond Portfolio - 280,515 shares ( cost $2,876,573 ) 2,833,206
T. Rowe Price Natural Resources Portfolio - 115,737 shares ( cost $1,865,920 ) 1,686,289
T. Rowe Price Small Company Value - 765,839 shares ( cost $9,832,518 ) 9,864,011
Founders Capital Appreciation Portfolio - 393,932 shares ( cost $6,917,744 ) 7,015,937
Founders Passport Portfolio - 200,691 shares ( cost $2,375,239 ) 2,364,138
PIMCO Total Return Bond Portfolio - 1,643,931 shares ( cost $17,920,516 ) 19,266,868
PIMCO Limited Maturity Bond Portfolio - 486,942 shares ( cost $5,216,887 ) 5,366,099
INVESCO Equity Income Portfolio - 306,225 shares ( cost $4,747,378 ) 5,055,773
Berger Capital Growth Portfolio - 102,895 shares ( cost $1,665,161 ) 1,709,091
Robertson Stephens Value + Growth Portfolio - 196,780 shares ( cost $2,705,757 ) 2,483,366
Janus Overseas Growth Portfolio - 233,996 shares ( cost $2,790,371 ) 2,777,532
Twentieth Century Strategic Balanced Portfolio - 3,695 shares ( cost $40,724 ) 41,897
Twentieth Century International Growth Portfolio - 43,447 shares ( cost $480,627 ) 500,504
Marsico Capital Growth - 12,993 shares ( cost $130,009 ) 130,315
Montgomery Variable Series ( Montgomery ):
Emerging Markets Fund - 293,539 shares ( cost $3,519,982 ) 3,102,708
-------------------
Total Invested Assets 175,682,079
Receivable from American Skandia Life Assurance Corporation 100,197
Receivable from The Alger American Fund 1,419,197
Receivable from Montgomery Variable Series 2,488
-------------------
Total Assets $ 177,203,961
===================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements
American Skandia Life Assurance Corporation
Variable Account B --- Class 2
Statement of Assets and Liabilities ( Concluded )
As of December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIABILITIES
<S> <C>
Payable to Neuberger & Berman Advisors Management Trust $ 1,520,462
Payable to American Skandia Trust 1,522
------------------
Total Liabilities $ 1,521,984
------------------
</TABLE>
<TABLE>
<CAPTION>
NET ASSETS
Unit
Contractowners' Equity Units Value
<S> <C> <C> <C>
NBAMT - Partners 489,518 $ 20.21 $ 9,894,101
AAF - Small Capitalization 454,258 16.23 7,370,704
AAF - Growth 345,362 19.43 6,709,614
AAF - MidCap Growth 290,286 18.76 5,445,132
AST - Putnam International Equity 477,264 14.38 6,864,476
AST - Putnam Balanced 211,541 15.57 3,294,357
AST - Putnam Value Growth & Income 104,567 12.14 1,269,023
AST - Lord Abbett Growth and Income 700,150 18.84 13,188,412
AST - JanCap Growth 666,835 21.18 14,121,106
AST - Money Market 1,518,310 11.63 17,656,028
AST - Federated Utility Income 260,929 16.07 4,192,108
AST - Federated High Yield 595,692 14.37 8,557,630
AST - T. Rowe Price Asset Allocation 99,319 15.78 1,567,728
AST - T. Rowe Price International Equity 955,465 11.88 11,354,381
AST - T. Rowe Price International Bond 266,136 10.65 2,833,206
AST - T. Rowe Price Natural Resources 114,880 14.68 1,686,259
AST - T. Rowe Price Small Company Value 771,770 12.78 9,864,011
AST - Founders Capital Appreciation 399,262 17.57 7,015,937
AST - Founders Passport 203,237 11.63 2,364,053
AST - PIMCO Total Return Bond 1,523,587 12.65 19,266,869
AST - PIMCO Limited Maturity Bond 469,686 11.42 5,366,099
AST - INVESCO Equity Income 287,286 17.60 5,055,773
AST - Berger Capital Growth 104,340 16.38 1,709,031
AST - Robertson Stephens Value + Growth 199,511 12.45 2,483,278
AST - Janus Overseas Growth 235,801 11.78 2,777,434
AST - Twentieth Century Strategic Balanced 3,720 11.25 41,859
AST - Twentieth Century International Growth 43,776 11.43 500,362
AST - Marsico Capital Growth 12,993 10.03 130,298
Montgomery Emerging Markets 305,775 10.15 3,102,708
------------------
==================
Total Net Assets $ 175,681,977
==================
</TABLE>
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 2
STATEMENT OF OPERATIONS
For the Periods Ended December 31, 1997
- --------------------------------------------------------------------------------
Class 2 Sub-account Investing In:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NBAMT AAF - Small
Total Partners Capitalization AAF - Growth
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 2,697,419 $ 21,285 $ - $ 20,706
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (1,190,435) (61,293) (52,532) (59,197)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,506,984 (40,008) (52,532) (38,491)
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 595,003,464 8,424,171 111,910,557 28,826,926
Cost of Securities Sold 580,824,894 7,460,941 111,374,144 27,012,429
-----------------------------------------------------------------------------------
Net Gain (Loss) 14,178,570 963,230 536,413 1,814,497
Capital Gain Distributions Received 2,295,167 327,782 280,992 37,499
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 16,473,737 1,291,012 817,405 1,851,996
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 4,451,309 436,685 (79,883) 287,486
End of Period 5,354,658 1,081,317 336,301 113,132
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 903,349 644,632 416,184 (174,354)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 18,884,070 $ 1,895,636 $ 1,181,057 $ 1,639,151
===================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced
<TABLE>
<CAPTION>
AST - Putnam
Value Grth & Inc
AAF - MidCap AST - Putnam AST - Putnam Jan. 3* thru
Growth International Equity Balanced Dec. 31, 1997
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 2,415 $ 72,097 $ 64,116 $ -
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (38,236) (43,707) (23,812) (3,051)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (35,821) 28,390 40,304 (3,051)
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 26,844,817 10,463,925 938,636 2,041,551
Cost of Securities Sold 26,064,393 9,732,007 917,652 2,012,240
-----------------------------------------------------------------------------------
Net Gain (Loss) 780,424 731,918 20,984 29,311
Capital Gain Distributions Received 8,898 232,340 294,110 -
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 839,322 964,258 315,094 29,311
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 76,810 259,829 148,393 -
End of Period 76,500 89,269 265,020 (4,191)
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (310) (170,560) 116,627 (4,191)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 803,191 $ 822,088 $ 472,025 $ 22,069
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Lord
Abbett Growth AST - JanCap AST - Money AST - Federated
and Income Growth Market Utility Income
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 115,812 $ 26,280 $ 942,746 $ 51,098
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (86,186) (94,368) (147,811) (14,485)
---------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 29,626 (68,088) 794,935 36,613
---------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 11,062,629 21,376,279 253,712,281 1,514,079
Cost of Securities Sold 9,361,692 19,196,026 253,712,281 1,394,464
---------------------------------------------------------------------------------
Net Gain (Loss) 1,700,937 2,180,253 - 119,615
Capital Gain Distributions Received 208,215 438,078 2,866 72,979
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 1,909,152 2,618,331 2,866 192,594
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 871,074 217,175 - 106,898
End of Period 1,060,413 355,378 - 375,484
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 189,339 138,203 - 268,586
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,128,117 $ 2,688,446 $ 797,801 $ 497,793
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - T. Rowe AST - T. Rowe AST - T. Rowe
AST - Federated Price Asset Price International Price International
High Yield Allocation Equity Bond
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 295,694 $ 20,278 $ 61,684 $ 36,542
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (56,168) (10,138) (94,640) (21,104)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 239,526 10,140 (32,956) 15,438
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 3,007,140 563,868 15,943,622 804,290
Cost of Securities Sold 2,694,457 472,922 14,967,265 825,867
-----------------------------------------------------------------------------------
Net Gain (Loss) 312,683 90,946 976,357 (21,577)
Capital Gain Distributions Received 35,211 18,847 70,107 58,539
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 347,894 109,793 1,046,464 36,962
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 409,760 94,355 441,703 101,577
End of Period 679,707 175,851 (361,853) (43,366)
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 269,947 81,496 (803,556) (144,943)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 857,367 $ 201,429 $ 209,952 $ (92,543)
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - T. Rowe Price
AST - T. Rowe Small Co. Value AST - Founders
Price Natural Jan. 3* thru Capital AST - Founders
Resources Dec. 31, 1997 Appreciation Passport
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 7,782 $ - $ - $ 18,604
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (15,601) (35,625) (44,392) (22,886)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (7,819) (35,625) (44,392) (4,282)
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 5,689,477 11,991,246 43,196,203 4,213,509
Cost of Securities Sold 5,369,571 10,804,129 42,653,200 4,106,288
-----------------------------------------------------------------------------------
Net Gain (Loss) 319,906 1,187,117 543,003 107,221
Capital Gain Distributions Received 38,714 - - 2,971
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 358,620 1,187,117 543,003 110,192
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 65,458 - 98,345 45,743
End of Period (179,631) 31,493 98,194 (11,102)
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (245,089) 31,493 (151) (56,845)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 105,712 $ 1,182,985 $ 498,460 $ 49,065
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - PIMCO AST - PIMCO
Total Return Limited Maturity AST - INVESCO AST - Berger
Bond Bond Equity Income Capital Growth
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ 605,956 $ 252,428 $ 74,651 $ 2,150
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (129,131) (41,030) (34,525) (14,178)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 476,825 211,398 40,126 (12,028)
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 5,160,226 3,079,618 6,847,068 4,777,915
Cost of Securities Sold 5,201,449 2,982,226 6,003,285 4,523,848
-----------------------------------------------------------------------------------
Net Gain (Loss) (41,223) 97,392 843,783 254,067
Capital Gain Distributions Received - - 104,019 13,000
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) (41,223) 97,392 947,802 267,067
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 315,270 123,014 395,879 6,386
End of Period 1,346,352 149,212 308,395 43,930
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) 1,031,082 26,198 (87,484) 37,544
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 1,466,684 $ 334,988 $ 900,444 $ 292,583
===================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Janus AST - Twentieth Cent. AST - Twentieth Cent.
AST - Robertson Overseas Growth Strategic Balanced International Growth
Stephens Value Jan. 3* thru Jan. 3* thru Jan. 3* thru
+ Growth Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997
-----------------------------------------------------------------------------------
INVESTMENT INCOME:
Income
<S> <C> <C> <C> <C>
Dividends $ - $ - $ - $ -
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (13,676) (9,899) (139) (2,907)
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) (13,676) (9,899) (139) (2,907)
-----------------------------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales 3,341,090 3,945,014 63,332 1,522,505
Cost of Securities Sold 3,072,365 3,786,610 60,816 1,477,499
-----------------------------------------------------------------------------------
Net Gain (Loss) 268,725 158,404 2,516 45,006
Capital Gain Distributions Received - - - -
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) 268,725 158,404 2,516 45,006
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period 21,959 - - -
End of Period (222,391) (12,838) 1,173 19,877
-----------------------------------------------------------------------------------
NET UNREALIZED GAIN (LOSS) (244,350) (12,838) 1,173 19,877
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 10,699 $ 135,667 $ 3,550 $ 61,976
===================================================================================
</TABLE>
Marsico Capital
Growth Montgomery
Dec. 22* thru Emerging
Dec. 31, 1997 Markets
---------------------------------------
INVESTMENT INCOME:
Income
Dividends $ - $ 5,095
Expenses
Mortality and Expense Risk Charges and
Administrative Fees (Note 6) (16) (19,702)
---------------------------------------
NET INVESTMENT INCOME (LOSS) (16) (14,607)
---------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENTS:
Proceeds from Sales - 3,741,490
Cost of Securities Sold - 3,584,828
---------------------------------------
Net Gain (Loss) - 156,662
Capital Gain Distributions Received - -
---------------------------------------
NET REALIZED GAIN (LOSS) - 156,662
UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Beginning of Period - 7,393
End of Period 306 (417,274)
---------------------------------------
NET UNREALIZED GAIN (LOSS) 306 (424,667)
---------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 290 $ (282,612)
=======================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 2
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NBAMT
Total Partners
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 1,506,984 $ 540,328 $ (40,008) $ (32,486)
Net Realized Gain (Loss) 16,473,737 10,734,545 1,291,012 762,140
Net Unrealized Gain (Loss) On Investments 903,349 872,791 644,632 390,526
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 18,884,070 12,147,664 1,895,636 1,120,180
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 52,903,672 55,211,471 2,057,624 1,753,409
Net Transfers Between Sub-accounts - - 285,130 1,820,705
Surrenders (22,396,198) (25,759,045) (950,409) (868,668)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 30,507,474 29,452,426 1,392,345 2,705,446
------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 49,391,544 41,600,090 3,287,981 3,825,626
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 126,290,433 84,690,343 6,606,120 2,780,494
------------------------------------------------------------------------
End of Period $ 175,681,977 $ 126,290,433 $ 9,894,101 $ 6,606,120
========================================================================
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
* Date Operations Commenced.
<TABLE>
<CAPTION>
AAF AAF
Small Capitalization Growth
------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (52,532) $ (64,449) $ (38,491) $ (71,077)
Net Realized Gain (Loss) 817,405 470,513 1,851,996 966,309
Net Unrealized Gain (Loss) On Investments 416,184 (110,783) (174,354) 23,542
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 1,181,057 295,281 1,639,151 918,774
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 1,084,223 1,788,314 730,296 2,670,879
Net Transfers Between Sub-accounts (930,062) 1,519,731 (3,352,322) (5,210)
Surrenders (746,941) (1,390,196) (1,181,931) (1,731,694)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions (592,780) 1,917,849 (3,803,957) 933,975
------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 588,277 2,213,130 (2,164,806) 1,852,749
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 6,782,427 4,569,297 8,874,420 7,021,671
------------------------------------------------------------------------
End of Period $ 7,370,704 $ 6,782,427 $ 6,709,614 $ 8,874,420
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
AAF - MidCap AST - Putnam International
Growth Equity Portfolio
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (35,821) $ (45,413) $ 28,390 $ 37,922
Net Realized Gain (Loss) 839,322 533,400 964,258 293,300
Net Unrealized Gain (Loss) On Investments (310) 69,728 (170,560) 98,200
----------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 803,191 557,715 822,088 429,422
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 537,969 1,443,610 924,997 1,391,140
Net Transfers Between Sub-accounts (586,212) 1,392,250 835,499 (583,996)
Surrenders (492,523) (1,238,393) (724,228) (1,340,672)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions (540,766) 1,597,467 1,036,268 (533,528)
------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 262,425 2,155,182 1,858,356 (104,106)
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 5,182,707 3,027,525 5,006,120 5,110,226
------------------------------------------------------------------------
End of Period $ 5,445,132 $ 5,182,707 $ 6,864,476 $ 5,006,120
========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Putnam Balanced AST - Putnam Value
Portfolio Growth & Income
-----------------------------------------------------------------------
Year Ended Year Ended Jan. 3* thru
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997
-----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income (Loss) $ 40,304 $ 32,991 $ (3,051)
Net Realized Gain (Loss) 315,094 256,027 29,311
Net Unrealized Gain (Loss) On Investments 116,627 (22,456) (4,191)
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 472,025 266,562 22,069
-----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 599,659 321,006 401,636
Net Transfers Between Sub-accounts (107,503) (321,244) 919,151
Surrenders (143,877) (678,425) (73,833)
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 348,279 (678,663) 1,246,954
-----------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 820,304 (412,101) 1,269,023
-----------------------------------------------------------------------
NET ASSETS:
Beginning of Period 2,474,053 2,886,154 -
-----------------------------------------------------------------------
End of Period $ 3,294,357 $ 2,474,053 $ 1,269,023
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Lord Abbett AST
Growth and Income JanCap Growth
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 29,626 $ 1,965 $ (68,088) $ (61,005)
Net Realized Gain (Loss) 1,909,152 1,020,468 2,618,331 2,098,523
Net Unrealized Gain (Loss) On Investments 189,339 395,313 138,203 (296,635)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 2,128,117 1,417,746 2,688,446 1,740,883
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 2,345,707 2,495,239 2,594,871 2,468,165
Net Transfers Between Sub-accounts (386,440) 1,131,309 952,511 2,308,853
Surrenders (1,185,778) (1,252,199) (1,644,835) (2,004,892)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 773,489 2,374,349 1,902,547 2,772,126
-------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,901,606 3,792,095 4,590,993 4,513,009
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 10,286,806 6,494,711 9,530,113 5,017,104
------------------------------------------------------------------------
End of Period $ 13,188,412 $ 10,286,806 $ 14,121,106 $ 9,530,113
========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST AST - Federated
Money Market Utility Income
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 794,935 $ 501,983 $ 36,613 $ 52,792
Net Realized Gain (Loss) 2,866 5,776 192,594 118,252
Net Unrealized Gain (Loss) On Investments - - 268,586 (36,777)
---------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 797,801 507,759 497,793 134,267
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 21,372,766 24,653,319 194,629 106,504
Net Transfers Between Sub-accounts (13,077,432) (15,809,346) 2,534,749 (324,626)
Surrenders (5,840,809) (5,315,782) (359,558) (503,562)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 2,454,525 3,528,191 2,369,820 (721,684)
--------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,252,326 4,035,950 2,867,613 (587,417)
---------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 14,403,702 10,367,752 1,324,495 1,911,912
-------------------------------------------------------------------------
End of Period $ 17,656,028 $ 14,403,702 $ 4,192,108 $ 1,324,495
========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Federated AST - T. Rowe Price
High Yield Asset Allocation
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) 239,526 $ 114,508 $ 10,140 $ 11,924
Net Realized Gain (Loss) 347,894 246,348 109,793 144,450
Net Unrealized Gain (Loss) On Investments 269,947 159,804 81,496 (22,748)
---------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 857,367 520,660 201,429 133,626
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 1,611,067 1,315,835 494,217 490,225
Net Transfers Between Sub-accounts 1,763,497 1,150,445 21,376 (128,423)
Surrenders (1,202,459) (857,167) (259,824) (460,908)
------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 2,172,105 1,609,113 255,769 (99,106)
---------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 3,029,472 2,129,773 457,198 34,520
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 5,528,158 3,398,385 1,110,530 1,076,010
------------------------------------------------------------------------
End of Period $ 8,557,630 $ 5,528,158 $ 1,567,728 $ 1,110,530
================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - T. Rowe Price AST - T. Rowe Price
International Equity International Bond
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (32,956) $ (31,946) $ 15,438 $ 2,329
Net Realized Gain (Loss) 1,046,464 975,172 36,962 60,736
Net Unrealized Gain (Loss) On Investments (803,556) 267,440 (144,943) 54,994
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 209,952 1,210,666 (92,543) 118,059
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 2,478,049 3,165,312 605,183 915,037
Net Transfers Between Sub-accounts (1,473,143) 2,083,722 188,712 231,046
Surrenders (1,197,011) (1,502,981) (236,642) (242,913)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions (192,105) 3,746,053 557,253 903,170
------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 17,847 4,956,719 464,710 1,021,229
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 11,336,534 6,379,815 2,368,496 1,347,267
------------------------------------------------------------------------------------------------
End of Period $ 11,354,381 $ 11,336,534 $ 2,833,206 $ 2,368,496
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - T. Rowe Price AST - T. Rowe Price
Natural Resources Small Company Value
-----------------------------------------------------------------------
Year Ended Year Ended Jan. 3* Thru
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997
-----------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C>
Net Investment Income (Loss) $ (7,819) $ (7,690) $ (35,625)
Net Realized Gain (Loss) 358,620 178,439 1,187,117
Net Unrealized Gain (Loss) On Investments (245,089) 56,880 31,493
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 105,712 227,629 1,182,985
-----------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 574,752 499,779 2,404,108
Net Transfers Between Sub-accounts (537,542) 1,123,429 6,606,923
Surrenders (463,651) (146,207) (330,005)
-----------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions (426,441) 1,477,001 8,681,026
-----------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (320,729) 1,704,630 9,864,011
-----------------------------------------------------------------------
NET ASSETS:
Beginning of Period 2,006,988 302,358 -
-----------------------------------------------------------------------
End of Period $ 1,686,259 $ 2,006,988 $ 9,864,011
=======================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Founders Capital AST - Founders
Appreciation Passport
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (44,392) $ (19,391) $ (4,282) $ (20,398)
Net Realized Gain (Loss) 543,003 886,255 110,192 235,101
Net Unrealized Gain (Loss) On Investments (151) 25,688 (56,845) 49,252
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 498,460 892,552 49,065 263,955
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 1,826,058 695,104 529,243 1,063,401
Net Transfers Between Sub-accounts 579,800 361,745 (871,533) 974,405
Surrenders (429,568) (523,510) (541,964) (519,444)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 1,976,290 533,339 (884,254) 1,518,362
------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 2,474,750 1,425,891 (835,189) 1,782,317
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 4,541,187 3,115,296 3,199,242 1,416,925
---------------------------------------------------------------------------------------------
End of Period $ 7,015,937 $ 4,541,187 $ 2,364,053 $ 3,199,242
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - PIMCO AST - PIMCO
Total Return Bond Limited Maturity Bond
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 476,825 $ 142,999 $ 211,398 $ (26,055)
Net Realized Gain (Loss) (41,223) 608,171 97,392 92,021
Net Unrealized Gain (Loss) On Investments 1,031,082 (312,105) 26,198 90,398
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 1,466,684 439,065 334,988 156,364
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 4,076,125 3,866,953 979,360 1,952,390
Net Transfers Between Sub-accounts 1,417,398 2,717,770 212,275 (351,846)
Surrenders (1,649,270) (2,647,351) (711,287) (1,360,357)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 3,844,253 3,937,372 480,348 240,187
------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 5,310,937 4,376,437 815,336 396,551
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 13,955,932 9,579,495 4,550,763 4,154,212
------------------------------------------------------------------------------------------------
End of Period $ 19,266,869 $ 13,955,932 $ 5,366,099 $ 4,550,763
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - INVESCO AST - Berger
Equity Income Capital Growth
------------------------------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ 40,126 $ 32,210 $ (12,028) $ (8,092)
Net Realized Gain (Loss) 947,802 517,303 267,067 245,321
Net Unrealized Gain (Loss) On Investments (87,484) 57,375 37,544 (94,198)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 900,444 606,888 292,583 143,031
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 850,773 1,183,947 485,801 670,780
Net Transfers Between Sub-accounts 110,432 (401,900) (220,302) (312,426)
Surrenders (888,297) (942,233) (274,483) (173,968)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 72,908 (160,186) (8,984) 184,386
------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 973,352 446,702 283,599 327,417
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 4,082,421 3,635,719 1,425,432 1,098,015
------------------------------------------------------------------------------------------------
End of Period $ 5,055,773 $ 4,082,421 $ 1,709,031 $ 1,425,432
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST -
AST - Robertson AST - Janus Twentieth Century
Stephens Value + Growth Overseas Growth Strategic Balanced
------------------------------------------------------------------------------------------------
Year Ended May 23* Thru Jan. 3* Thru Jan. 3* Thru
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1997
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (13,676) $ (2,941) $ (9,899) $ (139)
Net Realized Gain (Loss) 268,725 22,436 158,404 2,516
Net Unrealized Gain (Loss) On Investments (244,350) 21,959 (12,838) 1,173
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 10,699 41,454 135,667 3,550
------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 641,767 185,569 977,707 32,621
Net Transfers Between Sub-accounts 864,635 1,113,978 1,824,203 5,764
Surrenders (342,816) (32,008) (160,143) (76)
------------------------------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 1,163,586 1,267,539 2,641,767 38,309
------------------------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 1,174,285 1,308,993 2,777,434 41,859
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of Period 1,308,993 - - -
------------------------------------------------------------------------------------------------
End of Period $ 2,483,278 $ 1,308,993 $ 2,777,434 $ 41,859
================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AST - Montgomery
Twentieth Century Marsico Emerging
International Growth Capital Growth Markets
------------------------------------------------------------------------------------------------
Jan. 3* Thru Dec. 22* Thru Year Ended May 19* Thru
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1996
------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
<S> <C> <C> <C> <C>
Net Investment Income (Loss) $ (2,907) $ (16) $ (14,607) $ (352)
Net Realized Gain (Loss) 45,006 - 156,662 (1,916)
Net Unrealized Gain (Loss) On Investments 19,877 306 (424,667) 7,394
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Operations 61,976 290 (282,612) 5,126
------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Transfers of Annuity Fund Deposits 222,733 130,008 1,139,723 115,554
Net Transfers Between Sub-accounts 300,332 - 2,120,104 309,629
Surrenders (84,679) - (279,301) (25,515)
------------------------------------------------------------------------
Net Increase (Decrease) In Net Assets Resulting
From Capital Share Transactions 438,386 130,008 2,980,526 399,668
------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) IN NET ASSETS 500,362 130,298 2,697,914 404,794
------------------------------------------------------------------------
NET ASSETS:
Beginning of Period - - 404,794 -
------------------------------------------------------------------------
End of Period $ 500,362 $ 130,298 $ 3,102,708 $ 404,794
========================================================================
</TABLE>
American Skandia Life Assurance Corporation
Variable Account B - Class 2
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
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" or "Company"). 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, 1997 the Account consisted of twenty-nine 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 Invesment 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. for the Montgomery Funds III. The investment advisors are
paid fees for their services by the respective Trusts. The Choice 2000
Variable Annuity is marketed by American Skandia Marketing, an affiliate.
The following five sub-accounts commenced operations on January 3, 1997:
the Twentieth Century International Growth, the Twentieth Century Strategic
Balanced Fund, the Janus Overseas Growth Fund, The T.Rowe Price Small
Company Value Fund, and the Putnam Value Growth and Income Fund. The
Marsico Capital Growth Fund commenced operations on December 22, 1997.
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. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.
Actual results could differ from those estimates.
<PAGE>
American Skandia Life Assurance Corporation
Variable Account B - Class 2
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
4. 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.
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.
5. DIVERSIFICATION REQUIREMENTS
Under the provisions of Section 817(h) of the Internal Revenue Code a
variable annuity contract, other than a contract issued in connection with
certain types of employee benefit plans, will not be treated as an annuity
contract for federal tax purposes for any period in which the investments,
on which the contract is based, are not adequately diversified. American
Skandia believes the Account satisfies the current regulations, and the
Company intends that the Account will continue to meet such requirements.
6. CONTRACT CHARGES
The following contract charges are paid to American Skandia which provides
administrative services to the Account:
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, for each contractowner
account. This fee 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.
<PAGE>
American Skandia Life Assurance Corporation
Variable Account B - Class 2
Notes to Financial Statements
December 31, 1997
- --------------------------------------------------------------------------------
7. YEAR 2000 COMPLIANCE (UNAUDITED)
The Company's internally developed systems were designed from the start
with the correct four digit date fields. As a result, few technical
problems related to the year 2000 are anticipated. In addition, the
Company is working with external business partners and software
providers to request and review their year 2000 compliance status and
plans. Any new, externally developed software and all new service
providers are evaluated for year 2000 compliance before contracted.
Full internal compliance is anticipated by September 1998, followed by
continuous evaluation of internal systems, external business partners
and software providers until the year 2000.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
VARIABLE ACCOUNT B - CLASS 2
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
8. CHANGES IN THE UNITS OUTSTANDING
Class 2 Sub-accounts Investing In:
- ---------------------------------------------------------------------------
- ------------------------------------
<TABLE>
<CAPTION>
NBAMT AAF-Small
Partners Capitalization
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 425,664 230,034 462,016 321,334
Units Purchased 112,288 129,982 69,740 121,589
Units Transferred Between Sub-accounts 2,417 127,801 (26,160) 114,029
Units Surrendered (50,851) (62,153) (51,338) (94,937)
---------------------------------------------------------------------------
=======================================
Units Outstanding End of the Period 489,518 425,664 454,258 462,016
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AAF
AAF-Growth MidCap Growth
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 569,960 506,542 315,296 204,227
Units Purchased 41,661 184,688 31,032 91,889
Units Transferred Between Sub-accounts (199,926) (5,662) (28,140) 96,003
Units Surrendered (66,333) (115,608) (27,902) (76,823)
---------------------------------------------------------------------------
================== =======================================
Units Outstanding End of the Period 345,362 569,960 290,286 315,296
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST- Putnam AST-Putnam
Int'l Equity Balanced Asset
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 408,066 452,589 186,453 239,737
Units Purchased 65,664 119,692 41,803 26,190
Units Transferred Between Sub-accounts 59,462 (50,835) (6,819) (25,472)
Units Surrendered (55,928) (113,380) (9,896) (54,001)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 477,264 408,066 211,541 186,453
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Putnam Value AST-Lord Abbett
Growth & Income Growth & Income
----------------------------------------------------------
Jan. 3* thru Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1996
----------------------------------------------------------
<S> <C> <C> <C>
Units Outstanding Beginning of the Period 0 671,510 498,080
Units Purchased 34,538 135,140 180,992
Units Transferred Between Sub-accounts 76,755 (36,238) 80,234
Units Surrendered (6,726) (70,262) (87,796)
----------------------------------------------------------
==========================================================
Units Outstanding End of the Period 104,567 700,150 671,510
==========================================================
</TABLE>
<TABLE>
<CAPTION>
AST AST
JanCap Growth Money Market
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 574,520 384,701 1,292,931 968,666
Units Purchased 134,093 167,517 1,877,568 2,262,773
Units Transferred Between Sub-accounts 47,220 150,130 (1,144,379) (1,451,535)
Units Surrendered (88,998) (127,828) (507,810) (486,973)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 666,835 574,520 1,518,310 1,292,931
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Federated AST-Federated
Utility Income High Yield
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 103,416 164,976 433,739 300,107
Units Purchased 13,425 9,081 118,493 110,782
Units Transferred Between Sub-accounts 170,731 (28,299) 133,935 94,474
Units Surrendered (26,643) (42,341) (90,475) (71,624)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 260,929 103,416 595,692 433,739
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-T. Rowe Price AST-T. Rowe
Asset Allocation Price International Equity
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 82,655 89,787 959,467 610,851
Units Purchased 32,913 39,233 202,294 286,364
Units Transferred Between Sub-accounts 1,146 (10,449) (107,345) 196,584
Units Surrendered (17,395) (35,917) (98,951) (134,332)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 99,319 82,655 955,465 959,467
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-T. Rowe AST-T. Rowe Price
Price International Bond Natural Resources
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 213,216 127,373 140,275 27,379
Units Purchased 57,005 86,518 38,417 39,114
Units Transferred Between Sub-accounts 18,164 21,799 (32,736) 84,470
Units Surrendered (22,249) (22,474) (31,076) (10,688)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 266,136 213,216 114,880 140,275
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-T.Rowe Price AST-Founders
Small Company Value Capital Appreciation
----------------------------------------------------------
Jan. 3* thru Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1996
----------------------------------------------------------
<S> <C> <C> <C>
Units Outstanding Beginning of the Period 0 271,845 221,840
Units Purchased 208,161 107,596 44,713
Units Transferred Between Sub-accounts 591,206 47,440 39,299
Units Surrendered (27,597) (27,619) (34,008)
----------------------------------------------------------
==========================================================
Units Outstanding End of the Period 771,770 399,262 271,845
==========================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Founders AST-PIMCO Total
Passport Return Bond
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 278,460 137,991 1,203,159 846,356
Units Purchased 44,946 96,763 339,303 345,533
Units Transferred Between Sub-accounts (73,938) 89,864 119,410 244,821
Units Surrendered (46,231) (46,158) (138,285) (233,551)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 203,237 278,460 1,523,587 1,203,159
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-PIMCO AST-INVESCO
Limited Maturity Bond Equity Income
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 424,713 399,158 283,889 293,340
Units Purchased 88,637 187,300 51,478 91,446
Units Transferred Between Sub-accounts 20,910 (33,820) 7,517 (31,826)
Units Surrendered (64,574) (127,924) (55,598) (69,071)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 469,686 424,713 287,286 283,889
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Berger AST-Robertson Stephens
Capital Growth Value & Growth
---------------------------------------------------------------------------
Year Ended Year Ended Year Ended May 1* thru
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1997 Dec. 31, 1996
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 100,758 89,474 119,830 0
Units Purchased 32,801 49,001 49,325 17,235
Units Transferred Between Sub-accounts (11,587) (24,425) 55,593 105,829
Units Surrendered (17,632) (13,292) (25,237) (3,234)
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 104,340 100,758 199,511 119,830
===========================================================================
</TABLE>
<TABLE>
<CAPTION>
AST-Janus AST-Twentieth Century AST-Twentieth Century AST-Marsico
Overseas Growth Strategic Balanced International Growth Capital Growth
---------------------------------------------------------------------------
Jan. 3* thru Jan. 3* thru Jan. 3* thru Dec. 22* thru
Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997 Dec. 31, 1997
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units Outstanding Beginning of the Period 0 0 0 0
Units Purchased 84,373 3,104 20,039 12,993
Units Transferred Between Sub-accounts 166,494 623 31,204 0
Units Surrendered (15,066) (7) (7,467) 0
---------------------------------------------------------------------------
===========================================================================
Units Outstanding End of the Period 235,801 3,720 43,776 12,993
===========================================================================
</TABLE>
Montgomery
Emerging Markets
------------------------------------
Year Ended May 1* thru
Dec. 31, 1997 Dec. 31, 1996
------------------------------------
Units Outstanding Beginning of the Period 39,355 0
Units Purchased 98,893 11,451
Units Transferred Between Sub-accounts 192,112 30,452
Units Surrendered (24,585) (2,549)
------------------------------------
====================================
Units Outstanding End of the Period 305,775 39,355
====================================
choice2
PART C
OTHER INFORMATION
<PAGE>
Item 24. Financial Statements and Exhibits:
(a) All financial statements are included in Parts A & B of this Registration
Statement.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(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 to Registration Statement No.
33-19363, filed December 30, 1987).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March 2, 1998.
(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 known as Skandia Life Equity Sales Corporation
(previously filed in Post-Effective Amendment No. 3 to Registration Statement No. 33-44436, filed April
20, 1993).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(b) Form of Revised Dealer Agreement being filed via EDGAR with Post-Effective Amendment No. 7 to
Registration Statement No. 33-87010.
(4) Copy of the form of the Annuity filed via EDGAR in Pre-Effective No. 1 to this Registration Statement 333-08853,
filed December 20, 1996.
(5) A copy of the application form used with the Annuity provided
in response to (4) above (previously filed in Pre-Effective
Amendment No. 1 to Registration Statement No. 33-56770, filed
November 9, 1993).
FILED HEREWITH VIA EDGAR
(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).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(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).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(7) Not applicable.
(8) Agreements between Depositor and:
(a) Neuberger&Berman Advisers Management Trust (previously filed in Post-Effective Amendment 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 Amendment No. 5 to Registration Statement
No. 33-19363, filed February 28, 1990).
Filed via EDGAR with Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed March
2, 1998.
(c) 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.
(d) 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. FILED HEREWITH
(10) (a) Consent of Ernst & Young LLP FILED HEREWITH
(b) Consent of Deloitte & Touche LLP FILED HEREWITH
(11) Not applicable.
(12) Not applicable.
(13) Calculation of Performance Information for Advertisement of
Performance filed via EDGAR in the Initial Registration
Statement to this Registration Statement, filed July 25, 1996.
(14) Financial Data Schedule.
</TABLE>
Item 25. Directors and Officers of the Depositor: The Directors and Officers of
the Depositor are shown in Part A.
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
Corporation ("ASIST"): The organization 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 act as the
principal underwriter and/or provide securities law
supervisory services in relation to marketing of other
offerings, including 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.
Its primary role is expected to be as investment manager for
certain mutual funds, including but not limited to funds to be
made available primarily through the variable insurance
products of American Skandia Life Assurance Corporation.
(4) Skandia Vida: This subsidiary of 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. Currently, it is licensed for
this type of business in Mexico.
Item 27. Number of Contract Owners: As of December 31, 1997 there were 2,007
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 reasonable entitled
to be indemnified, and the court approves the amount. In shareholder derivative
suits, the director or officer must be finally adjudged not to have breached
this duty to the 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 Registrants'
securities, the director or officer may obtain indemnification only if a court
determines that, in view of all the circumstances, he is fairly and reasonably
entitled to be indemnified and then for such amount as the court shall
determine. The By-Laws of American Skandia Life Assurance Corporation ("ASLAC")
also provide directors and officers with rights of indemnification, consistent
with Connecticut Law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of ASLAC and ASM, Inc. can also be indemnified pursuant
to indemnity agreements between each director and officer and American Skandia
Investment Holding Corporation, a corporation organized under the laws of the
state of Delaware. The provisions of the indemnity agreement are governed by
Section 45 of the General Corporation Law of the State of Delaware.
The directors and officers of ASLAC and ASM, Inc. are covered under a directors
and officers liability insurance policy issued by an unaffiliated insurance
company 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>
<S> <C>
Name and Principal Business Address Position and Offices with Underwriter
Gordon C. Boronow Deputy Chief Executive Officer
American Skandia Life Assurance Corporation and Director
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
Robert Brinkman Senior Vice President,
American Skandia Life Assurance Corporation National Sales Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Jan R. Carendi Chairman of the Board
American Skandia Life Assurance Corporation of Directors and
One Corporate Drive, P.O. Box 883 Chief Executive Officer
Shelton, Connecticut 06484-0883
Kathleen A. Chapman Assistant Corporate Secretary
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Lucinda C. Ciccarello Vice President, Mutual Funds
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
William F. Cordner, Jr. Vice President, Customer Focus Teams
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Daniel R. Darst Senior Vice President,
American Skandia Life Assurance Corporation National Marketing Director
One Corporate Drive, P.O. Box 883 and Director
Shelton, Connecticut 06484-0883
Paul A. 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 and Deputy Chief
American Skandia Life Assurance Corporation Executive Officer and
One Corporate Drive, P.O. Box 883 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, Product Development
American Skandia Life Assurance Corporation and Director
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Thomas M. Mazzaferro Executive Vice President,
American Skandia Life Assurance Corporation Chief Financial Officer
One Corporate Drive, P.O. Box 883 and Director
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. Patricia Paez Director
American Skandia Life Assurance Corporation
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
Hayward L. 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
Anders O. Soderstrom Executive Vice President and
American Skandia Life Assurance Corporation Chief Information Officer
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Leslie S. Sutherland Vice President,
American Skandia Life Assurance Corporation National Accounts Manager
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
Amanda C. Sutyak Vice President
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
Shelton, Connecticut 06484-0883
C. Ake Svensson Treasurer
American Skandia Life Assurance Corporation
One Corporate Drive, P.O. Box 883
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
Mary Toumpas Vice President and
American Skandia Life Assurance Corporation Compliance Director
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
</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.
<PAGE>
EXHIBITS
As noted in Item 24(b), various exhibits are incorporated by reference
or are not applicable. The exhibits included are as follows:
No. 5 Copy of the application form
No. 9 Opinion and consent of Werner & Kennedy
No. 10 (a) Consent of Ernst & Young LLP
(b) Consent of Deloitte & Touche LLP
No. 14 Financial Data Schedule
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 23rd day of April, 1998.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B
(CLASS 2 SUB-ACCOUNTS)
Registrant
By: American Skandia Life Assurance Corporation
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
By:/s/ Kathleen A. Chapman Attest:/s/ Scott K. Richardson
Kathleen A. Chapman, Assistant Corporate Secretary Scott K. Richardson
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 23, 1998
Jan R. Carendi Chairman of the Board and Director
(Principal Financial Officer)
/s/ Thomas M. Mazzaferro Executive Vice President and April 23, 1998
Thomas M. Mazzaferro Chief Financial Officer
(Principal Accounting Officer)
/s/ David R. Monroe Vice President and April 23, 1998
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/ Kathleen A. Chapman
Kathleen A. Chapman
<FN>
*Pursuant to Powers of Attorney filed with Initial Registration Statement No. 333-25733
</FN>
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------- -------------------------------------------------------------------
<S> <C> <C> <C> <C>
Logo American Group Annuity Application
Skandia Life for Participant Group ID#
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
1. Participant(Applicant) 3. Annuitant(if other than Participant)
Name John Doe Name
Address 10 Any Street Address
Anytown, Anystate 12345
Sex X Male Female Date of Birth Sex Male Female Date of Birth
Social Security/Tax I.D. No. 123-45-6789 Social Security/Tax I.D. No.
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
2. Co-Participant(if applicable) 4. Contingent Annuitant(if applicable)
Name Name
Address Address
Sex Male Female Date of Birth Sex Male Female Date of Birth
Social Security/Tax I.D. No. Social Security/Tax I.D. No.
- --------------------------------------------------------------- -------------------------------------------------------------------
- --------------------------------------------------------------- -------------------------------------------------------------------
5. Beneficiary Designation (The Participant reserves the right to change the Beneficiaries unless indicated in No. 10.)
Primary Beneficiary Contingent Beneficiary
Name Jane Doe Relationship to Participant Name Susan Doe Relationship to Participant
Wife Daughter
- ---------------------------------------------------------------
6. Initial Premium -------------------------------------------------------------------
$10,000 9. Type of Plan
Type of Payment X Check/Wire 1035 Exchange
Trustee-to-Trustee Transfer X Non-qualified Qualified (indicate plan type):
IRA SEP/IRA IRA Rollover 401k 403b
Other
- ---------------------------------------------------------------
7. Investment Selection 10. Replacement
(Indicate your investment allocation below. Please use Is this annuity intended to replace (in whole or in part)
only whole number percentages. They must total 100%.) an existing life insurance or annuity? Yes X No
Variable Investment Options (if applicable) (If yes, please indicate carrier, contract no. and
X XX Money Market 100 % approximate premium amount in No. 11)
- --------------------------------------------------------------- -------------------------------------------------------------------
% 11. Special Instructions
%
%
Fixed Investment Options (if applicable)
YR % YR %
YR % YR %
- --------------------------------------------------------------- -------------------------------------------------------------------
8. Amendments to the Application(Home office use only). 12. Statement of Additional Information
Yes. Please send me a statement of additional information.
- --------------------------------------------------------------- -------------------------------------------------------------------
</TABLE>
Agreement
I/We represent to the best of my/our knowledge and belief the statements made in
this application are true and complete; including, under penalty of perjury, the
Social Security or Tax ID numbers provided. It is indicated and agreed that the
only statements which are to be construed as the basis of the contract are those
contained in this application or in any amendment to this application. I/WE HAVE
ALSO RECEIVED A COPY OF THE PROSPECTUS AND I/WE UNDERSTAND THAT: (A) ANNUITY
PAYMENTS OR SURRENDER VALUES, WHEN BASED ON THE INVESTMENT EXPERIENCE OF THE
SEPARATE ACCOUNT, ARE VARIABLE AND NOT GUARANTEED AS TO A DOLLAR AMOUNT; AND (B)
ALL PAYMENTS AND VALUES BASED ON THE FIXED ACCOUNT ARE SUBJECT TO A MARKET VALUE
ADJUSTMENT FORMULA, THE OPERATION OF WHICH MAY RESULT IN EITHER AN UPWARD OR
DOWNWARD ADJUSTMENT.
Signatures
Participants X /s/John Doe
Proposed Annuitant (if other than Participant) X
Dated at (location) Anytown, Anystate Date 01/03/92
Signature of Agent X /s/ Robert Smith Agent Name (please print) Robert Smith
Name and Address of Firm
Agent Report
Do you have any reason to believe that the contract applied for is to replace
existing annuities or life insurance? Yes X No
GPAA-12-91
(212) 408-6900
April 17, 1998
American Skandia Life Assurance Corporation
One Corporate Drive
Shelton, Connecticut 06484
Re: Post-effective Amendment No. 2 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.: 333-08853
Investment Company No.: 811-8248
Our File No. 74877-00-101
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.
333-08853, 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 understand that the above registration is a combination
registration with Post-effective Amendment No. 2 on Form S-2 filed by American
Skandia Life Assurance Corporation, Registrant, Registration No.: 333-24989.
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 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,
WERNER & KENNEDY
/s/WERNER & KENNEDY
G:legal/Andrea/FinalN4consentsCHOICE2
CHOICE 2000
INDEPENDENT AUDITORS' CONSENT
We consent to the reference to our firm under the captions "Independent
Auditors" and "Selected Financial Data" and to the use of our report dated
February 20, 1998 relating to American Skandia Life Assurance Corporation
included in the Registration Statement (Form N-4 No. 333-08853) and related
Prospectus, which is part of this Registration Statement, and to the use of our
report dated February 20, 1998 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 incorporation by reference herein of our report dated
February 20, 1998 with respect to the financial statements of American Skandia
Life Assurance Corporation for the year ended December 31, 1997 included in the
Annual Report (Form 10-K ) for 1997 filed with the Securities and Exchange
Commission.
/s/Ernst & Young LLP
Hartford, Connecticut
April 23, 1998
Choice II
Exhibit 10(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Pre-effective Amendment No. 2 to Registration
Statement No. 333-08853 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,
1997, 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
headings "Independent Auditors" appearing in such Statement of Additional
Information and "Selected Financial Data" appearing in such Prospectus.
/s/ Deloitte & Touche LLP
New York, New York
April 23, 1998
<TABLE> <S> <C>
<ARTICLE> 7
<MULTIPLIER> 1
<CURRENCY> U.S Dollars
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<DEBT-HELD-FOR-SALE> 108,323,668
<DEBT-CARRYING-VALUE> 117,690,339
<DEBT-MARKET-VALUE> 117,735,481
<EQUITIES> 6,710,851
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 125,088,457
<CASH> 81,974,204
<RECOVER-REINSURE> 3,120,221
<DEFERRED-ACQUISITION> 628,051,995
<TOTAL-ASSETS> 12,972,416,108 <F1>
<POLICY-LOSSES> 67,619,442
<UNEARNED-PREMIUMS> 0
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 213,000,000
0
0
<COMMON> 2,000,000
<OTHER-SE> 182,421,044
<TOTAL-LIABILITY-AND-EQUITY> 12,972,416,108 <F2>
920,042
<INVESTMENT-INCOME> 8,181,073
<INVESTMENT-GAINS> 87,103
<OTHER-INCOME> 148,826,076 <F3>
<BENEFITS> 4,596,607
<UNDERWRITING-AMORTIZATION> 52,524,520
<UNDERWRITING-OTHER> 37,972,432
<INCOME-PRETAX> 38,025,279
<INCOME-TAX> 10,477,746
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,547,533
<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 $12,095,163.
<F2> Included in Total Liabilities and Equity are Liabilities Related to
Separate Accounts of $12,095,163,569.
<F3> Other income includes annuity charges and fees of $121,157,846 and
fee income of $27,587,231.
</FN>
</TABLE>
