-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cio5h2JS8WuLAk8gbNGDWlkTHWjbMWUKa+H3TfdRNbJxgj0iVsYKZQ9rJ+zxHjAW eBdY6i0QK3SdPPJ7Dpmr6A== 0001193125-06-182575.txt : 20060830 0001193125-06-182575.hdr.sgml : 20060830 20060830153827 ACCESSION NUMBER: 0001193125-06-182575 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 REFERENCES 429: 333-117052 FILED AS OF DATE: 20060830 DATE AS OF CHANGE: 20060830 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN SKANDIA LIFE ASSURANCE CORP/CT CENTRAL INDEX KEY: 0000881453 STANDARD INDUSTRIAL CLASSIFICATION: INSURANCE CARRIERS, NEC [6399] IRS NUMBER: 061241288 STATE OF INCORPORATION: CT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 333-136996 FILM NUMBER: 061065466 BUSINESS ADDRESS: STREET 1: ONE CORPORATE DRIVE CITY: SHELTON STATE: CT ZIP: 06484 BUSINESS PHONE: 2039261888 MAIL ADDRESS: STREET 1: ONE CORPORATE DRIVE CITY: SHELTON STATE: CT ZIP: 06484 S-3 1 ds3.txt FORM S-3 - AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Filed with the Securities and Exchange Commission on August 30, 2006 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 On Form S-3 Registration Statement Under The Securities Act of 1933* AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (Exact name of registrant as specified in its charter) CONNECTICUT (State or other jurisdiction of incorporation or organization) 63 (Primary Standard Industrial Classification Code Number) 06-1241288 (I.R.S. Employer Identification No.) ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOSEPH D. EMANUEL, CHIEF LEGAL OFFICER ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 944-7504 (Name, address, including zip code, and telephone number, including area code, of agent for service) Copy To: LAURA KEALEY, ESQ. VICE PRESIDENT AND CORPORATE COUNSEL One Corporate Drive, Shelton, Connecticut 06484 (203) 944-5477 Approximate date of commencement of proposed sale to the public: August 30, 2006 or as soon as practicable after the effective date of this Registration Statement If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box: [ ] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: [ ] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering: [X] (the Securities Act registration number of the earlier filing is 333-117052) If this Form is a post-effective amendment pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier registration statement for the same offering: [ ] If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective amendment thereto that shall become effective upon filing with the Commission pursuant to Rule 462(e) under the Securities Act, check the following box: [ ] If this Form is a post-effective amendment to a registration statement filed pursuant to General Instruction I.D. filed to register additional securities or additional classes of securities pursuant to rule 413(b) under the Securities Act, check the following box: [ ] Calculation of Registration Fee ================================================================================ Title of each Proposed Proposed class of maximum maximum securities Amount offering aggregate Amount of to be to be price offering registration registered registered per unit price** fee - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Market Value Adjusted - -------------------------------------------------------------------------------- Annuity Contracts $2,000,000,000.00 $214,000 *This filing is being made pursuant to Rule 462(b) under the Securities Act of 1933 to register an additional $2 billion of interests in market value-adjusted annuity contracts. As permitted by Rule 457(o) under the Securities Act of 1933, the filing fee set forth above was calculated based on the maximum aggregate offering price of $2 billion. The market value adjusted securities are sold according to dollar value, and are not denominated in either shares or units. Finally, because some of Registrant's securities from the July 1, 2004 filing remain unsold, Registrant intends to add those unsold securities to the $2 billion of securities being registered herewith (thus, Registrant has not reduced the filing fee paid herewith on account of the filing fee associated with securities that remain unsold from the July 1, 2004 offering). ================================================================================ APEX AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA ADVISOR PLANSM III ("ASAP III") AMERICAN SKANDIA APEX(R) II ("APEX II") AMERICAN SKANDIA XTRA CREDITSM SIX ("XT6") AMERICAN SKANDIA LIFEVEST(R) II ("ASL II") Flexible Premium Deferred Annuities PROSPECTUS: MAY 1, 2 0 0 6 This prospectus describes four different flexible premium deferred annuities (the "Annuities" or the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our", or "us"). Each Annuity may be offered as an individual annuity contract or as an interest in a group annuity. Each Annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the Annuity. This Prospectus describes the important features of the Annuities and what you should consider before purchasing one of the Annuities. The Prospectus also describes differences among the Annuities which include differences in the fees and charges you pay and variations in some product features such as the availability of certain bonus amounts and basic death benefit protection. These differences among the products are discussed more fully in the Prospectus and summarized in Appendix F entitled "Selecting the Variable Annuity That's Right for You". There may also be differences in the compensation paid to your Financial Professional for each Annuity. In addition, selling broker-dealer firms through which each Annuity is sold may decline to make available to their customers certain of the optional features offered generally under the Annuity. Alternatively, such firms may restrict the availability of the optional benefits that they do make available to their customers (e.g., by imposing a lower maximum issue age for certain optional benefits than what is prescribed generally under the Annuity). Please speak to your registered representative for further details. Each Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. For more information about variations applicable to your state, please refer to your Annuity contract or consult your Financial Professional. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. The Sub-accounts - -------------------------------------------------------------------------------- Each Sub-account of American Skandia Life Assurance Corporation Variable Account B invests in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: AIM Variable Insurance Funds, American Skandia Trust, Evergreen Variable Annuity Trust, First Defined Portfolio Fund LLC, Gartmore Variable Insurance Trust, ProFunds VP, The Prudential Series Fund and Wells Fargo Variable Trust. See the following page for the complete list of Sub-accounts. Please Read This Prospectus - -------------------------------------------------------------------------------- Please read this Prospectus and the current prospectus for the underlying mutual funds. Keep them for future reference. If you are purchasing one of the Annuities as a replacement for an existing variable annuity or variable life coverage or a fixed insurance policy, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the Annuity's liquidity features will satisfy that need. Available Information - -------------------------------------------------------------------------------- We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 110. This Prospectus is part of the registration statement we filed with the SEC regarding this offering. Additional information on us and this offering is available in the registration statement and the exhibits thereto. You may review and obtain copies of these materials at the prescribed rates from the SEC's Public Reference Section, 100 F Street N.E., Washington, D.C., 20549. (See SEC file number 333-96577 for ASAP III, 333-71654 for APEX II, 333-71834 for XT6 and 333-71672 for ASL II). 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. For Further Information call: - -------------------------------------------------------------------------------- 1-800-752-6342 These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in an annuity involves investment risks, including possible loss of value, even with respect to amounts allocated to the AST Money Market Sub-account. 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. American Skandia Advisor Plan III/SM/, American Skandia APEX(R) II, American Skandia XTra Credit SIX/SM/ and American Skandia LifeVest(R) II are service marks or registered trademarks of The Prudential Insurance Company of America and are used under license by its affiliates. Prospectus Dated: May 1, 2006 Statement of Additional Information Dated: May 1, 2006 COREPROS0506 ASAP3SAI, APEX2SAI, XT6SAI, ASL2SAI
PLEASE SEE OUR PRIVACY POLICY AND OUR IRA, ROTH IRA AND FINANCIAL DISCLOSURE STATEMENTS ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. INVESTMENT OPTIONS AMERICAN SKANDIA TRUST AST Advanced Strategies AST Aggressive Asset Allocation AST AllianceBernstein Core Value AST AllianceBernstein Managed Index 500 AST AllianceBernstein Growth & Income AST American Century Income & Growth AST American Century Strategic Balanced AST Balanced Asset Allocation AST Capital Growth Asset Allocation AST Cohen & Steers Realty AST Conservative Asset Allocation AST DeAM Large-Cap Value AST DeAM Small-Cap Growth AST DeAM Small-Cap Value AST Federated Aggressive Growth AST First Trust Balanced Target AST First Trust Capital Appreciation Target AST Global Allocation AST Goldman Sachs Concentrated Growth AST Goldman Sachs Mid-Cap Growth AST Goldman Sachs Small-Cap Value AST High Yield AST JPMorgan International Equity AST Large-Cap Value AST Lord Abbett Bond Debenture AST LSV International Value AST Marsico Capital Growth AST MFS Global Equity AST MFS Growth AST Mid-Cap Value AST Money Market AST Neuberger Berman Mid-Cap Growth AST Neuberger Berman Mid-Cap Value AST PIMCO Limited Maturity Bond AST PIMCO Total Return Bond AST Preservation Asset Allocation AST Small-Cap Growth AST Small-Cap Value AST T. Rowe Price Asset Allocation AST T. Rowe Price Large-Cap Growth AST T. Rowe Price Global Bond AST T. Rowe Price Natural Resources AST William Blair International Growth AIM VARIABLE INSURANCE FUNDS AIM V.I. Dynamics Fund -- Series I shares AIM V.I. Financial Services Fund -- Series I shares AIM V.I. Global Health Care Fund -- Series I shares AIM V.I. Technology Fund -- Series I shares EVERGREEN VARIABLE ANNUITY TRUST Growth International Equity Omega FIRST DEFINED PORTFOLIO FUND, LLC First Trust(R) 10 Uncommon Values Global Dividend Target 15 NASDAQ(R) Target 15 S&P(R) Target 24 Target Managed VIP The Dow Target Dividend The Dow/SM/ DART 10 Value Line(R) Target 25 GARTMORE VARIABLE INSURANCE TRUST GVIT Developing Markets PROFUND VP Access VP High Yield Asia 30 Banks Basic Materials Bear Biotechnology Bull Consumer Goods Consumer Services Europe 30 Financials Health Care Industrials Internet Japan Large-Cap Growth Large-Cap Value Mid-Cap Growth Mid-Cap Value Oil & Gas OTC Pharmaceuticals Precious Metals Real Estate Rising Rates Opportunity Semiconductor Short Mid-Cap Short OTC Short Small-Cap Small-Cap Growth Small-Cap Value Technology Telecommunications U.S. Government Plus UltraBull UltraMid-Cap UltraOTC UltraSmall-Cap Utilities THE PRUDENTIAL SERIES FUND SP William Blair International Growth WELLS FARGO VARIABLE TRUST Wells Fargo Advantage VT Equity Income Contents Introduction.................................................................................. 1 Why Would I Choose to Purchase One of the Annuities?......................................... 1 What Are Some of the Key Features of the Annuities?.......................................... 1 How Do I Purchase One of the Annuities?...................................................... 2 Glossary of Terms............................................................................. 3 Summary of Contract Fees and Charges.......................................................... 5 Expense Examples.............................................................................. 15 Investment Options............................................................................ 16 What are the Investment Objectives and Policies of the Portfolio?............................ 16 What are the Fixed Allocations?.............................................................. 36 Fees and Charges.............................................................................. 37 What are the Contract Fees and Charges?...................................................... 37 What Charges Apply to the Fixed Allocations?................................................. 39 What Charges Apply if I Choose an Annuity Payment Option?.................................... 39 Exceptions/Reductions to Fees and Charges.................................................... 39 Purchasing Your Annuity....................................................................... 40 What are Our Requirements for Purchasing One of the Annuities?............................... 40 Managing Your Annuity......................................................................... 41 May I Change the Owner, Annuitant and Beneficiary Designations?.............................. 41 May I Return My Annuity if I Change My Mind?................................................. 41 May I Make Additional Purchase Payments?..................................................... 41 May I Make Scheduled Payments Directly from My Bank Account?................................. 42 May I Make Purchase Payments Through a Salary Reduction Program?............................. 42 Managing Your Account Value................................................................... 43 How and When are Purchase Payments Invested?................................................. 43 How Do I Receive a Loyalty Credit Under the ASAP III and APEX II Annuities?.................. 43 How Are Loyalty Credits Applied to My Account Value Under the ASAP III and APEX II Annuities? 43 How Do I Receive Credits Under the XT6 Annuity?.............................................. 44 How Are Credits Applied to Account Value Under the XT6 Annuity?.............................. 44 Are There Restrictions or Charges on Transfers Between Investment Options?................... 45 Do You Offer Dollar Cost Averaging?.......................................................... 47 Do You Offer Any Automatic Rebalancing Programs?............................................. 48 Are Any Asset Allocation Programs Available?................................................. 48 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date?.......... 48 May I Give My Financial Professional Permission to Forward Transaction Instructions?......... 49 May I Authorize My Third Party Investment Advisor to Manage My Account?...................... 49 How Do the Fixed Allocations Work?........................................................... 50 How Do You Determine Rates for Fixed Allocations?............................................ 51 How Does the Market Value Adjustment Work?................................................... 51 What Happens When My Guarantee Period Matures?............................................... 52 Access To Account Value....................................................................... 53 What Types of Distributions are Available to Me?............................................. 53 Are There Tax Implications for Distributions?................................................ 53 Can I Withdraw a Portion of My Annuity?...................................................... 53 How Much Can I Withdraw as a Free Withdrawal?................................................ 54 Can I Make Periodic Withdrawals from My Annuity During the Accumulation Period?.............. 54 Do You Offer a Program for Withdrawals Under Sections 72(t)/72(q) of the Internal Revenue Code?...................................................................................... 54 What are Minimum Distributions and When Would I Need to Make Them?........................... 54 Can I Surrender My Annuity for Its Value?.................................................... 55 What is a Medically-Related Surrender and How Do I Qualify?.................................. 55
(i) Contents What Types of Annuity Options are Available?............................................. 55 How and When Do I Choose the Annuity Payment Option?..................................... 57 How are Annuity Payments Calculated?..................................................... 57 Living Benefit Programs................................................................... 59 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive?................................................................................. 59 Guaranteed Return Option Plus/SM/ (GRO Plus/SM/)......................................... 59 Guaranteed Return Option (GRO)........................................................... 64 Guaranteed Minimum Withdrawal Benefit (GMWB)............................................. 67 Guaranteed Minimum Income Benefit (GMIB)................................................. 71 Lifetime Five/SM/ Income Benefit (Lifetime Five)......................................... 76 Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)............................. 81 Death Benefit............................................................................. 86 What Triggers the Payment of a Death Benefit?............................................ 86 Basic Death Benefit...................................................................... 86 Optional Death Benefits.................................................................. 86 American Skandia's Annuity Rewards....................................................... 91 Payment of Death Benefits................................................................ 91 Valuing Your Investment................................................................... 94 How is My Account Value Determined?...................................................... 94 What is the Surrender Value of My Annuity?............................................... 94 How and When Do You Value the Sub-Accounts?.............................................. 94 How Do You Value Fixed Allocations?...................................................... 94 When Do You Process and Value Transactions?.............................................. 94 What Happens to My Units When There is a Change in Daily Asset-Based Charges?............ 96 Tax Considerations........................................................................ 97 General Information....................................................................... 104 How Will I Receive Statements and Reports?............................................... 104 Who is American Skandia?................................................................. 104 What are Separate Accounts?.............................................................. 104 What is the Legal Structure of the Underlying Funds?..................................... 106 Who Distributes Annuities Offered by American Skandia?................................... 107 Incorporation of Certain Documents by Reference.......................................... 108 Financial Statements..................................................................... 108 How to Contact Us........................................................................ 108 Indemnification.......................................................................... 109 Legal Proceedings........................................................................ 109 Contents of the Statement of Additional Information...................................... 110 Appendix A -- Condensed Financial Information About Separate Account B.................... A-1 Appendix B -- Calculation of Optional Death Benefits...................................... B-1 Appendix C -- Plus40/TM/ Optional Life Insurance Rider.................................... C-1 Appendix D -- Additional Information on Asset Allocation Programs......................... D-1 Appendix E -- Description and Calculation of Previously Offered Optional E-1 Death Benefits............................................................... Appendix F -- Selecting the Variable Annuity That's Right for You......................... F-1
(ii) AMERICAN SKANDIA ANNUITIES PROSPECTUS Introduction Why Would I Choose to Purchase One of the Annuities? - -------------------------------------------------------------------------------- The Annuities are frequently used for retirement planning because they allow you to accumulate retirement savings and also offer annuity payment options when you are ready to begin receiving income. Each Annuity also offers a choice of different optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive and one or more Death Benefits that can protect your retirement savings if you die during a period of declining markets. Each Annuity may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). Each Annuity may also be used as an investment vehicle for "non-qualified" investments. Each Annuity allows you to invest your money in a number of Sub-accounts as well as in one or more Fixed Allocations. This Prospectus describes four different Annuities including features that these Annuities have in common as well as differences. For a summary of each Annuity's features, please refer to Appendix F entitled, "Selecting the Variable Annuity That's Right for You." When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 70 1/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. In other words, you need not invest in an Annuity to gain the preferential tax treatment provided by your retirement plan. An Annuity, however, may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including Death Benefit protection for your beneficiaries, lifetime income options and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your Financial Professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. What Are Some of the Key Features of the Annuities? - -------------------------------------------------------------------------------- .. Each Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of Purchase Payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. .. Each Annuity offers both Sub-accounts and Fixed Allocations. If you allocate your Account Value to Sub-accounts, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed Allocations of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. .. Each Annuity features two distinct periods -- the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. .. During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. Variable payment options are made available through a different contract and prospectus. .. Each Annuity offers optional income benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive. .. Each Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. .. You are allowed to withdraw a limited amount of money from each Annuity on an annual basis without any charges, although any optional guaranteed benefit you elect may be reduced. Other product features allow you to access your Account Value as necessary, although a charge may apply. .. Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. 5 AMERICAN SKANDIA ANNUITIES PROSPECTUS Introduction continued WITH RESPECT TO XT6 ONLY: .. If you purchase this Annuity, we apply an additional amount (referred to as an XTra Credit/SM/, Purchase Credit or Credit) to your Account Value with each Purchase Payment you make, including your initial Purchase Payment and any additional Purchase Payments during the first six Annuity Years. .. Please note that during the first 10 years, the total asset-based charges on the XT6 Annuity are higher than many of our other annuities. In addition, the Contingent Deferred Sales Charge (CDSC) on the XT6 Annuity is higher and is deducted for a longer period of time as compared to our other annuities. The XTra Credit/SM/ amount is included in your Account Value. However, American Skandia may take back all XTra Credit amounts if you return your Annuity under the "free-look" provision. In addition, American Skandia may take back XTra Credits associated with any Purchase Payment if (a) the XTra Credit was applied within twelve (12) months prior to the death of the Owner (or Annuitant if entity-owned) or (b) the XTra Credit was applied within 12 months prior to a request to surrender the Annuity under the medically-related surrender provision. If you qualify for the 6.5% Xtra Credit in the first year (for annuities issued on or after February 13, 2006, subject to state availability), only 6% of that amount will be taken back upon death or medically-related surrender request, both as described above. However, we will take back the entire 6.5% if you "free-look" your Annuity. .. In these situations, your Account Value could be substantially reduced. The amount we take back will equal the XTra Credit, without adjustment up or down for investment performance. Therefore, any gain on the XTra Credit amount will not be taken back. But if there was a loss on the XTra Credit, the amount we take back will still equal the amount of the XTra Credit. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we take back the XTra Credit amount. .. If replacing an annuity, please consider all charges associated with that annuity. Credits applicable to bonus products should not be viewed as an offset of any surrender charge that applies to any annuity contract you currently own. For more information on all available annuities, please see Appendix F of this prospectus. WITH RESPECT TO APEX II ONLY: .. For annuities issued on or after June 20, 2005 (subject to state availability) this Annuity offers a Loyalty Credit which we add to your Account Value with respect to Purchase Payments that have been made during the first four Annuity Years less withdrawals through the fifth Annuity Anniversary, subject to our rules and State availability. WITH RESPECT TO ASAP III ONLY: .. For annuities issued on or after February 13, 2006 (subject to state availability) this Annuity offers a Loyalty Credit which we add to your Account Value with respect to Purchase Payments that have been made during the first four Annuity Years less withdrawals through the fifth Annuity Anniversary, subject to our rules and State availability. How Do I Purchase One of the Annuities? - -------------------------------------------------------------------------------- We sell each Annuity through licensed, registered Financial Professionals. Unless we agree otherwise and subject to our rules, each Annuity has minimum initial Purchase Payments as follows: $1,000 for ASAP III, $10,000 for XT6 and APEX II, and $15,000 for ASL II. We may allow you to make a lower initial Purchase Payment provided you establish an electronic funds transfer under which Purchase Payments received in the first Annuity Year total at least the minimum initial Purchase Payment for the Annuity purchased. Unless we agree otherwise and subject to our rules, if the Annuity is owned by an individual or individuals, the oldest of those Owners must not be older than a maximum issue age as of the Issue Date of the Annuity as follows: age 80 for ASAP III, age 75 for XT6 and age 85 for APEX II. For ASL II, there is no maximum issue age, however the basic death benefit provides greater protection for Owners under age 85. If the Annuity is owned by an entity, the annuitant must not be older than the maximum issue age, as of the Issue Date of the Annuity unless we agree otherwise. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity, the date the benefit is elected, or the date of the Owner's death. 6 AMERICAN SKANDIA ANNUITIES PROSPECTUS Glossary of Terms Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. ACCOUNT VALUE The value of each allocation to a Sub-account (also referred to as a "variable investment option") or a Fixed Allocation prior to the Annuity Date, plus any earnings, and/or less any losses, distributions and charges. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on a contract anniversary, any fee that is deducted from the contract annually in arrears. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. With respect to XT6, the Account Value includes any Credits we applied to your Purchase Payments that we are entitled to take back under certain circumstances. With respect to ASAP III and APEX II, the Account Value includes any Loyalty Credit we apply. ANNUITIZATION The application of Account Value (or Protected Income Value for the Guaranteed Minimum Income Benefit, if applicable) to one of the available annuity options for the Annuitant to begin receiving periodic payments for life (or joint lives), for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. ANNUITY DATE The date you choose for annuity payments to commence. A maximum Annuity Date may apply. ANNUITY YEAR A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. CODE The Internal Revenue Code of 1986, as amended from time to time. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing the greater of the Highest Anniversary Value Death Benefit and a 5% annual increase on Purchase Payments adjusted for withdrawals. CONTINGENT DEFERRED SALES CHARGE (CDSC) This is a sales charge that may be deducted when you make a full or partial withdrawal under your Annuity. We refer to this as a "contingent" charge because it is imposed only if you make a withdrawal. The charge is a percentage of each applicable Purchase Payment that is being withdrawn. The period during which a particular percentage applies is measured from the effective date of each Purchase Payment. The amount and duration of the CDSC varies among ASAP III, APEX II and XT6. There is no CDSC for ASL II. See "Summary of Contract Fees and Charges" for details on the CDSC for each Annuity. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing amounts in addition to the basic Death Benefit that can be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. FIXED ALLOCATION An investment option that offers a fixed rate of interest for a specified Guarantee Period during the accumulation period. FREE LOOK Under state insurance laws, you have the right, during a limited period of time, to examine your Annuity and decide if you want to keep it. This right is referred to as your "free look" right. The length of this time period depends on the law of your state, and may vary depending on whether your purchase is a replacement or not. Check your Annuity contract for more details about your free look right. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) We offer a program that, for an additional cost, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on your total Purchase Payments and an annual increase of 5% on such Purchase Payments adjusted for withdrawals (called the "Protected Income Value"), regardless of the impact of market performance on your Account Value. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) We offer a program that, for an additional cost, guarantees your ability to withdraw amounts over time equal to an initial principal value, regardless of the impact of market performance on your Account Value. GUARANTEE PERIOD A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/ )/GUARANTEED RETURN OPTION We offer a program that, for an additional cost, guarantees a "return of premium" at a future date, while allowing you to allocate all or a portion of your Account Value to certain Sub-accounts. HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV") We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Anniversary Value, less proportional withdrawals. 7 AMERICAN SKANDIA ANNUITIES PROSPECTUS Glossary of Terms continued HIGHEST DAILY VALUE DEATH BENEFIT ("HDV") We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Daily Value, less proportional withdrawals. INTERIM VALUE The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. ISSUE DATE The effective date of your Annuity. LIFETIME FIVE INCOME BENEFIT We offer a program that, for an additional cost, guarantees your ability to withdraw amounts equal to a percentage of an initial principal value, regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. MVA A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day more than 30 days prior to the Maturity Date of such Fixed Allocation. OWNER With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. SPOUSAL LIFETIME FIVE INCOME BENEFIT We offer a program that, for an additional cost, guarantees until the later death of two Designated Lives (as defined in this Prospectus) the ability to withdraw an annual amount equal to 5% of an initial principal value regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. SUB-ACCOUNT We issue your Annuity through our separate account. See "What is the Separate Account?" under the General Information section. The separate account invests in underlying mutual fund portfolios. From an accounting perspective, we divide the separate account into a number of sections, each of which corresponds to a particular underlying mutual fund portfolio. We refer to each such section of our separate account as a "Sub-account". SURRENDER VALUE The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and the charge for any optional benefits and any additional amounts we applied to your Purchase Payments that we may be entitled to recover under certain circumstances. The surrender value may be calculated using a MVA with respect to amounts in any Fixed Allocation. No CDSC applies to the ASL II Annuity. UNIT A measure used to calculate your Account Value in a Sub-account during the accumulation period. VALUATION DAY Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. - - 8 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges Below is a summary of the fees and charges for the Annuities. Some fees and charges are assessed against each Annuity while others are assessed against assets allocated to the Sub-accounts. The fees and charges that are assessed against an Annuity include any applicable Contingent Deferred Sales Charge, Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are assessed against the Sub-accounts are the Mortality and Expense risk charge, the charge for Administration of the Annuity, any applicable Distribution Charge and the charge for certain optional benefits you elect, other than the Guaranteed Minimum Income Benefit, which is assessed against the Protected Income Value. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. The following table provides a summary of the fees and charges you will pay if you surrender your Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
YOUR TRANSACTION FEES AND CHARGES - --------------------------------------------------------------------------------------------------------------------------- (ASSESSED AGAINST EACH ANNUITY) FEE/CHARGE ASAP III APEX II ASL II XT6 - --------------------------------------------------------------------------------------------------------------------------- Contingent Deferred Up to 7.5% Up to 8.5% There is no Deferred Up to 9.0% Sales Charge* Sales Charge deducted upon surrender or partial withdrawal. - --------------------------------------------------------------------------------------------------------------------------- Transfer Fee** $10.00 (currently, $15.00 $10.00 (currently, $15.00 $10.00 (currently, $15.00 $10.00 (currently, $15.00 maximum) maximum) maximum) maximum) - --------------------------------------------------------------------------------------------------------------------------- Tax Charge*** 0% to 3.5% of the value 0% to 3.5% of the value 0% to 3.5% of the value 0% to 3.5% of the value that is annuitized, that is annuitized, that is annuitized, that is annuitized, depending on the depending on the depending on the depending on the requirements of the requirements of the requirements of the requirements of the applicable jurisdiction. applicable jurisdiction. applicable jurisdiction. applicable jurisdiction. - ---------------------------------------------------------------------------------------------------------------------------
* The tables on the following page contain the Contingent Deferred Sales Charges upon surrender or withdrawal. The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period during which a particular percentage applies is measured from the Issue Date of the Annuity. ** Currently, we deduct the fee after the 20/th/ transfer each Annuity Year. We guarantee that the number of charge free transfers per Annuity Year will never be less than 8. *** This charge is deducted generally at the time you annuitize your contract. 9 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY
------------------------------------------------------ ASAP III ------------------------------------------------------ ------------------------------------------------------ Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+ ------------------------------------------------------ 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% ------------------------------------------------------
------------------------------ APEX II ------------------------------ ------------------------------ Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5+ ------------------------------ 8.5% 8.0% 7.0% 6.0% 0.0% ------------------------------
-------------------------------------------------------------------- XT6 -------------------------------------------------------------------- -------------------------------------------------------------------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+ -------------------------------------------------------------------- 9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% --------------------------------------------------------------------
10 AMERICAN SKANDIA ANNUITIES PROSPECTUS The following table provides a summary of the periodic fees and charges you will pay while you own your Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus.
YOUR PERIODIC FEES AND CHARGES - --------------------------------------------------------------------------------------------------------------------------------- (ASSESSED AGAINST EACH ANNUITY) FEE/CHARGE ASAP III APEX II ASL II XT6 - --------------------------------------------------------------------------------------------------------------------------------- Annual Smaller of $35 or 2% of Smaller of $35 or 2% of Smaller of $35 or 2% of Smaller of $35 or 2% of Maintenance Fee* Account Value** Account Value** Account Value** Account Value - --------------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS/1/ - --------------------------------------------------------------------------------------------------------------------------------- (ASSESSED AS A PERCENTAGE OF THE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE - --------------------------------------------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge/2/ 0.50% 1.50% 1.50% 0.50% - --------------------------------------------------------------------------------------------------------------------------------- Administration 0.15% 0.15% 0.15% 0.15% Charge/2/ - --------------------------------------------------------------------------------------------------------------------------------- Distribution 1.00% in Annuity Years 1-10 Charge/3/ 0.60% in Annuity Years 1-8 N/A N/A - --------------------------------------------------------------------------------------------------------------------------------- 1.40% per year of the 1.40% per year of the 1.40% per year of the 1.40% per year of the value value of each Sub-account value of each Sub-account value of each Sub-account of each Sub-account if the if the Owner's if the Owner's if the Owner's beneficiary Owner's beneficiary elects beneficiary elects the beneficiary elects the elects the Qualified the Qualified Beneficiary Qualified Beneficiary Qualified Beneficiary Beneficiary Continuation Continuation Option/5/ Settlement Continuation Option/5/ Continuation Option/5/ Option/5/ ("Qualified BCO") ("Qualified BCO") Service Charge/4/ ("Qualified BCO") ("Qualified BCO") - --------------------------------------------------------------------------------------------------------------------------------- 1.25% per year of the 1.65% per year of the 1.65% per year of the 1.65% per year of the value value of each Sub-account value of each Sub-account value of each Sub-account of each Sub-account in in Annuity Years 1-8; (1.40% per year if you (1.40% per year if you are Annuity Years 1-10; 0.65% in 0.65% in Annuity Years 9 are a beneficiary a beneficiary electing the Annuity Years 11 and later and later (1.40% per year electing the Qualified Qualified BCO) (1.40% per year if you are a Total Annual if you are a beneficiary BCO) beneficiary electing the Charges of the electing the Qualified Qualified BCO) Sub-accounts BCO) - ---------------------------------------------------------------------------------------------------------------------------------
* Assessed annually on the Annuity's anniversary date or upon surrender. ** Only applicable if Account Value is less than $100,000. 1: These charges are deducted daily and apply to the Sub-accounts only. 2: The combination of the Mortality and Expense Risk Charge and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. 3: The Distribution Charge is 0.00% in Annuity Years 9+ for ASAP III and in Annuity Years 11+ for XT6. 4: The Mortality & Expense Risk Charge, the Administration Charge and the Distribution Charge (if applicable) do not apply if you are a beneficiary under the Qualified Beneficiary Continuation Option. The Settlement Service Charge applies only if your beneficiary elects the Qualified Beneficiary Continuation Option. 5: When an Annuity is used as an IRA, 403(b) or other "qualified investment", upon the Owner's death a beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. If a beneficiary elects this option, the beneficiary will incur the Settlement Service Charge. Please refer to the section of this Prospectus that describes the Qualified Beneficiary Continuation Option for more detailed information about this option, including certain restrictions and limitations that may apply. 11 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued The following table sets forth the charge for each optional benefit under the Annuity. These fees would be in addition to the periodic fees and transaction fees set forth in the tables above.
YOUR OPTIONAL BENEFIT FEES AND CHARGES - ----------------------------------------------------------------------------------------------------------------- TOTAL TOTAL TOTAL TOTAL OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL BENEFIT CHARGE* CHARGE* CHARGE* CHARGE* FEE/ for for for for OPTIONAL BENEFIT CHARGE ASAP III APEX II ASL II XT6 - ----------------------------------------------------------------------------------------------------------------- GUARANTEED RETURN OPTION Plus/SM/ (GRO Plus/SM/ )/GUARANTEED RETURN OPTION - ----------------------------------------------------------------------------------------------------------------- 0.25% of average daily 1.50% in Annuity 1.90%; 1.65% 1.90%; 1.65% 1.90% in Annuity net assets of the Sub- Years 1-8; 0.90% in for Qualified for Qualified Years 1-10; 0.90% in accounts Annuity Years 9 and BCO BCO Annuity Years 11 and later; 1.65% for later; 1.65% for Qualified BCO Qualified BCO GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - ----------------------------------------------------------------------------------------------------------------- 0.35% of average daily 1.60% in Annuity 2.00%; 1.75% 2.00%; 1.75% 2.00% in Annuity net assets of the Sub- Years 1-8; 1.00% in for Qualified for Qualified Years 1-10; 1.00% in accounts Annuity Years 9 and BCO BCO Annuity Years 11 and later; 1.75% for later; 1.75% for Qualified BCO Qualified BCO GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - ----------------------------------------------------------------------------------------------------------------- 0.50% per year of the 1.25% in Annuity 1.65% PLUS 1.65% PLUS 1.65% in Annuity average Protected Years 1-8; 0.65% in 0.50% per year 0.50% per year Years 1-10; 0.65% in Income Value during Annuity Years 9 and of average of average Annuity Years 11 and each year; deducted later PLUS 0.50% per Protected Protected later PLUS 0.50% per annually in arrears each year of average Income Value Income Value year of average Annuity Year Protected Income Protected Income Value Value LIFETIME FIVE/SM/ INCOME BENEFIT** - ----------------------------------------------------------------------------------------------------------------- 0.60% of average daily 1.85% in Annuity 2.25% 2.25% 2.25% in Annuity net assets of the Sub- Years 1-8; 1.25% in Years 1-10; 1.25% in accounts Annuity Years 9 and Annuity Years 9 and later later
12 AMERICAN SKANDIA ANNUITIES PROSPECTUS
OPTIONAL BENEFIT ------------------------------------------------------------------------------------------------------------------------------ TOTAL TOTAL TOTAL TOTAL OPTIONAL ANNUAL ANNUAL ANNUAL ANNUAL BENEFIT CHARGE* CHARGE* CHARGE* CHARGE* FEE/ for for for for CHARGE ASAP III APEX II ASL II XT6 ------------------------------------------------------------------------------------------------------------------------------ SPOUSAL LIFETIME FIVE INCOME BENEFIT** ------------------------------------------------------------------------------------------------------------------------------ 0.75% of average 2.00% in Annuity 2.40% 2.40% 2.40% in Annuity daily net assets of Years 1-8; 1.40% Years 1-10; the Subaccounts in Annuity Years 1.40% in Annuity 9 and later Years 11 and later ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** ------------------------------------------------------------------------------------------------------------------------------ 0.25% of average 1.50% in Annuity 1.90% 1.90% 1.90% in Annuity daily net assets of Years 1-8; 0.90% Years 1-10; the Subaccounts in Annuity Years 0.90% in Annuity 9 and later Years 11 and later HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** ------------------------------------------------------------------------------------------------------------------------------ 0.25% of average 1.50% in Annuity 1.90% 1.90% 1.90% in Annuity daily net assets of Years 1-8; 0.90% Years 1-10; the Subaccounts in Annuity Years 0.90% in Annuity 9 and later Years 11 and later COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** ------------------------------------------------------------------------------------------------------------------------------ 0.50% of average 1.75% in Annuity 2.15% 2.15% 2.15% in Annuity daily net assets of Years 1-8; 1.15% Years 1-10; the Sub-accounts in Annuity Years 1.15% in Annuity 9 and later Years 11 and later HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** ------------------------------------------------------------------------------------------------------------------------------ 0.50% of average 1.75% in Annuity 2.15% 2.15% 2.15% in Annuity daily net assets of Years 1-8; 1.15% Years 1-10; the Sub-accounts in Annuity Years 1.15% in Annuity 9 and later Years 11 and later ------------------------------------------------------------------------------------------------------------------------------ Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. ------------------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge and Distribution Charge (if applicable) assessed against the average daily net assets allocated to the Sub-accounts. If you elect more than one optional benefit, the Total Annual Charge would be increased to include the charge for each optional benefit. ** These optional benefits are not available under the Qualified BCO. 13 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2005. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES --------------------------------------------------------- MINIMUM MAXIMUM --------------------------------------------------------- Total Portfolio Operating Expense 0.63% 2.48 %
The following are the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2005, except as noted. The "Total Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. For certain of the underlying Portfolios, a portion of the management fee has been waived and/or other expenses have been partially reimbursed. The existence of any such fee waivers and/or reimbursements have been reflected in the footnotes. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-752-6342.
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES - -------------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE NET ASSETS OF THE UNDERLYING PORTFOLIOS) FOR THE YEAR ENDED DECEMBER 31, 2005 TOTAL ANNUAL MANAGEMENT OTHER 12B-1 PORTFOLIO OPERATING UNDERLYING PORTFOLIO FEES EXPENSES/1/ FEES EXPENSES American Skandia Trust/2,3/ - -------------------------------------------------------------------------------------------------------- AST Advanced Strategies 0.85% 0.18% 0.00% 1.03% AST Aggressive Asset Allocation/4/ 1.04% 0.29% 0.00% 1.33% AST AllianceBernstein Core Value 0.75% 0.19% 0.00% 0.94% AST AllianceBernstein Managed Index 500/5/ 0.60% 0.17% 0.00% 0.77% AST AllianceBernstein Growth & Income 0.75% 0.13% 0.00% 0.88% AST American Century Income & Growth 0.75% 0.18% 0.00% 0.93% AST American Century Strategic Balanced 0.85% 0.23% 0.00% 1.08% AST Balanced Asset Allocation/4/ 0.95% 0.20% 0.00% 1.15% AST Capital Growth Asset Allocation/4/ 1.00% 0.20% 0.00% 1.20% AST Cohen & Steers Realty 1.00% 0.18% 0.00% 1.18% AST Conservative Asset Allocation/4/ 0.94% 0.24% 0.00% 1.18% AST DeAM Large-Cap Value 0.85% 0.22% 0.00% 1.07% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% AST DeAM Small-Cap Value 0.95% 0.24% 0.00% 1.19% AST Federated Aggressive Growth 0.95% 0.17% 0.00% 1.12% AST First Trust Balanced Target 0.85% 0.19% 0.00% 1.04% AST First Trust Capital Appreciation Target 0.85% 0.19% 0.00% 1.04% AST Global Allocation/6/ 0.86% 0.23% 0.00% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.16% 0.00% 1.06% AST Goldman Sachs Mid-Cap Growth 1.00% 0.18% 0.00% 1.18% AST Goldman Sachs Small-Cap Value 0.95% 0.22% 0.00% 1.17% AST High Yield/7/ 0.75% 0.19% 0.00% 0.94% AST JPMorgan International Equity 0.88% 0.19% 0.00% 1.07%
14 AMERICAN SKANDIA ANNUITIES PROSPECTUS
FOR THE YEAR ENDED DECEMBER 31, 2005 TOTAL ANNUAL MANAGEMENT OTHER 12B-1 PORTFOLIO OPERATING UNDERLYING PORTFOLIO FEES EXPENSES/1/ FEES EXPENSES American Skandia Trust/2,3/ continued - ---------------------------------------------------------------------------------------------------------------- AST Large-Cap Value/8/ 0.75% 0.16% 0.00% 0.91% AST Lord Abbett Bond-Debenture 0.80% 0.17% 0.00% 0.97% AST LSV International Value 1.00% 0.26% 0.00% 1.26% AST Marsico Capital Growth 0.90% 0.13% 0.00% 1.03% AST MFS Global Equity 1.00% 0.26% 0.00% 1.26% AST MFS Growth 0.90% 0.18% 0.00% 1.08% AST Mid-Cap Value/9/ 0.95% 0.22% 0.00% 1.17% AST Money Market/10/ 0.50% 0.13% 0.00% 0.63% AST Neuberger Berman Mid-Cap Growth/11/ 0.90% 0.18% 0.00% 1.08% AST Neuberger Berman Mid-Cap Value 0.89% 0.14% 0.00% 1.03% AST PIMCO Limited Maturity Bond 0.65% 0.15% 0.00% 0.80% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% AST Preservation Asset Allocation/4/ 0.89% 0.38% 0.00% 1.27% AST Small-Cap Growth 0.90% 0.25% 0.00% 1.15% AST Small-Cap Value/12/ 0.90% 0.17% 0.00% 1.07% AST T. Rowe Price Asset Allocation 0.85% 0.23% 0.00% 1.08% AST T. Rowe Price Large-Cap Growth/13/ 0.90% 0.21% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.21% 0.00% 1.01% AST T. Rowe Price Natural Resources 0.90% 0.18% 0.00% 1.08% AST William Blair International Growth 1.00% 0.18% 0.00% 1.18% AIM Variable Insurance Funds/14/ - ---------------------------------------------------------------------------------------------------------------- AIM V.I. Dynamics Fund -- Series I shares 0.75% 0.42% 0.00% 1.17% AIM V.I. Financial Services Fund -- Series I shares 0.75% 0.37% 0.00% 1.12% AIM V.I. Global Health Care Fund -- Series I shares 0.75% 0.33% 0.00% 1.08% AIM V.I. Technology Fund -- Series I shares 0.75% 0.37% 0.00% 1.12% Evergreen Variable Annuity Trust - ---------------------------------------------------------------------------------------------------------------- Growth 0.70% 0.22% 0.00% 0.92% International Equity 0.41% 0.30% 0.00% 0.71% Omega 0.52% 0.19% 0.00% 0.71% First Defined Portfolio Fund, LLC/15,16/ - ---------------------------------------------------------------------------------------------------------------- First Trust(R) 10 Uncommon Values 0.60% 0.84% 0.25% 1.69% Global Dividend Target 15 0.60% 0.76% 0.25% 1.61% NASDAQ(R) Target 15 0.60% 0.98% 0.25% 1.83% S&P(R) Target 24 0.60% 0.73% 0.25% 1.58% Target Managed VIP 0.60% 0.63% 0.25% 1.48% The Dow Target Dividend 0.60% 0.67% 0.25% 1.52% The Dow/SM/ DART 10 0.60% 0.74% 0.25% 1.59% Value Line(R) Target 25 0.60% 0.64% 0.25% 1.49% Gartmore Variable Insurance Trust/17/ - ---------------------------------------------------------------------------------------------------------------- GVIT Developing Markets 1.05% 0.37% 0.25% 1.67%
15 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued
FOR THE YEAR ENDED DECEMBER 31, 2005 TOTAL ANNUAL MANAGEMENT OTHER 12B-1 PORTFOLIO OPERATING UNDERLYING PORTFOLIO FEES EXPENSES/1/ FEES EXPENSES ProFund VP/18/ - ------------------------------------------------------------------------------------------------------- Access VP High Yield 0.75% 1.13% 0.25% 2.13% Asia 30 0.75% 0.82% 0.25% 1.82% Banks 0.75% 1.03% 0.25% 2.03% Basic Materials 0.75% 0.91% 0.25% 1.91% Bear 0.75% 0.86% 0.25% 1.86% Biotechnology 0.75% 0.92% 0.25% 1.92% Bull 0.75% 0.78% 0.25% 1.78% Consumer Goods 0.75% 1.08% 0.25% 2.08% Consumer Services 0.75% 1.48% 0.25% 2.48% Europe 30 0.75% 0.76% 0.25% 1.76% Financials 0.75% 0.92% 0.25% 1.92% Health Care 0.75% 0.89% 0.25% 1.89% Industrials 0.75% 1.17% 0.25% 2.17% Internet 0.75% 0.92% 0.25% 1.92% Japan 0.75% 0.83% 0.25% 1.83% Large-Cap Growth 0.75% 0.94% 0.25% 1.94% Large-Cap Value 0.75% 1.00% 0.25% 2.00% Mid-Cap Growth 0.75% 0.89% 0.25% 1.89% Mid-Cap Value 0.75% 0.87% 0.25% 1.87% Oil & Gas 0.75% 0.86% 0.25% 1.86% OTC 0.75% 0.84% 0.25% 1.84% Pharmaceuticals 0.75% 0.93% 0.25% 1.93% Precious Metals 0.75% 0.86% 0.25% 1.86% Real Estate 0.75% 0.89% 0.25% 1.89% Rising Rates Opportunity 0.75% 0.73% 0.25% 1.73% Semiconductor 0.75% 0.98% 0.25% 1.98% Short Mid-Cap 0.75% 1.28% 0.25% 2.28% Short OTC 0.75% 0.85% 0.25% 1.85% Short Small-Cap 0.75% 0.90% 0.25% 1.90% Small-Cap Growth 0.75% 0.85% 0.25% 1.85% Small-Cap Value 0.75% 0.91% 0.25% 1.91% Technology 0.75% 0.89% 0.25% 1.89% Telecommunications 0.75% 0.91% 0.25% 1.91% U.S. Government Plus 0.50% 0.84% 0.25% 1.59% UltraBull 0.75% 0.88% 0.25% 1.88% UltraMid-Cap 0.75% 0.91% 0.25% 1.91% UltraOTC 0.75% 0.85% 0.25% 1.85% UltraSmall-Cap 0.75% 0.91% 0.25% 1.91% Utilities 0.75% 0.89% 0.25% 1.89% The Prudential Series Fund - ------------------------------------------------------------------------------------------------------- SP William Blair International Growth 0.85% 0.13% 0.00% 0.98% Wells Fargo Variable Trust/19/ - ------------------------------------------------------------------------------------------------------- Wells Fargo Advantage VT Equity Income/20/ 0.55% 0.25% 0.25% 1.05%
16 AMERICAN SKANDIA ANNUITIES PROSPECTUS 1: As noted above, shares of the Portfolios generally are purchased through variable insurance products. Many of the Portfolios and/or their investment advisers and/or distributors have entered into arrangements with us as the issuer of each Annuity under which they compensate us for providing ongoing services in lieu of the Trust providing such services. Amounts paid by a Portfolio under those arrangements are included under "Other Expenses." For more information see the prospectus for each underlying portfolio and, "Service Fees payable to American Skandia," later in this prospectus. 2: The total actual operating expenses for certain of the Portfolios listed above for the year ended December 31, 2005 were less than the amounts shown in the table above, due to fee waivers, reimbursement of expenses, and expense offset arrangements ("Arrangements"). These Arrangements are voluntary and may be terminated at any time. In addition, the Arrangements may be modified periodically. For more information regarding the Arrangements, please see the prospectus and statement of additional information for the Portfolios. 3: Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1 to permit an affiliate of the Trust's Investment Managers to receive brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of shares of the Portfolio. The Distribution Plan was terminated effective November 18, 2004. 4:a. Each Asset Allocation Portfolio invests primarily in shares of one or more AST Portfolios (the "Underlying Portfolios"). The only management fee directly paid by an Asset Allocation Portfolio is a 0.15% fee paid to the investment managers. The management fee shown in the chart for each Asset Allocation Portfolio includes: (i) the 0.15% management fee to be paid by the Asset Allocation Portfolio to the investment managers plus (ii) a weighted average estimate of the management fees to be paid by the Underlying Portfolios to the investment managers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2005 using the management fee rates shown in the chart above. b. The other expenses shown in the chart for each Asset Allocation Portfolio include: (i) an estimate of expenses other than management fees ("other expenses") paid by the Asset Allocation Portfolio plus (ii) a weighted average estimate of the other expenses to be paid by the Underlying Portfolios, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the other expenses paid by the Underlying Portfolios is calculated based on the percentage of the applicable Asset Allocation Portfolio invested in each Underlying Portfolio using the other expense rates shown in the chart above. Descriptions of the types of costs that are included as other expenses for the Asset Allocation Portfolios and the Underlying Portfolios are set forth in the prospectus for the Asset Allocation Portfolios. 5: Effective December 5, 2005, the AST AllianceBernstein Growth + Value Portfolio merged into the AST AllianceBernstein Managed Index 500 Portfolio. 6:a. The AST Global Allocation Portfolio invests primarily in shares of other AST Portfolios (the "Underlying Portfolios"). The only management fee directly paid by the Portfolio is a 0.10% fee paid to the investment managers. The management fee shown in the chart for the Portfolio includes: (i) that 0.10% management fee paid by the Portfolio plus (ii) a weighted average estimate of the management fees paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The weighted average estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2005 using the management fee rates shown in the chart above. b. The other expenses shown in the chart for the AST Global Allocation Portfolio include: (i) an estimate of expenses other than management fees ("other expenses") paid by the Portfolio plus (ii) a weighted average estimate of the other expenses to be paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. Each weighted average estimate of the other expenses paid by the Underlying Portfolios is calculated based on the percentage of the Portfolio invested in each Underlying Portfolio using the other expense rates shown in the chart above. Descriptions of the types of costs that are included as other expenses for the Portfolio and the Underlying Portfolios are set forth in the prospectus for the Portfolio. 7: Effective March 20, 2006, Pacific Investment Management Company LLC became a Sub-advisor of the Portfolio along with Goldman Sachs Asset Management L.P. Prior to March 20, 2006, Goldman Sachs Asset Management L.P. served as the sole Sub-advisor of the Portfolio, then named the "AST Goldman Sachs High Yield Bond Portfolio." 8: Effective March 20, 2006, Dreman Value Management LLC became a Sub-advisor along with J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC. Between December 5, 2005 and March 20, 2006, J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC served as Co-Sub-advisors of the Portfolio. Prior to December 5, 2005, Hotchkis & Wiley Capital Management, LLC served as Sub-advisor of the Portfolio, then named the "AST Hotchkis & Wiley Large-Cap Value Portfolio." 9: Effective December 5, 2005, EARNEST Partners LLC and WEDGE Capital Management, LLP became Co-Sub-advisors of the Portfolio. Prior to December 5, 2005, GAMCO Investors, Inc. served as Sub-advisor of the Portfolio, then named the "AST Gabelli All-Cap Value Portfolio." 10: Effective December 5, 2005, Prudential Investment Management, Inc. became the Sub-advisor of the Portfolio. Prior to December 5, 2005, Wells Capital Management, Inc. served as Sub-advisor of the Portfolio. 11: Effective December 5, 2005, the AST Alger All-Cap Growth Portfolio merged into the AST Neuberger Berman Mid-Cap Growth Portfolio. 12: Effective March 20, 2006, Dreman Value Management LLC became a Sub-advisor along with Salomon Brothers Asset Management, Inc., J.P. Morgan Investment Management, Inc. and Lee Munder Capital Group. Between December 5, 2005 and March 20, 2006, Salomon Brothers Asset Management, Inc., J.P. Morgan Investment Management, Inc., Lee Munder Capital Group and Integrity Asset Management served as Sub-advisors of the Portfolio. Prior to December 5, 2005, J.P. Morgan Investment Management, Inc., Lee Munder Capital Group and Integrity Asset Management served as Sub-advisors of the Portfolio. 13: Effective December 5, 2005, T. Rowe Price Associates, Inc. became the Sub-advisor of the Portfolio. Prior to December 5, 2005, Alliance Capital Management, L.P. served as Sub-advisor of the Portfolio, then named the "AST AllianceBernstein Large-Cap Growth Portfolio." 14: The Fund's advisor has contractually agreed to waive advisory fees and/or reimburse expenses of Series I shares to the extent necessary to limit Total Annual Portfolio Operating Expenses (excluding certain items discussed below) of Series I shares to 1.30% of average daily net assets. In determining the advisor's obligation to waive advisory fees and/or reimburse expenses, the following expenses are not taken into account, and could cause the Total Annual Portfolio Operating Expenses to exceed the number reflected above: (i) interest; (ii) taxes; (iii) dividend expense on short sales; (iv) extraordinary items; (v) expenses related to a merger or reorganizations as approved by the Fund's Board of Trustees; and (vi) expenses that the Fund has incurred but did not actually pay because of an expense offset arrangement. Currently, the expense offset arrangements from which the Fund may benefit are in the form of credits that the Fund receives from banks where the Fund or its transfer agent has deposit accounts in which it holds uninvested cash. Those credits are used to pay certain expenses incurred by the Fund. The expense limitation agreement is in effect through April 30, 2007. 15: The Funds' Board of Trustees reserve the right to suspend payments under the 12b-1 Plan at any time. On May 1, 2003, 12b-1 payments were suspended for all Funds except the First Trust 10 Uncommon Values Portfolio. Payments under the 12b-1 Plan resumed effective May 1, 2004 for the Target Managed VIP Portfolio, the Dow Dart 10 Portfolio, the Global Dividend Target 15 Portfolio, the S&P Target 24 Portfolio, the Nasdaq Target 15 Portfolio and the Value Line Target 25 Portfolio. 17 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued 16: For the period September 30, 2004 through December 31, 2007, First Trust has contractually agreed to waive fees and reimburse expenses of the Portfolios to limit the total annual fund operating expenses (excluding brokerage expense and extraordinary expense) to 1.37% for the First Trust 10 Uncommon Values Portfolio and 1.47% for each of the other Portfolios' average daily net assets. First Trust has entered into an agreement with First Defined Portfolio Fund, LLC that will allow First Trust to recover from the Portfolios any fees waived or reimbursed during the three year period of January 1, 2005 through December 31, 2007. However, First Trust's ability to recover such amounts is limited to the extent that it would not exceed the amount reimbursed or waived during such period.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT First Trust(R) 10 Uncommon Values 1.37% Target Managed VIP 1.47% S&P Target 24 1.47% The Dow/SM/ DART 10 1.47% Value Line(R) Target 25 1.47% Global Dividend Target 15 1.47% Nasdaq Target 15 1.47% Dow Target Dividend 1.47%
17: Effective January 1, 2006, the Fund implemented a performance fee structure and the management fee was lowered to 1.05%. Beginning January 1, 2007, the management fee may be adjusted, on a quarterly basis, upward or downward depending on the Fund's performance relative to its benchmark, the MSCI Emerging Markets Free Index. As a result, beginning January 1, 2007, if the management fee were calculated taking into account all base fee breakpoints and performance fee adjustments, the management fee could range from 0.95% at its lowest to 1.15% at its highest. 18: ProFund Advisors LLC has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Portfolio Operating Expenses, as a percentage of average daily net assets, exceed 1.98% (1.73% for ProFund VP U.S. Government Plus and 1.78% for ProFund VP Rising Rates Opportunity) through December 31, 2006. After such date, any of the expense limitations may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be repaid to ProFund Advisors LLC within three years of the waiver or reimbursement to the extent that recoupment will not cause the Portfolio's expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to investors. 19: a: The Adviser of Wells Fargo Variable Trust has committed through April 30, 2007 to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net operating expenses as shown.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT Wells Fargo Advantage VT Equity Income 1.00%
b: In addition, the following name changes were made effective May 1, 2006:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Advantage VT Equity Income Wells Fargo Advantage VT Equity Income
20: The Fund's investment adviser has implemented a breakpoint schedule for the Fund's management fee. The management fee charged to the Fund will decline as the Fund's assets grow and will continue to be based on a percentage of the Fund's average daily net assets. The breakpoint schedule for the Fund is as follows: 0.55% for assets under $500 million, 0.50% for the next $500 million in assets; 0.45% for the next $2 billion in assets; 0.425% for the next $2 billion; and 0.40% for assets over $5 billion. 18 AMERICAN SKANDIA ANNUITIES PROSPECTUS Expense Examples These examples are intended to help you compare the cost of investing in one American Skandia Annuity with the cost of investing in other American Skandia Annuities and/or other variable annuities. Below are examples for each Annuity showing what you would pay in expenses at the end of the stated time periods had you invested $10,000 in the Annuity and your investment has a 5% return each year. The examples reflect the following fees and charges for each Annuity as described in "Summary of Contract Fees and Charges": .. Insurance Charge .. Distribution Charge (if applicable) .. Contingent Deferred Sales Charge (when and if applicable) .. Annual Maintenance Fee .. The maximum combination of optional benefit charges The examples also assume the following for the period shown: .. You allocate all of your Account Value to the Sub-account with the maximum total annual operating expenses, and those expenses remain the same each year* .. You make no withdrawals of Account Value .. You make no transfers, or other transactions for which we charge a fee .. No tax charge applies .. You elect the Lifetime Five Income Benefit, the Highest Daily Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit (which are the maximum combination of optional benefit charges) .. For the XT6 example, the Credit applicable to the Annuity is 6.5% of the Purchase Payment** .. For the APEX II example, the Loyalty Credit applies to the Annuity and is equal to 2.75% of total purchase payments made during the first four Annuity years .. For the ASAP III example, the Loyalty Credit applies to the Annuity and is equal to 0.50% of total purchase payment made during the first four Annuity years. Amounts shown in the examples are rounded to the nearest dollar. * Note: Not all portfolios offered as Sub-accounts are available if you elect certain optional benefits. **The Credit that is applied to Purchase Payments received after the first Annuity Year is less than 6.5% (see "How do I Receive Credits?") 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 will be less than those shown if you elect a different combination of optional benefits than indicated in the examples or if you allocate Account Value to any other available Sub-accounts. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. A table of accumulation values appears in Appendix A to this Prospectus.
IF YOU SURRENDER YOUR ANNUITY AT THE IF YOU ANNUITIZE YOUR ANNUITY AT THE IF YOU DO NOT SURRENDER END OF THE APPLICABLE TIME PERIOD:/1/ END OF THE APPLICABLE TIME PERIOD:/2/ YOUR ANNUITY: - ---------------------------------------------------------------------------------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS ASAP III $1,217 $2,204 $3,136 $ 5,205 N/A $1,619 $2,686 $ 5,205 $ 542 $1,619 $2,686 $ 5,205 APEX II $1,346 $2,357 $2,855 $ 5,594 N/A $1,727 $2,855 $ 5,594 $ 581 $1,727 $2,855 $ 5,594 ASL II $ 581 $1,727 $2,855 $ 5,594 $ 581 $1,727 $2,855 $ 5,594 $ 581 $1,727 $2,855 $ 5,594 XT6 $1,479 $2,647 $3,698 $ 6,121 N/A N/A $3,026 $ 5,929 $ 615 $1,831 $3,026 $ 5,929
1: There is no CDSC for ASL II. See "Summary of Contract Fees and Charges" for the CDSC schedule for each Annuity. 2: If you own XT6, you may not annuitize in the first Three (3) Annuity Years; if you own ASAP III or APEX II, you may not annuitize in the first Annuity Year. 19 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information). Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. Not all portfolios offered as Sub-accounts are available if you elect certain optional benefits. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment managers for AST are American Skandia Investment Services, Incorporated, a Prudential Financial Company, and Prudential Investments LLC, both of which are affiliated companies of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day management. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuities are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-752-6342. Effective May 1, 2004, the SP William Blair International Growth Portfolio (formerly the SP Jennison International Growth Portfolio) is no longer offered as a Sub-account under the Annuities, except as follows: if at any time prior to May 1, 2004 you had any portion of your Account Value allocated to the SP William Blair International Growth Sub-account, you may continue to allocate Account Value and make transfers into and/ or out of the SP William Blair International Growth Sub-account, including any electronic funds transfer, dollar cost averaging, asset allocation and rebalancing programs. If you never had a portion of your Account Value allocated to the SP William Blair International Growth Sub-account prior to May 1, 2004 or if you purchase your Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP William Blair International Growth Sub-account. With respect to XT6, APEX II and ASL II: Effective as of the close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value Portfolio is no longer offered as a Sub-account under the Annuities, except as follows: if at any time on or prior to June 28, 2002 you had any portion of your Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account, you may continue to allocate Account Value and make transfers into and/or out of the AST Goldman Sachs Small-Cap Value Sub-account, including any electronic funds transfer, dollar cost averaging, asset allocation and rebalancing programs. If you never had a portion of your Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or prior to June 28, 2002 or if you purchase your Annuity after June 28, 2002, you cannot allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-Account. The AST Goldman Sachs Small-Cap Value Portfolio is not available nor was it ever available under ASAP III. Either of these Sub-accounts may be offered to new Owners at some future date; however, at the present time, there is no intention to do so. We also reserve the right to offer or close this Sub-account to all Owners that owned the Annuity prior to the close date. 20 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------------- AST FUNDS ------------------------------------------------------------------------- ASSET AST Advanced Strategies Portfolio: Marsico Capital ALLOCATION/ seeks a high level of absolute Management, LLC; BALANCED return. The Portfolio invests T. Rowe Price primarily in a diversified portfolio Associates, Inc.; of equity and fixed income securities LSV Asset across different investment Management; categories and investment managers. William Blair & The Portfolio pursues a combination Company, L.L.C.; of traditional and non-traditional Pacific Investment investment strategies. Management Company LLC (PIMCO) ------------------------------------------------------------------------- ASSET AST Aggressive Asset Allocation American Skandia ALLOCATION/ Portfolio: seeks the highest Investment BALANCED potential total return consistent Services, Inc./ with its specified level of risk Prudential tolerance. The Portfolio will invest Investments LLC its assets in several other American Skandia Trust Portfolios. Under normal market conditions, the Portfolio will devote between 92.5% to 100% of its net assets to underlying portfolios investing primarily in equity securities, and 0% to 7.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. ------------------------------------------------------------------------- LARGE CAP AST AllianceBernstein Core Value AllianceBernstein L.P. VALUE Portfolio: seeks long-term capital growth by investing primarily in common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of large companies that appear to be undervalued. Among other things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. ------------------------------------------------------------------------- LARGE CAP AST AllianceBernstein Growth & Income AllianceBernstein L.P. VALUE Portfolio: seeks long-term growth of capital and income while attempting to avoid excessive fluctuations in market value. The Portfolio normally will invest in common stocks (and securities convertible into common stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. ------------------------------------------------------------------------- LARGE CAP AST AllianceBernstein Managed Index AllianceBernstein L.P. BLEND 500 Portfolio (AST AllianceBernstein Growth + Value Portfolio merged into this Portfolio): seeks to outperform the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500") through stock selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest, under normal circumstances, at least 80% of its net assets in securities included in the S&P(R) 500. ------------------------------------------------------------------------- 21 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- LARGE CAP AST American Century Income & Growth American Century VALUE Portfolio: seeks capital growth with Investment current income as a secondary Management, Inc. objective. The Portfolio invests primarily in common stocks that offer potential for capital growth, and may, consistent with its investment objective, invest in stocks that offer potential for current income. The Sub-advisor utilizes a quantitative management technique with a goal of building an equity portfolio that provides better returns than the S&P 500 Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. ------------------------------------------------------------------- ASSET AST American Century Strategic American Century ALLOCATION/ Balanced Portfolio: seeks capital Investment BALANCED growth and current income. The Management, Inc. Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity securities and the remainder in bonds and other fixed income securities. Both the Portfolio's equity and fixed income investments will fluctuate in value. The equity securities will fluctuate depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fixed income investments will be affected primarily by rising or falling interest rates and the credit quality of the issuers. ------------------------------------------------------------------- ASSET AST Balanced Asset Allocation American Skandia ALLOCATION/ Portfolio: seeks the highest Investment BALANCED potential total return consistent Services, Inc./ with its specified level of risk Prudential tolerance. The Portfolio will invest Investments LLC its assets in several other American Skandia Trust Portfolios. Under normal market conditions, the Portfolio will devote between 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in equity securities, and 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. ------------------------------------------------------------------- ASSET AST Capital Growth Asset Allocation American Skandia ALLOCATION/ Portfolio: seeks the highest Investment BALANCED potential total return consistent Services, Inc./ with its specified level of risk Prudential tolerance. The Portfolio will invest Investments LLC its assets in several other American Skandia Trust Portfolios. Under normal market conditions, the Portfolio will devote between 72.5% to 87.5% of its net assets to underlying portfolios investing primarily in equity securities, and 12.5% to 27.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. ------------------------------------------------------------------- SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers seeks to maximize total return Capital through investment in real estate Management, Inc. securities. The Portfolio pursues its investment objective by investing, under normal circumstances, at least 80% of its net assets in securities of real estate issuers. Under normal circumstances, the Portfolio will invest substantially all of its assets in the equity securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. ------------------------------------------------------------------- ASSET AST Conservative Asset Allocation American Skandia ALLOCATION/ Portfolio: seeks the highest Investment BALANCED potential total return consistent Services, Inc./ with its specified level of risk Prudential tolerance. The Portfolio will invest Investments LLC its assets in several other American Skandia Trust Portfolios. Under normal market conditions, the Portfolio will devote between 47.5% to 62.5% of its net assets to underlying portfolios investing primarily in equity securities, and 37.5% to 52.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. ------------------------------------------------------------------- 22 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ----------------------------------------------------------------------- LARGE CAP AST DeAM Large-Cap Value Portfolio: Deutsche Asset VALUE seeks maximum growth of capital by Management, Inc. investing primarily in the value stocks of larger companies. The Portfolio pursues its objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R) Value Index, but which attempts to outperform the Russell 1000(R) Value Index through active stock selection. ----------------------------------------------------------------------- SMALL CAP AST DeAM Small-Cap Growth Portfolio: Deutsche Asset GROWTH seeks maximum growth of investors' Management, Inc. capital from a portfolio of growth stocks of smaller companies. The Portfolio pursues its objective, under normal circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R) Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R) Index, but which attempts to outperform the Russell 2000 Growth(R) Index. ----------------------------------------------------------------------- SMALL CAP AST DeAM Small-Cap Value Portfolio: Deutsche Asset VALUE seeks maximum growth of investors' Management, Inc. capital. The Portfolio pursues its objective, under normal market conditions, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000(R) Value Index, but which attempts to outperform the Russell 2000(R) Value Index. ----------------------------------------------------------------------- SMALL CAP AST Federated Aggressive Growth Federated Equity GROWTH Portfolio: seeks capital growth. The Management Portfolio pursues its investment Company of objective by investing primarily in Pennsylvania/ the stocks of small companies that Federated Global are traded on national security Investment exchanges, NASDAQ stock exchange and Management Corp. the over-the-counter-market. Small companies will be defined as companies with market capitalizations similar to companies in the Russell 2000 Growth Index. Up to 25% of the Portfolio's net assets may be invested in foreign securities, which are typically denominated in foreign currencies. ----------------------------------------------------------------------- ASSET AST First Trust Balanced Target First Trust Advisors ALLOCATION/ Portfolio: seeks long-term capital L.P. BALANCED growth balanced by current income. The Portfolio normally invests approximately 65% of its total assets in equity securities and 35% in fixed income securities. Depending on market conditions, the equity portion may range between 60-70% and the fixed income portion between 30-40%. The Portfolio allocates its assets across a number of uniquely specialized investment strategies. ----------------------------------------------------------------------- ASSET AST First Trust Capital Appreciation First Trust Advisors ALLOCATION/ Target Portfolio: seeks long-term L.P. BALANCED growth of capital. The Portfolio normally invests approximately 80% of its total assets in equity securities and 20% in fixed income securities. Depending on market conditions, the equity portion may range between 75-85% and the fixed income portion between 15-25%. The Portfolio allocates its assets across a number of uniquely specialized investment strategies. ----------------------------------------------------------------------- 23 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR --------------------------------------------------------------------- ASSET AST Global Allocation Portfolio: Prudential ALLOCATION/ seeks to obtain the highest potential Investments LLC BALANCED total return consistent with a specified level of risk tolerance. The Portfolio seeks to achieve its investment objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. It is expected that the investment objectives of such AST Portfolios will be diversified. --------------------------------------------------------------------- LARGE CAP AST Goldman Sachs Concentrated Growth Goldman Sachs GROWTH Portfolio: seeks growth of capital in Asset a manner consistent with the Management, L.P. preservation of capital. Realization of income is not a significant investment consideration 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 equity securities of companies that the Sub-advisor believes have the potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30-45 companies that are considered by the Sub-advisor to be positioned for long-term growth. --------------------------------------------------------------------- MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs GROWTH Portfolio: seeks long-term capital Asset growth. The Portfolio pursues its Management, L.P. investment objective, by investing primarily in equity securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Russell Mid Cap Growth Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. --------------------------------------------------------------------- SMALL CAP AST Goldman Sachs Small-Cap Value Goldman Sachs VALUE Portfolio: seeks long-term capital Asset appreciation. The Portfolio will seek Management, L.P. its objective through investments primarily in equity securities that are believed to be undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $4 billion or less. (see information above regarding limited availability of this option.) --------------------------------------------------------------------- FIXED AST High Yield Portfolio (formerly Goldman Sachs INCOME AST Goldman Sachs High Yield Asset Portfolio): seeks a high level of Management, L.P.; current income and may also consider Pacific Investment the potential for capital Management appreciation. The Portfolio invests, Company LLC under normal circumstances, at least (PIMCO) 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in high yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. Such securities are commonly referred to as "junk bonds". --------------------------------------------------------------------- 24 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ----------------------------------------------------------------------- INTERNATIONAL AST JPMorgan International Equity J.P. Morgan EQUITY Portfolio: seeks long-term capital Investment growth by investing in a diversified Management Inc. portfolio of international equity securities. The Portfolio seeks to meet its objective by investing, under normal market conditions, at least 80% of its assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The equity securities will ordinarily be traded on a recognized foreign securities exchange or traded in a foreign over-the-counter market in the country where the issuer is principally based, but may also be traded in other countries including the United States. ----------------------------------------------------------------------- LARGE CAP AST Large-Cap Value Portfolio Dreman Value VALUE (formerly AST Hotchkis and Wiley Management LLC, Large-Cap Value Portfolio): seeks Hotchkis and Wiley current income and long-term growth Capital of income, as well as capital Management, LLC; appreciation. The Portfolio invests, J.P. Morgan under normal circumstances, at least Investment 80% of its net assets in common Management Inc. stocks of large cap U.S. companies. The Portfolio focuses on common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. ----------------------------------------------------------------------- FIXED AST Lord Abbett Bond-Debenture Lord, Abbett & Co. INCOME Portfolio: seeks high current income LLC and the opportunity for capital appreciation to produce a high total return. To pursue its objective, the Portfolio will invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible into common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. ----------------------------------------------------------------------- INTERNATIONAL AST LSV International Value LSV Asset EQUITY Portfolio: seeks capital growth. The Management Portfolio pursues its objective by primarily investing at least 80% of the value of its assets in the equity securities of companies in developed non-U.S. countries that are represented in the MSCI EAFE Index. The target of this Portfolio is to outperform the unhedged US Dollar total return (net of foreign dividend withholding taxes) of the MSCI EAFE Index. The Sub-Advisor uses proprietary quantitative models to manage the Portfolio in a bottom-up security selection approach combined with overall portfolio risk management. ----------------------------------------------------------------------- 25 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ----------------------------------------------------------------------- LARGE CAP AST Marsico Capital Growth Portfolio: Marsico Capital GROWTH seeks capital growth. Income Management, LLC 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 of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that may benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, utilizing a "bottom up" stock selection process. The Portfolio will normally hold a core position of between 35 and 50 common stocks. The Portfolio may hold a limited number of additional common stocks at times when the Portfolio manager is accumulating new positions, phasing out existing or responding to exceptional market conditions. ----------------------------------------------------------------------- INTERNATIONAL AST MFS Global Equity Portfolio: Massachusetts EQUITY seeks capital growth. Under normal Financial Services circumstances the Portfolio invests Company at least 80% of its assets in equity securities of U.S. and foreign issuers (including issuers in developing countries). The Portfolio generally seeks to purchase securities of companies with relatively large market capitalizations relative to the market in which they are traded. ----------------------------------------------------------------------- LARGE CAP AST MFS Growth Portfolio: seeks Massachusetts GROWTH long-term capital growth and future Financial Services income. Under normal market Company conditions, the Portfolio invests at least 80% of its total assets in common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. ----------------------------------------------------------------------- MID CAP AST Mid-Cap Value Portfolio (formerly EARNEST Partners VALUE AST Gabelli All-Cap Value Portfolio): LLC/WEDGE seeks to provide capital growth by Capital investing primarily in Management, LLP mid-capitalization stocks that appear to be undervalued. The Portfolio has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its net assets in mid-capitalization companies. ----------------------------------------------------------------------- FIXED AST Money Market Portfolio: seeks Prudential INCOME high current income while maintaining Investment high levels of liquidity. The Management, Inc. Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. ----------------------------------------------------------------------- MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger Berman GROWTH Portfolio (AST Alger All-Cap Growth Management Inc. Portfolio merged into this Portfolio): seeks capital growth. Under normal market conditions, the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap companies. The Sub-adviser looks for fast-growing companies that are in new or rapidly evolving industries. ----------------------------------------------------------------------- 26 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR --------------------------------------------------------------------- MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman VALUE Portfolio: seeks capital growth. Management Inc. Under normal market conditions, the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R) Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. --------------------------------------------------------------------- FIXED AST PIMCO Limited Maturity Bond Pacific Investment INCOME Portfolio: seeks to maximize total Management return consistent with preservation Company LLC of capital and prudent investment (PIMCO) management. The Portfolio will invest in a diversified portfolio of fixed-income securities of varying maturities. The average portfolio duration of the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. --------------------------------------------------------------------- FIXED AST PIMCO Total Return Bond Pacific Investment INCOME Portfolio: seeks to maximize total Management return consistent with preservation Company LLC of capital and prudent investment (PIMCO) management. The Portfolio will invest in a diversified portfolio of fixed-income securities of varying maturities. The average portfolio duration of the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. --------------------------------------------------------------------- ASSET AST Preservation Asset Allocation American Skandia ALLOCATION/ Portfolio: seeks the highest Investment BALANCED potential total return consistent Services, Inc./ with its specified level of risk Prudential tolerance. The Portfolio will invest Investments LLC its assets in several other American Skandia Trust Portfolios. Under normal market conditions, the Portfolio will devote between 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in equity securities, and 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. --------------------------------------------------------------------- SMALL CAP AST Small-Cap Growth Portfolio: seeks Eagle Asset GROWTH long-term capital growth. The Management/ Portfolio pursues its objective by Neuberger Berman primarily investing in the common Management Inc. stocks of small-capitalization companies, which is defined as a company with a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000 Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. --------------------------------------------------------------------- SMALL CAP AST Small-Cap Value Portfolio: seeks Lee Munder VALUE to provide long-term capital growth Investments, Ltd; by investing primarily in J.P. Morgan small-capitalization stocks that Investment appear to be undervalued. The Management Inc.; Portfolio will have a non-fundamental Salomon Brothers policy to invest, under normal Asset circumstances, at least 80% of the Management Inc; value of its net assets in small Dreman Value capitalization stocks. The Portfolio Management LLC will focus on common stocks that appear to be undervalued. --------------------------------------------------------------------- 27 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ---------------------------------------------------------------------- ASSET AST T. Rowe Price Asset Allocation T. Rowe Price ALLOCATION/ Portfolio: seeks a high level of Associates, Inc. BALANCED total return by investing primarily in a diversified portfolio of fixed income and equity securities. The Portfolio normally invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. This mix may vary depending on the sub-advisor's outlook for the markets. The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small and medium-sized companies with good growth prospects. The fixed income portion of the Portfolio will be allocated among investment grade securities, high yield or "junk" bonds, foreign high quality debt securities and cash reserves. ---------------------------------------------------------------------- FIXED AST T. Rowe Price Global Bond T. Rowe Price INCOME Portfolio: seeks to provide high International, Inc. current income and capital growth by investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will invest at least 80% of its total assets in fixed income securities, including high quality bonds issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. ---------------------------------------------------------------------- LARGE CAP AST T. Rowe Price Large-Cap Growth T. Rowe Price GROWTH Portfolio (formerly AST Associates, Inc. AllianceBernstein Large-Cap Growth): seeks long-term growth of capital by investing predominantly in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. The Portfolio takes a growth approach to investment selection and normally invests at least 80% of its net assets in the common stocks of large cap companies. ---------------------------------------------------------------------- SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price Portfolio: seeks long-term capital Associates, Inc. growth primarily through the common stocks of companies that own or develop natural resources (such as energy products, precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio looks for companies that have the ability to expand production, to maintain superior exploration programs and production facilities, and the potential to accumulate new resources. At least 50% of Portfolio assets will be invested in U.S. securities, up to 50% of total assets also may be invested in foreign securities. ---------------------------------------------------------------------- 28 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------------- INTERNATIONAL AST William Blair International William Blair & EQUITY Growth Portfolio: seeks long-term Company, L.L.C. capital appreciation. The Portfolio invests primarily in stocks of large and medium-sized companies located in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. The Portfolio seeks companies that historically have had superior growth, profitability and quality relative to local markets and relative to companies within the same industry worldwide, and that are expected to continue such performance. ------------------------------------------------------------------------- MID CAP AIM Variable Insurance Funds -- AIM A I M Advisors, Inc. GROWTH V.I. Dynamics Fund -- Series I shares: seeks long-term capital growth. The Portfolio pursues its objective by normally investing at least 65% of its assets in common stocks of mid-sized companies that are included in the Russell Midcap(R) Growth Index at the time of purchase. ------------------------------------------------------------------------- SPECIALTY AIM Variable Insurance Funds -- AIM A I M Advisors, Inc. V.I. Financial Services Fund -- Series I shares: seeks capital growth. The Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks, insurance companies, investment and miscellaneous industries, and suppliers to financial services companies. ------------------------------------------------------------------------- SPECIALTY AIM Variable Insurance Funds -- AIM A I M Advisors, Inc. V.I. Global Health Care Fund -- Series I shares: (formerly AIM V.I. Health Sciences Fund) seeks capital growth. The Portfolio normally invests at least 80% of its net assets in securities of health care industry companies. ------------------------------------------------------------------------- SPECIALTY AIM Variable Insurance Funds -- AIM A I M Advisors, Inc. V.I. Technology Fund -- Series I shares: seeks capital growth. The Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. ------------------------------------------------------------------------- SMALL CAP Evergreen VA Growth: seeks long-term Evergreen GROWTH capital growth. The Portfolio invests Investment at least 75% of its assets in common Management stocks of small- and medium-sized Company, LLC companies (i.e., companies whose market capitalizations fall within the market capitalization range of the companies tracked by the Russell 2000(R) Growth Index, measured at the time of purchase). The remaining portion of the Portfolio's assets may be invested in companies of any size. The Portfolio's managers employ a growth-style of equity management and will purchase stocks of companies that have demonstrated earnings, asset values or growth potential which they believe are not yet reflected in the stock's market price. The Portfolio's managers consider earnings growth above the average earnings growth of companies included in the Russell 2000(R) Growth Index as a key factor in selecting investments. ------------------------------------------------------------------------- 29 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------ INTERNATIONAL Evergreen VA International Equity: Evergreen EQUITY seeks long-term capital growth and Investment secondarily, modest income. The Management Portfolio normally invests 80% of its Company, LLC assets in equity securities issued by established, quality, non-U.S. companies located in countries with developed markets and may purchase across all market capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.). The Portfolio may also invest in emerging markets. The Portfolio's managers seek both growth and value opportunities, and the Portfolio intends to seek modest income from dividends paid by its equity holdings. ------------------------------------------------------------------ SPECIALTY Evergreen VA Omega: seeks long-term Evergreen capital growth. The Portfolio invests Investment primarily, and under normal Management conditions substantially all of its Company, LLC assets, in common stocks and securities convertible into common stocks of U.S. companies across all market capitalizations. The Portfolio's managers employ a growth style of equity management. "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated earnings ranging from steady to accelerated growth. The Portfolio may invest up to 25% of its assets in foreign securities. ------------------------------------------------------------------ SPECIALTY S&P(R) Target 24: seeks to provide First Trust above-average total return. The Advisors L.P. Portfolio seeks to achieve its objective by investing in common stocks issued by companies that have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of twenty-four companies selected from a subset of the stocks included in the Standard & Poor's 500 Composite Stock Price Index. The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index based on the sector's market capitalization. ------------------------------------------------------------------ SPECIALTY First Trust(R) 10 Uncommon Values: First Trust seeks to provide above-average Advisors L.P. capital appreciation. The Portfolio seeks to achieve its objective by investing primarily in the ten common stocks selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. ------------------------------------------------------------------ SPECIALTY Global Dividend Target 15: seeks to First Trust provide above-average total return. Advisors L.P. The Portfolio seeks to achieve its objective by investing in common stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the companies which are components of the DJIA, the Financial Times Industrial Ordinary Share Index ("FT Index") and the Hang Seng Index. The Portfolio primarily consists of common stocks of the five companies with the lowest per share stock prices of the ten companies in each of the DJIA, FT Index and Hang Seng Index, respectively, that have the highest dividend yield in the respective index on or about the applicable stock selection date. ------------------------------------------------------------------ SPECIALTY Nasdaq(R) Target 15: seeks to provide First Trust above-average total return. The Advisors L.P. Portfolio seeks to achieve its objective by investing in common stocks issued by companies that are expected to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of fifteen companies selected from a pre-screened subset of the stocks included in the Nasdaq-100 Index(R) on or about the applicable stock selection date through a multi-step process. ------------------------------------------------------------------ 30 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR --------------------------------------------------------------------- SPECIALTY Target Managed VIP: seeks to provide First Trust above-average total return. The Advisors L.P. Portfolio seeks to achieve its objective by investing in common stocks of companies that are identified by a model based on six uniquely specialized strategies -- The Dow/SM/ DART 5, the European Target 20, the Nasdaq(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) Target 25. --------------------------------------------------------------------- SPECIALTY The Dow/SM/ Target Dividend: seeks to First Trust provide above-average total return. Advisors L.P. The Portfolio seeks to achieve its objective by investing in common stocks issued by companies that are expected to provided income and to have the potential for capital appreciation. The Portfolio invests primarily in the 20 common stocks from the Dow Jones Select Dividend Index/SM/ with the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio as of the close of business on or about the applicable stock selection date. --------------------------------------------------------------------- SPECIALTY The Dow/SM/ DART 10: seeks to provide First Trust above-average total return. The Advisors L.P. Portfolio seeks to achieve its objective by investing in common stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the ten companies in the DJIA that have the highest combined dividend yields and buyback ratios on or about the applicable stock selection date. --------------------------------------------------------------------- SPECIALTY Value Line(R) Target 25: seeks to First Trust provide above-average capital Advisors L.P. appreciation. The Portfolio seeks to achieve its objective by investing in 25 of the 100 common stocks that Value Line(R) gives a #1 ranking for Timeliness(TM) which have recently exhibited certain positive financial attributes as of the close of business on the applicable stock selection date through a multi-step process. Value Line(R) ranks 1,700 stocks of which only 100 are given their #1 ranking for Timeliness,(TM) which measures Value Line's view of their probable price performance during the next 6 to 12 months relative to the others. Value Line(R) bases their rankings on a long-term trend of earnings, prices, recent earnings, price momentum, and earnings surprise. --------------------------------------------------------------------- INTERNATIONAL GVIT Developing Markets: seeks Gartmore Global EQUITY long-term capital appreciation, under Asset normal conditions by investing at Management least 80% of its total assets in Trust/Gartmore stocks of companies of any size based Global Partners in the world's developing economies. Under normal market conditions, investments are maintained in at least six countries at all times and no more than 35% of total assets in any single one of them. --------------------------------------------------------------------- EACH PROFUND VP PORTFOLIO DESCRIBED BELOW PURSUES AN INVESTMENT STRATEGY THAT SEEKS TO PROVIDE DAILYINVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH A WIDELY FOLLOWED INDEX, INCREASED BY A SPECIFIEDFACTOR RELATIVE TO THE INDEX, OR THAT MATCH THE INVERSE OF THE INDEX OR THE INVERSE OF THE INDEX MULTIPLIED BY ASPECIFIED FACTOR. THE INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH POSITIVELY ANDNEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE APPLICABLE INDEX. IT IS RECOMMENDED THAT ONLY THOSE ANNUITYOWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSETALLOCATION STRATEGY INVEST IN THESE PORTFOLIOS. THE PORTFOLIOS ARE ARRANGED BASED ON THE INDEX ON WHICH ITSINVESTMENT STRATEGY IS BASED. --------------------------------------------------------------------- SPECIALTY ProFund VP Bull: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the S&P 500(R) Index. --------------------------------------------------------------------- 31 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SPECIALTY ProFund VP Bear: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the inverse (opposite) of the daily performance of the S&P 500(R) Index. If ProFund VP Bear is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the S&P 500(R) Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. ------------------------------------------------------------------- SPECIALTY ProFund VP UltraBull: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to twice (200%) the daily performance of the S&P 500(R) Index. If ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(R) Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. ------------------------------------------------------------------- THE S&P 500(R) INDEX IS A MEASURE OF LARGE-CAP U.S. STOCK MARKET PERFORMANCE. IT IS A FULL FREE FLOAT-ADJUSTEDMARKET CAPITALIZATION WEIGHTED INDEX OF 500 U.S. OPERATING COMPANIES AND REITS SELECTED BY AN S&P U.S.INDEX COMMITTEE THROUGH A NON-MECHANICAL PROCESS THAT FACTORS CRITERIA SUCH AS LIQUIDITY, PRICE, MARKETCAPITALIZATION AND FINANCIAL VIABILITY. RECONSTITUTION OCCURS BOTH ON A QUARTERLY AND ONGOING BASIS. ------------------------------------------------------------------- SPECIALTY ProFund VP OTC: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the NASDAQ-100 Index(R). ------------------------------------------------------------------- SPECIALTY ProFund VP Short OTC: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index(R). If ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the NASDAQ-100 Index(R) when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. ------------------------------------------------------------------- SPECIALTY ProFund VP UltraOTC: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to twice (200%) the daily performance of the NASDAQ-100 Index(R). If ProFund VP UltraOTC is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(R) when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. ------------------------------------------------------------------- THE NASDAQ-100 INDEX(R) INCLUDES 100 OF THE LARGEST NON-FINANCIAL DOMESTIC AND INTERNATIONAL ISSUES LISTEDON THE NASDAQ STOCK MARKET. TO BE ELIGIBLE FOR INCLUSION COMPANIES CANNOT BE IN BANKRUPTCY PROCEEDINGSAND MUST MEET CERTAIN ADDITIONAL CRITERIA INCLUDING MINIMUM TRADING VOLUME AND "SEASONING" REQUIREMENTS.THE INDEX IS CALCULATED UNDER A MODIFIED CAPITALIZATION-WEIGHTED METHODOLOGY. RECONSTITUTION ANDREBALANCING OCCURS ON AN ANNUAL, QUARTERLY AND ONGOING BASIS. ------------------------------------------------------------------- 32 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SPECIALTY ProFund VP UltraSmall-Cap: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to twice (200%) the daily performance of the Russell 2000(R) Index. If ProFund VP UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(R) when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. ------------------------------------------------------------------- SPECIALTY ProFund VP Short Small-Cap: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the inverse (opposite) of the daily performance of the Russell 2000(R) Index. If ProFund VP Short Small-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the Russell 2000 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. ------------------------------------------------------------------- THE RUSSELL 2000 INDEX IS A MEASURE OF SMALL-CAP U.S. STOCK MARKET PERFORMANCE. IT IS AN ADJUSTED MARKETCAPITALIZATION WEIGHTED INDEX CONTAINING APPROXIMATELY 2000 OF THE SMALLEST COMPANIES IN THE RUSSELL 3000INDEX OR APPROXIMATELY 8% OF THE TOTAL MARKET CAPITALIZATION OF THE RUSSELL 3000 INDEX, WHICH IN TURNREPRESENTS APPROXIMATELY 98% OF THE INVESTABLE U.S. EQUITY MARKET. ALL U.S. COMPANIES LISTED ON THE NYSE,AMEX OR NASDAQ MEETING AN INITIAL MINIMUM ($1) PRICE ARE CONSIDERED FOR INCLUSION. RECONSTITUTION OCCURSANNUALLY. SECURITIES ARE NOT REPLACED IF THEY LEAVE THE INDEX, HOWEVER, NEW ISSUE SECURITIES MEETING OTHERMEMBERSHIP REQUIREMENTS MAY BE ADDED ON A QUARTERLY BASIS. ------------------------------------------------------------------- SPECIALTY ProFund VP UltraMid-Cap: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to twice (200%) the daily performance of the S&P MidCap 400 Index(R). If ProFund VP UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. ------------------------------------------------------------------- SPECIALTY ProFund VP Short Mid-Cap: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the inverse (opposite) of the daily performance of the S&P MidCap 400 Index(R). If ProFund VP Short Mid-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the S&P MidCap 400 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. ------------------------------------------------------------------- THE S&P MIDCAP 400 INDEX IS A MEASURE OF MID-SIZE COMPANY U.S. STOCK MARKET PERFORMANCE. IT IS A FLOAT-ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEX OF 400 U.S. OPERATING COMPANIES AND REITS. SECURITIES ARESELECTED FOR INCLUSION IN THE INDEX BY THE S&P U.S. INDEX COMMITTEE THROUGH A NON-MECHANICAL PROCESS THATFACTORS CRITERIA SUCH AS LIQUIDITY, PRICE, MARKET CAPITALIZATION AND FINANCIAL VIABILITY. RECONSTITUTION OCCURSBOTH ON A QUARTERLY AND ONGOING BASIS. ------------------------------------------------------------------- 33 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SMALL CAP ProFund VP Small-Cap Value: seeks ProFund Advisors VALUE daily investment results, before fees LLC and expenses, that correspond to the daily performance of the S&P SmallCap 600/Citigroup Value Index(R). The S&P SmallCap 600/Citigroup Value Index is designed to provide a comprehensive measure of small-cap U.S. equity "value" performance. It is an unmanaged float adjusted market capitalization weighted index comprised of stocks representing approximately half the market capitalization of the S&P SmallCap 600 Index that have been identified as being on the value end of the growth-value spectrum. ------------------------------------------------------------------- SMALL CAP ProFund VP Small-Cap Growth: seeks ProFund Advisors GROWTH daily investment results, before fees LLC and expenses, that correspond to the daily performance of the S&P SmallCap 600/Citigroup Growth Index(R). The S&P SmallCap 600/Citigroup Growth Index is designed to provide a comprehensive measure of small-cap U.S. equity "growth" performance. It is an unmanaged float adjusted market capitalization weighted index comprised of stocks representing approximately half the market capitalization of the S&P SmallCap 600 Index that have been identified as being on the growth end of the growth-value spectrum. ------------------------------------------------------------------- THE S&P SMALLCAP 600 INDEX IS A MEASURE OF SMALL-CAP COMPANY U.S. STOCK MARKET PERFORMANCE. IT IS AFLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEX OF 600 U.S. OPERATING COMPANIES. SECURITIES ARE SELECTEDFOR INCLUSION IN THE INDEX BY AN S&P COMMITTEE THROUGH A NONMECHANICAL PROCESS THAT FACTORS CRITERIA SUCHAS LIQUIDITY, PRICE, MARKET CAPITALIZATION, FINANCIAL VIABILITY, AND PUBLIC FLOAT. ------------------------------------------------------------------- LARGE CAP ProFund VP Large-Cap Value: seeks ProFund Advisors VALUE daily investment results, before fees LLC and expenses, that correspond to the daily performance of the S&P 500/Citigroup Value Index(R). ------------------------------------------------------------------- LARGE CAP ProFund VP Large-Cap Growth: seeks ProFund Advisors GROWTH daily investment results, before fees LLC and expenses, that correspond to the daily performance of the S&P 500/Citigroup Growth Index(R). ------------------------------------------------------------------- THE S&P 500/CITIGROUP GROWTH INDEX IS DESIGNED TO PROVIDE A COMPREHENSIVE MEASURE OF LARGE-CAP U.S.EQUITY "GROWTH" PERFORMANCE. IT IS AN UNMANAGED FLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEXCOMPRISED OF STOCKS REPRESENTING APPROXIMATELY HALF THE MARKET CAPITALIZATION OF THE S&P 500 INDEX THATHAVE BEEN IDENTIFIED AS BEING ON THE GROWTH END OF THE GROWTH-VALUE SPECTRUM. ------------------------------------------------------------------- MID CAP ProFund VP Mid-Cap Value: seeks daily ProFund Advisors VALUE investment results, before fees and LLC expenses, that correspond to the daily performance of the S&P MidCap 400/Citigroup Value Index(R). ------------------------------------------------------------------- MID CAP ProFund VP Mid-Cap Growth: seeks ProFund Advisors GROWTH daily investment results, before fees LLC and expenses, that correspond to the daily performance of the S&P MidCap 400/Citigroup Growth Index(R). ------------------------------------------------------------------- THE S&P MIDCAP 400/CITIGROUP VALUE INDEX IS DESIGNED TO PROVIDE A COMPREHENSIVE MEASURE OF MID-CAPU.S. EQUITY "VALUE" PERFORMANCE. IT IS AN UNMANAGED FLOAT ADJUSTED MARKET CAPITALIZATION WEIGHTED INDEXCOMPRISED OF STOCKS REPRESENTING APPROXIMATELY HALF THE MARKET CAPITALIZATION OF THE S&P MIDCAP 400 INDEXTHAT HAVE BEEN IDENTIFIED AS BEING ON THE VALUE END OF THE GROWTH-VALUE SPECTRUM. ------------------------------------------------------------------- 34 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR --------------------------------------------------------------------- SPECIALTY ProFund VP Asia 30: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on the modified market capitalization method. --------------------------------------------------------------------- INTERNATIONAL ProFund VP Europe 30: seeks daily ProFund Advisors EQUITY investment results, before fees and LLC expenses, that correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 Index, created by ProFund Advisors, is composed of companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. --------------------------------------------------------------------- SPECIALTY ProFund VP Japan: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Nikkei 225 Stock Average. The Fund determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of the dollar-denominated Nikkei 225 futures contracts traded in the United States. The Fund seeks to provide a return consistent with an investment in the component equities in the Nikkei 225 Stock Average hedged to U.S. dollars. --------------------------------------------------------------------- THE NIKKEI 225 STOCK AVERAGE INDEX (NIKKEI INDEX) IS A MODIFIED PRICE-WEIGHTED INDEX OF THE 225 MOSTACTIVELY TRADED AND LIQUID JAPANESE COMPANIES LISTED IN THE FIRST SECTION OF THE TOKYO STOCK EXCHANGE (TSE).THE NIKKEI INDEX IS CALCULATED FROM THE PRICES OF THE 225 TSE FIRST SECTION STOCKS SELECTED TO REPRESENT ABROAD CROSS-SECTION OF JAPANESE INDUSTRIES AND THE OVERALL PERFORMANCE OF THE JAPANESE EQUITY MARKET.NIHON KEIZAI SHIMBUN, INC. IS THE SPONSOR OF THE INDEX. COMPANIES IN THE NIKKEI INDEX ARE REVIEWEDANNUALLY. EMPHASIS IS PLACED ON MAINTAINING THE INDEX'S HISTORICAL CONTINUITY WHILE KEEPING THE INDEXCOMPOSED OF STOCKS WITH HIGH MARKET LIQUIDITY. THE SPONSOR CONSULTS WITH VARIOUS MARKET EXPERTS, CONSIDERSCOMPANY SPECIFIC INFORMATION AND THE OVERALL COMPOSITION OF THE INDEX. --------------------------------------------------------------------- SPECIALTY ProFund VP Banks: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Banks Index. The Dow Jones U.S. Banks Index measures the performance of the banking sector of the U.S. equity market. Component companies include regional and major U.S. domiciled banks, savings and loans, engaged in a wide rage of financial services, including retail banking, loans and money transmissions. --------------------------------------------------------------------- SPECIALTY ProFund VP Basic Materials: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The Dow Jones U.S. Basic Materials Sector Index measures the performance of the basic materials industry of the U.S. equity market. Component companies are involved in the production of aluminum, steel, non ferrous metals, commodity chemicals, specialty chemicals, forest products, paper products, as well as the mining of precious metals and coal. --------------------------------------------------------------------- 35 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SPECIALTY ProFund VP Biotechnology: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones U.S. Biotechnology Index measures the performance of the biotechnology subsector of the U.S. equity market. Component companies engage in research and development of biological substances for drug discovery and diagnostic development these companies derive most of their revenue from the sale of licensing of drugs and diagnostic tools. ------------------------------------------------------------------- SPECIALTY ProFund VP Consumer Goods: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Goods Index. The Dow Jones U.S. Consumer Goods Index measures the performance of consumer spending in the goods industry of the U.S. equity market. Component companies include automobiles and auto parts and tires, brewers and distillers, farming and fishing, durable and non-durable household product manufacturers, cosmetic companies, food and tobacco products, clothing, accessories and footwear. ------------------------------------------------------------------- SPECIALTY ProFund VP Consumer Services: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones U.S. Consumer Services Index. The Dow Jones U.S. Consumer Services Index measures the performance of consumer spending in the services industry of the U.S. equity market. Component companies include airlines, broadcasting and entertainment, apparel and broadline retailers, food and drug retailers, media agencies, publishing, gambling, hotels, restaurants and bars, and travel and tourism. ------------------------------------------------------------------- SPECIALTY ProFund VP Financials: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Financials Sector Index. The Dow Jones U.S. Financials Sector Index measures the performance of the financial services industry of the U.S. equity market. Component companies include regional banks; major U.S. domiciled international banks; full line, life, and property and casualty insurance companies; companies that invest, directly or indirectly in real estate; diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders and investment advisers; securities brokers and dealers, including investment banks, merchant banks and online brokers; and publicly traded stock exchanges. ------------------------------------------------------------------- SPECIALTY ProFund VP Health Care: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Health Care Index. The Dow Jones U.S. Health Care Index measures the performance of the healthcare industry of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. ------------------------------------------------------------------- SPECIALTY ProFund VP Industrials: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Industrials Index. The Dow Jones U.S. Industrials Index measures the performance of the industrial industry of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. ------------------------------------------------------------------- 36 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SPECIALTY ProFund VP Internet: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones Composite Internet Index. The Dow Jones Composite Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce -- companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site. Internet Services -- companies that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. ------------------------------------------------------------------- SPECIALTY ProFund VP Oil & Gas: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Index measures the performance of the oil and gas industry of the U.S. equity market. Component companies include oil drilling equipment and services, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. ------------------------------------------------------------------- SPECIALTY ProFund VP Pharmaceuticals: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Index. The Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals subsector of the U.S. equity market. Component companies include the makers of prescription and over-the-counter drugs such as birth control pills, vaccines, aspirin and cold remedies. ------------------------------------------------------------------- SPECIALTY ProFund VP Precious Metals: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones Precious Metals Index. The Dow Jones Precious Metals Index measures the performance of the precious metals mining industry. Component companies include leading miners and producers of gold, silver and platinum-group metals whose securities are available to U.S. investors during U.S. trading hours. It is a float-adjusted market-capitalization weighted index. ------------------------------------------------------------------- SPECIALTY ProFund VP Real Estate: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate Index measures the performance of the real estate sector of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings and housing developments; and real estate investment trusts ("REITs") that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. ------------------------------------------------------------------- SPECIALTY ProFund VP Semiconductor: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones U.S. Semiconductor Index measures the performance of the semiconductor subsector of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as semiconductor capital equipment and mother-boards. ------------------------------------------------------------------- 37 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------- SPECIALTY ProFund VP Technology: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow Jones U.S. Technology Sector Index measures the performance of the technology industry of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and Internet services. ------------------------------------------------------------------- SPECIALTY ProFund VP Telecommunications: seeks ProFund Advisors daily investment results, before fees LLC and expenses, that correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications industry of the U.S. equity market. Component companies include fixed-line communications and wireless communications companies. ------------------------------------------------------------------- SPECIALTY ProFund VP Utilities: seeks daily ProFund Advisors investment results, before fees and LLC expenses, that correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow Jones U.S. Utilities Sector Index measures the performance of the utilities industry of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. ------------------------------------------------------------------- SPECIALTY ProFund VP U.S. Government Plus: ProFund Advisors seeks daily investment results, LLC before fees and expenses, that correspond to one and one-quarter times (125%) the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. ------------------------------------------------------------------- SPECIALTY ProFund VP Rising Rates Opportunity: ProFund Advisors seeks daily investment results, LLC before fees and expenses, that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the Long Bond on a given day. ------------------------------------------------------------------- 38 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ---------------------------------------------------------------------- SPECIALTY Access VP High Yield: seeks to ProFund Advisors provide investment results that LLC correspond generally to the total return of the high yield market consistent with maintaining reasonable liquidity. The Fund will achieve its high yield exposure primarily through credit default swaps (CDSs) but may invest in high yield debt instruments ("junk bonds"), interest rate swap agreements and futures contracts, and other debt and money market instruments without limitation, consistent with applicable regulations. Under normal market conditions, the Fund will invest at least 80% of its net assets in CDSs and other financial instruments that in combination have economic characteristics similar to the high yield debt market and/or in high yield debt securities. The Fund seeks to maintain exposure to the high yield bond markets regardless of market conditions and without taking defensive positions. ProFund Advisors does not conduct fundamental analysis in managing the Fund. ---------------------------------------------------------------------- INTERNATIONAL The Prudential Series Fund -- SP Prudential EQUITY William Blair International Growth Investments LLC/ Portfolio: seeks long-term capital William Blair & appreciation. The Portfolio invests Company, LLC primarily in stocks of large and medium-sized companies located in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. The Portfolio seeks companies that historically have had superior growth, profitability and quality relative to local markets and relative to companies within the same industry worldwide, and that are expected to continue such performance. (see information above regarding limited availability of this option.) ---------------------------------------------------------------------- LARGE CAP Wells Fargo Advantage VT Equity Wells Fargo Funds VALUE Income (formerly Wells Fargo Management, LLC Advantage Equity Income Fund): seeks long-term capital appreciation and above-average dividend income. The Portfolio invests in the common stocks of large U.S. companies with strong return potential and above-average dividend income. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. ---------------------------------------------------------------------- "Standard & Poor's(R), "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment Services, Incorporated. 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. "Dow Jones Industrial Average/SM/", "DJIA/SM/", "Dow Industrials/SM/", "Dow Jones Select Dividend Index/SM/", and "The Dow 10/SM/", are service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The portfolios, including, and in particular the Target Managed VIP portfolio The Dow/SM /DART 10 portfolio, and The Dow/SM /Target Dividend Portfolio are not endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. "The Nasdaq 100(R)", "Nasdaq-100 Index(R)", "Nasdaq Stock Market(R)", and "Nasdaq(R)" are trade or service marks of The Nasdaq Stock Market, Inc. (which with its affiliates are the "Corporations") and have been licensed for use by First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio have not been passed on by the Corporations as to its legality or suitability. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not issued, endorsed, sponsored, managed, sold or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Nasdaq Target 15 Portfolio or the Target Managed VIP Portfolio. "Value Line(R)," "The Value Line Investment Survey," and "Value Line Timeliness(TM) Ranking System" are registered trademarks of Value Line Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP(R) Portfolio is not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the Portfolio. The First Trust(R) 10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(R) 10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. 39 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued WHAT ARE THE FIXED ALLOCATIONS? We offer Fixed Allocations of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-752-6342 to determine availability of Fixed Allocations in your state and for your annuity product. 40 AMERICAN SKANDIA ANNUITIES PROSPECTUS Fees and Charges The charges under the contracts are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the contracts. They are also designed, in the aggregate, to compensate us for the risks of loss we assume pursuant to the contracts. If, as we expect, the charges that we collect from the contracts exceed our total costs in connection with the contracts, we will earn a profit. Otherwise we will incur a loss. For example, American Skandia may make a profit on the Insurance Charge if, over time, the actual costs of providing the guaranteed insurance obligations under an Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering an Annuity and, in the case of XT6, ASAP III and APEX II to offset a portion of the costs associated with offering Credits which are funded through American Skandia's general account. The rates of certain of our charges have been set with reference to estimates of the amount of specific types of expenses or risks that we will incur. In most cases, this prospectus identifies such expenses or risks in the name of the charge; however, the fact that any charge bears the name of, or is designed primarily to defray a particular expense or risk does not mean that the amount we collect from that charge will never be more than the amount of such expense or risk, nor does it mean that we may not also be compensated for such expense or risk out of any other charges we are permitted to deduct by the terms of the contract. A portion of the proceeds that American Skandia receives from charges that apply to the Sub-accounts may include amounts based on market appreciation of the Sub-account values including, for ASAP III, XT6 and APEX II, appreciation on amounts that represent any Credits. WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages for ASAP III, APEX II and XT6 are shown under "Summary of Contract Fees and Charges". No CDSC is deducted from ASL II Annuities. With respect to a partial withdrawal, we calculate the CDSC by assuming that any available free withdrawal amount is taken out first (see How Much Can I Withdraw as a Free Withdrawal?). If the free withdrawal amount is not sufficient, we then assume that withdrawals are taken from Purchase Payments that have not been previously withdrawn, on a first-in, first-out basis, and subsequently from any other Account Value in the Annuity. For purposes of calculating any applicable CDSC on a surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior partial withdrawals or if your Account Value has declined in value due to negative market performance. In that scenario, we would determine the CDSC amount as the applicable percentage of the Purchase Payments being withdrawn, rather than as a percentage of the remaining Account Value or withdrawal request. Thus, the CDSC would be greater than if it were calculated as a percentage of remaining Account Value or withdrawal amount. We may waive any applicable CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation program when we count the twenty free transfers. All transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit 41 AMERICAN SKANDIA ANNUITIES PROSPECTUS Fees and Charges continued transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the Sub-accounts, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. With respect to ASAP III, APEX II and ASL II, currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. With respect to XT6, we deduct the Annual Maintenance Fee regardless of Account Value. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charge: Several states and some municipalities charge premium taxes or similar taxes on annuities that we are required to pay. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2% of your premium and is designed to approximate the taxes that we are required to pay. We generally will deduct the charge at the time the tax is imposed, but may also decide to deduct the charge from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. We will pay company income taxes on the taxable corporate earnings created by this separate account product. While we may consider company income taxes when pricing our products, we do not currently include such income taxes in the tax charges you pay under the contract. We will periodically review the issue of charging for these taxes and may impose a charge in the future. In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets, which are treated as company assets under applicable income tax law. These benefits reduce our overall corporate income tax liability. Under current law, such benefits may include foreign tax credits and corporate dividends received deductions. We do not pass these tax benefits through to holders of the separate account annuity contracts because (i) the contract owners are not the owners of the assets generating these benefits under applicable income tax law and (ii) we do not currently include company income taxes in the tax charges you pay under the contract. Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed against the daily assets allocated to the Sub-accounts and is equal to the amount indicated under "Summary of Contract Fees and Charges". The Insurance Charge is the combination of the Mortality & Expense Risk Charge and the Administration Charge. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under each Annuity, including each Annuity's basic Death Benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under each Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under each Annuity. Distribution Charge: For ASAP III and XT6, we deduct a Distribution Charge daily. The charge is assessed against the average assets allocated to the Sub-accounts and is equal to the amount indicated under "Summary of Contract Fees and Charges" on an annual basis. The Distribution Charge is intended to compensate us for a portion of our acquisition expenses under the Annuity, including promotion and distribution of the Annuity and, with respect to XT6, the costs associated with offering Credits which are funded through American Skandia's general account. The Distribution Charge is deducted against your Annuity's Account Value and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts will affect the charge. Optional Benefits for which we assess a charge: If you elect to purchase certain optional benefits, we will deduct an additional charge on a daily basis solely from your Account Value 42 AMERICAN SKANDIA ANNUITIES PROSPECTUS allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. We may assess charges for other optional benefits on a different basis. Please refer to the sections entitled "Living Benefit Programs" and "Death Benefit" for a description of the charge for each Optional Benefit. Fees and expenses incurred by the Portfolios: Each Portfolio incurs total annual operating expenses comprised of an investment management fee, other expenses and any distribution and service (12b-1) fees that may apply. These fees and expenses are reflected daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and expenses can be found in the prospectuses for the Portfolios. WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fees or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the Sub-accounts or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will be subject to charges that apply under the variable immediate annuity option. Also, a tax charge may apply (see "Tax Charge" above). The variable annuity payment options are described in detail in a separate prospectus, which is available upon request and which will be provided to you if and when you elect one of the variable annuity payment options. The separate prospectus sets forth the fees and charges under the variable payment option, which may be higher than those set forth in this prospectus. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of any CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; (d) whether an annuity is reinstated pursuant to our rules; and/or (e) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce any fees and charges. 43 AMERICAN SKANDIA ANNUITIES PROSPECTUS Purchasing Your Annuity WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES? Initial Purchase Payment: Unless we agree otherwise and subject to our rules, you must make a minimum initial Purchase Payment as follows: $1,000 for ASAP III, $10,000 for XT6 and APEX II and $15,000 for ASL II. However, if you decide to make payments under a systematic investment or an electronic funds transfer program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, your subsequent Purchase Payments plus your initial Purchase Payment total the minimum initial Purchase Payment amount required for the Annuity purchased. Where allowed by law, we must approve any initial and additional Purchase Payments of $1,000,000 or more. We may apply certain limitations and/or restrictions on an Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under an Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under an Annuity or restricting the Sub-accounts or Fixed Allocations that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your Financial Professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an electronic funds transfer arrangement where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: Unless we agree otherwise and subject to our rules, the Owner (or Annuitant if entity owned) must not be older than a maximum issue age as of the Issue Date of the Annuity as follows: age 80 for ASAP III, age 75 for XT6 and age 85 for APEX II. For ASL II, there is no maximum issue age, however the basic death benefit provides greater protection for Owners under age 85. If an Annuity is owned jointly, the oldest of the Owners must not be older than the maximum issue age on the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. Owner, Annuitant and Beneficiary Designations: We will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. .. Owner: The Owner(s) holds all rights under the Annuity. You may name up to two Owners in which case all ownership rights are held jointly. Generally, joint owners are required to act jointly; however, if each owner provides us with an instruction that we find acceptable, we will permit each owner to act separately. All information and documents that we are required to send you will be sent to the first named owner. This Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." .. Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. .. Beneficiary: The Beneficiary is the person(s) or entity you name to receive the Death Benefit. Your beneficiary designation should be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. If you use a designation of "surviving spouse," we will pay the Death Benefit to the individual that is your spouse at the time of your death (as defined under the federal tax laws and regulations). If no beneficiary is named the Death Benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. 44 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Annuity MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us a request in writing. Upon an ownership change, any automated investment or withdrawal programs will be canceled. The new owner must submit the applicable program enrollment if they wish to participate in such a program. 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 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; .. a new Annuitant subsequent to the Annuity Date; .. for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and .. a change in Beneficiary if the Owner had previously made the designation irrevocable. There may be restrictions on designation changes when you have elected certain optional benefits. SPOUSAL OWNERS/SPOUSAL BENEFICIARIES If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse that was named as the co-owner unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For the Spousal Lifetime Five Income Benefit, the eligible surviving spouse will also be able to assume the benefit with the Annuity. See the description of this benefit in the "Living Benefit Programs" section of this Prospectus. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. CONTINGENT ANNUITANT If an Annuity is owned by an entity and the entity has named a Contingent Annuitant, no Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant will reflect the amount that would have been payable had a Death Benefit been paid. The Annuity is eligible to have a Contingent Annuitant designation if the entity which owns the annuity is a plan described in Internal Revenue Code Section 72(s)(5)(A)(i) or an entity described in Code section 72(u)(1), or any successor Code sections. MAY I RETURN MY ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted, less any applicable federal and state income tax withholding and depending on your state's requirements, any applicable insurance charges deducted. The amount returned to you may be higher or lower than the Purchase Payment(s) applied during the right to cancel period. Where required by law, we will return your Purchase Payment(s), or the greater of your current Account Value and the amount of your Purchase Payment(s) applied during the right to cancel period less any applicable federal and state income tax withholding. With respect to XT6, if you return your Annuity, we will not return any XTra Credits we applied to your Annuity based on your Purchase Payments. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? Unless we agree otherwise and subject to our rules, the minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic Purchase Payment program. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. Additional Purchase Payments may be paid at any time before the Annuity Date. 45 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Annuity continued MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. We call our electronic funds transfer program "American Skandia's Systematic Investment Plan." Purchase Payments made through electronic funds transfer may only be allocated to the Sub-accounts when applied. We may allow you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments through an electronic funds transfer that will equal at least the minimum Purchase Payment set forth above during the first 12 months of your Annuity. We may suspend or cancel electronic funds transfer privileges if sufficient funds are not available from the applicable financial institution on any date that a transaction is scheduled to occur. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to Sub-accounts and the periodic Purchase Payments received in the first year total at least the minimum Purchase Payment set forth above. 46 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your Purchase Payment in your Annuity according to your instructions for allocating your Account Value. The Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. You can allocate Account Value to one or more Sub-accounts or Fixed Allocations. Investment restrictions will apply if you elect certain optional benefits. Subsequent Purchase Payments: Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent Purchase Payments according to any new allocation instructions. Unless you tell us otherwise, Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE ASAP III AND APEX II ANNUITIES? We apply a Loyalty Credit to your Annuity's Account Value at the end of your fifth Annuity Year ("fifth Annuity Anniversary"). With respect to ASAP III, for annuities issued on or after February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 0.50% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. With respect to APEX II, for annuities issued between June 20, 2005 and February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. For APEX II Annuities issued on or after February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 2.75% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. If the total Purchase Payments made during the first four Annuity Years is less than the cumulative amount of withdrawals made on or before the fifth Annuity Anniversary, no Loyalty Credit will be applied to your Annuity. Also, no Loyalty Credit will be applied to your Annuity if your Account Value is zero on the fifth Annuity Anniversary. This would include any situation where the Annuity is still in force due to the fact that payments are being made under an optional benefit such as Lifetime Five, Spousal Lifetime Five or the Guaranteed Minimum Withdrawal Benefit. In addition, no Loyalty Credit will be applied to your Annuity if before the fifth Annuity Anniversary: (i) you have surrendered your Annuity; (ii) you have annuitized your Annuity; (iii) your Beneficiary has elected our Beneficiary Continuation Option; or (iv) we have received due proof of your death (and there has been no spousal continuation election made). If your spouse continues the contract under our spousal continuation option, we will apply the Loyalty Credit to your Annuity only on the fifth Annuity Anniversary measured from the date that we originally issued you the Annuity. Since the Loyalty Credit is applied to the Account Value only, any guarantees that are not based on Account Value will not reflect the Loyalty Credit. Similarly, guarantees that are made against a loss in Account Value will not be triggered in certain very limited circumstances where they otherwise would have been, had no Loyalty Credit been applied to the Account Value. HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE ASAP III AND APEX II ANNUITIES? Any Loyalty Credit that is allocated to your Account Value on the fifth Annuity Anniversary will be allocated to the Fixed Allocations and Sub-accounts in the same percentages as Purchase Payments are then being allocated to your Annuity. EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO ASAP III Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. During Annuity Year four (i.e., prior to the fourth Annuity Anniversary) you make an additional $10,000 Purchase Payment. During the early part of Annuity Year five (i.e., prior to the fifth Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year make a withdrawal of $5,000. The Loyalty Credit that we will apply to your Annuity on the fifth Annuity Anniversary is, subject to state availability, equal to 0.50% of $15,000 (this represents the $20,000 of Purchase Payments made during the first four Annuity Years minus the $5,000 withdrawal made in the fifth Annuity Year. The computation disregards the additional $10,000 Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit amount would be equal to $75.00. 47 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO APEX II Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. During Annuity Year four (i.e., prior to the fourth Annuity Anniversary) you make an additional $10,000 Purchase Payment. During the early part of Annuity Year five (i.e., prior to the fifth Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year make a withdrawal of $5,000. The Loyalty Credit that we will apply to your Annuity on the fifth Annuity Anniversary is, subject to state availability, equal to 2.75% of $15,000 (this represents the $20,000 of Purchase Payments made during the first four Annuity Years minus the $5,000 withdrawal made in the fifth Annuity Year. The computation disregards the additional $10,000 Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit amount would be equal to $412.50. HOW DO I RECEIVE CREDITS UNDER THE XT6 ANNUITY? We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment during the first six (6) Annuity Years. The amount of the Credit is payable from our general account. The amount of the Credit depends on the Annuity Year in which the Purchase Payment(s) is made, according to the table below: For annuities issued prior to February 13, 2006:
ANNUITY YEAR CREDIT ------------------- 1 6.00% 2 5.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00% 7+ 0.00% -------------------
For annuities issued on or after February 13, 2006 (subject to state availability):
ANNUITY YEAR CREDIT ------------------- 1 6.50% 2 5.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00% 7+ 0.00% -------------------
CREDITS APPLIED TO PURCHASE PAYMENTS FOR DESIGNATED CLASS OF ANNUITY OWNER Prior to May 1, 2004, where allowed by state law, Annuities could be purchased by a member of the class defined below, with a different table of Credits. The Credit applied to all Purchase Payments on such Annuities is as follows based on the Annuity Year in which the Purchase Payment was made: Year 1 -- 9.0%; Year 2 -- 9.0%; Year 3 -- 8.5%; Year 4 -- 8.0%; Year 5 -- 7.0%; Year 6 -- 6.0%; Year 7 -- 5.0%; Year 8 -- 4.0%; Year 9 -- 3.0%; Year 10 -- 2%; Year 11+ -- 0.0%. The designated class of Annuity Owners included: (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, custodian-ship, 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, a Prudential Financial Company; (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) the child(ren) or other legal dependent under the age of 21 of any such person noted in (b) through (h); and (j) the siblings of any such persons noted in (b) through (h) above. All other terms and conditions of the Annuity apply to Owners in the designated class. HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE XT6 ANNUITY? Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied. EXAMPLES OF APPLYING CREDITS Initial Purchase Payment Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. We would apply a 6.5% Credit to your Purchase Payment and allocate the amount of the Credit ($650 = $10,000 X .065) to your Account Value in the proportion that your Purchase Payment is allocated. 48 AMERICAN SKANDIA ANNUITIES PROSPECTUS Additional Purchase Payment in Annuity Year 2 Assume that you make an additional Purchase Payment of $5,000. We would apply a 5.0% Credit to your Purchase Payment and allocate the amount of the Credit ($250 = $5,000 X .05) to your Account Value. Additional Purchase Payment in Annuity Year 6 Assume that you make an additional Purchase Payment of $15,000. We would apply a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit ($150 = $15,000 X .01) to your Account Value. The amount of any XTra Credits applied to your XT6 Annuity Account Value can be taken back by American Skandia under certain circumstances: .. any XTra Credits applied to your Account Value on Purchase Payments made within the 12 months before the Owner's (or Annuitant's if entity owned) date of death will be taken back; .. the amount available under the medically-related surrender portion of the Annuity will not include the amount of any XTra Credits payable on Purchase Payments made within 12 months prior to the date of a request under the medically-related surrender provision; and .. if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any XTra Credits. If you qualify for the 6.5% Xtra Credit in the first year (for annuities issued on or after February 13, 2006, subject to state availability), only 6% of that amount will be taken back in connection with the first two bullets described above. However, we will take back the entire 6.5% if you "free-look" your Annuity. The Account Value may be substantially reduced if American Skandia takes back the XTra Credit amount under these circumstances. The amount we take back will equal the XTra Credit, without adjustment up or down for investment performance. Therefore, any gain on the XTra Credit amount will not be taken back. But if there was a loss on the XTra Credit, the amount we take back will still equal amount of the XTra Credit. We do not deduct a CDSC in any situation where we take back the XTra Credit amount. During the first 10 Annuity Years, the total asset-based charges on this Annuity (including the Insurance Charge and the Distribution Charge) are higher than many of our other annuities, including other annuities we offer that apply credits to purchase payments. GENERAL INFORMATION ABOUT CREDITS .. We do not consider Credits to be "investment in the contract" for income tax purposes. .. You may not withdraw the amount of any Credits under the Free Withdrawal provision. The Free Withdrawal provision only applies to withdrawals of Purchase Payments. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options subject to the restrictions outlined below. Transfers are not subject to taxation on any gain. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro- rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions (including transfer requests) for certain Portfolios based on the Portfolio's investment and/or transfer restrictions. We may do so to conform to any present or future restriction that is imposed by any portfolio available under an Annuity. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to /1//\\2 \\hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically, including through American Skandia's Internet website (www.americanskandia.prudential.com). Currently, we charge $10.00 for each transfer after the twentieth (20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee. We may also increase the Transfer Fee that we charge to $20.00 for each transfer after the number of free transfers has been used up. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. 49 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued Once you have made 20 transfers among the Sub-accounts during an Annuity Year, we will accept any additional transfer request during that year only if the request is submitted to us in writing with an original signature and otherwise is in good order. For purposes of this 20 transfer limit, we (i) do not view a facsimile transmission as a "writing", (ii) will treat multiple transfer requests submitted on the same business day as a single transfer, and (iii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio, or any transfer that involves one of our systematic programs, such as asset allocation and automated withdrawals. Frequent transfers among Sub-accounts in response to short-term fluctuations in markets, sometimes called "market timing," can make it very difficult for a Portfolio manager to manage a Portfolio's investments. Frequent transfers may cause the Portfolio to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect performance. Each Annuity offers Sub-accounts designed for Owners who wish to engage in frequent transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund Portfolios and the AST Money Market Portfolio), and we encourage Owners seeking frequent transfers to utilize those Sub-accounts. In light of the risks posed to Owners and other investors by frequent transfers, we reserve the right to limit the number of transfers in any Annuity Year for all existing or new Owners and to take the other actions discussed below. 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: (a) we believe that excessive transfer activity (as we define it) or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager) that the purchase or redemption of shares in the Portfolio must be restricted because the Portfolio believes the transfer activity to which such purchase and redemption relates would have a detrimental effect on the share prices of the affected Portfolio. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. In furtherance of our general authority to restrict transfers as described above, and without limiting other actions we may take in the future, we have adopted the following specific restrictions: .. With respect to each Sub-account (other than the AST Money Market Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we track amounts exceeding a certain dollar threshold that were transferred into the Sub-account. If you transfer such amount into a particular Sub-account, and within 30 calendar days thereafter transfer (the "Transfer Out") all or a portion of that amount into another Sub-account, then upon the Transfer Out, the former Sub-account becomes restricted (the "Restricted Sub-account"). Specifically, we will not permit subsequent transfers into the Restricted Sub-account for 90 calendar days after the Transfer Out if the Restricted Sub-account invests in a non-international Portfolio, or 180 calendar days after the Transfer Out if the Restricted Sub-account invests in an international Portfolio. For purposes of this rule, we (i) do not count transfers made in connection with one of our systematic programs, such as asset allocation and auto-mated withdrawals; (ii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio; and (iii) do not categorize as a transfer the first transfer that you make after the Issue Date, if you make that transfer within 30 calendar days after the Issue Date. Even if an amount becomes restricted under the foregoing rules, you are still free to redeem the amount from your Annuity at any time. .. We reserve the right to effect exchanges on a delayed basis for all contracts. That is, we may price an exchange involving the Sub-accounts on the Valuation Day subsequent to the Valuation Day on which the exchange request was received. Before implementing such a practice, we would issue a separate written notice to Owners that explains the practice in detail. If we deny one or more transfer requests under the foregoing rules, we will inform you or your Financial Professional promptly of the circumstances concerning the denial. Contract owners in New York who purchased their contracts prior to March 15, 2004 are not subject to the specific restrictions outlined in bulleted paragraphs immediately above. In addition, there are contract owners of different variable annuity contracts that are funded through the same Separate Account that are not subject to the above-referenced transfer restrictions and, therefore, might make more numerous and frequent transfers than contract owners who are subject to such limitations. Finally, there are contract owners of other variable annuity contracts or variable life contracts that are issued by American Skandia as well as other insurance companies that have the same underlying mutual fund portfolios available to them. Since some contract owners are not subject to the same transfer restrictions, unfavorable consequences associated with such frequent trading within the underlying mutual fund (e.g., greater portfolio turnover, higher transaction costs, or 50 AMERICAN SKANDIA ANNUITIES PROSPECTUS performance or tax issues) may affect all contract owners. Similarly, while contracts managed by a Financial Professional or third party investment advisor are subject to the restrictions on transfers between investment options that are discussed above, if the advisor manages a number of contracts in the same fashion unfavorable consequences may be associated with management activity since it may involve the movement of a substantial portion of an underlying mutual fund's assets which may affect all contract owners invested in the affected options. Apart from jurisdiction-specific and contract differences in transfer restrictions, we will apply these rules uniformly (including contracts managed by a Financial Professional or third party investment advisor), and will not waive a transfer restriction for any contract owner. Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount periodically from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. You may elect a Dollar Cost Averaging program that transfers amounts monthly, quarterly, semi-annually, or annually from Sub-accounts, or a program that transfers amounts monthly from Fixed Allocations. By investing amounts on a regular basis instead of investing the total amount at one time, Dollar Cost Averaging may decrease the effect of market fluctuation on the investment of your Purchase Payment. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. There is no minimum Account Value required to enroll in a Dollar Cost Averaging program and we do not deduct a charge for participating in a Dollar Cost Averaging program. You can Dollar Cost Average from Sub-accounts or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: .. You may only use Fixed Allocations with Guarantee Periods of 2 or 3 years. .. You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. .. Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. The Dollar Cost Averaging program is not available if you have elected an automatic rebalancing program or an asset allocation program. Dollar Cost Averaging from Fixed Allocations is not available if you elect the Guaranteed Return Option Plus or the Guaranteed Return Option. American Skandia may offer Fixed Allocations with Guarantee Periods of 6 months or 12 months exclusively for use with a Dollar Cost Averaging program ("DCA Fixed Allocations"). DCA Fixed Allocations are designed to automatically transfer Account Value in either 6 or 12 payments under a Dollar Cost Averaging program. Dollar Cost Averaging transfers will begin on the day following the date the DCA Fixed Allocation is established and each month following until the entire principal amount plus earnings is transferred. DCA Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a DCA Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. Account Value allocated to the DCA Fixed Allocation will be transferred to the Sub-accounts you choose under the Dollar Cost Averaging program. If you terminate the Dollar Cost Averaging program before the entire principal amount plus earnings has been transferred to the Sub-account(s), you must transfer all remaining Account Value to any other investment option. Unless you provide alternate instructions at the time you terminate the Dollar Cost Averaging program, Account Value will be transferred to the AST Money Market Sub-account. Transfers from Fixed Allocations as part of a Dollar Cost Averaging program are not subject to a Market Value Adjustment. However, a Market Value Adjustment will apply if you terminate the Dollar Cost Averaging program before the entire principal amount plus earnings has been transferred to the Sub-account(s). 51 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer Automatic Rebalancing among the Sub-accounts you choose. You can choose to have your Account Value rebalanced monthly, quarterly, semi-annually, or annually. On the appropriate date, the Sub-accounts you chose are rebalanced to the allocation percentages you requested. With Automatic Rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. For example, over time the performance of the Sub-accounts will differ, causing your percentage allocations to shift. Any transfer to or from any Sub-account that is not part of your Automatic Rebalancing program, will be made; however, that Sub-account will not become part of your rebalancing program unless we receive instructions from you indicating that you would like such option to become part of the program. There is no minimum Account Value required to enroll in Automatic Rebalancing. All rebalancing transfers as part of an Automatic Rebalancing program are not included when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an Automatic Rebalancing program. Participation in the Automatic Rebalancing program may be restricted if you are enrolled in certain other optional programs. Sub-accounts that are part of a Systematic Withdrawal program or Dollar Cost Averaging program will be excluded from an Automatic Rebalancing program. ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? We currently do not offer any asset allocation programs for use with your Annuity. Prior to December 5, 2005, we made certain asset allocation programs available. If you enrolled in one of the asset allocation programs prior to December 5, 2005, see the Appendix entitled, "Additional Information on the Asset Allocation Programs" for more information on how the programs are administered. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the Sub-accounts but also wish to protect their principal, as of a specific date in the future. They are the Balanced Investment Program and the Guaranteed Return Option Plus/SM/ (GRO Plus/SM/). GRO Plus is not available in all states. In some states where GRO Plus is not available we offer the Guaranteed Return Option (GRO).) Both the Balanced Investment Program and GRO Plus allow you to allocate a portion of your Account Value to the available Sub-accounts while ensuring that your Account Value will at least equal your contributions adjusted for withdrawals and transfers on a specified date. Under GRO Plus, Account Value is allocated to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts or the interest rate environment after the amount is allocated to a Fixed Allocation. Generally, more of your Account Value will be allocated to the Sub-accounts under the GRO Plus program than under the Balanced Investment Program (although in periods of poor market performance, low interest rates and/or as the option progresses to its maturity date, this may not be the case). You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. In addition, as with most return of premium programs, amounts that are available to allocate to the Sub-accounts may be substantially less than they would be if you did not elect a return of premium program. This means that, if investment experience in the Sub-accounts were positive, your Account Value would grow at a slower rate than if you did not elect a return of premium program and allocated all of your Account Value to the Sub-accounts. BALANCED INVESTMENT PROGRAM We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the Sub-accounts that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will 52 AMERICAN SKANDIA ANNUITIES PROSPECTUS terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under your Annuity. Account Value you allocate to the Sub-accounts is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. EXAMPLE Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.781198 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $78,120 will be allocated to the Fixed Allocation and the remaining Account Value ($21,880) will be allocated to the Sub-accounts. Assuming that you do not make any withdrawals or transfers from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the Sub-accounts. The Guaranteed Return Option Plus (GRO Plus) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control of your available Account Value among the Sub-accounts to participate in market experience. Under the GRO Plus program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value is the amount not allocated to the Fixed Allocations to support the guarantees provided. There is a fee associated with this program. See "Living Benefit Programs," later in this Prospectus, for more information about this program. MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS? Yes. Your Financial Professional may forward instructions regarding the allocation of your account and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. For annuities issued on or after July 21, 2006, subject to our rules, we will require affirmative consent from you in order to give your Financial Professional such authority. If your Financial Professional has this authority, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Financial Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT? Yes. You may engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Annuities. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make transfers for you, is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your Account Value under any circumstance. As such, we are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow or any specific transfers they make on your behalf. Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Annuity. If you authorize your investment advisor to withdraw amounts from your Annuity (to the extent permitted) to pay for the investment advisor's fee, as with any other withdrawal from your Annuity, you may incur adverse tax consequences, a CDSC and/or a market value adjustment. Withdrawals to pay your investment advisor generally will also reduce the level of various living and death benefit guarantees provided (e.g. the withdrawals will reduce proportionately your Annuity's guaranteed minimum death benefit.) We are not a party to the agreement you have with * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 53 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued your investment advisor and do not verify that amounts withdrawn from your Annuity, including amounts withdrawn to pay for the investment advisor's fee, are within the terms of your agreement with your investment advisor. You will, however, receive confirmations of transactions that affect your Annuity. If your investment advisor has also acted as your Financial Professional with respect to the sale of your Annuity, he or she may be receiving compensation for services provided both as a Financial Professional and investment advisor. Alternatively, the investment advisor may compensate the Financial Professional from whom you purchased your Annuity for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your Financial Professional receive in connection with your Annuity, you should ask them for more details. We or an affiliate of ours may provide administrative support to licensed, registered Financial Professionals or Investment advisors who you authorize to make financial transactions on your behalf. We may require Financial Professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the Financial Professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of a Financial Professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) of American Skandia. Please Note: Annuities where your Financial Professional or investment advisor has the authority to forward instruction on financial transactions are also subject to the restrictions on transfers between investment options that are discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?" Since transfer activity directed by a Financial Professional or third party investment adviser may result in unfavorable consequences to all contract owners invested in the affected options, we reserve the right to limit the investment options available to a particular Owner where such authority as described above has been given to a Financial Professional or investment advisor or impose other transfer restrictions we deem necessary. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your Financial Professional. Your Financial Professional will be informed of all such restrictions on an ongoing basis. We may also require that your Financial Professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.prudential.com). Limitations that we may impose on your Financial Professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED ALLOCATIONS WORK? We credit a fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-752-6342. A Guarantee Period for a Fixed Allocation begins: .. when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; .. upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or .. when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). 54 AMERICAN SKANDIA ANNUITIES PROSPECTUS The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. American Skandia may offer Fixed Allocations with Guarantee Periods of 3 months or 6 months exclusively for use as a short-term Fixed Allocation ("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a Short-term Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. On the Maturity Date of the Short-term Fixed Allocation, the Account Value will be transferred to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transferred to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the Annuity or transfer any Account Value from the Short-term Fixed Allocation to any other investment option before the end of the Guarantee Period, a Market Value Adjustment will apply. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. .. "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. .. "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. .. "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. 55 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued MVA FORMULA The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]/N/365/ where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is: [(1 + I)/(1 + J)]/N/365/ MVA EXAMPLES The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: .. You allocate $50,000 into a Fixed Allocation (we refer to this as the "Allocation Date" in these examples) with a Guarantee Period of 5 years (we refer to this as the "Maturity Date" in these examples). .. The Strip Yields for coupon Strips beginning on Allocation Date and maturing on Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%). .. You make no withdrawals or transfers until you decide to withdraw the entire Fixed Allocation after exactly three (3) years, at which point 730 days remain before the Maturity Date (N = 730). EXAMPLE OF POSITIVE MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]/N/365 /= [1.055/1.041]/2 /= 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $59,448.56 EXAMPLE OF NEGATIVE MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]/N/365 /= [1.055/1.071]/2 /= 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. 56 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through partial withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC, if applicable. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations.") DURING THE ACCUMULATION PERIOD A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. DURING THE ANNUITIZATION PERIOD During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in your Annuity. Once the tax basis in your Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in your Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. .. To meet liquidity needs, you can withdraw a limited amount from your Annuity during each Annuity Year without application of any CDSC that might otherwise be applicable being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of your Annuity. The minimum Free Withdrawal you may request is $100. .. You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount that you may withdraw will depend on your Annuity's Surrender Value as of the date we process the withdrawal request. After any partial withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the partial withdrawal request as a request to fully surrender your Annuity. The minimum partial withdrawal you may request is $100. To determine if a CDSC applies to partial withdrawals, we: 1. First determine what, if any, amounts qualify as a Free Withdrawal. These amounts are not subject to the CDSC. 2. Next determine what, if any, remaining amounts are withdrawals of Purchase Payments. Amounts in excess of the Free Withdrawal amount will be treated as withdrawals of Purchase Payments unless all Purchase Payments have been previously withdrawn. These amounts are subject to the CDSC. Purchase Payments are withdrawn on a first in, first out basis. 3. Withdraw any remaining amounts from any other Account Value. These amounts are not subject to the CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 57 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value continued HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? The maximum Free Withdrawal amount during each Annuity Year is equal to 10% of all Purchase Payments that are subject to a CDSC. Withdrawals made within an Annuity Year reduce the Free Withdrawal amount available for the remainder of the Annuity Year. If you do not make a withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a partial withdrawal. Systematic Withdrawals can be made from Account Value allocated to the Sub-accounts or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100 (which may occur under a program that provides payment of an amount equal to the earnings in your Annuity for the period requested), we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(T)/72(Q) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b), 408 or 408A 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". For contracts issued as nonqualified annuities, the Internal Revenue Code provides for the same exemption from penalty under Section 72(q) of the Code. Distributions received under these provisions in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to any applicable CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Sections 72(t)/72(q), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t)/72(q) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Sections 72(t)/72(q). The minimum amount for any such withdrawal is $100 and payments may be made monthly, quarterly, semi-annually or annually. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2 that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Minimum distribution rules do not apply to Roth IRAs during the Owner's lifetime. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC (if applicable) may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum amount that applies to Systematic Withdrawals applies to monthly minimum distributions but does not apply to Minimum Distributions taken out on a quarterly, semi-annual or annual basis. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. 58 AMERICAN SKANDIA ANNUITIES PROSPECTUS CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the surrendered Annuity. For purposes of calculating any applicable CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. In that scenario, we would determine the CDSC amount as the applicable percentage of the Purchase Payments being withdrawn, rather than as a percentage of the remaining Account Value or withdrawal request. Thus, the CDSC would be greater than if it were calculated as a percentage of remaining Account Value or withdrawal amount. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender all or part of your Annuity prior to the Annuity Date without application of any otherwise applicable CDSC upon occurrence of a medically-related "Contingency Event" as defined below. We may apply a Market Value Adjustment to any Fixed Allocations. If you request a full surrender, the amount payable will be your Account Value minus, with respect to XT6, (a) the amount of any XTra Credits applied within 12 months prior to your request to surrender your Annuity under this provision; and (b) the amount of any XTra Credits added in conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (e.g. Purchase Payments received at such time pursuant to a salary reduction program). With respect to partial surrenders, we similarly reserve the right to take back XTra Credits as described above. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: .. The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the "Contingency Event" described below in order to qualify for a medically-related surrender; .. the Annuitant must be alive as of the date we pay the proceeds of such surrender request; .. if the Owner is one or more natural persons, all such Owners must also be alive at such time; .. we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; .. this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant; and .. no additional Purchase Payments can be made to the Annuity. A "Contingency Event" occurs if the Annuitant is: .. first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or .. first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make available annuity options that provide fixed annuity payments, variable annuity payments or adjustable annuity payments. Your contract provides certain fixed annuity payment options. We currently offer variable annuity payment options, which are provided by exchanging the deferred annuity contract described in this prospectus for a separate contract issued as an annuity settlement option and described in a separate prospectus. The variable annuity payment options are described in detail in a separate prospectus, which is available upon request and which will be provided to you if and when you elect one of the variable annuity payment options. The separate prospectus sets forth the fees and charges under the variable payment option, which may be higher than those set forth in this prospectus. We do not guarantee to continue to make available variable annuity payment options or any other option other than the fixed annuity payment options set forth in your contract. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts and may include a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. Please refer to the "Guaranteed Minimum Income Benefit," the "Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit," under "Living Benefits" below for a 59 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value continued description of annuity options that are available when you elect these benefits. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Please note, with respect to XT6, you may not annuitize within the first three Annuity Years and with respect to ASAP III and APEX II, you may not annuitize within the first Annuity Year. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. If you choose this option, you will be provided with a separate prospectus that describes such variable annuity. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity 60 AMERICAN SKANDIA ANNUITIES PROSPECTUS payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. If you choose this option, you will be provided with a separate prospectus that describes such variable annuity. We may make different annuity payment options available in the future. We do not guarantee to continue to make available variable annuity payment options or any other option other than the fixed annuity payment options set forth in your contract. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. You have a right to choose your annuity start date. If you have not provided us with your Annuity Date or annuity payment option in writing, then: .. a default date for the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and .. the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. If you choose to defer the Annuity Date beyond the default date, the IRS may not consider your contract to be an annuity under the tax law. If that should occur, all gain in your Annuity at that time will become immediately taxable to you. Further, each subsequent year's increase in Account Value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your Annuity will not be considered an annuity for federal income tax purposes. HOW ARE ANNUITY PAYMENTS CALCULATED? FIXED ANNUITY PAYMENTS (OPTIONS 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. VARIABLE ANNUITY PAYMENTS Generally, we currently offer three different types of variable annuity payment options. The following is a brief description of the variable annuity payment options. If you choose a variable annuity payment option, you will be provided with a separate prospectus that describes such variable annuity. There is no guarantee that we will continue to make available variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. . Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We 61 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value continued determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. . Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. . Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. ADJUSTABLE ANNUITY PAYMENTS We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5/th/) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. 62 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY ARE ALIVE? American Skandia offers different optional benefits, for an additional charge, that can provide investment protection for Owners while they are alive. Notwithstanding the additional protection provided under the optional Living Benefit Programs, the additional cost has the impact of reducing net performance of the investment options. Each optional benefit offers a distinct type of guarantee, regardless of the performance of the Sub-accounts, that may be appropriate for you depending on the manner in which you intend to make use of your Annuity while you are alive. Depending on which optional benefit you choose, you can have flexibility to invest in the Sub-accounts while: .. protecting a principal amount from decreases in value as of specified future dates due to investment performance; .. taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; .. guaranteeing a minimum amount of growth will be applied to your principal, if it is to be used as the basis for certain types of lifetime income payments; or .. providing spousal continuation of certain benefits. The "living benefits" that American Skandia offers are the Guaranteed Return Option Plus (GRO Plus), the Guaranteed Minimum Withdrawal Benefit (GMWB), the Guaranteed Minimum Income Benefit (GMIB), the Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit. Please refer to the benefit descriptions that follow for a complete description of the terms, conditions and limitations of each optional benefit. Investment restrictions apply if you elect certain optional living benefits. You should consult with your Financial Professional to determine if any of these optional benefits may be appropriate for you based on your financial needs. There are many factors to consider, but we note that among them you may want to evaluate the tax implications of these different approaches to meeting your needs, both between these benefits and in comparison to other potential solutions to your needs (e.g., comparing the tax implications of the withdrawal benefit and annuity payments). GUARANTEED RETURN OPTION PLUS/SM / (GRO PLUS/SM/) The Guaranteed Return Option Plus described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program (and it is currently active), the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Spousal Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit, or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period and any applicable subsequent period as the "maturity date") and on each anniversary of the maturity date thereafter while the program remains in effect, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate period following election of the enhanced guarantee and on each anniversary thereafter while this enhanced guarantee amount remains in effect, your Account 63 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between the Sub-accounts you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the Sub-accounts to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the Sub-accounts and the Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender your Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- PROTECTED PRINCIPAL VALUE/ENHANCED PROTECTED PRINCIPAL VALUE The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. .. Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter that the program remains in effect, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date that the program remains in effect, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. .. Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of a specified period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter that the enhanced guaranteed amount remains in effect, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically create an enhanced guarantee (or increase your enhanced guarantee, if previously elected) on each anniversary of the program (and create a new maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the Protected Principal Value or Enhanced Protected Principal Value by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter that the enhanced guarantee amount remains in effect, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to any Fixed Allocations first and then to the Sub-accounts pro-rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to your Annuity. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. WITHDRAWALS UNDER YOUR ANNUITY Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and, with respect to XT6, any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the 64 AMERICAN SKANDIA ANNUITIES PROSPECTUS actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals other than Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any Fixed Allocations up to growth attributable to the Fixed Allocations and thereafter pro-rata solely from the Sub-accounts. Withdrawals will be subject to all other provisions of your Annuity, including any Contingent Deferred Sales Charge and Market Value Adjustment that would apply. Charges for other optional benefits under your Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM) Optional Life Insurance Rider (not currently offered for sale) and any third party investment advisory service will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO Plus/SM/ program are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes any Credits under XT6); 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GRO Plus or other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 18, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). . B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE -- ALLOCATION OF ACCOUNT VALUE Account Value is transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). .. If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the Sub-accounts will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the Sub-accounts pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have 65 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the Sub-accounts, which may result in a decrease or increase in your Account Value. .. If your Account Value is less than the reallocation trigger, a portion of your Account Value in the Sub-accounts will be transferred from the Sub-accounts pro-rata according to your allocations to a new Fixed Allocation(s) to support the applicable guaranteed amount. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the Sub-accounts while maintaining the guaranteed protection under the program (as described above). If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the Sub-accounts if there is a subsequent market recovery. During periods closer to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s), causing less of your Account Value to be available to participate in the investment experience of the Sub-accounts. Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value or Enhanced Protected Principal Value are transferred to the Sub-accounts differently than each other because of the different guarantees they support. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. ELECTION OF THE PROGRAM The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated. Termination of the Guaranteed Return Option for the purpose of electing the Guaranteed Return Option Plus will be treated as any other termination of the Guaranteed Return Option (see below), including the termination of any guaranteed amount, and application of any applicable Market Value Adjustment when amounts are transferred to the Sub-accounts as a result of the termination. The 66 AMERICAN SKANDIA ANNUITIES PROSPECTUS Guaranteed Return Option Plus program will then be added to your Annuity based on the current Account Value. TERMINATION OF THE PROGRAM You can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. You also can terminate the Guaranteed Return Option Plus program entirely. If you terminate the program entirely, you can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, you could, for example, terminate the program on a given Valuation Day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections (including any election made effective on the Annuity issue date and any election made by a surviving spouse) and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. Upon termination, any Account Value in the Fixed Allocations will be transferred to the Sub-accounts pro-rata based on the Account Values in such Sub-accounts, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option Plus will no longer provide any guarantees. The surviving spouse may elect the benefit at any time, subject to the limitations described above, after the death of the Annuity Owner. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION PLUS This program is subject to certain rules and restrictions, including, but not limited to the following: .. Upon inception of the program, 100% of your Account Value must be allocated to the Sub-accounts. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. .. You cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments under XT6) or transfer Account Value to or from a Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments under XT6) may be allocated by us to Fixed Allocations to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a Sub-account. .. Transfers from Fixed Allocations made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under an Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. .. Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under an Annuity. .. Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. .. Low interest rates may require allocation to Fixed Allocations even when the current Account Value exceeds the guarantee. .. As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to Fixed Allocations. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. CHARGES UNDER THE PROGRAM We deduct a charge equal to 0.25% of the average daily net assets of the Sub-accounts for participation in the Guaranteed 67 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued Return Option Plus program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. GUARANTEED RETURN OPTION (GRO) The Guaranteed Return Option described below is offered only in those jurisdictions where we have not yet received regulatory approval for the Guaranteed Return Option Plus as of the date the election of the option is made. Certain terms and conditions may differ between jurisdictions. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option is not available if you elect the GRO Plus rider, the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Spousal Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit, or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period as the "maturity date") guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program monitors your Account Value daily and, if necessary, systematically transfers amounts between the Sub-accounts you choose and the Fixed Allocation used to support the Protected Principal Value. The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the Sub-accounts to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option program. The guarantee provided by the program exists only on the applicable maturity date. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the Sub-accounts and the Fixed Allocation to support our future guarantee, the program may provide some protection from signifi-cant market losses if you choose to surrender your Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- PROTECTED PRINCIPAL VALUE Under the GRO option, American Skandia guarantees that on the maturity date, your Account Value will be no less than the Protected Principal Value. On the maturity date if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. Any amounts added to your Annuity to support our guarantee under the program will be applied to the Fixed Allocation first and then to the Sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to an Annuity. The Protected Principal Value is generally referred to as the "Guaranteed Amount" in the rider we issue for this benefit. KEY FEATURE -- ALLOCATION OF ACCOUNT VALUE Account Value is transferred to and maintained in a Fixed Allocation to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rate on the Fixed Allocation, the remaining duration until the applicable maturity date and the amount of Account Value allocated to the Fixed Allocation relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from the Fixed Allocation. While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from the Fixed Allocation. .. If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the Sub-accounts will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to the Fixed Allocation to support the guaranteed amount, all or a portion of those amounts may 68 AMERICAN SKANDIA ANNUITIES PROSPECTUS be transferred from the Fixed Allocation and re-allocated to the Sub-accounts pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from the Fixed Allocation to the Sub-accounts, which may result in a decrease or increase in your Account Value. .. If your Account Value is less than the reallocation trigger, a portion of your Account Value in the Sub-accounts will be transferred from your Sub-accounts pro-rata according to your allocations to a new Fixed Allocation to support the guaranteed amount. The new Fixed Allocation will have a Guarantee Period equal to the time remaining until the applicable maturity date. The Account Value allocated to the new Fixed Allocation will be credited with the fixed interest rate then being credited to a new Fixed Allocation maturing on the applicable maturity date (rounded to the next highest yearly duration). The Account Value will remain invested in the Fixed Allocation until the maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the Sub-accounts while maintaining the guaranteed protection under the program (as described above). If a significant amount of your Account Value is systematically transferred to the Fixed Allocation to support the Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the Sub-accounts if there is a subsequent market recovery. During periods closer to the maturity date of the guarantee a significant portion of your Account Value may be allocated to the Fixed Allocation to support any applicable guaranteed amount. If your Account Value is less than the reallocation trigger and a new Fixed Allocation must be established during periods where the interest rate being credited to such Fixed Allocation is low, a larger portion of your Account Value may need to be transferred to the Fixed Allocation to support the guaranteed amount, causing less of your Account Value to be available to participate in the investment experience of the Sub-accounts. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between the Fixed Allocation and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. ELECTION OF THE PROGRAM The Guaranteed Return Option can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the Protected Principal Value will be based on your Account Value as of that date. RESTART OF THE PROGRAM Once each Annuity Year you may request to restart the Program. Such a request is an election by you to terminate the existing Program and start a new one. Restarts only take effect on anniversaries of the Issue Date. To make such a request for a restart, you must notify us. If we accept your request, we then terminate the existing Program as of that valuation period, if it is an anniversary of the Issue Date, or, if not, as of the next following anniversary of the Issue Date. The new Program starts at that time. The initial Protected Principal Value for the new Program is the Account Value as of the effective date of the new Program. Unless you tell us otherwise, the duration of the new Program will be the same as that for the existing Program. However, if we do not then make that duration available, you must elect from those we make available at that time. As part of terminating the existing Program, we transfer any amounts in Fixed Allocations, subject to a Market Value Adjustment, to the Sub-accounts on a pro-rata basis. If your entire Account Value was then in Fixed Allocations, you must first provide us instructions as to how to allocate the transferred Account Value among the Sub-accounts. TERMINATION OF THE PROGRAM The Annuity Owner also can terminate the Guaranteed Return Option program. Upon termination, any Account Value in the Fixed Allocation will be transferred to the Sub-accounts pro-rata based on the Account Values in such Sub-accounts, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. 69 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of your Annuity. If you elect to terminate the program, the Guaranteed Return Option will no longer provide any guarantees. If the surviving spouse assumes your Annuity, he/ she may re-elect the benefit on any anniversary of the Issue Date of the Annuity or, if the deceased Owner had not previously elected the benefit, may elect the benefit at any time. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option program will no longer be deducted from your Account Value upon termination of the program. SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION This program is subject to certain rules and restrictions, including, but not limited to the following: .. Upon inception of the program, 100% of your Account Value must be allocated to the Sub-accounts. The Fixed Allocation may not be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to the Fixed Allocation as of the effective date of the program under some circumstances. .. Annuity Owners cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments under XT6) or transfer Account Value to or from the Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments under XT6) may be allocated by us to the Fixed Allocation to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a Sub-account. .. Transfers from the Fixed Allocation made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under an Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. .. Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed Allocation to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under an Annuity. .. Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. .. Low interest rates may require allocation to the Fixed Allocation even when the current Account Value exceeds the guarantee. .. As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to the Fixed Allocation. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. CHARGES UNDER THE PROGRAM We deduct a charge equal to 0.25% of the average daily net assets of the Sub-accounts for participation in the Guaranteed Return Option program. The annual charge is deducted daily. Account Value allocated to the Fixed Allocation under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. With respect to XT6 and APEX II, effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between February 4, 2002 and November 15, 2002 for XT6 and APEX II and subsequent to November 15, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 15, 2002 will be subject to the charge method described above. 70 AMERICAN SKANDIA ANNUITIES PROSPECTUS Owners who purchased an ASAP III Annuity between April 1, 2003 and September 30, 2003 or an ASL II Annuity between February 4, 2002 and November 15, 2002 (the "Promotional Period") will not be charged the 0.25% annual fee for the Guaranteed Return Option program (or GRO Plus if we are no longer offering GRO) if elected at any time while their Annuity is in effect. .. American Skandia will not charge the 0.25% annual fee for the entire period that the program remains in effect, including any extension of the program's maturity date resulting from the Owner's election to restart the 7-year program duration, regardless of when the Owner elects to participate in the Guaranteed Return Option program (or GRO Plus if we are no longer offering GRO). .. Owners who complete the initial 7-year program duration OR terminate the program before the program's maturity date, will not be charged the 0.25% annual fee for participating in the program if they re-elect the Guaranteed Return Option program (or GRO Plus if we are no longer offering GRO) at a later date. .. All other terms and conditions of your Annuity and the Guaranteed Return Option program (or GRO Plus if we are no longer offering GRO) apply to Owners who qualify for the waiver of the 0.25% annual fee. .. Owners who purchase an Annuity after the completion of the Promotional Period do not qualify for the 0.25% annual fee waiver. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) The Guaranteed Minimum Withdrawal Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Withdrawal Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit, the Lifetime Five Income Benefit or the Spousal Lifetime Five Income Benefit. We offer a program that guarantees your ability to withdraw amounts equal to an initial principal value (called the "Protected Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to protect your principal. You are not required to make withdrawals as part of the program - -- the guarantee is not lost if you withdraw less than the maximum allowable amount of principal each year under the rules of the program. There is an additional charge if you elect the GMWB program; however, the charge may be waived under certain circumstances described below. KEY FEATURE -- PROTECTED VALUE The Protected Value is the total amount that we guarantee will be available to you through withdrawals from your Annuity and/or benefit payments, regardless of the impact of market performance on your Account Value. The Protected Value is reduced with each withdrawal you make until the Protected Value is reduced to zero. When the Protected Value is reduced to zero due to your withdrawals, the GMWB program terminates. Additionally, the Protected Value is used to determine the maximum annual amount that you can withdraw from your Annuity, called the Protected Annual Withdrawal Amount, without triggering an 71 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued adjustment in the Protected Value on a proportional basis. The Protected Value is referred to as the "Benefit Base" in the rider we issue for this benefit. The Protected Value is determined as of the date you make your first withdrawal under your Annuity following your election of the GMWB program. The initial Protected Value is equal to the greater of (A) the Account Value on the date you elect the GMWB program, plus any additional Purchase Payments (plus any Credits applied to such Purchase Payments under XT6) before the date of your first withdrawal; or (B) the Account Value as of the date of the first withdrawal from your Annuity. The Protected Value may be enhanced by increases in your Account Value due to market performance during the period between your election of the GMWB program and the date of your first withdrawal. .. If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment (plus any Credits applied to such Purchase Payments under XT6). .. If we offer the GMWB program to existing Annuity Owners, the Account Value on the anniversary of the Issue Date of your Annuity following your election of the GMWB program will be used to determine the initial Protected Value. .. If you make additional Purchase Payments after your first withdrawal, the Protected Value will be increased by the amount of the additional Purchase Payment (plus any Credits applied to such Purchase Payments under XT6). You may elect to step-up your Protected Value if, due to positive market performance, your Account Value is greater than the Protected Value. You are eligible to step-up the Protected Value on or after the 5/th /Annuity anniversary following the first withdrawal under the GMWB program. The Protected Value can be stepped up again on or after the 5/th /Annuity anniversary following the preceding step-up. If you elect to step-up the Protected Value, you must do so during the 30-day period prior to your eligibility date. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the GMWB program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we reset the Protected Value to be equal to the then current Account Value. For example, assume your initial Protected Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Value to $60,000. On the date you are eligible to step-up the Protected Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Value to $75,000 on the date you are eligible. Upon election of the step-up, we also reset the Protected Annual Withdrawal Amount (discussed immediately below) to be equal to the greater of (A) the Protected Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the Protected Value immediately after the reset. KEY FEATURE -- PROTECTED ANNUAL WITHDRAWAL AMOUNT The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected Value. Under the GMWB program, if your cumulative withdrawals each Annuity Year are less than or equal to the Protected Annual Withdrawal Amount, your Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected Value is reduced by the actual amount of the withdrawal, including any CDSC or MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the Protected Annual Withdrawal Amount trigger a proportional adjustment to both the Protected Value and the Protected Annual Withdrawal Amount, as described in the rider for this benefit (see the examples of this calculation below). The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual Benefit" in the rider we issue for this benefit. The GMWB program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Protected Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Protected Annual Withdrawal Amount each Annuity Year. .. If, cumulatively, you withdraw an amount less than the Protected Annual Withdrawal Amount in any Annuity Year, you cannot carry-over the unused portion of the Protected Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Protected Annual Withdrawal Amount may extend the period of time until the remaining Protected Value is reduced to zero. .. Additional Purchase Payments will increase the Protected Annual Withdrawal Amount by 7% of the applicable Purchase Payment (and any Credits we apply to such Purchase Payments under XT6). 72 AMERICAN SKANDIA ANNUITIES PROSPECTUS .. If the Protected Annual Withdrawal Amount after an adjustment exceeds the Protected Value, the Protected Annual Withdrawal Amount will be set equal to the Protected Value. The following examples of dollar-for dollar and proportional reductions and the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the effective date of the GMWB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits in the case of XT6); 3.) a Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of $17,500 (7% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GMWB or any other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Protected Annual Withdrawal Amount: .. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining Protected Annual Withdrawal Amount for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $17,500 to $7,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount withdrawn exceeds the remaining Protected Annual Withdrawal Amount of $7,500 from Example 1: .. the Protected Value is first reduced by the remaining Protected Annual Withdrawal Amount (from $240,000 to $232,500); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the remaining Protected Annual Withdrawal Amount ($10,000 - $7,500, or $2,500). . B is the Account Value less the remaining Protected Annual Withdrawal Amount ($220,000 - $7,500, or $212,500). The resulting Protected Value is: $232,500 X (1 - $2,500 / $212,500), or $229,764.71. .. the Protected Annual Withdrawal Amount is also reduced by the ratio of A to B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 - $2,500 / $212,500), or $17,294.12. .. The remaining Protected Annual Withdrawal Amount is set to zero (0) for the balance of the first Annuity Year. EXAMPLE 3. RESET OF THE MAXIMUM ANNUAL BENEFIT A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The remaining Protected Annual Withdrawal Amount has been reset to the Protected Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn is less than the remaining Protected Annual Withdrawal Amount: .. the Protected Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $229,764.71 to $219,764.71). .. the remaining Protected Annual Withdrawal Amount for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $17,294.12 to $7,294.12). BENEFITS UNDER THE GMWB PROGRAM .. In addition to any withdrawals you make under the GMWB program, market performance may reduce your Account Value. If your Account Value is equal to zero, and you have not received all of your Protected Value in the form of withdrawals from your Annuity, we will continue to make payments equal to the remaining Protected Value in the form of fixed, periodic payments until the remainder of the Protected Value is paid, at which time the rider terminates. The fixed, periodic payments will each be equal to the Protected Annual Withdrawal Amount, except for the last payment which may be equal to the remaining Protected Value. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. You will not have the right to make additional Purchase Payments or receive the remaining Protected Value in a lump sum. You can elect the frequency of payments, subject to our rules then in effect. .. If the death benefit under your Annuity becomes payable before you have received all of your Protected Value in the form of withdrawals from your Annuity, your Beneficiary has the option to elect to receive the remaining Protected Value as an alternate death benefit payout in lieu of the amount payable under any other death benefit provided under your Annuity. The remaining Protected Value will be payable in the form of fixed, periodic payments. Your beneficiary can elect the frequency of payments, subject to our rules then in effect. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. The Protected Value is not 73 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued equal to the Account Value for purposes of the Annuity's other death benefit options. The GMWB program does not increase or decrease the amount otherwise payable under the Annuity's other death benefit options. Generally, the GMWB program would be of value to your Beneficiary only when the Protected Value at death exceeds any other amount available as a death benefit. .. If you elect to begin receiving annuity payments before you have received all of your Protected Value in the form of withdrawals from your Annuity, an additional annuity payment option will be available that makes fixed annuity payments for a certain period, determined by dividing the Protected Value by the Protected Annual Withdrawal Amount. If you elect to receive annuity payments calculated in this manner, the assumed interest rate used to calculate such payments will be 0%, which is less than the assumed interest rate on other annuity payment options we offer. This 0% assumed interest rate results in lower annuity payments than what would have been paid if the assumed interest rate was higher than 0%. You can also elect to terminate the GMWB program and begin receiving annuity payments based on your then current Account Value (not the remaining Protected Value) under any of the available annuity payment options. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the GMWB program are subject to all of the terms and conditions of your Annuity, including any CDSC and MVA that may apply. .. Withdrawals made while the GMWB program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under your Annuity. .. The GMWB program does not directly affect your Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the GMWB program. The GMWB program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Value in the form of periodic benefit payments. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. ELECTION OF THE PROGRAM Currently, the GMWB program can only be elected at the time that you purchase your Annuity. In the future, we may offer existing Annuity Owners the option to elect the GMWB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMWB program after the Issue Date of your Annuity, the program will be effective as of the next anniversary date. Your Account Value as of such anniversary date will be used to calculate the initial Protected Value and the initial Protected Annual Withdrawal Amount. We reserve the right to restrict the maximum amount of Protected Value that may be covered under the GMWB program under this Annuity or any other annuities that you own that are issued by American Skandia or its affiliated companies. TERMINATION OF THE PROGRAM The program terminates automatically when your Protected Value reaches zero based on your withdrawals. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of your Annuity, upon due proof of death (unless your surviving spouse elects to continue your Annuity and the GMWB program or your Beneficiary elects to receive the amounts payable under the GMWB program in lieu of the death benefit) or upon your election to begin receiving annuity payments. The charge for the GMWB program will no longer be deducted from your Account Value upon termination of the program. CHARGES UNDER THE PROGRAM Currently, we deduct a charge equal to 0.35% of the average daily net assets of the Sub-accounts per year to purchase the GMWB program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. .. If, during the seven years following the effective date of the program, you do not make any withdrawals, and do not make 74 AMERICAN SKANDIA ANNUITIES PROSPECTUS any additional Purchase Payments after a five-year period following the effective date of the program, the program will remain in effect; however, we will waive the annual charge going forward. If you make an additional Purchase Payment following the waiver of the annual charge, we will begin charging for the program. After year seven (7) following the effective date of the program, withdrawals will not cause a charge to be re-imposed. .. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the program have changed for new purchasers, your program may be subject to the new charge level for the benefit. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "quali-fied" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the owner's lifetime. The amount required under the Code may exceed the Protected Annual Withdrawal Amount, which will cause us to recalculate the Protected Value and the Protected Annual Withdrawal Amount, resulting in a lower amount payable in future Annuity Years. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) The Guaranteed Minimum Income Benefit program described below is only being offered in those juris-dictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Income Benefit program is not available if you elect any other optional living benefit. We offer a program that, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on a guaranteed minimum value (called the "Protected Income Value") that increases after the waiting period begins, regardless of the impact of market performance on your Account Value. The program may be appropriate for you if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. There is an additional charge if you elect the GMIB program. KEY FEATURE -- PROTECTED INCOME VALUE The Protected Income Value is the minimum amount that we guarantee will be available (net of any applicable tax charge), after a waiting period of at least seven years, as a basis to begin receiving fixed annuity payments. The Protected Income Value is initially established on the effective date of the GMIB program and is equal to your Account Value on such date. Currently, since the GMIB program may only be elected at issue, the effective date is the Issue Date of your Annuity. The Protected Income Value is increased daily based on an annual growth rate of 5%, subject to the limitations described below. The Protected Income Value is referred to as the "Protected Value" in the rider we issue for this benefit. The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the rider we issue for this benefit. 75 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued The Protected Income Value is subject to a limit of 200% (2X) of the sum of the Protected Income Value established on the effective date of the GMIB program, or the effective date of any step-up value, plus any additional Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of XT6) made after the waiting period begins ("Maximum Protected Income Value"), minus the sum of any reductions in the Protected Income Value due to withdrawals you make from your Annuity after the waiting period begins. .. Subject to the maximum age/durational limits described immediately below, we will no longer increase the Protected Income Value by the 5% annual growth rate once you reach the Maximum Protected Income Value. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments after you reach the Maximum Protected Income Value. Further, if you make withdrawals after you reach the Maximum Protected Income Value, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. .. Subject to the Maximum Protected Income Value, we will no longer increase the Protected Income Value by the 5% annual growth rate after the later of the anniversary date on or immediately following the Annuitant's 80/th /birthday or the 7/th /anniversary of the later of the effective date of the GMIB program or the effective date of the most recent step-up. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of XT6). Further, if you make withdrawals after the Annuitant reaches the maximum age/duration limits, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. .. Subject to the Maximum Protected Income Value, if you make an additional Purchase Payment, we will increase the Protected Income Value by the amount of the Purchase Payment (and any Credit that is applied to such Purchase Payment in the case of XT6) and will apply the 5% annual growth rate on the new amount from the date the Purchase Payment is applied. .. As described below, after the waiting period begins, cumulative withdrawals each Annuity Year that are up to 5% of the Protected Income Value on the prior anniversary of your Annuity will reduce the Protected Income Value by the amount of the withdrawal. Cumulative withdrawals each Annuity Year in excess of 5% of the Protected Income Value on the prior anniversary of your Annuity will reduce the Protected Income Value proportionately. All withdrawals after the Maximum Protected Income Value is reached will reduce the Protected Income Value proportionately. The 5% annual growth rate will be applied to the reduced Protected Income Value from the date of the withdrawal. Stepping-Up the Protected Income Value -- You may elect to "step-up" or "reset" your Protected Income Value if your Account Value is greater than the current Protected Income Value. Upon exercise of the step-up provision, your initial Protected Income Value will be reset equal to your current Account Value. From the date that you elect to step-up the Protected Income Value, we will apply the 5% annual growth rate to the stepped-up Protected Income Value, as described above. You can exercise the step-up provision twice while the GMIB program is in effect, and only while the Annuitant is less than age 76. .. A new seven-year waiting period will be established upon the effective date of your election to step-up the Protected Income Value. You cannot exercise your right to begin receiving annuity payments under the GMIB program until the end of the new waiting period. In light of this waiting period upon resets, it is not recommended that you reset your GMIB if the required beginning date under IRS minimum distribution requirements would commence during the 7 year waiting period. See "Tax Considerations" section in this prospectus for additional information on IRS requirements. .. The Maximum Protected Income Value will be reset as of the effective date of any step-up. The new Maximum Protected Income Value will be equal to 200% of the sum of the Protected Income Value as of the effective date of the step-up plus any subsequent Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of XT6), minus the impact of any withdrawals after the date of the step-up. .. When determining the guaranteed annuity purchase rates for annuity payments under the GMIB program, we will apply such rates based on the number of years since the most recent step-up. .. If you elect to step-up the Protected Income Value under the program, and on the date you elect to step-up, the charges under the GMIB program have changed for new purchasers, your program may be subject to the new charge going forward. 76 AMERICAN SKANDIA ANNUITIES PROSPECTUS .. A step-up will increase the dollar for dollar limit on the anniversary of the Issue Date of the Annuity following such step-up. Impact of Withdrawals on the Protected Income Value -- Cumulative withdrawals each Annuity Year up to 5% of the Protected Income Value will reduce the Protected Income Value on a "dollar-for-dollar" basis (the Protected Income Value is reduced by the actual amount of the withdrawal). Cumulative withdrawals in any Annuity Year in excess of 5% of the Protected Income Value will reduce the Protected Income Value proportionately (see the examples of this calculation below). The 5% annual withdrawal amount is determined on each anniversary of the Issue Date (or on the Issue Date for the first Annuity Year) and applies to any withdrawals during the Annuity Year. This means that the amount available for withdrawals each Annuity Year on a "dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect changes in the Protected Income Value during the prior Annuity Year. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GMIB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits in the case of XT6); 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GMIB or any other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. Immediately prior to the withdrawal, the Protected Income Value is $251,038.10 (the initial value accumulated for 31 days at an annual effective rate of 5%). As the amount withdrawn is less than the dollar-for-dollar limit: .. the Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). Immediately before the withdrawal, the Account Value is $220,000 and the Protected Income Value is $242,006.64. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the Protected Income Value is first reduced by the Remaining Limit (from $242,006.64 to $239,506.64); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). . B is the Account Value less the Remaining Limit ($220,000 - $2,500, or $217,500). The resulting Protected Income Value is: $239,506.64 X (1 - $7,500 / $217,500), or $231,247.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT A $10,000 withdrawal is made on the first anniversary of the Issue Date, October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected Income Value is $240,838.37. The Remaining Limit is reset to 5% of this amount, or $12,041.92. As the amount withdrawn is less than the dollar-for-dollar limit: .. the Protected Income Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $240,838.37 to $230,838.37). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,041.92 to $2,041.92). KEY FEATURE -- GMIB ANNUITY PAYMENTS You can elect to apply the Protected Income Value to one of the available GMIB Annuity Payment Options on any anniversary date following the initial waiting period, or any subsequent waiting period established upon your election to step-up the Protected Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the Annuity anniversary, during which you may elect to begin receiving annuity payments under one of the available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 95/th /birthday, except for Annuities used as a funding vehicle for an IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 92/nd /birthday. 77 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued The amount of each GMIB Annuity Payment will be determined based on the age and, where permitted by law, sex of the Annuitant by applying the Protected Income Value (net of any applicable tax charge that may be due) to the GMIB Annuity Payment Option you choose. We use special annuity purchase rates to calculate the amount of each payment due under the GMIB Annuity Payment Options. These special rates for the GMIB Annuity Payment Options are calculated using an assumed interest rate factor that provides for lower growth in the value applied to produce annuity payments than if you elected an annuity payment option that is not part of the GMIB program. These special rates also are calculated using other factors such as "age setbacks" (use of an age lower than the Annuitant's actual age) that result in lower payments than would result if you elected an annuity payment option that is not part of the GMIB program. Use of an age setback entails a longer assumed life for the Annuitant which in turn results in lower annuity payments. On the date that you elect to begin receiving GMIB Annuity Payments, we guarantee that your payments will be calculated based on your Account Value and our then current annuity purchase rates if the payment amount calculated on this basis would be higher than it would be based on the Protected Income Value and the special GMIB annuity purchase rates. GMIB ANNUITY PAYMENT OPTION 1 -- PAYMENTS FOR LIFE WITH A CERTAIN PERIOD Under this option, monthly annuity payments will be made until the death of the Annuitant. If the Annuitant dies before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. GMIB ANNUITY PAYMENT OPTION 2 -- PAYMENTS FOR JOINT LIVES WITH A CERTAIN PERIOD Under this option, monthly annuity payments will be made until the death of both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint Annuitant die before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. .. If the Annuitant dies first, we will continue to make payments until the later of the death of the Joint Annuitant and the end of the period certain. However, if the Joint Annuitant is still receiving annuity payments following the end of the certain period, we will reduce the amount of each subsequent payment to 50% of the original payment amount. .. If the Joint Annuitant dies first, we will continue to make payments until the later of the death of the Annuitant and the end of the period certain. You cannot withdraw your Account Value or the Protected Income Value under either GMIB Annuity Payment Option once annuity payments have begun. We may make other payout frequencies available, such as quarterly, semi-annually or annually. OTHER IMPORTANT CONSIDERATIONS .. You should note that GMIB is designed to provide a type of insurance that serves as a safety net only in the event your Account Value declines significantly due to negative investment performance. If your Account Value is not significantly affected by negative investment performance, it is unlikely that the purchase of the GMIB will result in your receiving larger annuity payments than if you had not purchased GMIB. This is because the assumptions that we use in computing the GMIB, such as the annuity purchase rates, (which include assumptions as to age-setbacks and assumed interest rates), are more conservative than the assumptions that we use in computing annuity payout options outside of GMIB. Therefore, you may generate higher income payments if you were to annuitize a lower Account Value at the current annuity purchase rates, than if you were to annuitize under the GMIB with a higher Protected Value than your Account Value but, at the annuity purchase rates guaranteed under the GMIB. The GMIB program does not directly affect an Annuity's Account Value, Surrender Value or the amount payable under either the basic Death Benefit provision of the Annuity or any optional Death Benefit provision. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Income Value. The Protected Income Value is only applicable if you elect to begin receiving annuity payments under one of the GMIB annuity options after the waiting period. .. Each Annuity offers other annuity payment options that you can elect which do not impose an additional charge, but which do not offer to guarantee a minimum value on which to make annuity payments. .. Where allowed by law, we reserve the right to limit subsequent Purchase Payments if we determine, at our sole discretion, that based on the timing of your Purchase 78 AMERICAN SKANDIA ANNUITIES PROSPECTUS Payments and withdrawals, your Protected Income Value is increasing in ways we did not intend. In determining whether to limit Purchase Payments, we will look at Purchase Payments which are disproportionately larger than your initial Purchase Payment and other actions that may artificially increase the Protected Income Value. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. .. If you change the Annuitant after the effective date of the GMIB program, the period of time during which we will apply the 5% annual growth rate may be changed based on the age of the new Annuitant. If the new Annuitant would not be eligible to elect the GMIB program based on his or her age at the time of the change, then the GMIB program will terminate. .. Annuity payments made under the GMIB program are subject to the same tax treatment as any other annuity payment. .. At the time you elect to begin receiving annuity payments under the GMIB program or under any other annuity payment option we make available, the protection provided by an Annuity's basic Death Benefit or any optional Death Benefit provision you elected will no longer apply. ELECTION OF THE PROGRAM Currently, the GMIB program can only be elected at the time that you purchase your Annuity. The Annuitant must be age 75 or less as of the effective date of the GMIB program. In the future, we may offer existing Annuity Owners the option to elect the GMIB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMIB program after the Issue Date of your Annuity, the program will be effective as of the date of election. Your Account Value as of that date will be used to calculate the Protected Income Value as of the effective date of the program. TERMINATION OF THE PROGRAM The GMIB program cannot be terminated by the Owner once elected. The GMIB program automatically terminates as of the date your Annuity is fully surrendered, on the date the Death Benefit is payable to your Beneficiary (unless your surviving spouse elects to continue your Annuity), or on the date that your Account Value is transferred to begin making annuity payments. The GMIB program may also be terminated if you designate a new Annuitant who would not be eligible to elect the GMIB program based on his or her age at the time of the change. Upon termination of the GMIB program we will deduct the charge from your Account Value for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). CHARGES UNDER THE PROGRAM Currently, we deduct a charge equal to 0.50% per year of the average Protected Income Value for the period the charge applies. Because the charge is calculated based on the average Protected Income Value, it does not increase or decrease based on changes to the Annuity's Account Value due to market performance. The dollar amount you pay each year will increase in any year the Protected Income Value increases, and it will decrease in any year the Protected Income Value decreases due to withdrawal, irrespective of whether your Account Value increases or decreases. The charge is deducted annually in arrears each Annuity Year on the anniversary of the Issue Date of an Annuity. We deduct the amount of the charge pro-rata from the Account Value allocated to the Sub-accounts and the Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed Allocation. If you surrender your Annuity, begin receiving annuity payments under the GMIB program or any other annuity payment option we make available during an Annuity Year, or the GMIB program terminates, we will deduct the charge for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No charge applies after the Annuity Date. 79 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE) The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Lifetime Five can be elected only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. Currently, if you elect Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Lifetime Five and Spousal Lifetime Five. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect any other optional living benefit. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees your ability to withdraw amounts equal to a percentage of an initial principal value (called the "Protected Withdrawal Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. There are two options -- one is designed to provide an annual withdrawal amount for life (the "Life Income Benefit") and the other is designed to provide a greater annual withdrawal amount as long as there is Protected Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no Protected Withdrawal Value, the withdrawal benefit will be zero. You do not choose between these two options; each option will continue to be available as long as your Annuity has an Account Value and the Lifetime Five is in effect. Certain benefits under Lifetime Five may remain in effect even if the Account Value of your Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive annual payments. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- PROTECTED WITHDRAWAL VALUE The Protected Withdrawal Value is initially used to determine the amount of each initial annual payment under the Life Income Benefit and the Withdrawal Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under your Annuity following your election of Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Lifetime Five growing at 5% per year from the date of your election of the program, or application of the Purchase Payment to your Annuity, as applicable, until the date of your first withdrawal or the 10/th /anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (A) and (C) above each value is increased by the amount of any subsequent Purchase Payments. With respect to XT6, Credits are added to Purchase Payments for purposes of calculating the Protected Withdrawal Value, the Annual Income Amount and the Annual Withdrawal Amount (see below for a description of Annual Income Amount and Annual Withdrawal Amount). .. If you elect the Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. .. For existing Owners who are electing the Lifetime Five benefit, the Account Value on the date of your election of the Lifetime Five program will be used to determine the initial Protected Withdrawal Value. .. If you make additional Purchase Payments after your first withdrawal, the Protected Withdrawal Value will be increased by the amount of each additional Purchase Payment. You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect, then you are eligible to step-up the Protected Withdrawal Value on or after the 5/th/ anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected prior to March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elected the Lifetime Five program on or after March 20, 2006, 80 AMERICAN SKANDIA ANNUITIES PROSPECTUS then you are eligible to step-up the Protected Withdrawal Value on or after the 3rd anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected on or after March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 3rd anniversary following the preceding step-up. In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. An optional automatic set-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will occur on the 3rd Annuity Anniversary (5th Annuity Anniversary if the benefit was elected prior to March 20, 2006) following the later of the first withdrawal under the benefit or the prior step-up. At this time, your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. If 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 3rd (5th if the benefit was elected prior to March 20, 2006) Annuity Anniversary following the most recent step-up. If, on the date that we implement an Auto Step-Up to your Protected Withdrawal Value, the charge for Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. The Protected Withdrawal Value is reduced each time a withdrawal is made on a dollar-for-dollar basis up to 7% per Annuity Year of the Protected Withdrawal Value and on the greater of a dollar-for-dollar basis or a pro rata basis for withdrawals in an Annuity Year in excess of that amount until the Protected Withdrawal Value is reduced to zero. At that point the Annual Withdrawal Amount will be zero until such time (if any) as the Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or additional Purchase Payments being made into the Annuity). KEY FEATURE -- ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. A withdrawal can be considered Excess Income under the Life Income Benefit even though it does not exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a step-up (or an auto step-up is effected), your Annual Income Amount increases to equal 5% of your Account Value after the step-up if such amount is greater than your Annual Income Amount. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. 81 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued KEY FEATURE -- ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT The initial Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals each Annuity Year are less than or equal to the Annual Withdrawal Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If your cumulative withdrawals are in excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Withdrawal to the Account Value immediately prior to such withdrawal (see the examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. When you elect a step-up (or an auto step-up is effected), your Annual Withdrawal Amount increases to equal 7% of your Account Value after the step-up if such amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 7% of any additional Purchase Payments. A determination of whether you have exceeded your Annual Withdrawal Amount is made at the time of each withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount will not offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount at the time the withdrawal was made. The Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount and the Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Annual Withdrawal Amount or Annual Income Amount in each Annuity Year. .. If, cumulatively, you withdraw an amount less than the Annual Withdrawal Amount under the Withdrawal Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Withdrawal Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. .. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Income Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on February 1, 2010 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for Lifetime Five or any other fees and charges. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a)Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33 (b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of $265,000). The Annual Income Amount is equal to $13,250 under the Life Income Benefit (5% of $265,000). EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $10,000 = $8,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 .. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 .. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000 82 AMERICAN SKANDIA ANNUITIES PROSPECTUS EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS (a) If $15,000 was withdrawn (more than the Annual Income Amount but less than the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $15,000 = $3,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 .. Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000 (b) If $25,000 was withdrawn (more than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 = $6,450) reduces Annual Withdrawal Amount for future Annuity Years. .. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value before Excess Withdrawal X Annual Withdrawal Amount = $6,450 / ($263,000 - $18,550) X $18,550 = $489 Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061 .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 = $11,750) reduces Annual Income Amount for future Annuity Years. .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $11,750 / ($263,000 - $13,250) X $13,250 = $623 Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627 .. Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount ($18,550) from $265,000 to $246,450. It is further reduced by the greater of a dollar-for-dollar reduction or a proportional reduction. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450 .. Proportional reduction = Excess Withdrawal / Account Value before Excess Withdrawal X Protected Withdrawal Value = $6,450 / ($263,000 - $18,550) X $246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450, $6,503} = $239,947 EXAMPLE 3. STEP-UP OF THE PROTECTED WITHDRAWAL VALUE If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on February 1, 2010 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a step-up is elected on February 1, 2010, then the following values would result: .. Protected Withdrawal Value = Account Value on February 1, 2010 = $280,000 .. Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is increased to $14,000. .. If the step-up request on February 1, 2010 was due to the election of the auto step-up feature, we would first check to see if an auto step-up should occur by checking to see if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. 5% of the Account Value is equal to 5% of $280,000, which is $14,000. 5% of the Annual Income Amount ($13,250) is $662.50, which added to the Annual Income Amount is $13,912.50. Since 5% of the Account Value is greater than $13,912.50, the step-up would still occur in this scenario, and all of the values would be increased as indicated above. .. Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual Withdrawal Amount is increased to $19,600. BENEFITS UNDER THE LIFETIME FIVE PROGRAM .. If your Account Value is equal to zero, and the cumulative withdrawals in the current Annuity Year are greater than the Annual Withdrawal Amount, the Lifetime Five program will terminate. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and 83 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued amounts are still payable under both the Life Income Benefit and the Withdrawal Benefit, you will be given the choice of receiving the payments under the Life Income Benefit or under the Withdrawal Benefit. Thus, in that scenario, the remaining amounts under the Life Income Benefit and the Withdrawal Benefit would be payable even though your Account Value was reduced to zero. Once you make this election we will make an additional payment for that Annuity Year equal to either the remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity Year, if any, depending on the option you choose. In subsequent Annuity Years we make payments that equal either the Annual Income Amount or the Annual Withdrawal Amount as described in this Prospectus. You will not be able to change the option after your election and no further Purchase Payments will be accepted under your Annuity. If you do not make an election, we will pay you annually under the Life Income Benefit. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount but less than or equal to the Annual Withdrawal Amount and amounts are still payable under the Withdrawal Benefit, you will receive the payments under the Withdrawal Benefit. In the year of a withdrawal that reduced your Account Value to zero, we will make an additional payment to equal any remaining Annual Withdrawal Amount and make payments equal to the Annual Withdrawal Amount in each subsequent year (until the Protected Withdrawal Value is depleted). Once your Account Value equals zero no further Purchase Payments will be accepted under your Annuity. .. If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years or any remaining Protected Withdrawal Value, you can elect one of the following three options: (1)apply your Account Value to any annuity option available; or (2)request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We make such annuity payments until the Annuitant's death; or (3)request that, as of the date annuity payments are to begin, we pay out any remaining Protected Withdrawal Value as annuity payments. Each year such annuity payments will equal the Annual Withdrawal Amount or the remaining Protected Withdrawal Value if less. We make such annuity payments until the earlier of the Annuitant's death or the date the Protected Withdrawal Value is depleted. We must receive your request in a form acceptable to us at our office. .. In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a single life fixed annuity with five payments certain using the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1)the present value of future Annual Income Amount payments. Such present value will be calculated using the greater of the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2)the Account Value. .. If no withdrawal was ever taken, we will determine a Protected Withdrawal Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you made your first withdrawal on the date the annuity payments are to begin. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the Lifetime Five program are subject to all of the terms and conditions of your Annuity, including any applicable CDSC. .. Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under your Annuity. The Lifetime Five program does not directly affect your Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Withdrawal Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Lifetime Five program. The Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Withdrawal Value or Annual Income Amount in the form of periodic benefit payments. .. You must allocate your Account Value in accordance with the then permitted and available option(s) with this program in order to elect and maintain the Lifetime Five program. 84 AMERICAN SKANDIA ANNUITIES PROSPECTUS ELECTION OF THE PROGRAM The Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value, the initial Protected Annual Withdrawal Amount, and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect Lifetime Five or elect the Spousal Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. If you elected Lifetime Five prior to March 20, 2006, and you terminate the program, there will be no waiting period before you can re-elect the program or elect Spousal Lifetime Five provided that you had not previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five. If you had previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminated Lifetime Five, you will be able to re-elect the program or elect Spousal Lifetime Five on any date on or after the next anniversary of the Annuity Date. However, once you choose to re-elect/elect, the waiting period described above will apply to subsequent re-elections. We reserve the right to limit the re-election/election frequency in the future. Before making any such change to the re-election/election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. TERMINATION OF THE PROGRAM The program terminates automatically when your Protected Withdrawal Value and Annual Income Amount equal zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. The program terminates upon your surrender of your Annuity, upon the death of the Annuitant (but your surviving spouse may elect a new Lifetime Five if your spouse elects the spousal continuance option and your spouse would then be eligible to elect the benefit if he or she was a new purchaser), upon a change in ownership of your Annuity that changes the tax identification number of the Owner, upon change in the Annuitant or upon your election to begin receiving annuity payments. While you may terminate your program at any time, we may not terminate the program other than in the circumstances listed above. However, we may stop offering the program for new elections or re-elections at any time in the future. The charge for the Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Withdrawal Amount and the Annual Income Amount, which will cause us to increase the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. Any such payments will reduce your Protected Withdrawal Value. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE) The Spousal Lifetime Five program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, if you elect Spousal Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Spousal Lifetime Five and Lifetime Five. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must be elected based on two Designated Lives, as described below. Each Designated Life must be at least 55 years old when the benefit is elected. The Spousal Lifetime Five program is not available if you elect any other optional living benefit or Death Benefit. As long as your Spousal Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. 85 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued We offer a program that guarantees until the later death of two natural persons that are each other's spouses at the time of election of Spousal Lifetime Five and at the first death of one of them (the "Designated Lives", each a "Designated Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit") equal to a percentage of an initial principal value (the "Protected Withdrawal Value") regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. The Spousal Life Income Benefit may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity, wish to ensure that market performance will not affect your ability to receive annual payments, and wish either spouse to be able to continue the Spousal Life Income Benefit after the death of the first. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- INITIAL PROTECTED WITHDRAWAL VALUE The initial Protected Withdrawal Value is used to determine the amount of initial annual payment under the Spousal Life Income Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Spousal Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Spousal Lifetime Five, plus any additional Purchase Payments growing at 5% per year from the application of the Purchase Payment to your Annuity, until the date of your first withdrawal or the 10/th /anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (A) and (C) above, each value is increased by the amount of any subsequent Purchase Payments. With respect to XT6, Credits are added to Purchase Payments for purposes of calculating the Protected Withdrawal Value and the Annual Income Amount (see below for a description of Annual Income Amount). .. If you elect the Spousal Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. .. For existing Owners who are electing the Spousal Lifetime Five benefit, the Account Value on the date of your election of the Spousal Lifetime Five program will be used to determine the initial Protected Withdrawal Value. KEY FEATURE -- ANNUAL INCOME AMOUNT UNDER THE SPOUSAL LIFE INCOME BENEFIT The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 3/rd /anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 3/rd /anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will 86 AMERICAN SKANDIA ANNUITIES PROSPECTUS occur on the 3rd Annuity Anniversary following the later of the first withdrawal under the benefit or the prior step-up. At this time, your Annual Income Amount will only be stepped-up if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. If 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 3rd Annuity Anniversary following the most recent step-up. If, on the date that we implement an Auto Step-Up to your Annual Income Amount, the charge for Spousal Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. The Spousal Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount. Under Spousal Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Spousal Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on February 1, 2010 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for the Spousal Lifetime Five or any other fees and charges. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a)Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05/(393/365/) = $263,484.33 (b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit (5% of $265,000). EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 EXAMPLE 3. STEP-UP OF THE ANNUAL INCOME AMOUNT If a step-up of the Annual Income Amount is requested on February 1, 2010, the request will be accepted because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. If the step-up request was due to the election of the auto step-up feature, the step-up would still occur because 5% of Account Value would exceed the Annual Income Amount by more than 5%. (5% of $13,250 = $662.50; $13,250 + $662.50 = $13,912.50; $14,000 (greater than) $13,912.50). BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM .. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under the Spousal Life Income Benefit, we will make an additional payment for that Annuity Year equal to the remaining Annual Income Amount for the Annuity Year, if any. Thus, in that scenario, the remaining Annual Income Amount would be 87 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued payable even though your Account Value was reduced to zero. In subsequent Annuity Years we make payments that equal the Annual Income Amount as described in this Prospectus. No further Purchase Payments will be accepted under your Annuity. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount, the Spousal Life Income Benefit terminates and no additional payments will be made. .. If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years, you can elect one of the following two options: (1)apply your Account Value to any annuity option available; or (2)request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. We must receive your request in a form acceptable to us at our office. .. In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a joint and survivor or single (as applicable) life fixed annuity with five payments certain using the same basis that is used to calculate the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1)the present value of future Annual Income Amount payments. Such present value will be calculated using the same basis that is used to calculate the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2)the Account Value. .. If no withdrawal was ever taken, we will determine an initial Protected Withdrawal Value and calculate an Annual Income Amount as if you made your first withdrawal on the date the annuity payments are to begin. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the Spousal Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. .. Withdrawals made while the Spousal Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Spousal Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Spousal Lifetime Five program. The Spousal Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Annual Income Amount in the form of periodic benefit payments. .. You must allocate your Account Value in accordance with the then available option(s) that we may permit in order to elect and maintain the Spousal Lifetime Five program. .. There may be circumstances where you will continue to be charged the full amount for the Spousal Lifetime Five program even when the benefit is only providing a guarantee of income based on one life with no survivorship. .. In order for the Surviving Designated Life to continue the Spousal Lifetime Five program upon the death of an owner, the Designated Life must elect to assume ownership of the Annuity under the spousal continuation option. See "Spousal Owners/Spousal Beneficiaries", and "Spousal Beneficiary --Assumption of Annuity" in this Prospectus. ELECTION OF AND DESIGNATIONS UNDER THE PROGRAM Spousal Lifetime Five can only be elected based on two Designated Lives. Designated Lives must be natural persons who are each other's spouses at the time of election of the program and at the death of the first of the Designated Lives to die. Currently, the program may only be elected where the Owner, Annuitant and Beneficiary designations are as follows: .. One Annuity Owner, where the Annuitant and the Owner are the same person and the beneficiary is the Owner's spouse. 88 AMERICAN SKANDIA ANNUITIES PROSPECTUS The Owner/Annuitant and the beneficiary each must be at least 55 years old at the time of election; or .. Co-Annuity Owners, where the Owners are each other's spouses. The Beneficiary designation must be the surviving spouse. The first named Owner must be the Annuitant. Both Owners must each be at least 55 years old at the time of election. No Ownership changes or Annuitant changes will be permitted once this program is elected. However, if the Annuity is co-owned, the Owner that is not the Annuitant may be removed without affecting the benefit. The Spousal Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Spousal Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. TERMINATION OF THE PROGRAM The program terminates automatically when your Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. We reserve the right to further limit the frequency election in the future. The program terminates upon your surrender of the Annuity, upon the first Designated Life to die if the Annuity is not continued, upon the second Designated Life to die or upon your election to begin receiving annuity payments. The charge for the Spousal Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Income Amount, which will cause us to increase the Annual Income Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 89 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? Each Annuity provides a Death Benefit during its accumulation period. If an Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. If an 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT Each Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under an Annuity. Each Annuity also offers four different optional Death Benefits that can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. In addition, with respect to XT6, under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. (See "How are Credits Applied to My Account Value".) Except as noted below for ASL II, where death occurs after the decedent's age 85, or older, the basic Death Benefit is the greater of: .. The sum of all Purchase Payments less the sum of all proportional withdrawals. .. The sum of your Account Value in the Sub-accounts and your Interim Value in the Fixed Allocations. With respect to ASL II, if death occurs after the decedent's age 85 or older: the Death Benefit is your Account Value in the Sub-accounts and your Interim Value in the Fixed Allocations. With respect to XT6, the basic Death Benefit is reduced by the amount of any Credits applied within 12 months prior to the date of death. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Four optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. Currently, these benefits are only offered in those jurisdictions where we have received regulatory approval and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase an optional Death Benefit subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ between jurisdictions once approved and if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit may only be elected individually, and cannot be elected in combination with any other optional Death Benefit. If you elect Spousal Lifetime Five, you are not permitted to elect an optional Death Benefit. With respect to XT6, under certain circumstances, each Optional Death Benefit that you elect may be reduced by the amount of Credits applied to your Purchase Payments. Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. 90 AMERICAN SKANDIA ANNUITIES PROSPECTUS The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 75 or less. If an Annuity is owned by an entity, the Annuitant must be age 75 or less. CALCULATION OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under an Annuity, as defined below. "Growth" means the sum of your Account Value in the Sub-accounts and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments (less the amount of any Credits applied within 12-months prior to the date of death, with respect to XT6) reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments. The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to an Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. The Enhanced Beneficiary Protection Optional Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. With respect to XT6, APEX II and ASL II, please see Appendix E for a description of the Enhanced Beneficiary Protection Optional Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. The Enhanced Beneficiary Protection Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit. See Appendix B for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit ("HAV") If an Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Anniversary Value Optional Death Benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 79 or less. If an Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. 91 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued CALCULATION OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT The HAV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of XT6) less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Anniversary Value Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" or the "Highest Daily Value " Death Benefit. With respect to XT6, APEX II and ASL II, please see Appendix E for a description of the Guaranteed Minimum Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. Please refer to the definition of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer contract anniversaries before the death benefit target date is reached. The death benefit target date under this death benefit is earlier than the death benefit target date under the Combination 5% Roll-up and Highest Anniversary Value Death Benefit for Owners who are age 76 or older when an Annuity is issued, which may result in a lower value on the death benefit, since there will be fewer contract anniversaries before the death benefit target date is reached. See Appendix B for examples of how the Highest Anniversary Value Death Benefit is calculated. Combination 5% Roll-up and Highest Anniversary Value Death Benefit If an Annuity has one Owner, the Owner must be age 79 or less at the time the Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under an Annuity are not available if you elect the Combination 5% Roll-up and HAV Death Benefit. If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s). In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this Death Benefit. Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death Benefit The Combination 5% Roll-up and HAV Death Benefit equals the greatest of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value Death Benefit described above; and 3. 5% Roll-up described below. The calculation of the 5% Roll-up depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date the 5% Roll up is equal to: .. all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of XT6) increasing at an annual effective interest rate of 5% starting on the date that each Purchase Payment is made and ending on the Owner's date of death; MINUS .. the sum of all withdrawals, dollar for dollar up to 5% of the Death Benefit's value as of the prior contract anniversary (or Issue Date if the withdrawal is in the first contract year). Any withdrawals in excess of the 5% dollar for dollar limit are proportional. If the Owner dies on or after the Death Benefit Target Date the 5% Roll-up is equal to: .. the 5% Roll-up value as of the Death Benefit Target Date increased by total Purchase Payments (including any Credits 92 AMERICAN SKANDIA ANNUITIES PROSPECTUS applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of XT6) made after the Death Benefit Target Date; MINUS .. the sum of all withdrawals which reduce the 5% Roll-up proportionally. In the case of XT6, as indicated, the amounts calculated in Items 1, 2 and 3 above (before, on or after the Death Benefit Target Date) may be reduced by any Credits under certain circumstances. Please refer to the definitions of Death Benefit Target Date below. This Death Benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer Annuity anniversaries before the Death Benefit Target Date is reached. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit is not available if you elect any other optional Death Benefit. In the case of XT6, APEX II and ASL II, please see Appendix E for a description of the Guaranteed Minimum Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. See Appendix B for examples of how the Combination 5% Roll-up and Highest Anniversary Value Death Benefit is calculated. Key Terms Used with the Highest Anniversary Value Death Benefit and the Combination 5% Roll-up and Highest Anniversary Value Death Benefit: .. The Death Benefit Target Date for the Highest Anniversary Value Death Benefit is the contract anniversary on or after the 80/th /birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. .. The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death Benefit is the later of the contract anniversary on or after the 80/th /birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of an Annuity. .. The Highest Anniversary Value equals the highest of all previous "Anniversary Values" less proportional withdrawals since such anniversary and plus any Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of XT6) since such anniversary. .. The Anniversary Value is the Account Value as of each anniversary of the Issue Date of an Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of XT6) .. Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Anniversary Value or 5% Roll-up value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value or 5% Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($ 125,000) by 10% or $12,500. Highest Daily Value Death Benefit ("HDV") If an Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Daily Value Death Benefit is elected. If an Annuity has joint Owners, the older Owner must be age 79 or less. If there are joint Owners, death of the Owner refers to the first to die of the joint Owners. If an Annuity is owned by an entity, the Annuitant must be age 79 or less and death of the Owner refers to the death of the Annuitant. If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. The HDV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 93 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued 1. the basic Death Benefit described above (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of XT6); and 2. the HDV as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV on the Death Benefit Target Date plus the sum of all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of XT6) less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The Highest Daily Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Daily Value Death Benefit is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, Spousal Lifetime Five, the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit, or the Highest Anniversary Value Death Benefit. KEY TERMS USED WITH THE HIGHEST DAILY VALUE DEATH BENEFIT: .. The Death Benefit Target Date for the Highest Daily Value Death Benefit is the later of an Annuity anniversary on or after the 80/th /birthday of the current Owner, or the older of either the joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of an Annuity. .. The Highest Daily Value equals the highest of all previous "Daily Values" less proportional withdrawals since such date and plus any Purchase Payments (plus associated Credits in the case of XT6) since such date. .. The Daily Value is the Account Value as of the end of each Valuation Day. The Daily Value on the Issue Date is equal to your Purchase Payment (plus associated Credits applied more than twelve (12) months prior to the date of death in the case of XT6). .. Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Daily Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Daily Value ($125,000) by 10% or $12,500. Please see Appendix B to this prospectus for a hypothetical example of how the HDV Death Benefit is calculated. ANNUITIES WITH JOINT OWNERS For Annuities with joint owners, the Death Benefits are calculated as shown above except that the age of the oldest of the joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own your Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of your Annuity and continue the Annuity instead of receiving the Death Benefit. ANNUITIES OWNED BY ENTITIES For Annuities owned by an entity, the Death Benefits are calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). CAN I TERMINATE THE OPTIONAL DEATH BENEFITS? DO THE OPTIONAL DEATH BENEFITS TERMINATE UNDER OTHER CIRCUMSTANCES? You can terminate the Enhanced Beneficiary Protection Death Benefit and the Highest Anniversary Value Death Benefit at any time. The "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated once elected. The optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. WHAT ARE THE CHARGES FOR THE OPTIONAL DEATH BENEFITS? We deduct a charge equal to 0.25% per year of the average daily net assets of the Sub-accounts for each of the Highest Anniversary Value Death Benefit and the Enhanced Beneficiary Protection 94 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit and 0.50% per year of the average daily net assets of the Sub-accounts for each of the "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge for each of these benefits to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. The additional annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS WHAT IS THE ANNUITY REWARDS BENEFIT IN ASAP III, APEX II AND XT6? The Annuity Rewards Benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than an Annuity's value as of the effective date of the benefit. Under the Annuity Rewards Benefit, American Skandia guarantees that the Death Benefit will not be less than: .. your Account Value in the Sub-accounts plus the Interim Value in any Fixed Allocations as of the effective date of the benefit .. MINUS any proportional withdrawals* following the effective date of the benefit .. PLUS any additional Purchase Payments applied to your Annuity following the effective date of the benefit. The Annuity Rewards Death Benefit enhancement does not affect the calculation of the basic Death Benefit or any Optional Death Benefits available under an Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. Annuity Rewards is not available under ASL II. WHO IS ELIGIBLE FOR THE ANNUITY REWARDS BENEFIT? Owners can elect the Annuity Rewards Death Benefit enhancement when there is no longer a CDSC associated with your Annuity. However, the Account Value on the date that the Annuity Rewards benefit is effective, must be greater than the amount that would be payable to the Beneficiary under the Death Benefit (including any amounts payable under any Optional Death Benefit then in effect). The effective date must occur before annuity payments begin. There can only be one effective date for the Annuity Rewards Death Benefit enhancement. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS PAYMENT OF DEATH BENEFIT TO BENEFICIARY Except in the case of a spousal assumption as described below, in the event of your death, the Death Benefit must be distributed: .. as a lump sum amount at any time within five (5) years of the date of death; or .. as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to Death Benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." SPOUSAL BENEFICIARY -- ASSUMPTION OF ANNUITY You may name your spouse as your Beneficiary. If you and your spouse own your Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. 95 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued See the section entitled "Managing Your Annuity -- Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. QUALIFIED BENEFICIARY CONTINUATION OPTION The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. .. If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31/st /of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31/st /of the year following the year of death or December 31/st /of the year in which the deceased would have reached age 70 1/2, which ever is later. .. If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. For a Roth IRA, if death occurs before the entire interest is distributed, the Death Benefit must be distributed under the same rules applied to IRAs where death occurs before the date Minimum Distributions must begin under the Code. Upon election of this Qualified Beneficiary Continuation option: .. the Owner's Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. .. the Beneficiary will be charged at an amount equal to 1.40% daily against the average daily assets allocated to the Sub-accounts. .. the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. .. the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner, except that the Sub-accounts offered will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. .. the Fixed Allocations will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. .. no additional Purchase Payments can be applied to the Annuity. .. other optional Benefits will be those offered under the Qualified Beneficiary Continuation option at the time of election. .. the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. / / .. the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of any applicable CDSC. .. upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. .. all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Your Beneficiary will be provided with a prospectus and settlement option that will describe this option at the time he or she elects this option. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the Qualified Beneficiary Continuation option. ARE THERE ANY EXCEPTIONS TO THESE RULES FOR PAYING THE DEATH BENEFIT? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if 96 AMERICAN SKANDIA ANNUITIES PROSPECTUS the decedent was not the Owner or Annuitant as of the Issue Date (or within 60 days thereafter) and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including any optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. WHEN DO YOU DETERMINE THE DEATH BENEFIT? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to an eligible annuity payment option. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. 97 AMERICAN SKANDIA ANNUITIES PROSPECTUS Valuing Your Investment HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, your Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. With respect to ASAP III and APEX II, the Account Value includes any Loyalty Credit we apply. With respect to XT6, the Account Value includes any Credits we applied to your Purchase Payments which we are entitled to take back under certain circumstances. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is defined under "Glossary of Terms" above. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge, the Distribution Charge (if applicable), and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge, any Distribution Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. EXAMPLE Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day more than 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next Valuation Day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. 98 AMERICAN SKANDIA ANNUITIES PROSPECTUS There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Wash-ington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: .. trading on the NYSE is restricted; .. an emergency exists making redemption or valuation of securities held in the separate account impractical; or .. the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) business days after we receive all of our requirements at our office to issue an Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) business days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment (and any associated Credit with respect to XT6) while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue an Annuity within two (2) business days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments (and any associated Credit with respect to XT6) on the Valuation Day that we receive the Purchase Payment at our office with satisfactory allocation instructions. Scheduled Transactions: Scheduled transactions include transfers made in connection with dollar cost averaging, the asset allocation program, auto-rebalancing, systematic withdrawals, systematic investments, required minimum distributions, substantially equal periodic payments under Section 72(t) or 72(q) of the Code, or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a business day. In that case, the transaction will be processed and valued on the next business day, unless (with respect to required minimum distributions, substantially equal periodic payments under Section 72(t) or 72(q) of the Code, systematic withdrawals and annuity payments only), the next business day falls in the subsequent calendar year, in which case the transaction will be processed and valued on the prior business day. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Death Benefits: Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our office all supporting documentation we require for such transactions and that are satisfactory to us. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to /1//\\2 \\hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americans-kandia.prudential.com). You cannot request a transaction involving the purchase, redemption or transfer of units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. 99 AMERICAN SKANDIA ANNUITIES PROSPECTUS Valuing Your Investment continued Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Distribution Charge Applicable to ASAP III and XT6: At the end of the Period during which the Distribution Charge applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge (and the charge for any optional benefits you have elected) but not the Distribution Charge. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. Termination of Optional Benefits: Except for the Guaranteed Minimum Income Benefit, the "Combination 5% Roll-up and Highest Anniversary Value Death Benefit" and the Highest Daily Value Death Benefit, which cannot be terminated by the owner once elected, if any optional benefit terminates, we will no longer deduct the charge we apply to purchase the optional benefit. Certain optional benefits may be added after you have purchased your Annuity. On the date a charge no longer applies or a charge for an optional benefit begins to be deducted, your Annuity will become subject to a different daily asset-based charge. This change may result in the number of Units attributed to your Annuity and the value of those Units being different than it was before the change; however, the adjustment in the number of Units and Unit Price will not affect your Account Value (although the change in charges that are deducted will affect your Account Value). 100 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations The tax considerations associated with each Annuity vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan (including contracts held by a non-natural person, such as a trust acting as an agent for a natural person), or (ii) held under a tax-favored retirement plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. The discussion includes a description of certain spousal rights under the contract and under tax-qualified plans. Our administration of such spousal rights and related tax reporting accords with our understanding of the Defense of Marriage Act (which defines a "marriage" as a legal union between a man and a woman and a "spouse" as a person of the opposite sex). The information provided is not intended as tax advice. You should consult with a qualified tax advisor for complete information and advice. References to Purchase Payments below relates to your cost basis in your contract. Generally, your cost basis in a contract not associated with a tax-favored retirement plan is the amount you pay into your contract, or into annuities exchanged for your contract, on an after-tax basis less any withdrawals of such payments. Each Annuity may also be purchased as a non-qualified annuity by a 401(a) trust or custodial IRA or Roth IRA account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for 401(a) plans, IRAs or Roth IRAs, as applicable, are the responsibility of the applicable trustee or custodian. CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS) TAXES PAYABLE BY YOU We believe each Annuity is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract. Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below. It is possible that the Internal Revenue Service (IRS) would assert that some or all of the charges for the optional benefits under the contract should be treated for federal income tax purposes as a partial withdrawal from the contract. If this were the case, the charge for this benefit could be deemed a withdrawal and treated as taxable to the extent there are earnings in the contract. Additionally, for owners under age 59 1/2, the taxable income attributable to the charge for the benefit could be subject to a tax penalty. If the IRS determines that the charges for one or more benefits under the contract are taxable withdrawals, then the sole or surviving owner will be provided with a notice from us describing available alternatives regarding these benefits. If you choose to defer the Annuity Date beyond the default date for your Annuity, the IRS may not consider your contract to be an annuity under the tax law. For more information, see "How and When Do I Choose the Annuity Payment Option?". TAXES ON WITHDRAWALS AND SURRENDER If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of Purchase Payments, until all gain has been withdrawn. You will generally be taxed on any withdrawals from the contract while you are alive even if the withdrawal is paid to someone else. If you assign or pledge all or part of your contract as collateral for a loan, the part assigned generally will be treated as a withdrawal. If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on any gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce. TAXES ON ANNUITY PAYMENTS A portion of each annuity payment you receive will be treated as a partial return of your Purchase Payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your Purchase Payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract. After the full amount of your Purchase Payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your Purchase Payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 101 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS Any taxable amount you receive under your contract may be subject to a 10% tax penalty. Amounts are not subject to this tax penalty if: .. the amount is paid on or after you reach age 59 1/2 or die; .. the amount received is attributable to your becoming disabled; .. generally the amount paid or received is in the form of substantially equal payments not less frequently than annually (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.); or .. the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase). SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035 Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits certain tax-free exchanges of a life insurance, annuity or endowment contract for an annuity. If an Annuity is purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any Purchase Payments made to the original contract prior to August 14, 1982 will be treated as made to the new contract prior to that date. (See Federal Tax Status section in the Statement of Additional Information.) Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract into an immediate annuity. As of the date of this prospectus, we will accept a partial 1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% tax penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. TAXES PAYABLE BY BENEFICIARIES The Death Benefit options are subject to income tax to the extent the distribution exceeds the cost basis in the contract. The value of the Death Benefit, as determined under federal law, is also included in the owner's estate. Generally, the same tax rules described above would also apply to amounts received by your beneficiary. Choosing any option other than a lump sum Death Benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below. Tax consequences to the beneficiary vary among the Death Benefit payment options. .. Choice 1: the beneficiary is taxed on earnings in the contract. .. Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case earnings are treated as being distributed first). .. Choice 3: the beneficiary is taxed on each payment (part will be treated as earnings and part as return of premiums). Considerations for Contingent Annuitants: There may be adverse tax consequences if a Contingent Annuitant succeeds an Annuitant when an Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. Continuing the benefit of tax deferral by naming one or more Contingent Annuitants when an 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. REPORTING AND WITHHOLDING ON DISTRIBUTIONS Taxable amounts distributed from an Annuity contract are subject to federal and state income tax reporting and withholding. In general, we will withhold federal income tax from the taxable portion of such distribution based on the type of distribution. In the case of an annuity or similar periodic payment, we will withhold as if you are a married individual with 3 exemptions unless you designate a different withholding status. In the case of 102 AMERICAN SKANDIA ANNUITIES PROSPECTUS all other distributions, we will withhold at a 10% rate. You may generally elect not to have tax withheld from your payments. An election out of withholding must be made on forms that we provide. State income tax withholding rules vary and we will withhold based on the rules of your State of residence. Special tax rules apply to withholding for nonresident aliens, and we generally withhold income tax for nonresident aliens at a 30% rate. A different withholding rate may be applicable to a nonresident alien based on the terms of an existing income tax treaty between the United States and the nonresident alien's country. Please refer to the discussion below regarding withholding rules for tax favored plans (for example, an IRA). Regardless of the amount withheld by us, you are liable for payment of federal and state income tax on the taxable portion of annuity distributions. You should consult with your tax advisor regarding the payment of the correct amount of these income taxes and potential liability if you fail to pay such taxes. ANNUITY QUALIFICATION Diversification And Investor Control. In order to qualify for the tax rules applicable to annuity contracts described above, the assets underlying the Sub-accounts of an Annuity must be diversified, according to certain rules. We believe these diversification rules will be met. An additional requirement for qualification for the tax treatment described above is that we, and not you as the contract owner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. While we also believe these investor control rules will be met, 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. It is unclear whether such guidelines, if in fact promulgated, would have retroactive effect. It is also unclear what effect, if any, such guidelines may have on transfers between the investment options offered pursuant to this Prospectus. We will take any action, including modifications to your Annuity or the investment options, required to comply with such guidelines if promulgated. Please refer to the Statement of Additional information for further information on these Diversification and Investor Control issues. Required Distributions Upon Your Death. Upon your death, certain distributions must be made under the contract. The required distributions depend on whether you die before you start taking annuity payments under the contract or after you start taking annuity payments under the contract. If you die on or after the Annuity Date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before the Annuity Date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if a periodic payment option is selected by your designated beneficiary and if such payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom benefit rights under the contract pass by reason of death, and must be a natural person in order to elect a periodic payment option based on life expectancy or a period exceeding five years. If an Annuity is payable to (or for the benefit of) your surviving spouse, that portion of the contract may be continued with your spouse as the owner. Changes In Your Annuity. We reserve the right to make any changes we deem necessary to assure that your Annuity qualifies as an annuity contract for tax purposes. Any such changes will apply to all contract owners and you will be given notice to the extent feasible under the circumstances. ADDITIONAL INFORMATION You should refer to the Statement of Additional Information if: .. The contract is held by a corporation or other entity instead of by an individual or as agent for an individual. .. Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982. .. You transfer your contract to, or designate, a beneficiary who is either 37 1/2 years younger than you or a grandchild. CONTRACTS HELD BY TAX-FAVORED PLANS The following discussion covers annuity contracts held under tax-favored retirement plans. Currently, an Annuity may be purchased for use in connection with individual retirement accounts and annuities (IRAs) which are subject to Sections 408(a) and 408(b) of the Code and Roth IRAs under Section 408A of the Code. In addition, each Annuity may be purchased for use in connection with a corporate Pension or Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities or TDAs), and Section 457 plans (subject 103 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued to 457 of the Code). This description assumes that you have satisfied the requirements for eligibility for these products. Each Annuity may also be purchased as a non-qualified annuity by a 401(a) trust or custodial IRA or Roth IRA account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for 401(a) plans, IRAs or Roth IRAs, as applicable, are the responsibility of the applicable trustee or custodian. You should be aware that tax favored plans such as IRAs generally provide income tax deferral regardless of whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax benefits (such as income tax deferral and income tax free transfers). TYPES OF TAX-FAVORED PLANS IRAs. If you buy an Annuity for use as an IRA, we will provide you a copy of the prospectus and contract. The "IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars, and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free-look" after making an initial contribution to the contract. During this time, you can cancel the Annuity by notifying us in writing, and we will refund all of the Purchase Payments under the Annuity (or, if provided by applicable state law, the amount credited under the Annuity, if greater), less any applicable federal and state income tax withholding. Contributions Limits/Rollovers. Because of the way each Annuity is designed, you may purchase an Annuity for an IRA in connection with a "rollover" of amounts from a qualified retirement plan or as a transfer from another IRA, as a current contribution in the case of ASAP III, or if you are age 50 or older by making a single contribution consisting of your IRA contributions and catch-up contributions attributable to the prior year and the current year from January 1 to April 15 of the current year in the case of XT6 and APEX II. In 2006 the contribution limit is $4,000; increasing to $5,000 in 2008. After 2008 the contribution amount will be indexed for inflation. The tax law also provides for a catch-up provision for individuals who are age 50 and above, permitting them to contribute an additional $1,000 each year. The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy an Annuity, you can make regular IRA contributions under the Annuity (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not retain possible favorable tax treatment if you subsequently "roll over" the contract funds originally derived from a qualified retirement plan or TDA into another Section 401(a) plan or TDA. Required Provisions. Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions: .. You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce); .. Your rights as owner are non-forfeitable; .. You cannot sell, assign or pledge the contract; .. The annual contribution you pay cannot be greater than the maximum amount allowed by law, including catch-up contributions if applicable (which does not include any rollover amounts); .. The date on which required minimum distributions must begin cannot be later than April 1st of the calendar year after the calendar year you turn age 70 1/2; and .. Death and annuity payments must meet "minimum distribution requirements" described below. Usually, the full amount of any distribution from an IRA (including a distribution from this contract) which is not a rollover is taxable. As taxable income, these distributions are subject to the general tax withholding rules described earlier. In addition to this normal tax liability, you may also be liable for the following, depending on your actions: .. A 10% "early distribution penalty" described below; .. Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or .. Failure to take a minimum distribution also described below. SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences: .. If you participate in a SEP, you generally do not include in income any employer contributions made to the SEP on your behalf up to the lesser of (a) $44,000 in 2006 or (b) 25% of your taxable compensation paid by the contributing employer 104 AMERICAN SKANDIA ANNUITIES PROSPECTUS (not including the employer's SEP contribution as "compensation" for these purposes). However, for these purposes, compensation in excess of certain limits established by the IRS will not be considered. In 2006, this limit is $220,000; .. SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and .. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997 may permit salary deferrals up to $15,000 in 2006 with the employer making these contributions to the SEP. However, no new "salary reduction" or "SARSEPs" can be established after 1996. Individuals participating in a SARSEP who are age 50 or above by the end of the year will be permitted to contribute an additional $5,000 in 2006. Thereafter, the amount is indexed for inflation. These Annuities are not available for SARSEPs. You will also be provided the same information, and have the same "free-look" period, as you would have if you purchased the contract for a standard IRA. ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars and other Roth IRA information. Like standard IRAs, income within a Roth IRA accumulates tax-free, and contributions are subject to specific limits. Roth IRAs have, however, the following differences: .. Contributions to a Roth IRA cannot be deducted from your gross income; .. "Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements: (1) the distribution must be made (a) after the owner of the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's disability; or (d) for a qualified first time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and earnings will be taxed generally in the same manner as distributions from a traditional IRA. .. If eligible (including meeting income limitations and earnings requirements), you may make contributions to a Roth IRA after attaining age 70 1/2, and distributions are not required to begin upon attaining such age or at any time thereafter. Because of the way each Annuity is designed, if you meet certain income limitations you may purchase an Annuity for a Roth IRA, as a current contribution in the case of ASAP III, or if you are age 50 or older by making a single contribution consisting of your Roth IRA contributions and catch-up contributions attributable to the prior year and the current year from January 1 to April 15 of the current year in the case of XT6 and APEX II. The Code permits persons who meet certain income limitations (generally, adjusted gross income under $100,000), who are not married filing a separate return and who receive certain qualifying distributions from such non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of all or any part of the amount of such distribution to a Roth IRA which they establish. This conversion triggers current taxation (but is not subject to a 10% early distribution penalty). Once an Annuity has been purchased, regular Roth IRA contributions will be accepted to the extent permitted by law. As of January 1, 2006, an individual receiving an eligible rollover distribution from a designated Roth account under an employer plan may roll over the distribution to a Roth IRA even if the individual is not eligible to make regular or conversion contributions to a Roth IRA. If you are considering rolling over funds from your Roth account under an employer plan, please contact your Financial Professional prior to purchase to confirm whether such rollovers are being accepted. TDAs. You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a public educational organization, and you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $15,000 in 2006. Individuals participating in a TDA who are age 50 or above by the end of the year will be permitted to contribute an additional $5,000 in 2006. After 2006, the amount is indexed for inflation. Further, you may roll over TDA amounts to another TDA or an IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP and a 457 government plan. A contract may only qualify as a TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of: .. Your attainment of age 59 1/2; .. Your severance of employment; .. Your death; .. Your total and permanent disability; or 105 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued .. Hardship (under limited circumstances, and only related to salary deferrals, not including earnings attributable to these amounts). In any event, you must begin receiving distributions from your TDA by April 1/st /of the calendar year after the calendar year you turn age 70 1/2 or retire, whichever is later. These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a mutual fund "custodial account" described under Code Section 403(b)(7). Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans. MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that generally payments must start by April 1 of the year after the year you reach age 70/1//\\2 \\and must be made for each year thereafter. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount. More information on the mechanics of this calculation is available on request. Please contact us at a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% tax penalty on the amount of any minimum distribution not made in a timely manner. Effective in 2006, in accordance with recent changes in laws and regulations, required minimum distributions will be calculated based on the sum of the contract value and the actuarial value of any additional death benefits and benefits from optional riders that you have purchased under the contract. As a result, the required minimum distributions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution of amounts under the Annuity and an increased amount of taxable income distributed to the Annuity owner, and a reduction of death benefits and the benefits of any optional riders. You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for an Annuity without either beginning annuity payments or surrendering the Annuity. We will distribute to you this minimum distribution amount, less any other partial withdrawals that you made during the year. Although the IRS rules determine the required amount to be distributed from your IRA each year, certain payment alternatives are still available to you. If you own more than one IRA, you can choose to satisfy your minimum distribution requirement for each of your IRAs by withdrawing that amount from any of your IRAs. If you inherit more than one Roth IRA from the same owner, similar rules apply. PENALTY FOR EARLY WITHDRAWALS You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2. Amounts are not subject to this tax penalty if: .. the amount is paid on or after you reach age 59 1/2 or die; .. the amount received is attributable to your becoming disabled; or .. generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59 1/2\\ \\or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.) Other exceptions to this tax may apply. You should consult your tax advisor for further details. WITHHOLDING Unless a distribution is an eligible rollover distribution that is "directly" rolled over into another qualified plan, IRA (including the IRA variations described above), SEP, 457 government plan or TDA, we will withhold federal income tax at the rate of 20%. This 20% withholding does not apply to distributions from IRAs and Roth IRAs. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis: .. For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and 106 AMERICAN SKANDIA ANNUITIES PROSPECTUS .. For all other distributions, we will withhold at a 10% rate. We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes. There may be additional state income tax withholding requirements. ERISA DISCLOSURE/REQUIREMENTS ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit from any party dealing with the plan, as a result of the sale of the contract. Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract. Information about any applicable fees, charges, discounts, penalties or adjustments may be found in the applicable sections of this Prospectus. Information about sales representatives and commissions may be found in the sections of this Prospectus addressing distribution of the Annuities. Please consult your tax advisor if you have any additional questions. SPOUSAL CONSENT RULES FOR RETIREMENT PLANS --QUALIFIED CONTRACTS If you are married at the time your payments commence, you may be required by federal law to choose an income option that provides survivor annuity income to your spouse, unless your spouse waives that right. Similarly, if you are married at the time of your death, federal law may require all or a portion of the Death Benefit to be paid to your spouse, even if you designated someone else as your beneficiary. A brief explanation of the applicable rules follows. For more information, consult the terms of your retirement arrangement. Defined Benefit Plans and Money Purchase Pension Plans. If you are married at the time your payments commence, federal law requires that benefits be paid to you in the form of a "qualified joint and survivor annuity" (QJSA), unless you and your spouse waive that right, in writing. Generally, this means that you will receive a reduced payment during your life and, upon your death, your spouse will receive at least one-half of what you were receiving for life. You may elect to receive another income option if your spouse consents to the election and waives his or her right to receive the QJSA. If your spouse consents to the alternative form of payment, your spouse may not receive any benefits from the plan upon your death. Federal law also requires that the plan pay a Death Benefit to your spouse if you are married and die before you begin receiving your benefit. This benefit must be available in the form of an annuity for your spouse's lifetime and is called a "qualified pre-retirement survivor annuity" (QPSA). If the plan pays Death Benefits to other beneficiaries, you may elect to have a beneficiary other than your spouse receive the Death Benefit, but only if your spouse consents to the election and waives his or her right to receive the QPSA. If your spouse consents to the alternate beneficiary, your spouse will receive no benefits from the plan upon your death. Any QPSA waiver prior to your attaining age 35 will become null and void on the first day of the calendar year in which you attain age 35, if still employed. Defined Contribution Plans (including 401(k) Plans and ERISA 403(b) Annuities). Spousal consent to a distribution is generally not required. Upon your death, your spouse will receive the entire Death Benefit, even if you designated someone else as your beneficiary, unless your spouse consents in writing to waive this right. Also, if you are married and elect an annuity as a periodic income option, federal law requires that you receive a QJSA (as described above), unless you and your spouse consent to waive this right. IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a distribution usually is not required. Upon your death, any Death Benefit will be paid to your designated beneficiary. ADDITIONAL INFORMATION For additional information about federal tax law requirements applicable to IRAs and Roth IRAs, see the "IRA Disclosure Statement" or "Roth IRA Disclosure Statement", as applicable. 107 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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 www.americanskandia.prudential.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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, Systematic Withdrawals (including 72(t) or 72(q) payments and required minimum distributions), electronic funds transfer, Dollar Cost Averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation, a Prudential Financial Company, ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"), whose ultimate parent is Prudential Financial, Inc. American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia offers a wide array of annuities, including (1) deferred and immediate variable annuities that are registered with the SEC, including fixed interest rate annuities that are offered as a companion to certain of our variable annuities and are registered because of their market value adjustment feature and (2) fixed annuities that are not registered with the SEC. In addition, American Skandia has in force a relatively small block of variable life insurance policies, but it no longer actively sells such policies. Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, Prudential Financial exercises significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the Sub-accounts are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". 108 AMERICAN SKANDIA ANNUITIES PROSPECTUS Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge, Distribution Charge (when applicable) and the charges for any optional benefits that are offered under the Annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B was consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which was subsequently renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B has multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B had no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuities as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under their Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. SEPARATE ACCOUNT D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We may employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. 109 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. VOTING RIGHTS We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. This voting procedure is sometimes referred to as "mirror voting" because, as indicated in the immediately preceding sentence, we mirror the votes that are actually cast, rather than decide on our own how to vote. In addition, because all the shares of a given mutual fund held within our separate account are legally owned by us, we intend to vote all of such shares when that underlying fund seeks a vote of its shareholders. As such, all such shares will be counted towards whether there is a quorum at the underlying fund's shareholder meeting and towards the ultimate outcome of the vote. Thus, under "mirror voting," it is possible that the votes of a small percentage of contractholders who actually vote will determine the ultimate outcome. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its co-investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC, subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI, Prudential Investments LLC and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. We may add new Sub-accounts that invest in a series of underlying funds other than the Trust that is managed by an affiliate. Such series of funds may have a similar order from the SEC. You also should review the prospectuses for the other underlying funds in which various Sub-accounts invest as to whether they have obtained similar orders from the SEC. MATERIAL CONFLICTS It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. SERVICE FEES PAYABLE TO AMERICAN SKANDIA American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of the underlying Portfolios. Under the terms of these agreements, American Skandia may provide administrative and support services to the Portfolios for which it receives a fee of up to 0.75% (currently) of the average assets allocated to the Portfolios under each Annuity from the investment adviser, distributor and/or the fund. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. 110 AMERICAN SKANDIA ANNUITIES PROSPECTUS In addition, the investment adviser, sub-advisor or distributor of the underlying Portfolios may also compensate us by providing reimbursement or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with each Annuity. These services may include, but are not limited to: co-sponsoring various meetings and seminars attended by broker-dealer firms' registered representatives and creating marketing material discussing each Annuity and the available options. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and co-distributor of American Skandia Trust. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Each Annuity is offered on a continuous basis. ASM enters into distribution agreements with broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuities but are exempt from registration ("firms"). Applications for each Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuities directly to potential purchasers. Commissions are paid to firms on sales of the Annuities according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of his or her firm. Commissions are generally based on a percentage of Purchase Payments made, up to a maximum of 7.0% for ASAP III, 6.0% for XT6, 5.5% for APEX II and 2.0% for ASL II. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of the Account Value. We may also provide compensation to the distributing firm for providing ongoing service to you in relation to your Annuity. Commissions and other compensation paid in relation to your Annuity do not result in any additional charge to you or to the Separate Account. In addition, in an effort to promote the sale of our products (which may include the placement of American Skandia and/or the Annuities on a preferred or recommended company or product list and/or access to the firm's registered representatives), we or ASM may enter into compensation arrangements with certain broker-dealer firms with respect to certain or all registered representatives of such firms under which such firms may receive separate compensation or reimbursement for, among other things, training of sales personnel and/or marketing and/or administrative services and/or other services they provide. These services may include, but are not limited to: educating customers of the firm on the Annuitys' features; conducting due diligence and analysis, providing office access, operations and systems support; holding seminars intended to educate the firm's registered representatives and make them more knowledgeable about the Annuities; providing a dedicated marketing coordinator; providing priority sales desk support; and providing expedited marketing compliance approval. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or non-cash compensation. These arrangements may not be offered to all firms and the terms of such arrangements may differ between firms. A list of the firms to whom American Skandia pays an amount of greater than $10,000 under these arrangements is provided in the Statement of Additional Information, which is available upon request. You should note that firms and individual registered representatives and branch managers within some firms participating in one of these compensation arrangements might receive greater compensation for selling the Annuities than for selling a different annuity that is not eligible for these compensation arrangements. While compensation is generally taken into account as an expense in considering the charges applicable to an annuity product, any such compensation will be paid by us or ASM and will not result in any additional charge to you. Overall compensation paid to the distributing firm does not exceed, based on actuarial assumptions, 8.5% of the total Purchase Payments made. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. On July 1, 2003, Prudential Financial combined its retail securities brokerage and clearing operations with those of Wachovia Corporation ("Wachovia") and formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a joint venture headquartered in Richmond, Virginia. Prudential Financial has a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. 111 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued Wachovia and Wachovia Securities are key distribution partners for certain products of Prudential Financial affiliates, including mutual funds and individual annuities that are distributed through their financial advisors, bank channel and independent channel. In addition, Prudential Financial is a service provider to the managed account platform and certain wrap-fee programs offered by Wachovia Securities. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by an independent registered public accounting firm. American Skandia's annual report for the year ended December 31, 2005, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia -- Variable Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling (202) 551-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. FINANCIAL STATEMENTS The financial statements of the separate account and American Skandia Life Assurance Corporation are included in the Statement of Additional Information. HOW TO CONTACT US You can contact us by: .. calling our Customer Service Team at 1-800-752-6342 during our normal business hours, Monday through Friday, or Skandia's telephone automated response system at 1-800-766-4530. .. writing to us via regular mail at American Skandia -- Variable Annuities, P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American Skandia -- Variable Annuities, 2101 Welsh Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. .. sending an email to customerservice@prudential.com or visiting our Internet Website at www.americanskandia.prudential.com. .. accessing information about your Annuity through our Internet Website at www.americanskandia.prudential.com. You can obtain account information by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or your Financial Professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. Please note that unless you tell us otherwise, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to 112 AMERICAN SKANDIA ANNUITIES PROSPECTUS unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS American Skandia is subject to legal and regulatory actions in the ordinary course of its business, including class action lawsuits. American Skandia's pending legal and regulatory actions include proceedings specific to us and proceedings generally applicable to business practices in the industry in which we operate. We are subject to class action lawsuits and other litigation alleging, among other things, that we made improper or inadequate disclosures in connection with the sale of annuity products or charged excessive or impermissible fees on these products, recommended unsuitable products to customers, mishandled customer accounts or breached fiduciary duties to customers. We are also subject to litigation arising out of our general business activities, such as our investments, contracts, leases and labor and employment relationships, including claims of discrimination and harassment. In some of our pending legal and regulatory actions, parties are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The following is a summary of certain pending proceedings. American Skandia is in discussions with various state insurance departments concerning a remediation program to correct errors in the administration of approximately 11,000 annuity contracts issued by us. The owners of these contracts did not receive notification that the contracts were approaching or past their designated annuitization date or default annuitization date (both dates referred to as the "contractual annuity date") and the contracts were not annuitized at their contractual annuity dates. Some of these contracts also were affected by data integrity errors resulting in incorrect contractual annuity dates. The lack of notice and the data integrity errors, as reflected on the annuities administrative system, all occurred before the acquisition of American Skandia by Prudential Financial, Inc. Certain state insurance departments have requested modifications to the remediation program that American Skandia anticipates will impact the overall cost of the program. The remediation and administrative costs of the remediation program would be subject to the indemnification provisions of the agreement pursuant to which Prudential Financial, Inc. acquired American Skandia (the "Acquisition Agreement"). With the approval of Skandia Insurance Company Ltd. (publ) ("Skandia"), an offer was made to the authorities investigating American Skandia and certain affiliated companies, the SEC and New York Attorney General, to settle the matters relating to market timing in variable annuities by paying restitution and a civil penalty of $95 million in the aggregate. While not assured, American Skandia believes these discussions are likely to lead to settlements with these authorities. Any regulatory settlement involving American Skandia or any affiliates of American Skandia that Prudential Financial, Inc. acquired from Skandia would be subject to the indemnification provisions of the Acquisition Agreement. If achieved, settlement of the matters could involve continuing monitoring, changes to and/or supervision of business practices, findings that may adversely affect existing or cause additional litigation, adverse publicity and other adverse impacts to American Skandia's business. American Skandia's litigation is subject to many uncertainties, and given its complexity and scope, its outcome cannot be predicted. It is possible that the results of operations or the cash flow of American Skandia in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flow for such period. Management believes, however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves, should not have a material adverse effect on American Skandia's financial position. It should be noted that the judgments, settlements and expenses associated with many of these lawsuits, administrative and regulatory matters, and contingencies, including the claims described above, may, in whole or in part, after satisfaction of certain retention requirements, fall within Skandia's indemnification obligations to Prudential Financial, Inc. and its subsidiaries under the terms of the Acquisition Agreement. Those obligations of Skandia provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits and other claims against American Skandia ("matters"), 113 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued and apply only to matters, or groups of related matters, for which the costs and expenses exceed $25,000 individually. Those obligations only apply to such costs and expenses that exceed $10 million in the aggregate, subject to reduction for insurance proceeds, certain accruals and any realized tax benefit applicable to such amounts, and those obligations do not apply to the extent that such aggregate exceeds $1 billion. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia .. American Skandia Life Assurance Corporation .. American Skandia Life Assurance Corporation Variable Account B .. American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor -- American Skandia Marketing, Incorporated Payments Made to Promote Sale of our Products How the Unit Price is Determined Additional Information on Fixed Allocations .. How We Calculate the Market Value Adjustment General Information .. Voting Rights .. Modification .. Deferral of Transactions .. Misstatement of Age or Sex .. Ending the Offer Annuitization Experts Legal Experts Financial Statements 114 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B Separate Account B consists of multiple Sub-accounts that are available as investment options for the American Skandia Annuities. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following tables show for each Annuity: (a) the historical Unit Price, corresponding to the Annuity features bearing the highest and lowest combinations of asset-based charges*, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus**; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. In the tables, "BOP" refers to Beginning of Period and "EOP" refers to End of Period. The period for each year begins on January 1 and ends on December 31. Since November 18, 2002, we have been determining, on a daily basis, multiple Unit Prices for each Sub-account of Separate Account B. We compute multiple Unit Prices because several of our variable annuities invest in the same Sub-accounts, and these annuities deduct varying charges that correspond to each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charges for each optional benefit. Where an asset-based charge corresponding to a particular Sub-account within a new annuity product is identical to that in the same Sub-account within an existing annuity, the Unit Price for the new annuity will be identical to that of the existing annuity. In such cases, we will for reference purposes depict, in the condensed financial information for the new annuity, Unit Prices of the existing annuity. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31/st /of the applicable year. When a Unit Price was first calculated for a particular Sub-account, we set the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2006. * Note: While a unit price is reflected for the maximum combination of asset based charges for each Sub-account, not all Sub-accounts are available if you elect certain optional benefits. ** The remaining unit values appear in the Statement of Additional Information, which you may obtain free of charge by sending in the request form at the end of the Prospectus or contacting us at 1-800-752-6342. A-115 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------- AST Aggressive Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.00 -- -- -- -- -- Number of Units 171,403 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.99 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------- AST Capital Growth Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.01 -- -- -- -- -- Number of Units 403,183 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.00 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------- AST Balanced Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.02 -- -- -- -- -- Number of Units 405,782 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.01 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------- AST Conservative Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.03 -- -- -- -- -- Number of Units 53,897 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------- AST Preservation Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.04 -- -- -- -- -- Number of Units 215,279 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.03 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------
A-116 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $8.24 $7.13 $5.53 $6.86 $8.99 EOP Unit Value 9.04 8.24 7.13 5.53 6.86 $8.99 Number of Units 1,051,557 553,542 362,254 153,652 136,976 33,897 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.57 -- -- -- -- -- Number of Units -- -- -- -- -- -- - --------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $16.42 $14.32 $10.35 $14.1 $18.68 EOP Unit Value 18.90 16.42 14.32 10.35 14.1 $18.68 Number of Units 2,113,594 1,953,908 1,166,396 7,064 5,277 6,782 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.20 -- -- -- -- -- Number of Units -- -- -- -- -- -- - --------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $7.01 $5.86 $4.43 $5.41 $8.08 EOP Unit Value 7.87 7.01 5.86 4.43 5.41 $8.08 Number of Units 402,497 233,045 91,736 32,967 29,954 20,311 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.62 -- -- -- -- -- Number of Units -- -- -- -- -- -- - --------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits BOP Unit Value $10.98 $9.40 $7.48 $8.64 $9.72 EOP Unit Value 11.67 10.98 9.40 7.48 8.64 $9.72 Number of Units 218,705 213,485 123,219 46,925 49,536 23,151 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.39 -- -- -- -- -- Number of Units -- -- -- -- -- -- - --------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $15.97 $17.38 $12.12 $18.7 $20.25 EOP Unit Value 16.00 15.97 17.38 12.12 18.7 $20.25 Number of Units 126,824 107,136 145,364 6,331 2,439 978 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.35 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ---------------------------------------------------------------------------------
A-117 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $7.41 $6.86 $4.71 $6.48 $9.17 EOP Unit Value 7.35 7.41 6.86 4.71 6.48 $9.17 Number of Units 267,925 293,384 258,089 44,611 41,602 35,743 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $10.12 $8.33 $4.98 $7.12 $9.08 EOP Unit Value 10.94 10.12 8.33 4.98 7.12 $9.08 Number of Units 1,386,930 1,169,995 859,909 25,040 10,912 243 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.87 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $16.64 $14.47 $10.79 $12.06 $11.41 EOP Unit Value 17.52 16.64 14.47 10.79 12.06 $11.41 Number of Units 1,484,712 1,293,786 962,965 66,744 33,608 15,339 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.56 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $13.13 $10.89 $7.69 -- -- EOP Unit Value 13.12 13.13 10.89 $7.69 -- -- Number of Units 187,206 138,078 131,066 124 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.94 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $4.44 $3.87 $2.98 $4.15 $7.03 EOP Unit Value 4.60 4.44 3.87 2.98 4.15 $7.03 Number of Units 2,666,933 2,232,502 1,535,565 28,812 17,882 2,473 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.49 -- -- -- -- -- Number of Units -- -- -- -- -- -- - -------------------------------------------------------------------------------
A-118 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------------------ AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits BOP Unit Value $7.14 $6.23 $4.83 $7.11 $9.71 EOP Unit Value 8.00 7.14 6.23 4.83 7.11 $9.71 Number of Units 771,461 555,160 371,267 56,712 51,711 36,882 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.25 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------------------ AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $16.76 $13.82 $10.26 $11.62 $12.13 EOP Unit Value 18.55 16.76 13.82 10.26 11.62 $12.13 Number of Units 1,303,740 1,116,503 781,348 69,657 56,219 16,574 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.80 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------------------ AST Alger All-Cap Growth (2000) (merged into AST Neuberger Berman Mid-Cap Growth) With No Optional Benefits BOP Unit Value $6.49 $6.06 $4.53 $7.14 $8.68 EOP Unit Value 7.48 6.49 6.06 4.53 7.14 $8.68 Number of Units -- 214,092 200,264 61,001 56,649 30,915 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.63 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------------------ AST Mid-Cap Value (2000) (formerly AST Gabelli All-Cap Value) With No Optional Benefits BOP Unit Value $11.63 $10.21 $7.61 $9.72 $10.07 EOP Unit Value 12.11 11.63 10.21 7.61 9.72 $10.07 Number of Units 192,419 256,401 140,873 38,982 26,857 12,895 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.27 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------------------ AST T. Rowe Price Natural Resources (1995) With No Optional Benefits BOP Unit Value $17.81 $13.75 $10.42 $11.18 $11.24 EOP Unit Value 23.11 17.81 13.75 10.42 11.18 $11.24 Number of Units 254,041 192,336 75,013 4,994 1,879 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.65 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------------------
A-119 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 -------------------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth (formerly AST AllianceBernstein Large-Cap Growth) With No Optional Benefits BOP Unit Value $6.19 $5.93 $4.86 $7.12 $8.46 EOP Unit Value 7.12 6.19 5.93 4.86 7.12 $8.46 Number of Units 512,012 326,194 263,698 106,056 106,762 97,356 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $12.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $7.04 $6.44 $5.31 $7.48 $9.68 EOP Unit Value 7.39 7.04 6.44 5.31 7.48 $9.68 Number of Units 1,025,239 791,823 893,170 112,701 47,656 3,089 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.67 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $9.67 $8.46 $6.50 $7.8 $10.09 EOP Unit Value 10.20 9.67 8.46 6.5 7.8 $10.09 Number of Units 7,048,021 5,717,404 4,075,719 228,033 182,904 114,992 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.82 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits BOP Unit Value $4.68 $4.57 $3.69 $5.33 $7.9 EOP Unit Value 4.77 4.68 4.57 3.69 5.33 $7.9 Number of Units 657,833 733,920 604,491 405,437 404,404 235,747 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.67 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits BOP Unit Value $11.18 $9.58 $7.67 $9.17 $9.83 EOP Unit Value 12.07 11.18 9.58 7.67 9.17 $9.83 Number of Units 242,789 191,637 85,554 7,126 1,696 442 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.63 -- -- -- -- -- Number of Units -- -- -- -- -- -- --------------------------------------------------------------------------------------
A-120 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------------- AST AllianceBernstein Growth + Value (2001) (merged into AST AllianceBernstein Managed Index 500) With No Optional Benefits BOP Unit Value $9.66 $8.89 $7.14 $9.64 -- EOP Unit Value 10.72 9.66 8.89 7.14 $9.64 -- Number of Units -- 194,363 137,293 37,810 -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.24 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.28 $10.91 $8.61 $10.05 -- EOP Unit Value 12.79 12.28 10.91 8.61 $10.05 -- Number of Units 635,232 603,508 453,569 82,054 18,453 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------- AST Cohen & Steers Real Estate (1998) With No Optional Benefits BOP Unit Value $22.03 $16.17 $11.91 $11.75 $11.57 EOP Unit Value 24.98 22.03 16.17 11.91 11.75 $11.57 Number of Units 223,264 281,181 149,582 25,464 16,487 16,557 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.92 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------- AST AllianceBernstein Managed Index 500 (1998) With No Optional Benefits BOP Unit Value $8.99 $8.28 $6.59 $8.41 $9.46 EOP Unit Value 9.20 8.99 8.28 6.59 8.41 $9.46 Number of Units 851,019 642,882 554,156 90,506 39,414 9,941 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.32 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits BOP Unit Value $9.48 $8.52 $6.70 $8.47 $9.36 EOP Unit Value 9.79 9.48 8.52 6.7 8.47 $9.36 Number of Units 626,417 613,910 339,653 124,168 113,372 70,887 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.25 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------------
A-121 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------- AST AllianceBernstein Growth & Income With No Optional Benefits BOP Unit Value $11.24 $10.25 $7.84 $10.35 $10.53 EOP Unit Value 11.63 11.24 10.25 7.84 10.35 $10.53 Number of Units 5,200,126 4,119,501 3,076,626 142,152 205,232 34,439 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.18 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $10.25 $8.99 $7.59 $9.31 $10.32 EOP Unit Value 10.77 10.25 8.99 7.59 9.31 $10.32 Number of Units 694,885 417,314 204,589 44,419 44,212 8,596 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.47 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST Global Allocation (1993) With No Optional Benefits BOP Unit Value $9.55 $8.71 $7.38 $8.84 $10.14 EOP Unit Value 10.09 9.55 8.71 7.38 8.84 $10.14 Number of Units 80,896 78,619 61,801 34,451 38,208 30,678 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.54 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits BOP Unit Value $10.56 $9.81 $8.36 $9.38 $9.87 EOP Unit Value 10.91 10.56 9.81 8.36 9.38 $9.87 Number of Units 173,191 146,721 115,095 5,490 4,905 1,725 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits BOP Unit Value $11.39 $10.37 $8.47 $9.52 $10.12 EOP Unit Value 11.77 11.39 10.37 8.47 9.52 $10.12 Number of Units 558,395 357,085 222,150 13,799 13,152 2,412 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.27 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------------
A-122 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $14.73 $13.73 $12.32 $10.84 $10.7 EOP Unit Value 13.89 14.73 13.73 12.32 10.84 $10.7 Number of Units 938,585 657,913 289,862 36,987 16,390 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.37 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST High Yield (formerly AST Goldman Sachs High Yield Bond) With No Optional Benefits BOP Unit Value $12.06 $10.99 $9.16 $9.27 $9.37 EOP Unit Value 12.04 12.06 10.99 9.16 9.27 $9.37 Number of Units 873,440 957,756 906,947 73,614 45,297 12,929 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.78 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.71 $11.98 $10.22 $10.3 $10.13 EOP Unit Value 12.69 12.71 11.98 10.22 10.3 $10.13 Number of Units 1,294,706 1,012,739 814,135 43,077 16,628 425 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.87 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $13.72 $13.23 $12.72 $11.8 $10.97 EOP Unit Value 13.88 13.72 13.23 12.72 11.8 $10.97 Number of Units 1,924,370 3,074,732 2,301,863 362,294 275,317 37,918 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.07 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $12.18 $12.08 $10.09 $11.29 $10.59 EOP Unit Value 12.22 12.18 12.08 10.09 11.29 $10.59 Number of Units 2,996,257 2,189,975 956,856 38,260 112,948 1,940 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.98 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------------
A-123 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $10.46 $10.51 $10.57 $10.57 $10.32 EOP Unit Value 10.62 10.46 10.51 10.57 10.57 $10.32 Number of Units 3,179,376 1,663,940 1,245,396 403,604 179,509 29,567 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- SP William Blair International Growth With No Optional Benefits BOP Unit Value $10.53 -- -- -- -- EOP Unit Value 12.10 10.53 -- -- -- -- Number of Units 32,119 18,568 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.21 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits BOP Unit Value $12.52 $10.59 $6.71 $7.53 $8.19 EOP Unit Value 16.26 12.52 10.59 6.71 7.53 $8.19 Number of Units 351,335 264,541 122,136 6,530 6,555 3,293 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.97 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- Wells Fargo Advantage VT Equity Income (1999) (formerly WFVT Advantage Equity Income) With No Optional Benefits BOP Unit Value $17.32 $15.79 $12.67 $15.89 $17.01 EOP Unit Value 18.02 17.32 15.79 12.67 15.89 $17.01 Number of Units 23,574 19,612 10,586 1,063 1,992 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.12 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Dynamics (1999) With No Optional Benefits BOP Unit Value $6.96 $6.22 $4.57 $6.8 $9.99 EOP Unit Value 7.61 6.96 6.22 4.57 6.8 $9.99 Number of Units 135,001 188,184 137,600 18,808 15,825 22,264 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.83 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------------
A-124 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits BOP Unit Value $3.32 $3.21 $2.24 $4.27 $7.98 EOP Unit Value 3.35 3.32 3.21 2.24 4.27 $7.98 Number of Units 77,941 78,567 42,720 30,448 35,767 25,984 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.64 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- AIM V.I. -- Global Health Care (1999) (formerly AIM V.I. -- Health Sciences) With No Optional Benefits BOP Unit Value $11.34 $10.68 $8.46 $11.35 $13.14 EOP Unit Value 12.12 11.34 10.68 8.46 11.35 $13.14 Number of Units 106,295 92,506 59,116 19,405 27,104 32,969 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.08 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits BOP Unit Value $12.72 $11.85 $9.26 $11.02 $12.38 EOP Unit Value 13.30 12.72 11.85 9.26 11.02 $12.38 Number of Units 48,007 44,091 48,538 7,204 8,536 9,786 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.66 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $12.31 $10.46 -- -- -- EOP Unit Value 14.10 12.31 $10.46 -- -- -- Number of Units 130,750 62,400 24,847 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.92 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- Evergreen VA -- Special Equity (1999) (merged into Evergreen VA Growth) With No Optional Benefits BOP Unit Value $9.57 $9.16 $6.10 $8.49 $9.35 EOP Unit Value 8.53 9.57 9.16 6.1 8.49 $9.35 Number of Units -- 92,559 69,344 5,427 5,085 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.26 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------
A-125 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $9.75 $9.21 -- $9.04 -- EOP Unit Value 10.00 9.75 $9.21 -- $9.04 -- Number of Units 18,356 26,849 15,743 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.53 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- Evergreen VA Growth Fund With No Optional Benefits BOP Unit Value -- EOP Unit Value $11.47 -- -- -- -- -- Number of Units 64,775 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.36 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits BOP Unit Value $7.90 $7.00 $5.11 $6.97 $9.3 EOP Unit Value 8.43 7.90 7.00 5.11 6.97 $9.3 Number of Units 76,381 201,444 75,543 2,539 7,317 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.45 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits BOP Unit Value $12.43 $12.66 -- -- -- EOP Unit Value 14.67 12.43 $12.66 -- -- -- Number of Units 83,233 63,254 47,272 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.13 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits BOP Unit Value $9.65 $9.09 -- -- -- EOP Unit Value 13.51 9.65 $9.09 -- -- -- Number of Units 165,707 87,251 28,579 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $13.42 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------
A-126 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------ ProFund VP -- Banks (2002) With No Optional Benefits BOP Unit Value $12.11 $10.97 -- -- -- EOP Unit Value 11.94 12.11 $10.97 -- -- -- Number of Units 44,665 12,480 8,886 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.13 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Basic Materials (2002) With No Optional Benefits BOP Unit Value $12.00 $11.02 -- -- -- EOP Unit Value 12.13 12.00 $11.02 -- -- -- Number of Units 53,592 42,597 53,759 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.51 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Biotechnology (2001) With No Optional Benefits BOP Unit Value $7.73 $7.14 $5.17 $8.38 -- EOP Unit Value 9.11 7.73 7.14 5.17 $8.38 -- Number of Units 73,804 32,726 20,329 460 3,279 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $13.53 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Consumer Services (2002) With No Optional Benefits BOP Unit Value $9.67 $9.10 -- -- -- EOP Unit Value 9.10 9.67 $9.10 -- -- -- Number of Units 3,866 20,288 13,935 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.70 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Consumer Goods (2002) With No Optional Benefits BOP Unit Value $10.47 $9.71 -- -- -- EOP Unit Value 10.31 10.47 $9.71 -- -- -- Number of Units 6,876 7,578 3,821 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.76 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------
A-127 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits BOP Unit Value $11.62 $9.10 -- $9.2 -- EOP Unit Value 15.07 11.62 $9.10 -- $9.2 -- Number of Units 278,771 186,654 50,155 -- -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.96 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Financials (2001) With No Optional Benefits BOP Unit Value $10.77 $9.88 $7.76 $9.23 -- EOP Unit Value 11.06 10.77 9.88 7.76 $9.23 -- Number of Units 43,105 70,662 32,283 3,258 8,154 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.56 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits BOP Unit Value $8.38 $8.29 $7.15 $9.37 -- EOP Unit Value 8.77 8.38 8.29 7.15 $9.37 -- Number of Units 83,943 91,641 23,591 1,235 2,564 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.49 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits BOP Unit Value $11.27 $10.08 -- -- -- EOP Unit Value 11.40 11.27 $10.08 -- -- -- Number of Units 9,851 22,333 11,186 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.10 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits BOP Unit Value $18.08 $15.10 -- -- -- EOP Unit Value 19.18 18.08 $15.10 -- -- -- Number of Units 46,724 20,851 8,287 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $12.76 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------
A-128 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------ ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits BOP Unit Value $8.02 $8.95 -- -- -- EOP Unit Value 7.62 8.02 $8.95 -- -- -- Number of Units 36,753 27,913 24,743 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.47 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Precious Metals (2002) With No Optional Benefits BOP Unit Value $11.90 $13.38 $9.73 -- -- EOP Unit Value 14.84 11.90 13.38 $9.73 -- -- Number of Units 200,315 102,230 89,687 1,179 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $12.04 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Real Estate (2001) With No Optional Benefits BOP Unit Value $17.58 $14.00 $10.65 $10.78 -- EOP Unit Value 18.54 17.58 14.00 10.65 $10.78 -- Number of Units 31,980 53,006 18,355 2,230 2,306 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.21 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Semiconductor (2002) With No Optional Benefits BOP Unit Value $7.23 $9.58 -- -- -- EOP Unit Value 7.76 7.23 $9.58 -- -- -- Number of Units 68,309 52,485 17,621 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.68 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Technology (2001) With No Optional Benefits BOP Unit Value $4.91 $5.00 -- $5.92 -- EOP Unit Value 4.91 4.91 $5.00 -- $5.92 -- Number of Units 109,698 88,720 74,180 -- 12,704 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.57 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------
A-129 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits BOP Unit Value $5.04 $4.41 -- $7.11 -- EOP Unit Value 4.64 5.04 $4.41 -- $7.11 -- Number of Units 45,279 118,731 30,179 -- -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.77 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits BOP Unit Value $8.75 $7.32 $6.11 $8.13 -- EOP Unit Value 9.77 8.75 7.32 6.11 $8.13 -- Number of Units 213,813 79,702 18,902 491 -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.64 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits BOP Unit Value $10.65 $9.91 -- -- -- EOP Unit Value 10.80 10.65 $9.91 -- -- -- Number of Units 384,503 412,259 394,427 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.15 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits BOP Unit Value $9.09 $10.26 $13.78 $11.55 -- EOP Unit Value 8.86 9.09 10.26 13.78 $11.55 -- Number of Units 35,612 16,155 28,299 2,012 -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.57 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Ultra Bull (2001) With No Optional Benefits BOP Unit Value $8.25 $7.13 $4.72 $7.48 -- EOP Unit Value 8.36 8.25 7.13 4.72 $7.48 -- Number of Units 82,031 305,666 56,257 2,988 -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.28 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------
A-130 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------ ProFund VP -- OTC (2001) With No Optional Benefits BOP Unit Value $5.44 $5.07 -- $5.77 -- EOP Unit Value 5.38 5.44 $5.07 -- $5.77 -- Number of Units 234,956 293,311 257,947 -- -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.59 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Short OTC (2002) With No Optional Benefits BOP Unit Value $5.99 $6.83 $11.03 -- -- EOP Unit Value 5.97 5.99 6.83 $11.03 -- -- Number of Units 77,757 77,280 40,617 934 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.17 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- UltraOTC (1999) With No Optional Benefits BOP Unit Value $0.87 $0.77 -- $1.25 $4.06 EOP Unit Value 0.82 0.87 $0.77 -- 1.25 $4.06 Number of Units 7,044,313 6,405,048 890,270 -- 58,556 3,787 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.08 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.80 $10.30 -- -- -- EOP Unit Value 12.68 11.80 $10.30 -- -- -- Number of Units 86,401 87,968 59,964 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.63 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------ ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits BOP Unit Value $10.70 $9.75 -- -- -- EOP Unit Value 11.75 10.70 $9.75 -- -- -- Number of Units 181,173 80,520 24,107 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.79 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------
A-131 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits BOP Unit Value $12.13 $9.62 -- -- -- EOP Unit Value 14.12 12.13 $9.62 -- -- -- Number of Units 150,869 115,073 34,556 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.42 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.22 $9.46 -- -- -- EOP Unit Value 11.52 11.22 $9.46 -- -- -- Number of Units 53,564 123,988 105,751 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.33 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits BOP Unit Value $12.11 $10.23 -- -- -- EOP Unit Value 12.86 12.11 $10.23 -- -- -- Number of Units 341,834 237,000 65,882 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.51 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------- ProFund VP Large-Cap Growth With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.35 -- -- -- -- -- Number of Units 98,334 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------- ProFund VP Large-Cap Value With No Optional Benefits BOP Unit Value $10.37 -- -- -- -- EOP Unit Value 10.55 $10.37 -- -- -- -- Number of Units 131,175 3,839 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------
A-132 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------- ProFund VP Short Mid-Cap With No Optional Benefits BOP Unit Value $9.70 -- -- -- -- EOP Unit Value 8.67 $9.70 -- -- -- -- Number of Units 975 571 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $8.97 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP Short Small-Cap With No Optional Benefits BOP Unit Value $9.55 -- -- -- -- EOP Unit Value 9.15 $9.55 -- -- -- -- Number of Units 11,578 7,859 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.20 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits BOP Unit Value $12.28 $9.49 $4.82 $8.5 $9.32 EOP Unit Value 12.10 12.28 9.49 4.82 8.5 $9.32 Number of Units 52,922 143,175 60,051 953 -0- 3,174 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.69 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits BOP Unit Value $11.91 $11.15 $11.59 -- -- EOP Unit Value 12.83 11.91 11.15 $11.59 -- -- Number of Units 119,421 42,782 20,058 1,005 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.58 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits BOP Unit Value $6.70 $7.61 -- -- -- EOP Unit Value 6.09 6.70 $7.61 -- -- -- Number of Units 302,975 266,169 78,428 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.11 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------
A-133 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ----------------------------------------------------------------------- Access VP High Yield With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $10.59 -- -- -- -- -- Number of Units 299,437 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.49 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- First Trust(R) 10 Uncommon Values (2000) With No Optional Benefits BOP Unit Value $4.38 $3.99 $2.95 $4.73 $7.44 EOP Unit Value 4.35 4.38 3.99 2.95 4.73 $7.44 Number of Units 14,496 33,075 22,064 23,080 31,543 32,451 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.77 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- First Trust Managed VIP With No Optional Benefits BOP Unit Value $14.64 $13.20 -- -- -- EOP Unit Value 15.50 14.64 $13.20 -- -- -- Number of Units 732,182 695,591 476,951 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.47 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- First Trust The Dow Target 10 With No Optional Benefits BOP Unit Value $12.35 $12.05 -- -- -- EOP Unit Value 11.81 12.35 $12.05 -- -- -- Number of Units 25,001 24,245 10,069 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.56 -- -- -- -- -- Number of Units -- -- -- -- -- -- ----------------------------------------------------------------------- First Trust The Dow Target Dividend With No Optional Benefits BOP Unit Value -- -- -- -- -- EOP Unit Value $9.79 -- -- -- -- -- Number of Units 290,982 -- -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.70 -- -- -- -- -- Number of Units -- -- -- -- -- -- -----------------------------------------------------------------------
A-134 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASAP III - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------- First Trust Global Dividend Target 15 With No Optional Benefits BOP Unit Value $16.05 $12.96 -- -- -- EOP Unit Value 17.46 16.05 $12.96 -- -- -- Number of Units 52,338 22,405 8,569 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.86 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------- First Trust S&P Target 24 With No Optional Benefits BOP Unit Value $13.34 $11.89 -- -- -- EOP Unit Value 13.72 13.34 $11.89 -- -- -- Number of Units 46,537 43,536 5,532 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.51 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits BOP Unit Value $12.54 -- -- -- -- EOP Unit Value 12.79 $12.54 -- -- -- -- Number of Units 10,385 7,266 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.78 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------- First Trust Value Line Target 25 With No Optional Benefits BOP Unit Value $16.61 -- -- -- -- EOP Unit Value 19.64 $16.61 -- -- -- -- Number of Units 130,528 33,213 -- -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.14 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------
A-135 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------- AST Aggressive Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units 649,829 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Capital Growth Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units 2,586,012 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Balanced Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units 2,726,484 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Conservative Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units 685,724 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Preservation Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units 115,215 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------
A-136 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $12.67 $11.00 $8.56 EOP Unit Value $13.84 $12.67 $11.00 $8.56 Number of Units 5,621,836 3,227,381 2,415,394 2,569,506 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $15.30 $13.39 $9.72 EOP Unit Value $17.54 $15.30 $13.39 $9.72 Number of Units 12,141,522 11,265,469 5,547,558 835,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.16 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $12.84 $10.79 $8.19 EOP Unit Value $14.36 $12.84 $10.79 $8.19 Number of Units 2,013,544 1,897,469 1,201,268 269,995 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits BOP Unit Value $13.16 $11.30 $9.04 EOP Unit Value $13.92 $13.16 $11.30 $9.04 Number of Units 1,907,776 2,276,801 1,393,001 969,509 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.36 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $9.05 $9.89 $6.92 EOP Unit Value $9.04 $9.05 $9.89 $6.92 Number of Units 2,134,730 2,242,129 3,292,593 1,970,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.31 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------
A-137 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $11.98 $11.13 $7.67 EOP Unit Value $11.83 $11.98 $11.13 $7.67 Number of Units 1,385,430 1,618,719 1,682,193 639,695 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $15.42 $12.74 $7.64 EOP Unit Value $16.60 $15.42 $12.74 $7.64 Number of Units 5,464,856 4,808,453 3,085,373 1,255,415 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Goldman Sachs Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $15.19 $12.85 $9.26 EOP Unit Value $15.68 $15.19 $12.85 $9.26 Number of Units 1,243,642 1,541,896 1,504,296 1,492,775 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $14.22 $12.42 $9.30 EOP Unit Value $14.91 $14.22 $12.42 $9.30 Number of Units 11,285,282 10,785,030 10,183,346 6,141,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $12.99 $10.81 $7.66 EOP Unit Value $12.92 $12.99 $10.81 $7.66 Number of Units 2,106,236 2,143,020 1,134,865 423,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.90 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-138 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $11.80 $10.31 $7.97 EOP Unit Value $12.16 $11.80 $10.31 $7.97 Number of Units 5,391,424 4,375,813 3,027,057 1,273,118 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits BOP Unit Value $10.86 $9.51 $7.41 EOP Unit Value $12.12 $10.86 $9.51 $7.41 Number of Units 5,728,446 4,715,301 3,415,318 2,175,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $14.51 $12.01 $8.96 EOP Unit Value $15.99 $14.51 $12.01 $8.96 Number of Units 12,260,007 11,461,684 8,530,129 5,118,558 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Alger All-Cap Growth (2000) (merged into AST Neuberger Berman Mid-Cap Growth) With No Optional Benefits BOP Unit Value $9.67 $9.07 $6.80 EOP Unit Value $11.10 $9.67 $9.07 $6.80 Number of Units -- 1,798,457 2,002,166 658,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.59 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Mid-Cap Value (2000) (formerly AST Gabelli All-Cap Value) With No Optional Benefits BOP Unit Value $12.38 $10.91 $8.17 EOP Unit Value $12.83 $12.38 $10.91 $8.17 Number of Units 1,988,252 2,587,064 2,513,413 1,200,225 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------------
A-139 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits BOP Unit Value $16.25 $12.59 $9.59 EOP Unit Value $21.00 $16.25 $12.59 $9.59 Number of Units 3,677,614 2,040,188 2,011,627 724,670 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.61 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth (formerly AST AllianceBernstein Large-Cap Growth) With No Optional Benefits BOP Unit Value $9.44 $9.08 $7.46 EOP Unit Value $10.81 $9.44 $9.08 $7.46 Number of Units 3,925,740 2,378,881 2,098,873 1,869,353 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.98 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $9.97 $9.16 $7.58 EOP Unit Value $10.43 $9.97 $9.16 $7.58 Number of Units 5,915,443 4,529,834 4,784,269 2,930,432 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $12.26 $10.78 $8.32 EOP Unit Value $12.88 $12.26 $10.78 $8.32 Number of Units 32,140,125 28,117,321 20,138,164 10,144,317 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.78 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits BOP Unit Value $9.64 $9.45 $7.67 EOP Unit Value $9.80 $9.64 $9.45 $7.67 Number of Units 2,531,900 2,785,100 2,053,023 1,349,939 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------
A-140 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - -------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits BOP Unit Value $12.53 $10.78 $8.66 EOP Unit Value $13.47 $12.53 $10.78 $8.66 Number of Units 2,585,881 2,351,197 1,072,256 664,649 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------- AST AllianceBernstein Growth + Value (2001) (merged into AST AllianceBernstein Managed Index 500) With No Optional Benefits BOP Unit Value $10.72 $9.91 $7.99 EOP Unit Value $11.86 $10.72 $9.91 $7.99 Number of Units -- 1,620,391 1,387,072 965,912 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.39 $11.06 $8.76 EOP Unit Value $12.86 $12.39 $11.06 $8.76 Number of Units 4,311,857 4,643,022 3,621,862 6,005,922 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------- AST Cohen & Steers Real Estate (1998) With No Optional Benefits BOP Unit Value $18.49 $13.63 $10.08 EOP Unit Value $20.88 $18.49 $13.63 $10.08 Number of Units 3,749,124 4,080,179 3,097,315 1,563,489 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.88 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------- AST AllianceBernstein Managed Index 500 (1998) With No Optional Benefits BOP Unit Value $11.07 $10.23 $8.17 EOP Unit Value $11.27 $11.07 $10.23 $8.17 Number of Units 6,774,078 6,845,372 5,442,511 3,662,406 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.28 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------
A-141 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits BOP Unit Value $11.57 $10.45 $8.25 EOP Unit Value $11.90 $11.57 $10.45 $8.25 Number of Units 4,205,655 4,670,846 2,115,438 1,751,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.22 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.46 $10.50 $8.06 EOP Unit Value $11.81 $11.46 $10.50 $8.06 Number of Units 31,190,346 25,850,506 21,264,670 6,667,373 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.15 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $11.17 $9.83 $8.34 EOP Unit Value $11.69 $11.17 $9.83 $8.34 Number of Units 5,245,458 3,717,848 2,647,064 2,110,071 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Global Allocation (1993) With No Optional Benefits BOP Unit Value $11.19 $10.24 $8.71 EOP Unit Value $11.77 $11.19 $10.24 $8.71 Number of Units 1,055,033 1,061,887 898,161 847,517 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits BOP Unit Value $11.46 $10.69 $9.14 EOP Unit Value $11.79 $11.46 $10.69 $9.14 Number of Units 2,294,531 2,335,598 2,045,205 1,126,058 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------
A-142 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits BOP Unit Value $12.13 $11.09 $9.09 EOP Unit Value $12.49 $12.13 $11.09 $9.09 Number of Units 4,192,626 3,551,315 2,243,566 921,329 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $13.45 $12.59 $11.34 EOP Unit Value $12.64 $13.45 $12.59 $11.34 Number of Units 6,261,824 4,717,822 2,962,471 1,739,313 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.34 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST High Yield (formerly AST Goldman Sachs High Yield Bond) With No Optional Benefits BOP Unit Value $12.69 $11.61 $9.71 EOP Unit Value $12.62 $12.69 $11.61 $9.71 Number of Units 9,658,908 13,717,125 12,201,163 5,592,940 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.75 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.26 $11.61 $9.94 EOP Unit Value $12.20 $12.26 $11.61 $9.94 Number of Units 12,427,806 8,369,008 7,751,236 4,146,530 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $11.31 $10.95 $10.57 EOP Unit Value $11.40 $11.31 $10.95 $10.57 Number of Units 22,436,395 33,208,749 26,287,388 20,544,075 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-143 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $10.55 $10.51 $10.34 EOP Unit Value $10.54 $10.55 $10.51 $10.34 Number of Units 28,031,653 21,299,789 15,242,856 11,274,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.94 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $9.78 $9.86 $9.96 EOP Unit Value $9.88 $9.78 $9.86 $9.96 Number of Units 42,442,274 29,870,576 32,730,501 36,255,772 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- SP William Blair International Growth With No Optional Benefits BOP Unit Value $10.53 -- -- EOP Unit Value $12.05 $10.53 -- -- Number of Units 672,243 269,671 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.18 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits BOP Unit Value $16.02 $13.60 $8.66 EOP Unit Value $20.72 $16.02 $13.60 $8.66 Number of Units 3,395,891 2,103,950 1,763,660 283,466 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.93 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Wells Fargo Advantage VT Equity Income (1999) (formerly WFVT Advantage Equity Income) With No Optional Benefits BOP Unit Value $11.18 $10.23 $8.25 EOP Unit Value $11.59 $11.18 $10.23 $8.25 Number of Units 534,649 590,808 314,757 196,720 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.08 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-144 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ----------------------------------------------------------------------------- AIM V.I. -- Dynamics (1999) With No Optional Benefits BOP Unit Value $10.72 $9.61 $7.09 EOP Unit Value $11.67 $10.72 $9.61 $7.09 Number of Units 602,064 668,032 889,464 543,762 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.80 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits BOP Unit Value $8.09 $7.87 $5.50 EOP Unit Value $8.13 $8.09 $7.87 $5.50 Number of Units 453,391 512,424 578,651 293,307 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Global Health Care (1999) (formerly AIM V.I. -- Health Sciences) With No Optional Benefits BOP Unit Value $10.64 $10.05 $8.00 EOP Unit Value $11.31 $10.64 $10.05 $8.00 Number of Units 1,131,375 937,586 698,364 475,873 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits BOP Unit Value $11.94 $11.17 $8.76 EOP Unit Value $12.43 $11.94 $11.17 $8.76 Number of Units 1,042,992 585,185 607,265 366,258 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.62 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $13.66 $11.65 $8.15 EOP Unit Value $15.59 $13.66 $11.65 $8.15 Number of Units 689,816 414,631 189,143 113,389 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.88 -- -- -- Number of Units -- -- -- -- -----------------------------------------------------------------------------
A-145 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- Evergreen VA -- Special Equity (1999) (merged into Evergreen VA Growth) With No Optional Benefits BOP Unit Value $11.58 $11.12 $7.44 EOP Unit Value $10.31 $11.58 $11.12 $7.44 Number of Units -- 702,642 815,621 127,728 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.26 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $11.29 $10.71 $7.78 EOP Unit Value $11.53 $11.29 $10.71 $7.78 Number of Units 281,775 570,123 404,789 39,943 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA Growth Fund With No Optional Benefits BOP Unit Value -- EOP Unit Value $11.44 -- Number of Units 606,614 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.33 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits BOP Unit Value $12.17 $10.83 $7.93 EOP Unit Value $12.94 $12.17 $10.83 $7.93 Number of Units 1,133,421 1,812,435 2,116,400 292,396 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.41 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits BOP Unit Value $12.30 $12.57 $7.75 EOP Unit Value $14.45 $12.30 $12.57 $7.75 Number of Units 1,723,105 896,010 942,605 281,993 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.10 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-146 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits BOP Unit Value $9.55 $9.03 $7.24 EOP Unit Value $13.31 $9.55 $9.03 $7.24 Number of Units 3,413,955 710,879 426,718 65,845 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.38 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Banks (2002) With No Optional Benefits BOP Unit Value $11.98 $10.90 $8.56 EOP Unit Value $11.77 $11.98 $10.90 $8.56 Number of Units 351,876 229,711 93,067 101,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.10 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits BOP Unit Value $11.87 $10.95 $8.46 EOP Unit Value $11.96 $11.87 $10.95 $8.46 Number of Units 681,692 529,237 1,512,864 76,331 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits BOP Unit Value $10.52 $9.75 $7.09 EOP Unit Value $12.34 $10.52 $9.75 $7.09 Number of Units 697,686 757,678 208,971 130,082 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Consumer Services (2002) With No Optional Benefits BOP Unit Value $9.56 $9.04 $7.25 EOP Unit Value $8.97 $9.56 $9.04 $7.25 Number of Units 86,431 430,620 136,269 128,022 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.66 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-147 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ------------------------------------------------------------------------- ProFund VP -- Consumer Goods (2002) With No Optional Benefits BOP Unit Value $10.36 $9.64 $8.28 EOP Unit Value $10.15 $10.36 $9.64 $8.28 Number of Units 161,037 369,007 58,425 148,446 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.73 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits BOP Unit Value $13.33 $10.48 $8.71 EOP Unit Value $17.22 $13.33 $10.48 $8.71 Number of Units 2,573,776 1,856,882 1,225,844 299,833 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.92 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Financials (2001) With No Optional Benefits BOP Unit Value $12.19 $11.23 $8.85 EOP Unit Value $12.46 $12.19 $11.23 $8.85 Number of Units 616,873 553,342 398,159 221,377 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits BOP Unit Value $9.23 $9.17 $7.94 EOP Unit Value $9.63 $9.23 $9.17 $7.94 Number of Units 2,175,821 1,318,525 707,449 388,508 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits BOP Unit Value $11.15 $10.01 $7.93 EOP Unit Value $11.23 $11.15 $10.01 $7.93 Number of Units 211,677 253,411 318,339 12,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.06 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------
A-148 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits BOP Unit Value $17.89 $15.00 $8.57 EOP Unit Value $18.90 $17.89 $15.00 $8.57 Number of Units 467,320 992,879 206,876 306,572 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.71 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits BOP Unit Value $7.93 $8.89 $8.56 EOP Unit Value $7.51 $7.93 $8.89 $8.56 Number of Units 515,768 527,336 266,978 136,559 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.44 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits BOP Unit Value $11.77 $13.29 $9.70 EOP Unit Value $14.62 $11.77 $13.29 $9.70 Number of Units 2,426,530 1,479,384 1,329,806 1,175,651 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits BOP Unit Value $16.15 $12.91 $9.86 EOP Unit Value $16.96 $16.15 $12.91 $9.86 Number of Units 501,989 1,816,706 462,906 441,318 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.17 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Semiconductor (2002) With No Optional Benefits BOP Unit Value $7.15 $9.51 $5.14 EOP Unit Value $7.64 $7.15 $9.51 $5.14 Number of Units 746,085 694,352 423,958 93,241 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.65 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------
A-149 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------- ProFund VP -- Technology (2001) With No Optional Benefits BOP Unit Value $8.48 $8.66 $6.03 EOP Unit Value $8.45 $8.48 $8.66 $6.03 Number of Units 577,739 727,580 497,972 254,131 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits BOP Unit Value $8.19 $7.21 $7.15 EOP Unit Value $7.52 $8.19 $7.21 $7.15 Number of Units 456,586 460,848 398,350 272,408 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits BOP Unit Value $11.13 $9.34 $7.83 EOP Unit Value $12.37 $11.13 $9.34 $7.83 Number of Units 1,996,877 1,060,939 618,427 521,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits BOP Unit Value $10.53 $9.84 $7.97 EOP Unit Value $10.64 $10.53 $9.84 $7.97 Number of Units 7,846,866 8,215,357 3,563,562 954,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.12 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits BOP Unit Value $7.45 $8.44 $11.38 EOP Unit Value $7.23 $7.45 $8.44 $11.38 Number of Units 2,169,662 1,202,243 1,886,515 1,532,543 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.54 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------
A-150 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Ultra Bull (2001) With No Optional Benefits BOP Unit Value $11.76 $10.20 $6.78 EOP Unit Value $11.87 $11.76 $10.20 $6.78 Number of Units 1,158,025 2,817,803 1,431,345 297,435 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.25 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits BOP Unit Value $9.94 $9.32 $6.45 EOP Unit Value $9.80 $9.94 $9.32 $6.45 Number of Units 2,467,486 4,885,351 4,445,234 1,346,852 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.55 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Short OTC (2002) With No Optional Benefits BOP Unit Value $5.93 $6.78 $11.00 EOP Unit Value $5.88 $5.93 $6.78 $11.00 Number of Units 2,494,108 908,064 1,535,439 433,181 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.14 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits BOP Unit Value $7.89 $7.03 $3.53 EOP Unit Value $7.47 $7.89 $7.03 $3.53 Number of Units 4,740,165 6,592,447 3,410,589 1,003,123 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.67 $10.23 $7.66 EOP Unit Value $12.49 $11.67 $10.23 $7.66 Number of Units 2,164,543 2,632,869 1,455,513 438,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-151 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- ProFund VP - Mid-Cap Growth (2002) With No Optional Benefits BOP Unit Value $10.58 $9.69 $7.70 EOP Unit Value $11.58 $10.58 $9.69 $7.70 Number of Units 5,059,311 2,220,901 1,009,867 439,054 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits BOP Unit Value $11.99 $9.55 $5.71 EOP Unit Value $13.91 $11.99 $9.55 $5.71 Number of Units 1,935,487 3,106,849 1,112,311 477,953 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.38 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.10 $9.39 $7.09 EOP Unit Value $11.35 $11.10 $9.39 $7.09 Number of Units 1,398,442 4,088,760 5,144,632 994,778 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.30 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits BOP Unit Value $11.98 $10.16 $7.69 EOP Unit Value $12.67 $11.98 $10.16 $7.69 Number of Units 4,579,887 4,677,820 3,868,951 772,260 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP Large-Cap Growth With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.30 $10.37 -- -- Number of Units 2,620,748 72,725 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.98 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-152 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------- ProFund VP Large-Cap Value With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.51 $10.37 -- -- Number of Units 2,141,308 159,605 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Mid-Cap With No Optional Benefits BOP Unit Value $9.70 -- -- EOP Unit Value $8.64 $9.70 -- -- Number of Units 364,782 39,360 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $8.94 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Small-Cap With No Optional Benefits BOP Unit Value $9.54 -- -- EOP Unit Value $9.11 $9.54 -- -- Number of Units 220,843 136,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.17 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits BOP Unit Value $15.52 $12.04 $6.14 EOP Unit Value $15.23 $15.52 $12.04 $6.14 Number of Units 816,755 5,098,565 1,702,558 212,085 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.66 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits BOP Unit Value $11.79 $11.08 $11.56 EOP Unit Value $12.64 $11.79 $11.08 $11.56 Number of Units 2,312,868 1,051,158 731,470 2,486,854 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------
A-153 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits BOP Unit Value $6.63 $7.56 $8.02 EOP Unit Value $6.00 $6.63 $7.56 $8.02 Number of Units 3,415,324 5,314,528 1,817,924 165,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.08 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- Access VP High Yield With No Optional Benefits BOP Unit Value -- EOP Unit Value $10.56 -- Number of Units 899,141 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.47 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust(R) 10 Uncommon Values (2000) With No Optional Benefits BOP Unit Value $10.03 $9.16 $6.80 EOP Unit Value $9.92 $10.03 $9.16 $6.80 Number of Units 87,726 91,924 66,435 19,826 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Global Dividend Target 15 With No Optional Benefits BOP Unit Value $11.85 -- -- EOP Unit Value $12.84 $11.85 -- -- Number of Units 590,605 311,233 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.83 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Managed VIP With No Optional Benefits BOP Unit Value $11.32 -- -- EOP Unit Value $11.94 $11.32 -- -- Number of Units 2,420,873 1,777,316 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.43 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-154 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS APEX II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits BOP Unit Value $10.66 -- -- EOP Unit Value $10.83 $10.66 -- -- Number of Units 134,177 82,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.75 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust S&P Target 24 With No Optional Benefits BOP Unit Value $10.75 -- -- EOP Unit Value $11.01 $10.75 -- -- Number of Units 304,840 173,851 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target 10 With No Optional Benefits BOP Unit Value $10.48 -- -- EOP Unit Value $9.98 $10.48 -- -- Number of Units 194,864 155,695 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.53 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target Dividend With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $9.76 -- -- -- Number of Units 1,240,527 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.67 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust Value Line Target 25 With No Optional Benefits BOP Unit Value $12.59 -- -- EOP Unit Value $14.82 $12.59 -- -- Number of Units 1,068,339 389,792 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.11 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------
A-155 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------- AST Aggressive Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units 649,829 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Capital Growth Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units 2,586,012 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Balanced Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units 2,726,484 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Conservative Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units 685,724 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Preservation Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units 115,215 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------
A-156 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $12.67 $11.00 $8.56 EOP Unit Value $13.84 $12.67 $11.00 $8.56 Number of Units 5,621,836 3,227,381 2,415,394 2,569,506 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $15.30 $13.39 $9.72 EOP Unit Value $17.54 $15.30 $13.39 $9.72 Number of Units 12,141,522 11,265,469 5,547,558 835,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.16 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $12.84 $10.79 $8.19 EOP Unit Value $14.36 $12.84 $10.79 $8.19 Number of Units 2,013,544 1,897,469 1,201,268 269,995 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits BOP Unit Value $13.16 $11.30 $9.04 EOP Unit Value $13.92 $13.16 $11.30 $9.04 Number of Units 1,907,776 2,276,801 1,393,001 969,509 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.36 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $9.05 $9.89 $6.92 EOP Unit Value $9.04 $9.05 $9.89 $6.92 Number of Units 2,134,730 2,242,129 3,292,593 1,970,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.31 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------
A-157 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $11.98 $11.13 $7.67 EOP Unit Value $11.83 $11.98 $11.13 $7.67 Number of Units 1,385,430 1,618,719 1,682,193 639,695 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $15.42 $12.74 $7.64 EOP Unit Value $16.60 $15.42 $12.74 $7.64 Number of Units 5,464,856 4,808,453 3,085,373 1,255,415 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Goldman Sachs Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $15.19 $12.85 $9.26 EOP Unit Value $15.68 $15.19 $12.85 $9.26 Number of Units 1,243,642 1,541,896 1,504,296 1,492,775 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $14.22 $12.42 $9.30 EOP Unit Value $14.91 $14.22 $12.42 $9.30 Number of Units 11,285,282 10,785,030 10,183,346 6,141,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $12.99 $10.81 $7.66 EOP Unit Value $12.92 $12.99 $10.81 $7.66 Number of Units 2,106,236 2,143,020 1,134,865 423,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.90 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-158 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $11.80 $10.31 $7.97 EOP Unit Value $12.16 $11.80 $10.31 $7.97 Number of Units 5,391,424 4,375,813 3,027,057 1,273,118 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits BOP Unit Value $10.86 $9.51 $7.41 EOP Unit Value $12.12 $10.86 $9.51 $7.41 Number of Units 5,728,446 4,715,301 3,415,318 2,175,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $14.51 $12.01 $8.96 EOP Unit Value $15.99 $14.51 $12.01 $8.96 Number of Units 12,260,007 11,461,684 8,530,129 5,118,558 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Alger All-Cap Growth (2000) (merged into AST Neuberger Berman Mid-Cap Growth) With No Optional Benefits BOP Unit Value $9.67 $9.07 $6.80 EOP Unit Value $11.10 $9.67 $9.07 $6.80 Number of Units -- 1,798,457 2,002,166 658,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.59 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Mid-Cap Value (2000) (formerly AST Gabelli All-Cap Value) With No Optional Benefits BOP Unit Value $12.38 $10.91 $8.17 EOP Unit Value $12.83 $12.38 $10.91 $8.17 Number of Units 1,988,252 2,587,064 2,513,413 1,200,225 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------------
A-159 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits BOP Unit Value $16.25 $12.59 $9.59 EOP Unit Value $21.00 $16.25 $12.59 $9.59 Number of Units 3,677,614 2,040,188 2,011,627 724,670 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.61 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth (formerly AST AllianceBernstein Large-Cap Growth) With No Optional Benefits BOP Unit Value $9.44 $9.08 $7.46 EOP Unit Value $10.81 $9.44 $9.08 $7.46 Number of Units 3,925,740 2,378,881 2,098,873 1,869,353 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.98 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $9.97 $9.16 $7.58 EOP Unit Value $10.43 $9.97 $9.16 $7.58 Number of Units 5,915,443 4,529,834 4,784,269 2,930,432 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $12.26 $10.78 $8.32 EOP Unit Value $12.88 $12.26 $10.78 $8.32 Number of Units 32,140,125 28,117,310 20,138,164 10,144,317 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.78 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits BOP Unit Value $9.64 $9.45 $7.67 EOP Unit Value $9.80 $9.64 $9.45 $7.67 Number of Units 2,531,900 2,785,100 2,053,023 1,349,939 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------------
A-160 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits BOP Unit Value $12.53 $10.78 $8.66 EOP Unit Value $13.47 $12.53 $10.78 $8.66 Number of Units 2,585,881 2,351,197 1,072,256 664,649 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Growth + Value (2001) (merged into AST AllianceBernstein Managed Index 500) With No Optional Benefits BOP Unit Value $10.72 $9.91 $7.99 EOP Unit Value $11.86 $10.72 $9.91 $7.99 Number of Units -- 1,620,391 1,387,072 965,912 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.39 $11.06 $8.76 EOP Unit Value $12.86 $12.39 $11.06 $8.76 Number of Units 4,311,857 4,643,022 3,621,862 6,005,922 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Cohen & Steers Real Estate (1998) With No Optional Benefits BOP Unit Value $18.49 $13.63 $10.08 EOP Unit Value $20.88 $18.49 $13.63 $10.08 Number of Units 3,749,124 4,080,179 3,097,315 1,563,489 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.88 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Managed Index 500 (1998) With No Optional Benefits BOP Unit Value $11.07 $10.23 $8.17 EOP Unit Value $11.27 $11.07 $10.23 $8.17 Number of Units 6,774,078 6,845,372 5,442,511 3,662,406 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.28 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------------
A-161 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits BOP Unit Value $11.57 $10.45 $8.25 EOP Unit Value $11.90 $11.57 $10.45 $8.25 Number of Units 4,205,655 4,670,846 2,115,438 1,751,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.22 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.46 $10.50 $8.06 EOP Unit Value $11.81 $11.46 $10.50 $8.06 Number of Units 31,190,346 25,850,506 21,264,670 6,667,373 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.15 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $11.17 $9.83 $8.34 EOP Unit Value $11.69 $11.17 $9.83 $8.34 Number of Units 5,245,455 3,717,848 2,647,064 2,110,071 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Global Allocation (1993) With No Optional Benefits BOP Unit Value $11.19 $10.24 $8.71 EOP Unit Value $11.77 $11.19 $10.24 $8.71 Number of Units 1,055,033 1,061,887 898,161 847,517 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits BOP Unit Value $11.46 $10.69 $9.14 EOP Unit Value $11.79 $11.46 $10.69 $9.14 Number of Units 2,294,531 2,335,598 2,045,205 1,126,058 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------
A-162 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits BOP Unit Value $12.13 $11.09 $9.09 EOP Unit Value $12.49 $12.13 $11.09 $9.09 Number of Units 4,192,626 3,551,315 2,243,566 921,329 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $13.45 $12.59 $11.34 EOP Unit Value $12.64 $13.45 $12.59 $11.34 Number of Units 6,261,824 4,717,822 2,962,471 1,739,313 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.34 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST High Yield (formerly AST Goldman Sachs High Yield Bond) With No Optional Benefits BOP Unit Value $12.69 $11.61 $9.71 EOP Unit Value $12.62 $12.69 $11.61 $9.71 Number of Units 9,658,908 13,717,125 12,201,163 5,592,940 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.75 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.26 $11.61 $9.94 EOP Unit Value $12.20 $12.26 $11.61 $9.94 Number of Units 12,427,806 8,369,008 7,751,236 4,146,530 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $11.31 $10.95 $10.57 EOP Unit Value $11.40 $11.31 $10.95 $10.57 Number of Units 22,436,395 33,208,749 26,287,388 20,544,075 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-163 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $10.55 $10.51 $10.34 EOP Unit Value $10.54 $10.55 $10.51 $10.34 Number of Units 28,031,653 21,299,789 15,242,856 11,274,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.94 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $9.78 $9.86 $9.96 EOP Unit Value $9.88 $9.78 $9.86 $9.96 Number of Units 42,442,274 29,870,576 32,730,501 36,255,772 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- SP William Blair International Growth With No Optional Benefits BOP Unit Value $10.53 -- -- EOP Unit Value $12.05 $10.53 -- -- Number of Units 672,243 269,671 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.18 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits BOP Unit Value $16.02 $13.60 $8.66 EOP Unit Value $20.72 $16.02 $13.60 $8.66 Number of Units 3,395,891 2,103,950 1,763,660 283,466 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.93 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Wells Fargo Advantage VT Equity Income (1999) (formerly WFVT Advantage Equity Income) With No Optional Benefits BOP Unit Value $11.18 $10.23 $8.25 EOP Unit Value $11.59 $11.18 $10.23 $8.25 Number of Units 534,649 590,808 314,757 196,720 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.08 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-164 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ----------------------------------------------------------------------------- AIM V.I. -- Dynamics (1999) With No Optional Benefits BOP Unit Value $10.72 $9.61 $7.09 EOP Unit Value $11.67 $10.72 $9.61 $7.09 Number of Units 602,064 668,032 889,464 543,762 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.80 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits BOP Unit Value $8.09 $7.87 $5.50 EOP Unit Value $8.13 $8.09 $7.87 $5.50 Number of Units 453,391 512,424 578,651 293,307 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Global Health Care (1999) (formerly AIM V.I. -- Health Sciences) With No Optional Benefits BOP Unit Value $10.64 $10.05 $8.00 EOP Unit Value $11.31 $10.64 $10.05 $8.00 Number of Units 1,131,375 937,586 698,364 475,873 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits BOP Unit Value $11.94 $11.17 $8.76 EOP Unit Value $12.43 $11.94 $11.17 $8.76 Number of Units 1,042,992 585,185 607,265 366,258 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.62 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $13.66 $11.65 $8.15 EOP Unit Value $15.59 $13.66 $11.65 $8.15 Number of Units 689,816 414,631 189,143 113,389 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.88 -- -- -- Number of Units -- -- -- -- -----------------------------------------------------------------------------
A-165 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- Evergreen VA -- Special Equity (1999) (merged into Evergreen VA Growth) With No Optional Benefits BOP Unit Value $11.58 $11.12 $7.44 EOP Unit Value $10.31 $11.58 $11.12 $7.44 Number of Units -- 702,642 815,621 127,728 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.26 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $11.29 $10.71 $7.78 EOP Unit Value $11.53 $11.29 $10.71 $7.78 Number of Units 281,775 570,123 404,789 39,943 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA Growth Fund With No Optional Benefits BOP Unit Value -- -- -- -- EOP Unit Value $11.44 -- -- -- Number of Units 606,614 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.33 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits BOP Unit Value $12.17 $10.83 $7.93 EOP Unit Value $12.94 $12.17 $10.83 $7.93 Number of Units 1,133,421 1,812,435 2,116,400 292,396 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.41 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits BOP Unit Value $12.30 $12.57 $7.75 EOP Unit Value $14.45 $12.30 $12.57 $7.75 Number of Units 1,723,105 896,010 942,605 281,993 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.10 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-166 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits BOP Unit Value $9.55 $9.03 $7.24 EOP Unit Value $13.31 $9.55 $9.03 $7.24 Number of Units 3,413,955 710,879 426,718 65,845 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.38 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Banks (2002) With No Optional Benefits BOP Unit Value $11.98 $10.90 $8.56 EOP Unit Value $11.77 $11.98 $10.90 $8.56 Number of Units 351,876 229,711 93,067 101,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.10 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits BOP Unit Value $11.87 $10.95 $8.46 EOP Unit Value $11.96 $11.87 $10.95 $8.46 Number of Units 681,692 529,237 1,512,864 76,331 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits BOP Unit Value $10.52 $9.75 $7.09 EOP Unit Value $12.34 $10.52 $9.75 $7.09 Number of Units 697,686 757,678 208,971 130,082 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Consumer Services (2002) With No Optional Benefits BOP Unit Value $9.56 $9.04 $7.25 EOP Unit Value $8.97 $9.56 $9.04 $7.25 Number of Units 86,431 430,620 136,269 128,022 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.66 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-167 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ------------------------------------------------------------------------- ProFund VP -- Consumer Goods (2002) With No Optional Benefits BOP Unit Value $10.36 $9.64 $8.28 EOP Unit Value $10.15 $10.36 $9.64 $8.28 Number of Units 161,037 369,007 58,425 148,446 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.73 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits BOP Unit Value $13.33 $10.48 $8.71 EOP Unit Value $17.22 $13.33 $10.48 $8.71 Number of Units 2,573,776 1,856,882 1,225,844 299,833 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.92 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Financials (2001) With No Optional Benefits BOP Unit Value $12.19 $11.23 $8.85 EOP Unit Value $12.46 $12.19 $11.23 $8.85 Number of Units 616,873 553,342 398,159 221,377 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits BOP Unit Value $9.23 $9.17 $7.94 EOP Unit Value $9.63 $9.23 $9.17 $7.94 Number of Units 2,175,821 1,318,525 707,449 388,508 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits BOP Unit Value $11.15 $10.01 $7.93 EOP Unit Value $11.23 $11.15 $10.01 $7.93 Number of Units 211,677 253,411 318,339 12,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.06 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------
A-168 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits BOP Unit Value $17.89 $15.00 $8.57 EOP Unit Value $18.90 $17.89 $15.00 $8.57 Number of Units 467,320 992,879 206,876 306,572 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.71 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits BOP Unit Value $7.93 $8.89 $8.56 EOP Unit Value $7.51 $7.93 $8.89 $8.56 Number of Units 515,768 527,336 266,978 136,559 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.44 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits BOP Unit Value $11.77 $13.29 $9.70 EOP Unit Value $14.62 $11.77 $13.29 $9.70 Number of Units 2,426,530 1,479,384 1,329,806 1,175,651 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits BOP Unit Value $16.15 $12.91 $9.86 EOP Unit Value $16.96 $16.15 $12.91 $9.86 Number of Units 501,989 1,816,706 462,906 441,318 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.17 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Semiconductor (2002) With No Optional Benefits BOP Unit Value $7.15 $9.51 $5.14 EOP Unit Value $7.64 $7.15 $9.51 $5.14 Number of Units 746,085 694,352 423,958 93,241 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.65 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------
A-169 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------- ProFund VP -- Technology (2001) With No Optional Benefits BOP Unit Value $8.48 $8.66 $6.03 EOP Unit Value $8.45 $8.48 $8.66 $6.03 Number of Units 577,739 727,580 497,972 254,131 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits BOP Unit Value $8.19 $7.21 $7.15 EOP Unit Value $7.52 $8.19 $7.21 $7.15 Number of Units 456,586 460,848 398,350 272,408 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits BOP Unit Value $11.13 $9.34 $7.83 EOP Unit Value $12.37 $11.13 $9.34 $7.83 Number of Units 1,996,877 1,060,939 618,427 521,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits BOP Unit Value $10.53 $9.84 $7.97 EOP Unit Value $10.64 $10.53 $9.84 $7.97 Number of Units 7,846,866 8,215,357 3,563,562 954,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.12 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits BOP Unit Value $7.45 $8.44 $11.38 EOP Unit Value $7.23 $7.45 $8.44 $11.38 Number of Units 2,169,659 1,202,243 1,886,515 1,532,543 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.54 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------
A-170 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Ultra Bull (2001) With No Optional Benefits BOP Unit Value $11.76 $10.20 $6.78 EOP Unit Value $11.87 $11.76 $10.20 $6.78 Number of Units 1,158,025 2,817,803 1,431,345 297,435 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.25 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits BOP Unit Value $9.94 $9.32 $6.45 EOP Unit Value $9.80 $9.94 $9.32 $6.45 Number of Units 2,467,486 4,885,351 4,445,234 1,346,852 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.55 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Short OTC (2002) With No Optional Benefits BOP Unit Value $5.93 $6.78 $11.00 EOP Unit Value $5.88 $5.93 $6.78 $11.00 Number of Units 2,494,108 908,064 1,535,439 433,181 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.14 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits BOP Unit Value $7.89 $7.03 $3.53 EOP Unit Value $7.47 $7.89 $7.03 $3.53 Number of Units 4,740,165 6,592,447 3,410,589 1,003,123 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.67 $10.23 $7.66 EOP Unit Value $12.49 $11.67 $10.23 $7.66 Number of Units 2,164,543 2,632,869 1,455,513 438,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-171 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits BOP Unit Value $10.58 $9.69 $7.70 EOP Unit Value $11.58 $10.58 $9.69 $7.70 Number of Units 5,059,311 2,220,901 1,009,867 439,054 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits BOP Unit Value $11.99 $9.55 $5.71 EOP Unit Value $13.91 $11.99 $9.55 $5.71 Number of Units 1,935,487 3,106,849 1,112,311 477,953 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.38 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.10 $9.39 $7.09 EOP Unit Value $11.35 $11.10 $9.39 $7.09 Number of Units 1,398,442 4,088,760 5,144,632 994,778 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.30 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits BOP Unit Value $11.98 $10.16 $7.69 EOP Unit Value $12.67 $11.98 $10.16 $7.69 Number of Units 4,579,887 4,677,820 3,868,951 772,260 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP Large-Cap Growth With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.30 $10.37 -- -- Number of Units 2,620,751 72,725 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.98 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-172 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------- ProFund VP Large-Cap Value With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.51 $10.37 -- -- Number of Units 2,141,308 159,605 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Mid-Cap With No Optional Benefits BOP Unit Value $9.70 -- -- EOP Unit Value $8.64 $9.70 -- -- Number of Units 364,782 39,360 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $8.94 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Small-Cap With No Optional Benefits BOP Unit Value $9.54 -- -- EOP Unit Value $9.11 $9.54 -- -- Number of Units 220,843 136,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.17 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits BOP Unit Value $15.52 $12.04 $6.14 EOP Unit Value $15.23 $15.52 $12.04 $6.14 Number of Units 816,755 5,098,565 1,702,558 212,085 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.66 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits BOP Unit Value $11.79 $11.08 $11.56 EOP Unit Value $12.64 $11.79 $11.08 $11.56 Number of Units 2,312,868 1,051,158 731,470 2,486,854 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------
A-173 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits BOP Unit Value $6.63 $7.56 $8.02 EOP Unit Value $6.00 $6.63 $7.56 $8.02 Number of Units 3,415,324 5,314,528 1,817,924 165,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.08 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- Access VP High Yield With No Optional Benefits BOP Unit Value -- -- -- -- EOP Unit Value $10.56 -- -- -- Number of Units 899,141 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.47 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust(R) 10 Uncommon Values (2000) With No Optional Benefits BOP Unit Value $10.03 $9.16 $6.80 EOP Unit Value $9.92 $10.03 $9.16 $6.80 Number of Units 87,726 91,924 66,435 19,826 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Global Dividend Target 15 With No Optional Benefits BOP Unit Value $11.85 -- -- EOP Unit Value $12.84 $11.85 -- -- Number of Units 590,605 311,233 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.83 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Managed VIP With No Optional Benefits BOP Unit Value $11.32 -- -- EOP Unit Value $11.94 $11.32 -- -- Number of Units 2,420,873 1,777,316 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.43 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-174 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASXT Six - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits BOP Unit Value $10.66 -- -- EOP Unit Value $10.83 $10.66 -- -- Number of Units 134,177 82,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.75 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust S&P Target 24 With No Optional Benefits BOP Unit Value $10.75 -- -- EOP Unit Value $11.01 $10.75 -- -- Number of Units 304,840 173,851 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target 10 With No Optional Benefits BOP Unit Value $10.48 -- -- EOP Unit Value $9.98 $10.48 -- -- Number of Units 194,864 155,695 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.53 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target Dividend With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $9.76 -- -- -- Number of Units 1,240,527 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.67 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust Value Line Target 25 With No Optional Benefits BOP Unit Value $12.59 -- -- EOP Unit Value $14.82 $12.59 -- -- Number of Units 1,068,339 389,792 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.11 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------
A-175 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------- AST Aggressive Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units 649,829 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Capital Growth Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units 2,586,012 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Balanced Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units 2,726,484 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.01 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Conservative Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units 685,724 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.02 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------- AST Preservation Asset Allocation Portfolio With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units 115,215 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.03 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------
A-176 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $12.67 $11.00 $8.56 EOP Unit Value $13.84 $12.67 $11.00 $8.56 Number of Units 5,621,836 3,227,381 2,415,394 2,569,506 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $15.30 $13.39 $9.72 EOP Unit Value $17.54 $15.30 $13.39 $9.72 Number of Units 12,141,522 11,265,469 5,547,558 835,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.16 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $12.84 $10.79 $8.19 EOP Unit Value $14.36 $12.84 $10.79 $8.19 Number of Units 2,013,544 1,897,469 1,201,268 269,995 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits BOP Unit Value $13.16 $11.30 $9.04 EOP Unit Value $13.92 $13.16 $11.30 $9.04 Number of Units 1,907,776 2,276,801 1,393,001 969,509 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.36 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $9.05 $9.89 $6.92 EOP Unit Value $9.04 $9.05 $9.89 $6.92 Number of Units 2,134,730 2,242,129 3,292,593 1,970,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.31 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------
A-177 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $11.98 $11.13 $7.67 EOP Unit Value $11.83 $11.98 $11.13 $7.67 Number of Units 1,385,430 1,618,719 1,682,193 639,695 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $15.42 $12.74 $7.64 EOP Unit Value $16.60 $15.42 $12.74 $7.64 Number of Units 5,464,856 4,808,453 3,085,373 1,255,415 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Goldman Sachs Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $15.19 $12.85 $9.26 EOP Unit Value $15.68 $15.19 $12.85 $9.26 Number of Units 1,243,642 1,541,896 1,504,296 1,492,775 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $14.22 $12.42 $9.30 EOP Unit Value $14.91 $14.22 $12.42 $9.30 Number of Units 11,285,282 10,785,030 10,183,346 6,141,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $12.99 $10.81 $7.66 EOP Unit Value $12.92 $12.99 $10.81 $7.66 Number of Units 2,106,236 2,143,020 1,134,865 423,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.90 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-178 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - -------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $11.80 $10.31 $7.97 EOP Unit Value $12.16 $11.80 $10.31 $7.97 Number of Units 5,391,424 4,375,813 3,027,057 1,273,118 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits BOP Unit Value $10.86 $9.51 $7.41 EOP Unit Value $12.12 $10.86 $9.51 $7.41 Number of Units 5,728,446 4,715,301 3,415,318 2,175,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $14.51 $12.01 $8.96 EOP Unit Value $15.99 $14.51 $12.01 $8.96 Number of Units 12,260,007 11,461,684 8,530,129 5,118,558 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Alger All-Cap Growth (2000) (merged into AST Neuberger Berman Mid-Cap Growth) With No Optional Benefits BOP Unit Value $9.67 $9.07 $6.80 EOP Unit Value $11.10 $9.67 $9.07 $6.80 Number of Units -- 1,798,457 2,002,166 658,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.59 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------- AST Mid-Cap Value (2000) (formerly AST Gabelli All-Cap Value) With No Optional Benefits BOP Unit Value $12.38 $10.91 $8.17 EOP Unit Value $12.83 $12.38 $10.91 $8.17 Number of Units 1,988,252 2,587,064 2,513,413 1,200,225 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------------
A-179 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits BOP Unit Value $16.25 $12.59 $9.59 EOP Unit Value $21.00 $16.25 $12.59 $9.59 Number of Units 3,677,614 2,040,188 2,011,627 724,670 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.61 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth (formerly AST AllianceBernstein Large-Cap Growth) With No Optional Benefits BOP Unit Value $9.44 $9.08 $7.46 EOP Unit Value $10.81 $9.44 $9.08 $7.46 Number of Units 3,925,740 2,378,881 2,098,873 1,869,353 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.98 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $9.97 $9.16 $7.58 EOP Unit Value $10.43 $9.97 $9.16 $7.58 Number of Units 5,915,443 4,529,834 4,784,269 2,930,432 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $12.26 $10.78 $8.32 EOP Unit Value $12.88 $12.26 $10.78 $8.32 Number of Units 32,140,125 28,117,310 20,138,164 10,144,317 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.78 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits BOP Unit Value $9.64 $9.45 $7.67 EOP Unit Value $9.80 $9.64 $9.45 $7.67 Number of Units 2,531,900 2,785,100 2,053,023 1,349,939 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------------
A-180 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits BOP Unit Value $12.53 $10.78 $8.66 EOP Unit Value $13.47 $12.53 $10.78 $8.66 Number of Units 2,585,881 2,351,197 1,072,256 664,649 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Growth + Value (2001) (merged into AST AllianceBernstein Managed Index 500) With No Optional Benefits BOP Unit Value $10.72 $9.91 $7.99 EOP Unit Value $11.86 $10.72 $9.91 $7.99 Number of Units -- 1,620,391 1,387,072 965,912 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.21 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.39 $11.06 $8.76 EOP Unit Value $12.86 $12.39 $11.06 $8.76 Number of Units 4,311,857 4,643,022 3,621,862 6,005,922 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST Cohen & Steers Real Estate (1998) With No Optional Benefits BOP Unit Value $18.49 $13.63 $10.08 EOP Unit Value $20.88 $18.49 $13.63 $10.08 Number of Units 3,749,124 4,080,179 3,097,315 1,563,489 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.88 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------------- AST AllianceBernstein Managed Index 500 (1998) With No Optional Benefits BOP Unit Value $11.07 $10.23 $8.17 EOP Unit Value $11.27 $11.07 $10.23 $8.17 Number of Units 6,774,078 6,845,369 5,442,511 3,662,406 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.28 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------------
A-181 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits BOP Unit Value $11.57 $10.45 $8.25 EOP Unit Value $11.90 $11.57 $10.45 $8.25 Number of Units 4,205,655 4,670,846 2,115,438 1,751,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.22 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.46 $10.50 $8.06 EOP Unit Value $11.81 $11.46 $10.50 $8.06 Number of Units 31,190,346 25,850,506 21,264,670 6,667,373 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.15 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $11.17 $9.83 $8.34 EOP Unit Value $11.69 $11.17 $9.83 $8.34 Number of Units 5,245,455 3,717,848 2,647,064 2,110,071 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Global Allocation (1993) With No Optional Benefits BOP Unit Value $11.19 $10.24 $8.71 EOP Unit Value $11.77 $11.19 $10.24 $8.71 Number of Units 1,055,033 1,061,887 898,161 847,517 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits BOP Unit Value $11.46 $10.69 $9.14 EOP Unit Value $11.79 $11.46 $10.69 $9.14 Number of Units 2,294,531 2,335,598 2,045,205 1,126,058 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------
A-182 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits BOP Unit Value $12.13 $11.09 $9.09 EOP Unit Value $12.49 $12.13 $11.09 $9.09 Number of Units 4,192,626 3,551,315 2,243,566 921,329 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.24 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $13.45 $12.59 $11.34 EOP Unit Value $12.64 $13.45 $12.59 $11.34 Number of Units 6,261,824 4,717,822 2,962,471 1,739,313 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.34 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST High Yield (formerly AST Goldman Sachs High Yield Bond) With No Optional Benefits BOP Unit Value $12.69 $11.61 $9.71 EOP Unit Value $12.62 $12.69 $11.61 $9.71 Number of Units 9,658,908 13,717,128 12,201,163 5,592,940 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.75 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.26 $11.61 $9.94 EOP Unit Value $12.20 $12.26 $11.61 $9.94 Number of Units 12,427,806 8,369,008 7,751,236 4,146,530 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.84 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $11.31 $10.95 $10.57 EOP Unit Value $11.40 $11.31 $10.95 $10.57 Number of Units 22,436,395 33,208,757 26,287,388 20,544,075 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-183 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $10.55 $10.51 $10.34 EOP Unit Value $10.54 $10.55 $10.51 $10.34 Number of Units 28,031,653 21,299,789 15,242,856 11,274,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.94 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $9.78 $9.86 $9.96 EOP Unit Value $9.88 $9.78 $9.86 $9.96 Number of Units 42,442,274 29,870,585 32,730,501 36,255,772 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- SP William Blair International Growth With No Optional Benefits BOP Unit Value $10.53 -- -- EOP Unit Value $12.05 $10.53 -- -- Number of Units 672,243 269,671 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.18 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Gartmore Variable Investment Trust - GVIT Developing Markets (1996) With No Optional Benefits BOP Unit Value $16.02 $13.60 $8.66 EOP Unit Value $20.72 $16.02 $13.60 $8.66 Number of Units 3,395,891 2,103,950 1,763,660 283,466 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.93 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------- Wells Fargo Advantage VT Equity Income (1999) (formerly WFVT Advantage Equity Income) With No Optional Benefits BOP Unit Value $11.18 $10.23 $8.25 EOP Unit Value $11.59 $11.18 $10.23 $8.25 Number of Units 534,649 590,808 314,757 196,720 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.08 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------------
A-184 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ----------------------------------------------------------------------------- AIM V.I. -- Dynamics (1999) With No Optional Benefits BOP Unit Value $10.72 $9.61 $7.09 EOP Unit Value $11.67 $10.72 $9.61 $7.09 Number of Units 602,064 668,032 889,464 543,762 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.80 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits BOP Unit Value $8.09 $7.87 $5.50 EOP Unit Value $8.13 $8.09 $7.87 $5.50 Number of Units 453,391 512,424 578,651 293,307 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Global Health Care (1999) (formerly AIM V.I. -- Health Sciences) With No Optional Benefits BOP Unit Value $10.64 $10.05 $8.00 EOP Unit Value $11.31 $10.64 $10.05 $8.00 Number of Units 1,131,375 937,586 698,364 475,873 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits BOP Unit Value $11.94 $11.17 $8.76 EOP Unit Value $12.43 $11.94 $11.17 $8.76 Number of Units 1,042,992 585,185 607,265 366,258 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.62 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $13.66 $11.65 $8.15 EOP Unit Value $15.59 $13.66 $11.65 $8.15 Number of Units 689,816 414,631 189,143 113,389 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.88 -- -- -- Number of Units -- -- -- -- -----------------------------------------------------------------------------
A-185 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- Evergreen VA -- Special Equity (1999) (merged into Evergreen VA Growth) With No Optional Benefits BOP Unit Value $11.58 $11.12 $7.44 EOP Unit Value $10.31 $11.58 $11.12 $7.44 Number of Units 169 702,642 815,621 127,728 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.26 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $11.29 $10.71 $7.78 EOP Unit Value $11.53 $11.29 $10.71 $7.78 Number of Units 281,775 570,123 404,789 39,943 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA Growth Fund With No Optional Benefits BOP Unit Value -- -- -- -- EOP Unit Value $11.44 -- -- -- Number of Units 606,614 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.33 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits BOP Unit Value $12.17 $10.83 $7.93 EOP Unit Value $12.94 $12.17 $10.83 $7.93 Number of Units 1,133,421 1,812,435 2,116,400 292,396 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.41 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits BOP Unit Value $12.30 $12.57 $7.75 EOP Unit Value $14.45 $12.30 $12.57 $7.75 Number of Units 1,723,105 896,010 942,605 281,993 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.10 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-186 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits BOP Unit Value $9.55 $9.03 $7.24 EOP Unit Value $13.31 $9.55 $9.03 $7.24 Number of Units 3,413,955 710,879 426,718 65,845 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.38 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Banks (2002) With No Optional Benefits BOP Unit Value $11.98 $10.90 $8.56 EOP Unit Value $11.77 $11.98 $10.90 $8.56 Number of Units 351,876 229,711 93,067 101,136 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.10 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits BOP Unit Value $11.87 $10.95 $8.46 EOP Unit Value $11.96 $11.87 $10.95 $8.46 Number of Units 681,692 529,237 1,512,864 76,331 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits BOP Unit Value $10.52 $9.75 $7.09 EOP Unit Value $12.34 $10.52 $9.75 $7.09 Number of Units 697,686 757,678 208,971 130,082 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $13.48 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Consumer Services (2002) With No Optional Benefits BOP Unit Value $9.56 $9.04 $7.25 EOP Unit Value $8.97 $9.56 $9.04 $7.25 Number of Units 86,431 430,620 136,269 128,022 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.66 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-187 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ------------------------------------------------------------------------- ProFund VP -- Consumer Goods (2002) With No Optional Benefits BOP Unit Value $10.36 $9.64 $8.28 EOP Unit Value $10.15 $10.36 $9.64 $8.28 Number of Units 161,037 369,007 58,425 148,446 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.73 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits BOP Unit Value $13.33 $10.48 $8.71 EOP Unit Value $17.22 $13.33 $10.48 $8.71 Number of Units 2,573,776 1,856,882 1,225,844 299,833 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.92 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Financials (2001) With No Optional Benefits BOP Unit Value $12.19 $11.23 $8.85 EOP Unit Value $12.46 $12.19 $11.23 $8.85 Number of Units 616,873 553,342 398,159 221,377 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits BOP Unit Value $9.23 $9.17 $7.94 EOP Unit Value $9.63 $9.23 $9.17 $7.94 Number of Units 2,175,821 1,318,525 707,449 388,508 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- ------------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits BOP Unit Value $11.15 $10.01 $7.93 EOP Unit Value $11.23 $11.15 $10.01 $7.93 Number of Units 211,677 253,411 318,339 12,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.06 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------
A-188 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ---------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits BOP Unit Value $17.89 $15.00 $8.57 EOP Unit Value $18.90 $17.89 $15.00 $8.57 Number of Units 467,320 992,879 206,876 306,572 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.71 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits BOP Unit Value $7.93 $8.89 $8.56 EOP Unit Value $7.51 $7.93 $8.89 $8.56 Number of Units 515,768 527,336 266,978 136,559 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.44 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits BOP Unit Value $11.77 $13.29 $9.70 EOP Unit Value $14.62 $11.77 $13.29 $9.70 Number of Units 2,426,530 1,479,384 1,329,806 1,175,651 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $12.00 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits BOP Unit Value $16.15 $12.91 $9.86 EOP Unit Value $16.96 $16.15 $12.91 $9.86 Number of Units 501,989 1,816,706 462,906 441,318 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.17 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------- ProFund VP -- Semiconductor (2002) With No Optional Benefits BOP Unit Value $7.15 $9.51 $5.14 EOP Unit Value $7.64 $7.15 $9.51 $5.14 Number of Units 746,085 694,352 423,958 93,241 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.65 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------
A-189 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------- ProFund VP -- Technology (2001) With No Optional Benefits BOP Unit Value $8.48 $8.66 $6.03 EOP Unit Value $8.45 $8.48 $8.66 $6.03 Number of Units 577,739 727,580 497,972 254,131 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits BOP Unit Value $8.19 $7.21 $7.15 EOP Unit Value $7.52 $8.19 $7.21 $7.15 Number of Units 456,586 460,848 398,350 272,408 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits BOP Unit Value $11.13 $9.34 $7.83 EOP Unit Value $12.37 $11.13 $9.34 $7.83 Number of Units 1,996,877 1,060,939 618,427 521,419 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits BOP Unit Value $10.53 $9.84 $7.97 EOP Unit Value $10.64 $10.53 $9.84 $7.97 Number of Units 7,846,866 8,215,357 3,563,562 954,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.12 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits BOP Unit Value $7.45 $8.44 $11.38 EOP Unit Value $7.23 $7.45 $8.44 $11.38 Number of Units 2,169,662 1,202,243 1,886,515 1,532,543 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.54 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------
A-190 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 -------------------------------------------------------------------------- ProFund VP -- Ultra Bull (2001) With No Optional Benefits BOP Unit Value $11.76 $10.20 $6.78 EOP Unit Value $11.87 $11.76 $10.20 $6.78 Number of Units 1,158,025 2,817,803 1,431,345 297,435 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.25 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits BOP Unit Value $9.94 $9.32 $6.45 EOP Unit Value $9.80 $9.94 $9.32 $6.45 Number of Units 2,467,486 4,885,351 4,445,234 1,346,852 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.55 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Short OTC (2002) With No Optional Benefits BOP Unit Value $5.93 $6.78 $11.00 EOP Unit Value $5.88 $5.93 $6.78 $11.00 Number of Units 2,494,112 908,064 1,535,439 433,181 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.14 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits BOP Unit Value $7.89 $7.03 $3.53 EOP Unit Value $7.47 $7.89 $7.03 $3.53 Number of Units 4,740,165 6,592,447 3,410,589 1,003,123 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.04 -- -- -- Number of Units -- -- -- -- -------------------------------------------------------------------------- ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.67 $10.23 $7.66 EOP Unit Value $12.49 $11.67 $10.23 $7.66 Number of Units 2,164,543 2,632,869 1,455,513 438,387 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.60 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------
A-191 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits BOP Unit Value $10.58 $9.69 $7.70 EOP Unit Value $11.58 $10.58 $9.69 $7.70 Number of Units 5,059,311 2,220,901 1,009,867 439,054 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits BOP Unit Value $11.99 $9.55 $5.71 EOP Unit Value $13.91 $11.99 $9.55 $5.71 Number of Units 1,935,487 3,106,849 1,112,311 477,953 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.38 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits BOP Unit Value $11.10 $9.39 $7.09 EOP Unit Value $11.35 $11.10 $9.39 $7.09 Number of Units 1,398,442 4,088,760 5,144,632 994,778 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.30 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits BOP Unit Value $11.98 $10.16 $7.69 EOP Unit Value $12.67 $11.98 $10.16 $7.69 Number of Units 4,579,887 4,677,820 3,868,951 772,260 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- ProFund VP Large-Cap Growth With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.30 $10.37 -- -- Number of Units 2,620,751 72,725 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.98 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-192 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------- ProFund VP Large-Cap Value With No Optional Benefits BOP Unit Value $10.37 -- -- EOP Unit Value $10.51 $10.37 -- -- Number of Units 2,141,308 159,605 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Mid-Cap With No Optional Benefits BOP Unit Value $9.70 -- -- EOP Unit Value $8.64 $9.70 -- -- Number of Units 364,782 39,360 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $8.94 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP Short Small-Cap With No Optional Benefits BOP Unit Value $9.54 -- -- EOP Unit Value $9.11 $9.54 - - Number of Units 220,843 $136,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.17 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits BOP Unit Value $15.52 $12.04 $6.14 EOP Unit Value $15.23 $15.52 $12.04 $6.14 Number of Units 816,755 5,098,565 1,702,558 212,085 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.66 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits BOP Unit Value $11.79 $11.08 $11.56 EOP Unit Value $12.64 $11.79 $11.08 $11.56 Number of Units 2,312,868 1,051,158 731,470 2,486,854 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.54 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------
A-193 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ----------------------------------------------------------------------------------- ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits BOP Unit Value $6.63 $7.56 $8.02 EOP Unit Value $6.00 $6.63 $7.56 $8.02 Number of Units 3,415,324 5,314,528 1,817,924 165,792 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.08 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- Access VP High Yield With No Optional Benefits BOP Unit Value -- -- -- -- EOP Unit Value $10.56 -- -- -- Number of Units 899,141 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.47 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust(R) 10 Uncommon Values (2000) With No Optional Benefits BOP Unit Value $10.03 $9.16 $6.80 EOP Unit Value $9.92 $10.03 $9.16 $6.80 Number of Units 87,726 91,924 66,435 19,826 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.74 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Global Dividend Target 15 With No Optional Benefits BOP Unit Value $11.85 -- -- EOP Unit Value $12.84 $11.85 -- -- Number of Units 590,605 311,233 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.83 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------- First Trust Managed VIP With No Optional Benefits BOP Unit Value $11.32 -- -- EOP Unit Value $11.94 $11.32 -- -- Number of Units 2,420,873 1,777,316 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.43 -- -- -- Number of Units -- -- -- -- - -----------------------------------------------------------------------------------
A-194 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS ASL II - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits BOP Unit Value $10.66 -- -- EOP Unit Value $10.83 $10.66 -- -- Number of Units 134,177 82,809 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.75 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust S&P Target 24 With No Optional Benefits BOP Unit Value $10.75 -- -- EOP Unit Value $11.01 $10.75 -- -- Number of Units 304,840 173,851 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.48 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target 10 With No Optional Benefits BOP Unit Value $10.48 -- -- EOP Unit Value $9.98 $10.48 -- -- Number of Units 194,864 155,695 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.53 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust The Dow Target Dividend With No Optional Benefits BOP Unit Value -- -- -- EOP Unit Value $9.76 -- -- -- Number of Units 1,240,527 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.67 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------- First Trust Value Line Target 25 With No Optional Benefits BOP Unit Value $12.59 -- -- EOP Unit Value $14.82 $12.59 -- -- Number of Units 1,068,339 389,792 -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.11 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------
A-195 Appendix B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Growth = Account Value of variable minus Purchase Payments - investment options plus Interim proportional withdrawals Value of Fixed Allocations (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth =$75,000 - [$50,000 - $0] =$25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth =$25,000 X 0.40 =$10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$85,000
Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth =$45,000 - [$50,000 - $0] =$-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$50,000
B-196 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth =$90,000 - [$50,000 - ($50,000 X $15,000/$75,000)] =$90,000 - [$50,000 - $10,000] =$90,000 - $40,000 =$50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth =$50,000 X 0.40 =$20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$110,000
EXAMPLES OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT CALCULATION The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value =$90,000 - [$90,000 X $15,000/$75,000] =$90,000 - $18,000 =$72,000 Basic Death Benefit =max [$80,000, $50,000 - ($50,000 X $15,000/$75,000)] =max [$80,000, $40,000] =$80,000
The Death Benefit therefore is $80,000. B-197 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value =$80,000 + $15,000 - [($ 80,000 + $15,000) X $5,000/$70,000] =$80,000 + $15,000 - $6,786 =$88,214 Basic Death Benefit =max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $88,214. EXAMPLES OF COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT CALCULATION The following are examples of how the Combination 5% Roll-Up and Highest Anniversary Value Death Benefit are calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the 7/th /anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $75,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Roll-Up Value is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than both the Roll-Up Value ($67,005) and the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Owner made a withdrawal of $5,000 on the 6/th /anniversary of the Issue Date when the Account Value was $45,000. The Roll-Up Value on the 6/th /anniversary of the Issue Date is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal Limit for the 7/th /annuity year is equal to 5% of the Roll-Up Value as of the 6/th /anniversary of the Issue Date, or $3,350. Therefore, the remaining $1,650 of the withdrawal results in a proportional reduction to the Roll-Up Value. On the 7/th /anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $43,000; however, the Anniversary Value on the 2/nd /anniversary of the Issue Date was $70,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. B-198 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Roll-Up Value ={(67,005 - $3,350) - [($67,005 - $3,350) X $1,650/($45,000 - $3,350)]} X 1.05 =($63,655 - $2,522) X 1.05 =$64,190 Highest Anniversary Value =$70,000 - [$70,000 X $5,000/$45,000] =$70,000 - $7,778 =$62,222 Basic Death Benefit =max [$43,000, $50,000 - ($50,000 X $5,000/$45,000)] =max [$43,000, $44,444] =$44,444
The Death Benefit therefore is $64,190. Example with death after Death Benefit Target Date Assume that the Owner has not made any withdrawals prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Roll-Up Value on the Death Benefit Target Date (the contract anniversary on or following the Owner's 80/th /birthday) is equal to initial Purchase Payment accumulated at 5% for 10 years, or $81,445. The Highest Anniversary Value on the Death Benefit Target Date was $85,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as of the Death Benefit Target Date; each increased by subsequent purchase payments and reduced proportionally for subsequent withdrawals. Roll-Up Value =$81,445 + $15,000 - [($81,445 + 15,000) X $5,000/$70,000] =$81,445 + $15,000 - $6,889 =$89,556 Highest Anniversary Value =$85,000 + $15,000 - [($85,000 + 15,000) X $5,000/$70,000] =$85,000 + $15,000 - $7,143 =$92,857 Basic Death Benefit =max [$75,000, $50,000 + $15,000 - {(50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $92,857. EXAMPLES OF HIGHEST DAILY VALUE DEATH BENEFIT CALCULATION The following are examples of how the HDV Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Highest Daily Value was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value or the basic Death Benefit. The Death Benefit would be the HDV ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). B-199 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Highest Daily Value ($90,000) was attained during the fifth Annuity Year. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value (proportionally reduced by the subsequent withdrawal) or the basic Death Benefit. Highest Daily Value =$90,000 - [$90,000 X $15,000/$75,000] =$90,000 - $18,000 =$72,000 Basic Death Benefit =max [$80,000, $50,000 - ($50,000 X $15,000/$75,000)] =max [$80,000, $40,000] =$80,000
The Death Benefit therefore is $80,000. Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Daily Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Daily Value on the Death Benefit Target Date plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Daily Value =$80,000 + $15,000 - [($80,000 + $15,000) X $5,000/$70,000] =$80,000 + $15,000 - $6,786 =$88,214 Basic Death Benefit =max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $88,214. B-200 APPENDIX C AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider American Skandia's Plus40/(TM) /Optional Life Insurance Rider was offered, in those states where approved, between November 18, 2002 for ASAP III, January 17, 2002 for ASL II and APEX II, and January 23, 2002 for XT6 and May 1, 2003. The description below of the Plus40/(TM) /benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40/(TM) /benefit. The life insurance coverage provided under the Plus40/(TM) /Optional Life Insurance Rider ("Plus40/(TM) /rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40/(TM) /rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40/(TM) /rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40/(TM) /rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable -- the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40/(TM) /rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40/(TM) /rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS . If you die during the first 24 months following the effective date of the Plus40/(TM)/ rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40/(TM) /rider if you die within 24 months of its effective date. . If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40/(TM) /rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. . If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40/(TM) /rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40/(TM) /rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. . If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40/(TM)/ rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. C-201 APPENDIX C AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued . If charges for the Plus40/(TM)/ rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). . If the age of any person covered under the Plus40/(TM)/ rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. . On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95/th /birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40/(TM) /rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40/(TM) /rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40/(TM) /rider or similar life insurance coverage. . The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. . The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40/(TM) /riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40/(TM) /rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40/(TM) /rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40/(TM) /rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40/(TM) /rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40/(TM) /RIDER The Plus40/(TM) /rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40/(TM) /rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. C-202 APPENDIX C AMERICAN SKANDIA ANNUITIES PROSPECTUS
PERCENTAGE OF ATTAINED AGE ACCOUNT VALUE Age 40-75 .80% Age 76-80 1.60% Age 81-85 3.20% Age 86-90 4.80% Age 91 6.50% Age 92 7.50% Age 93 8.50% Age 94 9.50% Age 95 10.50%
The charge for the Plus40/(TM) /rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. . If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. . If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40/(TM) /rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40/(TM) /rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40/(TM) /rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40/(TM) /rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40/(TM) /rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. C-203 APPENDIX C AMERICAN SKANDIA ANNUITIES PROSPECTUS SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40/(TM) /rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40/(TM) /rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40/(TM) /rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40/(TM) /rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40/(TM) /rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. C-204 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix D -- Additional Information on Asset Allocation Programs Program Rules .. Prior to December 5, 2005, you could elect an asset allocation program where the Sub-accounts for each asset class in each model portfolio were designated based on an evaluation of available Sub-accounts. Effective December 5, 2005, you can no longer enroll in an asset allocation program, but you will be permitted to remain in the program if you enrolled prior to the date. These Program Rules reflect how the asset allocation program will be administered as of December 5, 2005 for those Owners who have chosen to remain in their program. Asset allocation is a sophisticated method of diversification that allocates assets among asset classes in order to manage investment risk and potentially enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. How the Asset Allocation Program Works .. Amounts will automatically be allocated in accordance with the percentages and to Sub-accounts indicated for the model portfolio that you previously chose. If you allocate your Account Value or transfer your Account Value among any Sub-accounts that are outside of your model portfolio, we will allocate these amounts according to the allocation percentages of the applicable model portfolio upon the next rebalancing. You will not be permitted to change from one model portfolio to another. Upon each rebalance, 100% of your Account Value allocated to the variable Sub-accounts will be allocated to the asset allocation program. Any Account Value not invested in the Sub-accounts will not be part of the program. .. Additional Purchase Payments: Unless otherwise requested, any additional Purchase Payments applied to the variable Sub-accounts in the Annuity will be allocated to the Sub-accounts according to the allocation percentages for the model portfolio you chose. Allocation of additional Purchase Payments outside of your model portfolio but into a Sub-account, will be reallocated according to the allocation percentages of the applicable model portfolio upon the next rebalancing. .. Rebalancing Your Model Portfolio: Changes in the value of the Sub-account will cause your Account Value allocated to the Sub-accounts to vary from the percentage allocations of the model portfolio you select. By selecting the asset allocation program, you have directed us to periodically (e.g., quarterly) rebalance your Account Value allocated to the Sub-accounts in accordance with the percentage allocations assigned to each Sub-account within your model portfolio at the time you elected the program or had later been modified with your consent. Some asset allocation programs will only require that a rebalancing occur when the percent of your Account Value allocated to the Sub-accounts are outside of the acceptable range permitted under such asset allocation program. Note -- Any Account Value not invested in the Sub-accounts will not be affected by any rebalance. .. Sub-account Changes Within the Model Portfolios: From time to time you may be notified of a change in a Sub-account within your model portfolio. If you consent (in the manner that is then permitted or required) to the change, then it will be implemented upon the next rebalance. If you do not consent then rebalancing will continue in accordance with your unchanged model portfolio, unless the Sub-account is no longer available under your Annuity, in which case your lack of consent will be deemed a request to terminate the asset allocation program and the provisions under "Termination or Modification of the Asset Allocation Program" will apply. .. Owner Changes in Choice of Model Portfolio: You may not change from the model portfolio that you have elected to any other model portfolio. Termination or Modification of the Asset Allocation Program: .. You may request to terminate your asset allocation program at any time. Once you terminate your asset allocation program, you will not be permitted to re-enroll in the program. Any termination will be effective on the date that American Skandia receives your termination request in good order. If you are enrolled in HDV or LT5, termination of your asset allocation program must coincide with (i) the enrollment in a then currently available and approved asset allocation program or other approved option, or (ii) the allocation of your entire account value to the then required investment option(s) available with these benefits. However, if you are enrolled in LT5 you may terminate the LT5 benefit in order to then terminate your asset allocation program. American Skandia reserves the right to terminate or modify the asset allocation program at any time with respect to any programs. Restrictions on Electing the Asset Allocation: .. You cannot participate in auto-rebalancing or a DCA program while enrolled in an asset allocation program and Systematic Withdrawals can only be made as flat dollar amounts. D-205 APPENDIX E AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix E -- Description and Calculation of Previously Offered Optional Death Benefits (this applies solely to APEX II, ASL II, and XT6) If you purchased your Annuity before November 18, 2002 and were not a resident of the State of New York, the following optional death benefits were offered: ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. CALCULATION OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the Annuity's basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. The amount calculated in Items 1 & 2 above may be reduced by any Credits under certain circumstances. The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. KEY TERMS USED WITH THE GUARANTEED MINIMUM DEATH BENEFIT .. The Death Benefit Target Date is the contract anniversary on or after the 80/th/ birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. .. The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". E-206 APPENDIX E AMERICAN SKANDIA ANNUITIES PROSPECTUS .. The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. .. A Proportional Reduction is a reduction to the value being measured caused by a withdrawal, equaling the percentage of the withdrawal as compared to the Account Value as of the date of the withdrawal. For example, if your Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will reduce both your Anniversary Value and the amount determined by Purchase Payments increasing at the appropriate interest rate by 20%. CALCULATION OF GUARANTEED MINIMUM DEATH BENEFIT The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. The amount calculated in Items 1 & 3 above may be reduced by any Credits under certain circumstances. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. The amount calculated in Item 1 above may be reduced by any Credits under certain circumstances. ANNUITIES WITH JOINT OWNERS For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. ANNUITIES OWNED BY ENTITIES For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). CAN I TERMINATE THE OPTIONAL DEATH BENEFITS? DO THE OPTIONAL DEATH BENEFITS TERMINATE UNDER OTHER CIRCUMSTANCES? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. E-207 APPENDIX E AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix E -- Description and Calculation of Previously Offered Optional Death Benefits (this applies solely to APEX II, ASL II, and XT6) continued WHAT ARE THE CHARGES FOR THE OPTIONAL DEATH BENEFITS? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only) If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. ADDITIONAL CALCULATIONS EXAMPLES OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT CALCULATION The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value less the amount of any Credits applied within 12-months prior to the date of death, whichever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $75,000 Basic Death Benefit = $75,000 Death Benefit Amount = $75,000- $50,000 = $25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit =$75,000 + $12,500 = $87,500
EXAMPLES WITH MARKET DECLINE Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value less the amount of any Credits applied within 12-months prior to the date of death, whichever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. E-208 APPENDIX E AMERICAN SKANDIA ANNUITIES PROSPECTUS Purchase Payments =$50,000 Account Value =$40,000 Basic Death Benefit =$50,000 Death Benefit Amount =$50,000 - $50,000 = $0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit =$50,000 + $0 = $50,000
In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. EXAMPLES OF GUARANTEED MINIMUM DEATH BENEFIT CALCULATION The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). E-209 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix F -- Selecting the Variable Annuity That's Right for You American Skandia Life Assurance Corporation offers several deferred variable annuity products. Each annuity has different features and benefits that may be appropriate for you based on your individual financial situation and how you intend to use the annuity. Not all of these annuities may be available to you, depending on your state of residence and/or the broker-dealer through which your annuity was sold. You can verify which of these annuities is available to you by speaking to your Financial Professional or calling 1-800-752-6342. The different features and benefits may include variations on your ability to access funds in your annuity without the imposition of a withdrawal charge as well as different ongoing fees and charges you pay to stay in the contract. Additionally, differences may exist on various optional benefits such as guaranteed living benefits or death benefit protection. Among the factors you should consider when choosing which annuity product may be most appropriate for your individual needs are the following: .. Your age; .. The amount of your investment and any planned future deposits into the annuity; .. How long you intend to hold the annuity (also referred to as investment time horizon); .. Your desire to make withdrawals from the annuity; .. Your investment return objectives; .. The effect of optional benefits that may be elected, and .. Your desire to minimize costs and/or maximize return associated with the annuity. The following chart outlines some of the different features for each actively sold American Skandia Annuity. The availability of optional features, such as those noted in the chart, may increase the cost of the contract. Therefore you should carefully consider which features you plan to use when selecting your annuity. You should also consider the investment objectives, risks, charges and expenses of an investment carefully before investing. In addition, the hypothetical illustrations below reflect the account value and surrender value of each variable annuity over a variety of holding periods. These charts are meant to reflect how your annuities can grow or decrease depending on market conditions and the comparable value of each of the annuities (which reflects the charges associated with the annuities) under the assumptions noted. Your registered Financial Professional can provide you with prospectuses for one or more of these variable annuities noted in this document and can guide you through Selecting the Variable Annuity That's Right for You. AMERICAN SKANDIA ANNUITY PRODUCT COMPARISON Below is a summary of American Skandia's actively sold annuity products. ASL II refers to American Skandia Lifevest(R) II, APEX II refers to American Skandia APEX(R) II, ASAP III refers to American Skandia Advisor Plan/SM/ III, and XTra Credit SIX refers to American Skandia XTra Credit/SM/ SIX. You should consider the investment objectives, risks, charges and expenses of an investment in any Annuity carefully before investing. The prospectus for the Annuities as well as the underlying portfolio prospectuses contain this and other information about the variable annuities and underlying investment options. Your registered Financial Professional can provide you with prospectuses for one or more of these variable annuities and the underlying portfolios and can help you decide upon the Annuity that would be most advantageous for you given your individual needs. Please read the prospectuses carefully before investing. F-210 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS
ASL II APEX II ASAP III XTRA CREDIT SIX - ------------------------------------------------------------------------------------------------------------------------- Minimum Investment $15,000 $10,000 $1,000 $10,000 - ------------------------------------------------------------------------------------------------------------------------- Maximum Issue Age No Maximum Age 85 80 75 - ------------------------------------------------------------------------------------------------------------------------- Withdrawal Charge None 4 Years 8 Years 10 Years Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, (9%, 9%, 8.5% ,8%, 5%, 4%, 3%, 2%) 7%, 6%, 5%, 4%, 3%, 2%) - ------------------------------------------------------------------------------------------------------------------------- Insurance and 1.65% 1.65% 1.25% years 1-8; 1.65% years 1-10; Distribution Charge 0.65% years 9+ 0.65% years 11+ - ------------------------------------------------------------------------------------------------------------------------- Annual Lesser of $35 or Lesser of $35 or Lesser of $35 or Lesser of $35 or Maintenance Fee 2% of Account Value* 2% of Account Value* 2% of Account Value* 2% of Account Value - ------------------------------------------------------------------------------------------------------------------------- Contract Credit No Yes. Effective for Yes. Effective for Yes. The amount of Contracts issued on or Contracts issued on or the credit applied to a after June 20, 2005, after February 13, purchase payment is subject to state 2006, subject to state based on the year the availability. Generally, availability. Generally, purchase payment is we apply a Loyalty we apply a Loyalty received, for the first 6 Credit to your Credit to your years of the contract Annuity's Account Annuity's Account as follows: Value at the end of Value at the end of For contracts issued your fifth contract year your fifth contract year on or after February (i.e., on your fifth (i.e., on your fifth 13, 2006, subject to Contract Anniversary). Contract Anniversary). state availability, the The Loyalty Credit is The Loyalty Credit is credit percentages for equal to 2.75% equal to 0.50% of each year, starting (2.25% for contracts total Purchase with the first, are issued between June Payments made 6.50%, 5.00%, 4.00%, 20, 2005 and during the first four 3.00%, 2.00%, and February 13, 2006) of contract years less the 1.00%. total Purchase cumulative amount of Generally, for Payments made withdrawals made contracts issued prior during the first four (including the to February 13, 2006, contract years less the deduction of any the credit percentage cumulative amount of CDSC amounts) for the first year is withdrawals made through the fifth 6.0%. (including the Contract Anniversary deduction of any CDSC amounts) through the fifth Contract Anniversary - ------------------------------------------------------------------------------------------------------------------------- Fixed Allocation Fixed Allocation Fixed Allocation Fixed Allocation Fixed Allocation (early withdrawals are Available (As of May Available (As of May Available (As of May Available (As of May subject to a Market 1, 2005 currently 1, 2005 currently 1, 2005 currently 1, 2005 currently Value Adjustment) offering durations of: offering durations of: offering durations of: offering durations of: 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) - ------------------------------------------------------------------------------------------------------------------------- Variable Investment All options available All options available All options available All options available Options - -------------------------------------------------------------------------------------------------------------------------
F-211 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix F -- Selecting the Variable Annuity That's Right for You continued
ASL II APEX II ASAP III XTRA CREDIT SIX - ---------------------------------------------------------------------------------------------------------------------- Basic Death Benefit Prior to age 85: The The greater of: The greater of: The greater of: greater of: purchase purchase payments purchase payments purchase payments payments less less proportional less proportional less proportional proportional withdrawals or withdrawals or withdrawals or withdrawals or account value (no account value (no account value (no account value (no MVA Applied). MVA Applied). MVA Applied) less an MVA Applied). amount equal to the On or after age 85: credits applied within account value the 12 months prior to date of death. - ---------------------------------------------------------------------------------------------------------------------- Optional Death Enhanced Beneficiary EBP II, EBP II, EBP II, Benefits (for an Protection (EBPII) HDV, HDV, HDV, additional cost)/1/ Highest Daily Value HAV, HAV, HAV, (HDV) Combo 5% Roll-up / Combo 5% Roll-up/ Combo 5% Roll-up / Highest Anniversary HAV HAV HAV Value (HAV) Combo 5% Roll Up/ HAV - ---------------------------------------------------------------------------------------------------------------------- Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, additional cost)/2/ Guaranteed Minimum GMWB, GMWB, GMWB, Withdrawal Benefit GMIB, GMIB, GMIB, (GMWB), Lifetime Five, Spousal Lifetime Five, Spousal Lifetime Five, Spousal Guaranteed Minimum Lifetime Five Lifetime Five Lifetime Five Income Benefit (GMIB), Lifetime Five, Spousal Lifetime Five - ---------------------------------------------------------------------------------------------------------------------- Annuity Rewards/3/ Not Available Available after initial Available after initial Available after initial withdrawal period withdrawal period withdrawal period - ----------------------------------------------------------------------------------------------------------------------
HYPOTHETICAL ILLUSTRATION The following examples outline the value of each annuity as well as the amount that would be available to an investor as a result of full surrender at the end of each of the Annuity years specified. The values shown below are based on the following assumptions: An initial investment of $100,000 is made into each Annuity earning a gross rate of return of 0% and 6% respectively. .. No subsequent deposits or withdrawals are made from the Annuity. .. The hypothetical gross rates of return are reduced by the arithmetic average of the fees and expenses of the underlying portfolios and the charges that are deducted from the Annuity at the Separate Account level as follows/4:/ . 1.44% based on the fees and expenses of the underlying portfolios as of December 31,2005. The arithmetic average of all fund expenses is computed by adding portfolio management fees, 12b-1 fees and other expenses of all of the underlying portfolios and then dividing by the number of portfolios. For purposes of the illustrations, we do not reflect any expense reimbursements or expense waivers that might apply and are described in the prospectus fee table. . The Separate Account level charges include the Insurance Charge and Distribution Charge (as applicable). .. The Annuity Value and Surrender Value are further reduced by the annual maintenance fee. For XTra Credit SIX, APEX II, and ASAP III, the Annuity Value and Surrender Value also reflect the addition of any applicable credits. F-212 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS The Contract Value assumes no surrender, while the Surrender Value assumes a 100% surrender two days prior to the anniversary of the Issue Date of the Annuity ("Annuity Anniversary"), therefore reflecting the withdrawal charge applicable to that Annuity year. Note that a withdrawal on the Annuity Anniversary would be subject to the withdrawal charge applicable to the next Annuity year, which usually is lower. The values that you actually experience under an Annuity will be different than what is depicted here if any of the assumptions we make here differ from your circumstances, however the relative values for each Annuity reflected below will remain the same. (We will provide you with a personalized illustration upon request). Shaded cells represent the product with the highest customer Surrender Value for the contract year. Multiple shaded cells represent a tie between two or more annuities. 0% GROSS RATE OF RETURN
APEX II ASAP III XTRA CREDIT SIX ASL II - ------------------------------------------------------------------------------- CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER YR VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE - ------------------------------------------------------------------------------- 1 96,942 88,442 97,335 88,835 103,243 94,743 96,942 96,942 - ------------------------------------------------------------------------------- 2 93,936 85,936 94,700 87,700 100,044 91,044 93,936 93,936 - ------------------------------------------------------------------------------- 3 91,021 84,021 92,136 85,636 96,942 88,442 91,021 91,021 - ------------------------------------------------------------------------------- 4 88,197 82,197 89,640 83,640 93,936 85,936 88,197 88,197 - ------------------------------------------------------------------------------- 5 85,458 85,458 87,211 82,211 91,022 84,022 85,458 85,458 - ------------------------------------------------------------------------------- 6 85,470 85,470 85,333 81,333 88,197 82,197 82,804 82,804 - ------------------------------------------------------------------------------- 7 82,815 82,815 83,019 80,019 85,458 80,458 80,231 80,231 - ------------------------------------------------------------------------------- 8 80,242 80,242 80,767 78,767 82,804 78,804 77,737 77,737 - ------------------------------------------------------------------------------- 9 77,748 77,748 79,051 79,051 80,231 77,231 75,320 75,320 - ------------------------------------------------------------------------------- 10 75,330 75,330 77,371 77,371 77,737 75,737 72,976 72,976 - ------------------------------------------------------------------------------- 11 72,986 72,986 75,727 75,727 76,083 76,083 70,705 70,705 - ------------------------------------------------------------------------------- 12 70,714 70,714 74,117 74,117 74,466 74,466 68,503 68,503 - ------------------------------------------------------------------------------- 13 68,512 68,512 72,541 72,541 72,882 72,882 66,368 66,368 - ------------------------------------------------------------------------------- 14 66,377 66,377 70,998 70,998 71,332 71,332 64,299 64,299 - ------------------------------------------------------------------------------- 15 64,308 64,308 69,486 69,486 69,813 69,813 62,294 62,294 - ------------------------------------------------------------------------------- 16 62,302 62,302 68,006 68,006 68,326 68,326 60,350 60,350 - ------------------------------------------------------------------------------- 17 60,358 60,358 66,557 66,557 66,871 66,871 58,465 58,465 - ------------------------------------------------------------------------------- 18 58,473 58,473 65,138 65,138 65,445 65,445 56,639 56,639 - ------------------------------------------------------------------------------- 19 56,647 56,647 63,748 63,748 64,049 64,049 54,868 54,868 - ------------------------------------------------------------------------------- 20 54,876 54,876 62,387 62,387 62,682 62,682 53,152 53,152 - ------------------------------------------------------------------------------- 21 53,159 53,159 61,055 61,055 61,344 61,344 51,488 51,488 - ------------------------------------------------------------------------------- 22 51,495 51,495 59,751 59,751 60,033 60,033 49,876 49,876 - ------------------------------------------------------------------------------- 23 49,882 49,882 58,473 58,473 58,750 58,750 48,312 48,312 - ------------------------------------------------------------------------------- 24 48,319 48,319 57,222 57,222 57,493 57,493 46,797 46,797 - ------------------------------------------------------------------------------- 25 46,803 46,803 55,997 55,997 56,263 56,263 45,328 45,328 - -------------------------------------------------------------------------------
Assumptions: a. $100,000 initial investment b. Fund Expenses = 1.44% c. No optional death benefits or living benefits elected d. Annuity was issued on or after February 13, 2006 e. Surrender value assumes surrender 2 days before policy anniversary F-213 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix F -- Selecting the Variable Annuity That's Right for You continued 6% GROSS RATE OF RETURN
APEX II ASAP III XTRA CREDIT SIX ASL II - ------------------------------------------------------------------------------- CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER YR VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE - ------------------------------------------------------------------------------- 1 102,742 94,242 103,159 94,659 109,420 100,920 102,742 102,742 - ------------------------------------------------------------------------------- 2 105,567 97,567 106,427 99,427 112,393 103,393 105,567 105,567 - ------------------------------------------------------------------------------- 3 108,470 101,470 109,798 103,298 115,448 106,948 108,470 108,470 - ------------------------------------------------------------------------------- 4 111,453 105,453 113,276 107,276 118,586 110,586 111,453 111,453 - ------------------------------------------------------------------------------- 5 114,518 114,518 116,864 111,864 121,811 114,811 114,518 114,518 - ------------------------------------------------------------------------------- 6 120,492 120,492 121,082 117,082 125,125 119,125 117,667 117,667 - ------------------------------------------------------------------------------- 7 123,805 123,805 124,917 121,917 128,530 123,530 120,902 120,902 - ------------------------------------------------------------------------------- 8 127,210 127,210 128,874 126,874 132,028 128,028 124,227 124,227 - ------------------------------------------------------------------------------- 9 130,708 130,708 133,762 133,762 135,623 132,623 127,643 127,643 - ------------------------------------------------------------------------------- 10 134,302 134,302 138,838 138,838 139,316 137,316 131,153 131,153 - ------------------------------------------------------------------------------- 11 137,995 137,995 144,106 144,106 144,562 144,562 134,759 134,759 - ------------------------------------------------------------------------------- 12 141,789 141,789 149,574 149,574 150,011 150,011 138,465 138,465 - ------------------------------------------------------------------------------- 13 145,688 145,688 155,250 155,250 155,667 155,667 142,272 142,272 - ------------------------------------------------------------------------------- 14 149,694 149,694 161,141 161,141 161,537 161,537 146,184 146,184 - ------------------------------------------------------------------------------- 15 153,811 153,811 167,255 167,255 167,631 167,631 150,204 150,204 - ------------------------------------------------------------------------------- 16 158,040 158,040 173,602 173,602 173,955 173,955 154,334 154,334 - ------------------------------------------------------------------------------- 17 162,386 162,386 180,189 180,189 180,520 180,520 158,578 158,578 - ------------------------------------------------------------------------------- 18 166,851 166,851 187,027 187,027 187,333 187,333 162,939 162,939 - ------------------------------------------------------------------------------- 19 171,439 171,439 194,123 194,123 194,405 194,405 167,419 167,419 - ------------------------------------------------------------------------------- 20 176,153 176,153 201,489 201,489 201,746 201,746 172,023 172,023 - ------------------------------------------------------------------------------- 21 180,997 180,997 209,135 209,135 209,365 209,365 176,753 176,753 - ------------------------------------------------------------------------------- 22 185,974 185,974 217,071 217,071 217,273 217,273 181,613 181,613 - ------------------------------------------------------------------------------- 23 191,088 191,088 225,307 225,307 225,481 225,481 186,607 186,607 - ------------------------------------------------------------------------------- 24 196,343 196,343 233,857 233,857 234,000 234,000 191,739 191,739 - ------------------------------------------------------------------------------- 25 201,742 201,742 242,730 242,730 242,843 242,843 197,011 197,011 - -------------------------------------------------------------------------------
Assumptions: a. $100,000 initial investment b. Fund Expenses = 1.44% c. No optional death benefits or living benefits elected d. Annuity was issued on or after February 13, 2006 e. Surrender value assumes surrender 2 days before policy anniversary F-214 APPENDIX F AMERICAN SKANDIA ANNUITIES PROSPECTUS In addition, the following charts indicate the days (measured from the Issue Date) in which each annuity product would have the highest Surrender Value amongst the products listed given the above assumptions. 0% GROSS RATE OF RETURN
OVER 30 YEARS, DAYS WON TOTAL DAYS YEAR ACTUAL DAYS --------------------------------------------------------- APEX II 1460 4 1460 5 1461-1825 6 1826-2190 7 2191-2555 8 2556-2919 --------------------------------------------------------- ASAP III 730 8 2920 9 2921-3285 10 3286-3649 --------------------------------------------------------- Xtra Credit SIX 7301 10 3650 11-30 3651-10950 --------------------------------------------------------- ASL II 1825 1-5 1-1825 ---------------------------------------------------------
6% GROSS RATE OF RETURN
OVER 30 YEARS, DAYS WON TOTAL DAYS YEAR ACTUAL DAYS --------------------------------------------------------- APEX II 729 6 1826-2190 7 2191-2554 --------------------------------------------------------- ASAP III 1425 9 2956-3285 10 3286-3649 28-30 10220-10950 --------------------------------------------------------- Xtra Credit SIX 7337 4 1460 5 1461-1825 7 2555 8 2556-2920 9 2921-2955 10 3650 11-26 3651-9490 27 9491-9855 28 9856-10219 --------------------------------------------------------- ASL II 1459 1-3 1-1095 4 1096-1459 ---------------------------------------------------------
Days listed assume 365 days per year and do not account for Leap Years. * Annual Maintenance Fee is waived for account values of $100,000 or more. 1)For more information on these benefits, refer to the "Death Benefit" section in the Prospectus. 2)For more information on these benefits, refer to the "Living Benefit Programs" section in the Prospectus. 3)The Annuity Rewards benefit offers Owners an ability to increase the guaranteed death benefit so that the death benefit will at least equal the Annuity's account value on the effective date of the Annuity Rewards benefits, if the terms of the Annuity Rewards benefit are met. 4)These reductions result in hypothetical net rates of return corresponding to the 0% and 6% gross rates of return, respectively as follows: ASLII -3.02% and 2.80%; APEX II -3.02% and 2.80%; ASAP III -2.64% and 3.21% in years 1-8 and -2.06% and 3.82% in years 9+, XTra Credit SIX -3.02% and 2.80% in years 1-10 and -2.06% and 3.82% in years 11+. F-215 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS (PLEASE CHECK ONE) ________ ASAPIII-PROS (05/2006), ________ APEX2PROS (05/2006), ________, ASL2PROS (05/2006), ________ XT6PROS (05/2006). ----------------- (print your name) ----------------- (address) ----------------- (city/state/zip code) [LOGO] PRSRT STD The Prudential Insurance Company of America U.S. POSTAGE 751 Broad Street PAID Newark, NJ 07102-3777 LANCASTER, PA PERMIT NO. 1793 Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED A Prudential Financial Company A Prudential Financial Company One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-752-6342 Telephone: 203-926-1888 http://www.americanskandia.prudential.com http://www.americanskandia.prudential.com
MAILING ADDRESSES: AMERICAN SKANDIA -- VARIABLE ANNUITIES P.O. Box 7960 Philadelphia, PA 19176 EXPRESS MAIL: AMERICAN SKANDIA -- VARIABLE ANNUITIES 2101 Welsh Road Dresher, PA 19025 Supplement dated June 30, 2006 to the May 1, 2006 Prospectuses for the following annuity products: American Skandia Advisor Plan III, American Skandia XTra Credit SIX, American Skandia LifeVest(R) II, American Skandia APEX II, Advisors Choice (R)/2000/, Optimum, Optimum Plus, Optimum Four, American Skandia Variable Adjustable Immediate Annuity and American Skandia Variable Immediate Annuity (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable or immediate annuity you own, and is not intended to be a prospectus or offer for any other variable or immediate annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe a change to the above-referenced Prospectuses. This change applies to each Prospectus and will be effective on or about June 30, 2006. The section of the Prospectus entitled "May I Give My Financial Professional Permission to Forward Transaction Instructions?" is replaced with the following: Yes. Subject to our rules, your Financial Professional may forward instructions regarding the allocation of your Account Value, and request financial transactions involving investment options. If your Financial Professional has this authority, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Financial Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. Supplement to Prospectuses Dated May 1, 2006 Supplement dated August 14, 2006 Supplement dated August 14, 2006 to the May 1, 2006 Prospectuses for the following annuity products: American Skandia Advisor Plan III, American Skandia APEX(R) II, American Skandia XTra Credit Six, American Skandia LifeVest(R) II, Advisors Choice (R)/2000/, Optimum, Optimum Four and Optimum Plus, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable annuity you own, and is not intended to be a prospectus or offer for any other variable annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to each Prospectus in order to: (1) describe certain changes regarding the step-up feature of the Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit; (2) reflect a change to the non-fundamental investment policies of one American Skandia Trust ("AST") portfolio; (3) reflect the removal of a sub-advisor for one AST portfolio and the addition of sub-advisors for two AST Portfolios; and (4) modify the disclosure concerning certain payment arrangements. All of these changes apply to each Prospectus and will be effective on or about August 14, 2006, unless specifically stated otherwise. 1. Administrative Changes to Certain Optional Benefits --------------------------------------------------- Lifetime Five Income Benefit - ---------------------------- The following prospectus revisions reflect, for elections of this benefit on or after March 20, 2006, a reduced waiting period (i.e. from 3 years to 1 year) for the step-up of certain values associated with the Lifetime Five Income Benefit and a change to the threshold requirement associated with the Auto Step-Up feature of the benefit: A. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit (Lifetime Five)", under the heading "Key Feature - Protected Withdrawal Value" the following replaces the second and third paragraphs: You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program on or after March 20, 2006: . you are eligible to step-up the Protected Withdrawal Value on or after the 1st anniversary of the first withdrawal under the Lifetime Five program . the Protected Withdrawal Value can be stepped up again on or after the 1st anniversary of the preceding step-up If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect: . you are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program . the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary of the preceding step-up In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of step-up. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elected the Lifetime Five program on or after March 20, 2006 and have also elected the Auto Step-Up feature: . the first Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the later of (1) the date of the first withdrawal under the Lifetime Five program or (2) the most recent step-up . your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value is greater than the Annual Income Amount by any amount . if at the time of the first Auto Step-Up opportunity, 5% of the Account Value is not greater than the Annual Income Amount, an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs . once a step-up occurs, the next Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the most recent step-up If you elected the Lifetime Five program prior to March 20, 2006 and have also elected the Auto Step-Up feature: . the first Auto Step-Up opportunity will occur on the Annuity Anniversary that is at least 5 years after the later of (1) the date of the first withdrawal under the Lifetime Five Program benefit or (2) the most recent step-up . your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value is greater than the Annual Income Amount by 5% or more . if at the time of the first Auto Step-Up opportunity, 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs . once a step-up occurs, the next Auto Step-Up opportunity will occur on the Annuity Anniversary that is at least 5 years after the most recent step-up In either scenario (i.e., elections before or after March 20, 2006), if on the date that we implement an Auto Step-Up to your Protected Withdrawal Value, the charge for Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. Subject to our rules and restrictions, you will still be permitted to manually step-up the Protected Withdrawal Value even if you elect the Auto Step-Up feature. B. "Example 3. Step-up of the Protected Withdrawal Value" under the "Lifetime Five Income Benefit (Lifetime Five)" section of each Prospectus is replaced with the following hypothetical example. In addition, in the assumptions that precede the examples, we delete item 5, which states that "the Account Value on February 1, 2010 is equal to $280,000". Example 3. Step-up of the Protected Withdrawal Value If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a step-up is elected on February 1, 2012, and the Account Value on February 1, 2012 is $280,000, then the following values would result: .. Protected Withdrawal Value = Account Value on February 1, 2012 = $280,000 .. Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is increased to $14,000. .. Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual Withdrawal Amount is increased to $19,600. .. Because the Issue Date and Effective Date of Lifetime Five for this example is prior to March 20, 2006, if the step-up request on February 1, 2012 was due to the election of the auto step-up feature, we would first check to see if an auto step-up should occur by checking to see if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. 5% of the Account Value is equal to 5% of $280,000, which is $14,000. 5% of the Annual Income Amount ($13,250) is $662.50, which added to the Annual Income 2 Amount is $13,912.50. Since 5% of the Account Value is greater than $13,912.50, the step-up would still occur in this scenario, and all of the values would be increased as indicated above. Had the Issue Date and Effective Date of the Lifetime Five benefit been on or after March 20, 2006, the step-up would still occur because 5% of the Account Value is greater than the Annual Income Amount. Spousal Lifetime Five Income Benefit - ------------------------------------ The following prospectus revisions reflect a reduced waiting period (i.e. from 3 years to 1 year) for the step-up of the Annual Income Amount and a change to the threshold requirement associated with the Auto Step-Up feature: A. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)", under the heading "Key Feature - Annual Income Amount under the Spousal Life Income Benefit" the following replaces the second and third paragraphs: You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 1st anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 1st anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the later of (1) the date of the first withdrawal under the Spousal Lifetime Five program or (2) the most recent step-up. At this time, your Annual Income Amount will be stepped-up if 5% of your Account Value is greater than the Annual Income Amount by any amount. If 5% of the Account Value does not exceed the Annual Income Amount, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least 1 year after the most recent step-up. If, on the date that we implement an Auto Step-Up to your Annual Income Amount, the charge for Spousal Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. Subject to our rules and restrictions, you will still be permitted to manually step-up the Annual Income Amount even if you elect the Auto Step-Up feature. B. "Example 3. Step-up of the Annual Income Amount" under the "Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)" section of each Prospectus is replaced with the following: Example 3. Step-up of the Annual Income Amount If a step-up of the Annual Income Amount is requested on February 1, 2010 or the Auto Step-Up feature was elected, the step-up would occur because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. 2. Investment Policy Change ------------------------ As a result of an investment policy change to the AST Goldman Sachs Small-Cap Value Portfolio, effective August 25, 2006, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: 3 INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ ------------------------------------------------------------------------------------------------------------ ----------- Small AST Goldman Sachs Small-Cap Value Portfolio: seeks long-term capital appreciation. The Portfolio will Goldman Cap seek its objective through investments primarily in equity securities that are believed to be undervalued in Sachs Asset Value the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their Management, outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, L.P. at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as stocks of companies with market capitalizations that are within the range of the Russell 2000 Value Index at the time of purchase.
3. Sub-advisor Changes/Additions ----------------------------- a. Effective June 16, 2006, Goldman Sachs Asset Management, L.P. (GSAM) is no longer a sub-advisor of the AST High Yield Portfolio. To reflect this change, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" GSAM is deleted from the column entitled "Portfolio Advisor/Sub-Advisor" for the Portfolio. b. Effective on or about November 13, 2006, Marsico Capital Management, LLC (Marsico) will be added as a sub-advisor to the AST William Blair International Growth Portfolio and the name of the Portfolio will be changed to the "AST International Growth Portfolio". As a result, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised to reflect these changes. c. Effective on or about November 13, 2006, Thornburg Investment Management, Inc. (Thornburg) will be added as a sub-advisor to the AST LSV International Value Portfolio and the name of the Portfolio will be changed to the "AST International Value Portfolio". As a result, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised to reflect these changes. 4. Service Fees ------------ In the section of each Prospectus entitled "General Information", sub-section "What Is The Structure Of The Underlying Funds?", under the heading "Service Fees Payable to American Skandia," we replace the second paragraph that begins "[I]n addition, the investment adviser, sub-adviser or distributor . . ." with the following: In addition, an investment adviser, sub-adviser or distributor of the underlying Portfolios may also compensate us by providing reimbursement, defraying the costs of, or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with the Annuity. These services may include, but are not limited to: sponsoring or co-sponsoring various promotional, educational or marketing meetings and seminars attended by distributors, wholesalers, and/or broker dealer firms' registered representatives, and creating marketing material discussing the contract, available options, and underlying Portfolios. The amounts paid depend on the nature of the meetings, the number of meetings attended by the adviser, sub-adviser, or distributor, the number of participants and attendees at the meetings, the costs expected to be incurred, and the level of the adviser's, sub-adviser's or distributor's participation. These payments or reimbursements may not be offered by all advisers, sub-advisers, or distributor and the amounts of such payments may vary between and among each adviser, sub-adviser and distributor depending on their respective participation. 4 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 OPTIMUMSM OPTIMUM FOURSM OPTIMUM PLUSSM Flexible Premium Deferred Annuities PROSPECTUS: MAY 1, 2 0 0 6 This prospectus describes three different flexible premium deferred annuities (the "Annuities" or the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our", or "us") exclusively through Linsco/Private Ledger, Corp. Each Annuity may be offered as an individual annuity contract or as an interest in a group annuity. Each Annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the Annuity. This Prospectus describes the important features of the Annuities and what you should consider before purchasing one of the Annuities. The Prospectus also describes differences among the Annuities which include differences in the fees and charges you pay and variations in some product features such as the availability of certain bonus amounts and basic death benefit protection. These differences among the products are discussed more fully in the Prospectus and summarized in Appendix D entitled "Selecting the Variable Annuity That's Right for You". There may also be differences in the compensation paid to your Financial Professional for each Annuity. In addition, selling broker-dealer firms through which each Annuity is sold may decline to make available to their customers certain of the optional features offered generally under the Annuity. Alternatively, such firms may restrict the availability of the optional benefits that they do make available to their customers (e.g., by imposing a lower maximum issue age for certain optional benefits than what is prescribed generally under the Annuity). Please speak to your registered representative for further details. Each Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. For more information about variations applicable to your state, please refer to your Annuity contract or consult your Financial Professional. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. The Sub-accounts - -------------------------------------------------------------------------------- Each Sub-account of American Skandia Life Assurance Corporation Variable Account B invests in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: American Skandia Trust and Evergreen Variable Annuity Trust. See the following page for a complete list of Sub-accounts. Please Read This Prospectus - -------------------------------------------------------------------------------- Please read this Prospectus and the current prospectus for the underlying mutual funds. Keep them for future reference. If you are purchasing one of the Annuities as a replacement for an existing variable annuity or variable life coverage or a fixed insurance policy, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the Annuity's liquidity features will satisfy that need. Available Information - -------------------------------------------------------------------------------- We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 89. This Prospectus is part of the registration statement we filed with the SEC regarding this offering. Additional information on us and this offering is available in the registration statement and the exhibits thereto. You may review and obtain copies of these materials at the prescribed rates from the SEC's Public Reference Section, 100 F Street N.E., Washington, D.C., 20549. (See SEC file number 333-96577 for Optimum, 333-71654 for Optimum Four and 333-71834 for Optimum Plus). 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. For Further Information call: - -------------------------------------------------------------------------------- 1-800-752-6342 These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in an annuity involves investment risks, including possible loss of value, even with respect to amounts allocated to the AST Money Market Sub-account. 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. Optimum/SM/, Optimum Four/SM/, Optimum Plus/SM/, are service marks or registered trademarks of Linsco/Private Ledger, Corp. Prospectus Dated: May 1, 2006 Statement of Additional Information Dated: May 1, 2006 OA074PROS-0506 LPLOASAI
PLEASE SEE OUR PRIVACY POLICY AND OUR IRA, ROTH IRA AND FINANCIAL DISCLOSURE STATEMENTS ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. INVESTMENT OPTIONS AMERICAN SKANDIA TRUST: AST AllianceBernstein Core Value AST AllianceBernstein Growth & Income AST DeAM Small-Cap Growth AST Federated Aggressive Growth AST Goldman Sachs Mid-Cap Growth AST JPMorgan International Equity AST Large-Cap Value AST Lord Abbett Bond Debenture AST LSV International Value AST Marsico Capital Growth AST MFS Growth AST Money Market AST Neuberger Berman Mid-Cap Value AST PIMCO Limited Maturity Bond AST PIMCO Total Return Bond AST Small-Cap Growth AST Small-Cap Value AST T. Rowe Price Large-Cap Growth AST T. Rowe Price Global Bond AST William Blair International Growth EVERGREEN VARIABLE ANNUITY TRUST: International Equity Omega Contents Introduction.................................................................................... 1 Why Would I Choose to Purchase One of the Annuities?........................................... 1 What Are Some of the Key Features of the Annuities?............................................ 1 How Do I Purchase One of the Annuities?........................................................ 2 Glossary of Terms............................................................................... 3 Summary of Contract Fees and Charges............................................................ 5 Expense Examples................................................................................ 12 Investment Options.............................................................................. 13 What are the Investment Objectives and Policies of the Portfolio?.............................. 13 What are the Fixed Allocations?................................................................ 17 Fees and Charges................................................................................ 18 What are the Contract Fees and Charges?........................................................ 18 What Charges Apply to the Fixed Allocations?................................................... 20 What Charges Apply if I Choose an Annuity Payment Option?...................................... 20 Exceptions/Reductions to Fees and Charges...................................................... 20 Purchasing Your Annuity......................................................................... 21 What are Our Requirements for Purchasing One of the Annuities?................................. 21 Managing Your Annuity........................................................................... 22 May I Change the Owner, Annuitant and Beneficiary Designations?................................ 22 May I Return My Annuity if I Change My Mind?................................................... 22 May I Make Additional Purchase Payments?....................................................... 22 May I Make Scheduled Payments Directly from My Bank Account?................................... 23 May I Make Purchase Payments Through a Salary Reduction Program?............................... 23 Managing Your Account Value..................................................................... 24 How and When are Purchase Payments Invested?................................................... 24 How Do I Receive a Loyalty Credit Under the Optimum and Optimum Four Annuities?................ 24 How Are Loyalty Credits Applied to My Account Value Under the Optimum and Optimum Four Annuities?................................................................................... 24 How Do I Receive Credits Under the Optimum Plus Annuity?....................................... 25 How Are Credits Applied to Account Value Under the Optimum Plus Annuity?....................... 25 Are There Restrictions or Charges on Transfers Between Investment Options?..................... 26 Do You Offer Dollar Cost Averaging?............................................................ 28 Do You Offer Any Automatic Rebalancing Programs?............................................... 28 Are Any Asset Allocation Programs Available?................................................... 29 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date?............ 29 May I Give My Financial Professional Permission to Forward Transaction Instructions?........... 30 May I Authorize My Third Party Investment Advisor to Manage My Account?........................ 30 How Do the Fixed Allocations Work?............................................................. 31 How Do You Determine Rates for Fixed Allocations?.............................................. 32 How Does the Market Value Adjustment Work?..................................................... 32 What Happens When My Guarantee Period Matures?................................................. 33 Access To Account Value......................................................................... 34 What Types of Distributions are Available to Me?............................................... 34 Are There Tax Implications for Distributions?.................................................. 34 Can I Withdraw a Portion of My Annuity?........................................................ 34 How Much Can I Withdraw as a Free Withdrawal?.................................................. 35 Can I Make Periodic Withdrawals from My Annuity During the Accumulation Period?................ 35 Do You Offer a Program for Withdrawals Under Sections 72(t)/72(q) of the Internal Revenue Code? 35 What are Minimum Distributions and When Would I Need to Make Them?............................. 35 Can I Surrender My Annuity for Its Value?...................................................... 36 What is a Medically-Related Surrender and How Do I Qualify?.................................... 36
(i) Contents What Types of Annuity Options are Available?............................................. 36 How and When Do I Choose the Annuity Payment Option?..................................... 38 How are Annuity Payments Calculated?..................................................... 38 Living Benefit Programs................................................................... 40 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive?................................................................................. 40 Guaranteed Return Option Plus/SM/ (GRO Plus/SM/)......................................... 40 Guaranteed Return Option (GRO)........................................................... 45 Guaranteed Minimum Withdrawal Benefit (GMWB)............................................. 48 Guaranteed Minimum Income Benefit (GMIB)................................................. 51 Lifetime Five Income Benefit (Lifetime Five)............................................. 56 Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)............................. 62 Death Benefit............................................................................. 66 What Triggers the Payment of a Death Benefit?............................................ 66 Basic Death Benefit...................................................................... 66 Optional Death Benefits.................................................................. 66 American Skandia's Annuity Rewards....................................................... 70 Payment of Death Benefits................................................................ 71 Valuing Your Investment................................................................... 73 How is My Account Value Determined?...................................................... 73 What is the Surrender Value of My Annuity?............................................... 73 How and When Do You Value the Sub-Accounts?.............................................. 73 How Do You Value Fixed Allocations?...................................................... 73 When Do You Process and Value Transactions?.............................................. 73 What Happens to My Units When There is a Change in Daily Asset-Based Charges?............ 74 Tax Considerations........................................................................ 76 General Information....................................................................... 83 How Will I Receive Statements and Reports?............................................... 83 Who is American Skandia?................................................................. 83 What are Separate Accounts?.............................................................. 83 What is the Legal Structure of the Underlying Funds?..................................... 85 Who Distributes Annuities Offered by American Skandia?................................... 86 Incorporation of Certain Documents by Reference.......................................... 87 Financial Statements..................................................................... 87 How to Contact Us........................................................................ 87 Indemnification.......................................................................... 88 Legal Proceedings........................................................................ 88 Contents of the Statement of Additional Information...................................... 89 Appendix A -- Condensed Financial Information About Separate Account B.................... A-1 Appendix B -- Calculation of Optional Death Benefits...................................... B-1 Appendix C -- Additional Information on Asset Allocation Programs......................... C-1 Appendix D -- Selecting the Variable Annuity That's Right for You......................... D-1
(ii) AMERICAN SKANDIA ANNUITIES PROSPECTUS Introduction Why Would I Choose to Purchase One of the Annuities? - -------------------------------------------------------------------------------- The Annuities are frequently used for retirement planning because they allow you to accumulate retirement savings and also offer annuity payment options when you are ready to begin receiving income. Each Annuity also offers a choice of different optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive and one or more Death Benefits that can protect your retirement savings if you die during a period of declining markets. Each Annuity may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). Each Annuity may also be used as an investment vehicle for "non-qualified" investments. Each Annuity allows you to invest your money in a number of Sub-accounts as well as in one or more Fixed Allocations. This Prospectus describes four different Annuities including features that these Annuities have in common as well as differences. For a summary of each Annuity's features, please refer to Appendix D entitled, "Selecting the Variable Annuity That's Right for You." When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 70 1/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. In other words, you need not invest in an Annuity to gain the preferential tax treatment provided by your retirement plan. An Annuity, however, may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including Death Benefit protection for your beneficiaries, lifetime income options and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your Financial Professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. What Are Some of the Key Features of the Annuities? - -------------------------------------------------------------------------------- .. Each Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of Purchase Payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. .. Each Annuity offers both Sub-accounts and Fixed Allocations. If you allocate your Account Value to Sub-accounts, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed Allocations of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. .. Each Annuity features two distinct periods -- the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. .. During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. Variable payment options are made available through a different contract and prospectus. .. Each Annuity offers optional income benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive. .. Each Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. .. You are allowed to withdraw a limited amount of money from each Annuity on an annual basis without any charges, although any optional guaranteed benefit you elect may be reduced. Other product features allow you to access your Account Value as necessary, although a charge may apply. .. Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. 5 AMERICAN SKANDIA ANNUITIES PROSPECTUS Introduction continued WITH RESPECT TO OPTIMUM PLUS ONLY: .. If you purchase this Annuity, we apply an additional amount (referred to as an Optimum Plus/SM/ amount, Purchase Credit or Credit ) to your Account Value with each Purchase Payment you make, including your initial Purchase Payment and any additional Purchase Payments during the first six Annuity Years. .. Please note that during the first 10 years, the total asset-based charges on the Optimum Plus Annuity are higher than many of our other annuities. In addition, the Contingent Deferred Sales Charge (CDSC) on the Optimum Plus Annuity is higher and is deducted for a longer period of time as compared to our other annuities. The Optimum Plus/SM/ amount is included in your Account Value. However, American Skandia may take back all Optimum Plus amounts if you return your Annuity under the "free-look" provision. In addition, American Skandia may take back an Optimum Plus amount associated with any Purchase Payment if (a) the Optimum Plus amount was applied within twelve (12) months prior to the death of the Owner (or Annuitant if entity owned) or (b) the Optimum Plus amount was applied within 12 months prior to a request to surrender the Annuity under the medically-related surrender provision. If you qualify for the 6.5% Optimum Plus amount in the first year (for annuities issued on or after February 13, 2006, subject to state availability), only 6% of that amount will be taken back upon death or medically-related surrender request, both as described above. However, we will take back the entire 6.5% if you "free-look" your Annuity. Inthese situations, your Account Value could be substantially reduced. The amount we take back will equal the Optimum Plus amount, without adjustment up or down for investment performance. Therefore, any gain on the Optimum Plus amount will not be taken back. But if there was a loss on the Optimum Plus amount, the amount we take back will still equal the Optimum Plus amount. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we take back the Optimum Plus/SM/ amount. .. If replacing an annuity, please consider all charges associated with that annuity. Purchase Credits applicable to bonus products should not be viewed as an offset of any surrender charge that applies to any annuity contract you currently own. For more information on all available annuities, please see Appendix D of this prospectus. WITH RESPECT TO OPTIMUM FOUR ONLY: .. This Annuity offers (subject to state availability) a Loyalty Credit which we add to your Account Value with respect to Purchase Payments that have been made during the first four Annuity Years less withdrawals through the fifth Annuity Anniversary, subject to our rules and State availability. WITH RESPECT TO OPTIMUM ONLY: .. For annuities issued on or after February 13, 2006 (subject to state availability) this Annuity offers a Loyalty Credit which we add to your Account Value with respect to Purchase Payments that have been made during the first four Annuity Years less withdrawals through the fifth Annuity Anniversary, subject to our rules and State availability. How Do I Purchase One of the Annuities? - -------------------------------------------------------------------------------- We sell each Annuity through licensed, registered Financial Professionals. Unless we agree otherwise and subject to our rules, each Annuity has minimum initial Purchase Payments as follows: $1,000 for Optimum, $10,000 for Optimum Plus and Optimum Four. We may allow you to make a lower initial Purchase Payment provided you establish an electronic funds transfer under which Purchase Payments received in the first Annuity Year total at least the minimum initial Purchase Payment for the Annuity purchased. Unless we agree otherwise and subject to our rules, if the Annuity is owned by an individual or individuals, the oldest of those Owners must not be older than a maximum issue age as of the Issue Date of the Annuity as follows: age 80 for Optimum, age 75 for Optimum Plus and age 85 for Optimum Four. If the Annuity is owned by an entity, the annuitant must not be older than the maximum issue age, as of the Issue Date of the Annuity unless we agree otherwise. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity, on the date the benefit is elected or the date of the Owner's death. 6 AMERICAN SKANDIA ANNUITIES PROSPECTUS Glossary of Terms Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. ACCOUNT VALUE The value of each allocation to a Sub-account (also referred to as a "variable investment option") or a Fixed Allocation prior to the Annuity Date, plus any earnings, and/or less any losses, distributions and charges. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on a contract anniversary, any fee that is deducted from the contract annually in arrears. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. With respect to Optimum Plus, the Account Value includes any Credits we applied to your Purchase Payments that we are entitled to take back under certain circumstances. With respect to Optimum and Optimum Four, the Account Value includes any Loyalty Credit we apply. ANNUITIZATION The application of Account Value (or Protected Income Value for the Guaranteed Minimum Income Benefit, if applicable) to one of the available annuity options for the Annuitant to begin receiving periodic payments for life (or joint lives), for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. ANNUITY DATE The date you choose for annuity payments to commence. A maximum Annuity Date may apply. ANNUITY YEAR A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. CODE The Internal Revenue Code of 1986, as amended from time to time. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing the greater of the Highest Anniversary Value Death Benefit and a 5% annual increase on Purchase Payments adjusted for withdrawals. CONTINGENT DEFERRED SALES CHARGE (CDSC) This is a sales charge that may be deducted when you make a full or partial withdrawal under your Annuity. We refer to this as a "contingent" charge because it is imposed only if you make a withdrawal. The charge is a percentage of each applicable Purchase Payment that is being withdrawn. The period during which a particular percentage applies is measured from the effective date of each Purchase Payment. The amount and duration of the CDSC varies among Optimum, Optimum Four and Optimum Plus. See "Summary of Contract Fees and Charges" for details on the CDSC for each Annuity. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing amounts in addition to the basic Death Benefit that can be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. FIXED ALLOCATION An investment option that offers a fixed rate of interest for a specified Guarantee Period during the accumulation period. FREE LOOK Under state insurance laws, you have the right, during a limited period of time, to examine your Annuity and decide if you want to keep it. This right is referred to as your "free look" right. The length of this time period depends on the law of your state, and may vary depending on whether your purchase is a replacement or not. Check your Annuity contract for more details about your free look right. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) We offer a program that, for an additional cost, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on your total Purchase Payments and an annual increase of 5% on such Purchase Payments adjusted for withdrawals (called the "Protected Income Value"), regardless of the impact of market performance on your Account Value. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) We offer a program that, for an additional cost, guarantees your ability to withdraw amounts over time equal to an initial principal value, regardless of the impact of market performance on your Account Value. GUARANTEE PERIOD A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/ )/GUARANTEED RETURN OPTION We offer a program that, for an additional cost, guarantees a "return of premium" at a future date, while allowing you to allocate all or a portion of your Account Value to certain Sub-accounts. HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV") We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Anniversary Value, less proportional withdrawals. 7 AMERICAN SKANDIA ANNUITIES PROSPECTUS Glossary of Terms continued HIGHEST DAILY VALUE DEATH BENEFIT ("HDV") We offer an Optional Death Benefit that, for an additional cost, provides an enhanced level of protection for your beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Daily Value, less proportional withdrawals. INTERIM VALUE The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. ISSUE DATE The effective date of your Annuity. LIFETIME FIVE INCOME BENEFIT We offer a program that, for an additional cost, guarantees your ability to withdraw amounts equal to a percentage of an initial principal value, regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. MVA A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day more than 30 days prior to the Maturity Date of such Fixed Allocation. OWNER With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. SPOUSAL LIFETIME FIVE INCOME BENEFIT We offer a program that, for an additional cost, guarantees until the later death of two Designated Lives (as defined in this Prospectus) the ability to withdraw an annual amount equal to 5% of an initial principal value regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. SUB-ACCOUNT We issue your Annuity through our separate account. See "What is the Separate Account?" under the General Information section. The separate account invests in underlying mutual fund portfolios. From an accounting perspective, we divide the separate account into a number of sections, each of which corresponds to a particular underlying mutual fund portfolio. We refer to each such section of our separate account as a "Sub-account". SURRENDER VALUE The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and the charge for any optional benefits and any additional amounts we applied to your Purchase Payments that we may be entitled to recover under certain circumstances. The surrender value may be calculated using a MVA with respect to amounts in any Fixed Allocation. UNIT A measure used to calculate your Account Value in a Sub-account during the accumulation period. VALUATION DAY Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. 8 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges Below is a summary of the fees and charges for the Annuities. Some fees and charges are assessed against each Annuity while others are assessed against assets allocated to the Sub-accounts. The fees and charges that are assessed against an Annuity include any applicable Contingent Deferred Sales Charge, Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are assessed against the Sub-accounts are the Mortality and Expense risk charge, the charge for Administration of the Annuity, any applicable Distribution Charge and the charge for certain optional benefits you elect, other than the Guaranteed Minimum Income Benefit, which is assessed against the Protected Income Value. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. The following table provides a summary of the fees and charges you will pay if you surrender your Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
YOUR TRANSACTION FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------ (ASSESSED AGAINST EACH ANNUITY) FEE/CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS - ------------------------------------------------------------------------------------------------------------------------ Contingent Deferred Sales Charge* Up to 7.5% Up to 8.5% Up to 9.0% - ------------------------------------------------------------------------------------------------------------------------ Transfer Fee** $10.00 (currently, $10.00 (currently, $10.00 (currently, $15.00 maximum) $15.00 maximum) $15.00 maximum) - ------------------------------------------------------------------------------------------------------------------------ Tax Charge*** 0% to 3.5% of the value that 0% to 3.5% of the value that 0% to 3.5% of the value that is annuitized, depending on is annuitized, depending on is annuitized, depending on the requirements of the the requirements of the the requirements of the applicable jurisdiction. applicable jurisdiction. applicable jurisdiction. - ------------------------------------------------------------------------------------------------------------------------
* The tables on the following page contain the Contingent Deferred Sales Charges upon surrender or withdrawal. The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period during which a particular percentage applies is measured from the Issue Date of the Annuity. ** Currently, we deduct the fee after the 20/th/ transfer each Annuity Year. We guarantee that the number of charge free transfers per Annuity Year will never be less than 8. *** This charge is deducted generally at the time you annuitize your contract. 9 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY
------------------------------------------------------ OPTIMUM ------------------------------------------------------ ------------------------------------------------------ Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+ ------------------------------------------------------ 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% ------------------------------------------------------
------------------------------ OPTIMUM FOUR ------------------------------ ------------------------------ Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5+ ------------------------------ 8.5% 8.0% 7.0% 6.0% 0.0% ------------------------------
-------------------------------------------------------------------- OPTIMUM PLUS -------------------------------------------------------------------- -------------------------------------------------------------------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+ -------------------------------------------------------------------- 9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% --------------------------------------------------------------------
10 AMERICAN SKANDIA ANNUITIES PROSPECTUS The following table provides a summary of the periodic fees and charges you will pay while you own your Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus.
YOUR PERIODIC FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------ (ASSESSED AGAINST EACH ANNUITY) FEE/CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS - ------------------------------------------------------------------------------------------------------------------------ Annual Maintenance Fee* Smaller of $35 or 2% of Smaller of $35 or 2% of Smaller of $35 or 2% of Account Value** Account Value** Account Value - ------------------------------------------------------------------------------------------------------------------------ ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS/1/ - ------------------------------------------------------------------------------------------------------------------------ (ASSESSED AS A PERCENTAGE OF THE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE - ------------------------------------------------------------------------------------------------------------------------ Mortality & Expense Risk Charge/2/ 0.50% 1.50% 0.50% - ------------------------------------------------------------------------------------------------------------------------ Administration Charge/2/ 0.15% 0.15% 0.15% - ------------------------------------------------------------------------------------------------------------------------ 1.00% in Annuity Distribution Charge/3/ 0.60% in Annuity Years 1-8 N/A Years 1-10 - ------------------------------------------------------------------------------------------------------------------------ 1.40% per year of the value 1.40% per year of the value 1.40% per year of the value of each Sub-account if the of each Sub-account if the of each Sub-account if the Owner's beneficiary elects Owner's beneficiary elects Owner's beneficiary elects the Qualified Beneficiary the Qualified Beneficiary the Qualified Beneficiary Settlement Service Continuation Option/5/ Continuation Option/5/ Continuation Option/5/ Charge/4/ ("Qualified BCO") ("Qualified BCO") ("Qualified BCO") - ------------------------------------------------------------------------------------------------------------------------ 1.25% per year of the value 1.65% per year of the value 1.65% per year of the value of each Sub-account in of each Sub-account of each Sub-account in Annuity Years 1-8; 0.65% (1.40% per year if you are Annuity Years 1-10; 0.65% in Annuity Years 9 and a beneficiary electing the in Annuity Years 11 and later (1.40% per year if you Qualified BCO) later (1.40% per year if you Total Annual Charges of the Sub- are a beneficiary electing are a beneficiary accounts the Qualified BCO) electing the Qualified BCO) - ------------------------------------------------------------------------------------------------------------------------
* Assessed annually on the Annuity's anniversary date or upon surrender. ** Only applicable if Account Value is less than $100,000. 1: These charges are deducted daily and apply to the Sub-accounts only. 2: The combination of the Mortality and Expense Risk Charge and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. 3: The Distribution Charge is 0.00% in Annuity Years 9+ for Optimum and in Annuity Years 11+ for Optimum Plus. 4: The Mortality & Expense Risk Charge, the Administration Charge and the Distribution Charge (if applicable) do not apply if you are a beneficiary under the Qualified Beneficiary Continuation Option. The Settlement Service Charge applies only if your beneficiary elects the Qualified Beneficiary Continuation Option. 5: When an Annuity is used as an IRA, 403(b) or other "qualified investment", upon the Owner's death a beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. If a beneficiary elects this option, the beneficiary will incur the Settlement Service Charge. Please refer to the section of this Prospectus that describes the Qualified Beneficiary Continuation Option for more detailed information about this option, including certain restrictions and limitations that may apply. 11 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued The following table sets forth the charge for each optional benefit under the Annuity. These fees would be in addition to the periodic fees and transaction fees set forth in the tables above.
YOUR OPTIONAL BENEFIT FEES AND CHARGES - -------------------------------------------------------------------------------------------------- TOTAL TOTAL TOTAL OPTIONAL ANNUAL ANNUAL ANNUAL BENEFIT CHARGE* CHARGE* CHARGE* FEE/ for for for OPTIONAL BENEFIT CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS - -------------------------------------------------------------------------------------------------- GUARANTEED RETURN OPTION Plus/SM/ (GRO Plus/SM/ )/GUARANTEED RETURN OPTION - -------------------------------------------------------------------------------------------------- 0.25% of average daily 1.50% in Annuity 1.90%; 1.65% 1.90% in Annuity net assets of the Sub- Years 1-8; 0.90% in for Qualified Years 1-10; 0.90% in accounts Annuity Years 9 and BCO Annuity Years 11 and later; 1.65% for later; 1.65% for Qualified BCO Qualified BCO GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - -------------------------------------------------------------------------------------------------- 0.35% of average daily 1.60% in Annuity 2.00%; 1.75% 2.00% in Annuity net assets of the Sub- Years 1-8; 1.00% in for Qualified Years 1-10; 1.00% in accounts Annuity Years 9 and BCO Annuity Years 11 and later; 1.75% for later; 1.75% for Qualified BCO Qualified BCO GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - -------------------------------------------------------------------------------------------------- 0.50% per year of the 1.25% in Annuity 1.65% PLUS 1.65% in Annuity average Protected Years 1-8; 0.65% in 0.50% per year Years 1-10; 0.65% in Income Value during Annuity Years 9 and of average Annuity Years 11 and each year; deducted later PLUS 0.50% per Protected later PLUS 0.50% per annually in arrears each year of average Income Value year of average Annuity Year Protected Income Protected Income Value Value
12 AMERICAN SKANDIA ANNUITIES PROSPECTUS
- --------------------------------------------------------------------------------------------- TOTAL TOTAL TOTAL OPTIONAL ANNUAL ANNUAL ANNUAL BENEFIT CHARGE* CHARGE* CHARGE* FEE/ for for for OPTIONAL BENEFIT CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS - --------------------------------------------------------------------------------------------- LIFETIME FIVE INCOME BENEFIT** - --------------------------------------------------------------------------------------------- 0.60% of average daily 1.85% in Annuity 2.25% 2.25% in Annuity net assets of the Sub- Years 1-8; 1.25% in Years 1-10; 1.25% in accounts Annuity Years 9 and Annuity Years 9 and later later SPOUSAL LIFETIME FIVE INCOME BENEFIT** - --------------------------------------------------------------------------------------------- 0.75% of average daily 2.00% in Annuity 2.40% 2.40% in Annuity net assets of the Years 1-8; 1.40% in Years 1-10; 1.40% in Subaccounts Annuity Years 9 and Annuity Years 11 and later later ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - --------------------------------------------------------------------------------------------- 0.25% of average daily 1.50% in Annuity 1.90% 1.90% in Annuity net assets of the Years 1-8; 0.90% in Years 1-10; 0.90% in Subaccounts Annuity Years 9 and Annuity Years 11 and later later HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - --------------------------------------------------------------------------------------------- 0.25% of average daily 1.50% in Annuity 1.90% 1.90% in Annuity net assets of the Years 1-8; 0.90% in Years 1-10; 0.90% in Subaccounts Annuity Years 9 and Annuity Years 11 and later later COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** - --------------------------------------------------------------------------------------------- 0.50% of average daily 1.75% in Annuity 2.15% 2.15% in Annuity net assets of the Sub- Years 1-8; 1.15% in Years 1-10; 1.15% in accounts Annuity Years 9 and Annuity Years 11 and later later
13 AMERICAN SKANDIA ANNUITIES PROSPECTUS Summary of Contract Fees and Charges continued
- ------------------------------------------------------------------------------------------------------------------------------ TOTAL TOTAL TOTAL ANNUAL ANNUAL ANNUAL OPTIONAL CHARGE* CHARGE* CHARGE* BENEFIT for for for OPTIONAL BENEFIT FEE/CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS - ------------------------------------------------------------------------------------------------------------------------------ HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** - ------------------------------------------------------------------------------------------------------------------------------ 0.50% of average 1.75% in Annuity 2.15% 2.15% in Annuity daily net assets of Years 1-8; 1.15% Years 1-10; the Sub-accounts in Annuity Years 1.15% in Annuity 9 and later Years 11 and later - ------------------------------------------------------------------------------------------------------------------------------ Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - ------------------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge and Distribution Charge (if applicable) assessed against the average daily net assets allocated to the Sub-accounts. If you elect more than one optional benefit, the Total Annual Charge would be increased to include the charge for each optional benefit. ** These optional benefits are not available under the Qualified BCO. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2005. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES --------------------------------------------------------- MINIMUM MAXIMUM --------------------------------------------------------- Total Portfolio Operating Expense 0.63% 1.26%
The following are the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2005, except as noted. The "Total Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. There is no guarantee that actual expenses will be the same as those shown in the table. For certain of the underlying Portfolios, a portion of the management fee has been waived and/or other expenses have been partially reimbursed. The existence of any such fee waivers and/or reimbursements have been reflected in the footnotes. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-752-6342.
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES - -------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE NET ASSETS OF THE UNDERLYING PORTFOLIOS) FOR THE YEAR ENDED DECEMBER 31, 2005 ----------------------------------------------- TOTAL ANNUAL MANAGEMENT OTHER 12B-1 PORTFOLIO OPERATING UNDERLYING PORTFOLIO FEES EXPENSES/1/ FEE EXPENSES American Skandia Trust/2,3/ - -------------------------------------------------------------------------------------------------- AST AllianceBernstein Core Value 0.75% 0.19% 0.00% 0.94% AST AllianceBernstein Growth & Income 0.75% 0.13% 0.00% 0.88% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% AST Federated Aggressive Growth 0.95% 0.17% 0.00% 1.12% AST Goldman Sachs Mid-Cap Growth 1.00% 0.18% 0.00% 1.18%
14 AMERICAN SKANDIA ANNUITIES PROSPECTUS
FOR THE YEAR ENDED DECEMBER 31, 2005 TOTAL ANNUAL MANAGEMENT OTHER 12B-1 PORTFOLIO OPERATING UNDERLYING PORTFOLIO FEES EXPENSES/1/ FEES EXPENSES American Skandia Trust:/2,3/ continued - --------------------------------------------------------------------------------------------------- AST JPMorgan International Equity 0.88% 0.19% 0.00% 1.07% AST Large-Cap Value/4/ 0.75% 0.16% 0.00% 0.91% AST Lord Abbett Bond Debenture 0.80% 0.17% 0.00% 0.97% AST LSV International Value 1.00% 0.26% 0.00% 1.26% AST Marsico Capital Growth 0.90% 0.13% 0.00% 1.03% AST MFS Growth 0.90% 0.18% 0.00% 1.08% AST Money Market/5/ 0.50% 0.13% 0.00% 0.63% AST Neuberger Berman Mid-Cap Value 0.89% 0.14% 0.00% 1.03% AST PIMCO Limited Maturity Bond 0.65% 0.15% 0.00% 0.80% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% AST Small-Cap Growth 0.90% 0.25% 0.00% 1.15% AST Small-Cap Value/6/ 0.90% 0.17% 0.00% 1.07% AST T. Rowe Price Large-Cap Growth/7/ 0.90% 0.21% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.21% 0.00% 1.01% AST William Blair International Growth 1.00% 0.18% 0.00% 1.18% Evergreen Variable Annuity Trust: - --------------------------------------------------------------------------------------------------- International Equity 0.41% 0.30% 0.00% 0.71% Omega 0.52% 0.19% 0.00% 0.71%
1: As noted above, shares of the Portfolios generally are purchased through variable insurance products. Many of the Portfolios and/or their investment advisers and/or distributors have entered into arrangements with us as the issuer of each Annuity under which they compensate us for providing ongoing services in lieu of the Trust providing such services. Amounts paid by a Portfolio under those arrangements are included under "Other Expenses." For more information see the prospectus for each underlying portfolio and, "Service Fees payable to American Skandia," later in this prospectus. 2: The total actual operating expenses for certain of the Portfolios listed above for the year ended December 31, 2005 were less than the amounts shown in the table above, due to fee waivers, reimbursement of expenses, and expense offset arrangements ("Arrangements"). These Arrangements are voluntary and may be terminated at any time. In addition, the Arrangements may be modified periodically. For more information regarding the Arrangements, please see the prospectus and statement of additional information for the Portfolios. 3: Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1 to permit an affiliate of the Trust's Investment Managers to receive brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of shares of the Portfolio. The Distribution Plan was terminated effective November 18, 2004. 4: Effective March 20, 2006, Dreman Value Management LLC became a Sub-advisor along with J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC. Between December 5, 2005 and March 20, 2006, J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC served as Co-Sub-advisors of the Portfolio. Prior to December 5, 2005, Hotchkis & Wiley Capital Management, LLC served as Sub-advisor of the Portfolio, then named the "AST Hotchkis & Wiley Large-Cap Value Portfolio." 5: Effective December 5, 2005, Prudential Investment Management, Inc. became the Sub-advisor of the Portfolio. Prior to December 5, 2005, Wells Capital Management, Inc. served as Sub-advisor of the Portfolio. 6: Effective March 20, 2006, Dreman Value Management LLC became a Sub-advisor along with Salomon Brothers Asset Management, Inc., J.P. Morgan Investment Management, Inc. and Lee Munder Capital Group. Between December 5, 2005 and March 20, 2006, Salomon Brothers Asset Management, Inc., J.P. Morgan Investment Management, Inc., Lee Munder Capital Group and Integrity Asset Management served as Sub-advisors of the Portfolio. Prior to December 5, 2005, J.P. Morgan Investment Management, Inc., Lee Munder Capital Group and Integrity Asset Management served as Sub-advisors of the Portfolio. 7: Effective December 5, 2005, T. Rowe Price Associates, Inc. became the Sub-advisor of the Portfolio. Prior to December 5, 2005, Alliance Capital Management, L.P. served as Sub-advisor of the Portfolio, then named the "AST AllianceBernstein Large-Cap Growth Portfolio." 15 AMERICAN SKANDIA ANNUITIES PROSPECTUS Expense Examples These examples are intended to help you compare the cost of investing in one American Skandia Annuity with the cost of investing in other American Skandia Annuities and/or other variable annuities. Below are examples for each Annuity showing what you would pay in expenses at the end of the stated time periods had you invested $10,000 in the Annuity and your investment has a 5% return each year. The examples reflect the following fees and charges for each Annuity as described in "Summary of Contract Fees and Charges": .. Insurance Charge .. Distribution Charge (if applicable) .. Contingent Deferred Sales Charge (when and if applicable) .. Annual Maintenance Fee .. The maximum combination of optional benefit charges The examples also assume the following for the period shown: .. You allocate all of your Account Value to the Sub-account with the maximum total annual operating expenses, and those expenses remain the same each year* .. You make no withdrawals of Account Value .. You make no transfers, or other transactions for which we charge a fee .. No tax charge applies .. You elect the Lifetime Five Income Benefit, the Highest Daily Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit (which are the maximum combination of optional benefit charges) .. For the Optimum Plus example, the Credit applicable to the Annuity is 6.5% of the Purchase Payment** .. For the Optimum Four example, the Loyalty Credit applies to the Annuity and is equal to 2.75% of total purchase payments made during the first four Annuity years .. For the Optimum example, the Loyalty Credit applies to the Annuity and is equal to 0.50% of total purchase payment made during the first four Annuity years. Amounts shown in the examples are rounded to the nearest dollar. *Note: Not all portfolios offered as Sub-accounts are available if you elect certain optional benefits. **The Credit that is applied to Purchase Payments received after the first Annuity Year is less than 6.5% (see "How do I Receive Credits?") 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 will be less than those shown if you elect a different combination of optional benefits than indicated in the examples or if you allocate Account Value to any other available Sub-accounts. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. A table of accumulation values appears in Appendix A to this Prospectus.
IF YOU SURRENDER YOUR ANNUITY AT THE IF YOU ANNUITIZE YOUR ANNUITY AT THE IF YOU DO NOT SURRENDER END OF THE APPLICABLE TIME PERIOD: END OF THE APPLICABLE TIME PERIOD:/1/ YOUR ANNUITY: - ------------------------------------------------------------------------------------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS Optimum $1,098 $1,863 $2,597 $ 4,256 N/A $1,278 $2,147 $ 4,256 $ 423 $1,278 $2,147 $ 4,256 Optimum Four $1,227 $2,021 $2,328 $ 4,701 N/A $1,391 $2,328 $ 4,701 $ 462 $1,391 $2,328 $ 4,701 Optimum Plus $1,354 $2,291 $3,139 $ 5,175 N/A N/A $2,467 $ 4,983 $ 490 $1,475 $2,467 $ 4,983
1: If you own Optimum Plus, you may not annuitize in the first Three (3) Annuity Years; if you own Optimum or Optimum Four, you may not annuitize in the first Annuity Year. 16 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information). Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. Not all portfolios offered as Sub-accounts are available if you elect certain optional benefits. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment managers for AST are American Skandia Investment Services, Incorporated, a Prudential Financial Company, and Prudential Investments LLC, both of which are affiliated companies of American Skandia. However, a sub- advisor, as noted below, is engaged to conduct day-to-day management. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuities are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-752-6342. PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------------------------------------------------------------------------- LARGE CAP AST AllianceBernstein Core Value AllianceBernstein L.P. VALUE Portfolio: seeks long-term capital growth by investing primarily in common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of large companies that appear to be undervalued. Among other things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. ------------------------------------------------------------------------- LARGE CAP AST AllianceBernstein Growth & Income AllianceBernstein L.P. VALUE Portfolio: seeks long-term growth of capital and income while attempting to avoid excessive fluctuations in market value. The Portfolio normally will invest in common stocks (and securities convertible into common stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. ------------------------------------------------------------------------- 17 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ----------------------------------------------------------------------- SMALL CAP AST DeAM Small-Cap Growth Portfolio: Deutsche Asset GROWTH seeks maximum growth of investors' Management, Inc. capital from a portfolio of growth stocks of smaller companies. The Portfolio pursues its objective, under normal circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R) Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R) Index, but which attempts to outperform the Russell 2000 Growth(R) Index. ----------------------------------------------------------------------- SMALL CAP AST Federated Aggressive Growth Federated Equity GROWTH Portfolio: seeks capital growth. The Management Portfolio pursues its investment Company of objective by investing primarily in Pennsylvania/ the stocks of small companies that Federated Global are traded on national security Investment exchanges, NASDAQ stock exchange and Management Corp. the over-the-counter-market. Small companies will be defined as companies with market capitalizations similar to companies in the Russell 2000 Growth Index. Up to 25% of the Portfolio's net assets may be invested in foreign securities, which are typically denominated in foreign currencies. ----------------------------------------------------------------------- MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs GROWTH Portfolio: seeks long-term capital Asset growth. The Portfolio pursues its Management, L.P. investment objective, by investing primarily in equity securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Russell Mid Cap Growth Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. ----------------------------------------------------------------------- INTERNATIONAL AST JPMorgan International Equity J.P. Morgan EQUITY Portfolio: seeks long-term capital Investment growth by investing in a diversified Management Inc. portfolio of international equity securities. The Portfolio seeks to meet its objective by investing, under normal market conditions, at least 80% of its assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The equity securities will ordinarily be traded on a recognized foreign securities exchange or traded in a foreign over-the-counter market in the country where the issuer is principally based, but may also be traded in other countries including the United States. ----------------------------------------------------------------------- LARGE CAP AST Large-Cap Value Portfolio Dreman Value VALUE (formerly AST Hotchkis and Wiley Management LLC, Large-Cap Value Portfolio): seeks Hotchkis and Wiley current income and long-term growth Capital of income, as well as capital Management, LLC; appreciation. The Portfolio invests, J.P. Morgan under normal circumstances, at least Investment 80% of its net assets in common Management Inc. stocks of large cap U.S. companies. The Portfolio focuses on common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. ----------------------------------------------------------------------- 18 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ----------------------------------------------------------------------- FIXED AST Lord Abbett Bond-Debenture Lord, Abbett & Co. INCOME Portfolio: seeks high current income LLC and the opportunity for capital appreciation to produce a high total return. To pursue its objective, the Portfolio will invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible into common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. ----------------------------------------------------------------------- INTERNATIONAL AST LSV International Value LSV Asset EQUITY Portfolio: seeks capital growth. The Management Portfolio pursues its objective by primarily investing at least 80% of the value of its assets in the equity securities of companies in developed non-U.S. countries that are represented in the MSCI EAFE Index. The target of this Portfolio is to outperform the unhedged US Dollar total return (net of foreign dividend withholding taxes) of the MSCI EAFE Index. The Sub-Advisor uses proprietary quantitative models to manage the Portfolio in a bottom-up security selection approach combined with overall portfolio risk management. ----------------------------------------------------------------------- LARGE CAP AST Marsico Capital Growth Portfolio: Marsico Capital GROWTH seeks capital growth. Income Management, LLC 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 of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that may benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, utilizing a "bottom up" stock selection process. The Portfolio will normally hold a core position of between 35 and 50 common stocks. The Portfolio may hold a limited number of additional common stocks at times when the Portfolio manager is accumulating new positions, phasing out existing or responding to exceptional market conditions. ----------------------------------------------------------------------- LARGE CAP AST MFS Growth Portfolio: seeks Massachusetts GROWTH long-term capital growth and future Financial Services income. Under normal market Company conditions, the Portfolio invests at least 80% of its total assets in common stocks and related securities, such as preferred stocks, convertible securities and depositary receipts, of companies that the Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. ----------------------------------------------------------------------- FIXED AST Money Market Portfolio: seeks Prudential INCOME high current income while maintaining Investment high levels of liquidity. The Management, Inc. Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. ----------------------------------------------------------------------- 19 AMERICAN SKANDIA ANNUITIES PROSPECTUS Investment Options continued PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ---------------------------------------------------------------------- MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman VALUE Portfolio: seeks capital growth. Management Inc. Under normal market conditions, the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R) Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. ---------------------------------------------------------------------- FIXED AST PIMCO Limited Maturity Bond Pacific Investment INCOME Portfolio: seeks to maximize total Management return consistent with preservation Company LLC of capital and prudent investment (PIMCO) management. The Portfolio will invest in a diversified portfolio of fixed-income securities of varying maturities. The average portfolio duration of the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. ---------------------------------------------------------------------- FIXED AST PIMCO Total Return Bond Pacific Investment INCOME Portfolio: seeks to maximize total Management return consistent with preservation Company LLC of capital and prudent investment (PIMCO) management. The Portfolio will invest in a diversified portfolio of fixed-income securities of varying maturities. The average portfolio duration of the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. ---------------------------------------------------------------------- SMALL CAP AST Small-Cap Growth Portfolio: seeks Eagle Asset GROWTH long-term capital growth. The Management/ Portfolio pursues its objective by Neuberger Berman primarily investing in the common Management Inc. stocks of small-capitalization companies, which is defined as a company with a market capitalization, at the time of purchase, no larger than the largest capitalized company included in the Russell 2000 Index during the most recent 11-month period (based on month-end data) plus the most recent data during the current month. ---------------------------------------------------------------------- SMALL CAP AST Small-Cap Value Portfolio: seeks Lee Munder VALUE to provide long-term capital growth Investments, Ltd; by investing primarily in J.P. Morgan small-capitalization stocks that Investment appear to be undervalued. The Management Inc.; Portfolio will have a non-fundamental Salomon Brothers policy to invest, under normal Asset circumstances, at least 80% of the Management Inc; value of its net assets in small Dreman Value capitalization stocks. The Portfolio Management LLC will focus on common stocks that appear to be undervalued. ---------------------------------------------------------------------- FIXED AST T. Rowe Price Global Bond T. Rowe Price INCOME Portfolio: seeks to provide high International, Inc. current income and capital growth by investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will invest at least 80% of its total assets in fixed income securities, including high quality bonds issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. ---------------------------------------------------------------------- 20 AMERICAN SKANDIA ANNUITIES PROSPECTUS PORTFOLIO ADVISOR/ STYLE/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR --------------------------------------------------------------------- LARGE CAP AST T. Rowe Price Large-Cap Growth T. Rowe Price GROWTH Portfolio (formerly AST Associates, Inc. AllianceBernstein Large-Cap Growth): seeks long-term growth of capital by investing predominantly in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. The Portfolio takes a growth approach to investment selection and normally invests at least 80% of its net assets in the common stocks of large cap companies. --------------------------------------------------------------------- INTERNATIONAL AST William Blair International William Blair & EQUITY Growth Portfolio: seeks long-term Company, L.L.C. capital appreciation. The Portfolio invests primarily in stocks of large and medium-sized companies located in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. The Portfolio seeks companies that historically have had superior growth, profitability and quality relative to local markets and relative to companies within the same industry worldwide, and that are expected to continue such performance. --------------------------------------------------------------------- INTERNATIONAL Evergreen VA International Equity: Evergreen EQUITY seeks long-term capital growth and Investment secondarily, modest income. The Management Portfolio normally invests 80% of its Company, LLC assets in equity securities issued by established, quality, non-U.S. companies located in countries with developed markets and may purchase across all market capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.). The Portfolio may also invest in emerging markets. The Portfolio's managers seek both growth and value opportunities, and the Portfolio intends to seek modest income from dividends paid by its equity holdings. --------------------------------------------------------------------- SPECIALTY Evergreen VA Omega: seeks long-term Evergreen capital growth. The Portfolio invests Investment primarily, and under normal Management conditions substantially all of its Company, LLC assets, in common stocks and securities convertible into common stocks of U.S. companies across all market capitalizations. The Portfolio's managers employ a growth style of equity management. "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated earnings ranging from steady to accelerated growth. The Portfolio may invest up to 25% of its assets in foreign securities. --------------------------------------------------------------------- WHAT ARE THE FIXED ALLOCATIONS? We offer Fixed Allocations of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-752-6342 to determine availability of Fixed Allocations in your state and for your annuity product. 21 AMERICAN SKANDIA ANNUITIES PROSPECTUS Fees and Charges The charges under the contracts are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the contracts. They are also designed, in the aggregate, to compensate us for the risks of loss we assume pursuant to the contracts. If, as we expect, the charges that we collect from the contracts exceed our total costs in connection with the contracts, we will earn a profit. Otherwise we will incur a loss. For example, American Skandia may make a profit on the Insurance Charge if, over time, the actual costs of providing the guaranteed insurance obligations under an Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering an Annuity and to offset a portion of the costs associated with offering Credits which are funded through American Skandia's general account. The rates of certain of our charges have been set with reference to estimates of the amount of specific types of expenses or risks that we will incur. In most cases, this prospectus identifies such expenses or risks in the name of the charge; however, the fact that any charge bears the name of, or is designed primarily to defray a particular expense or risk does not mean that the amount we collect from that charge will never be more than the amount of such expense or risk, nor does it mean that we may not also be compensated for such expense or risk out of any other charges we are permitted to deduct by the terms of the contract. A portion of the proceeds that American Skandia receives from charges that apply to the Sub-accounts may include amounts based on market appreciation of the Sub-account values including appreciation on amounts that represent any Credits. WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages for each Annuity are shown under "Summary of Contract Fees and Charges". With respect to a partial withdrawal, we calculate the CDSC by assuming that any available free withdrawal amount is taken out first (see How Much Can I Withdraw as a Free Withdrawal?). If the free withdrawal amount is not sufficient, we then assume that withdrawals are taken from Purchase Payments that have not been previously withdrawn, on a first-in, first-out basis, and subsequently from any other Account Value in the Annuity. For purposes of calculating any applicable CDSC on a surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior partial withdrawals or if your Account Value has declined in value due to negative market performance. In that scenario, we would determine the CDSC amount as the applicable percentage of the Purchase Payments being withdrawn, rather than as a percentage of the remaining Account Value or withdrawal request. Thus, the CDSC would be greater than if it were calculated as a percentage of remaining Account Value or withdrawal amount. We may waive any applicable CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation program when we count the twenty free transfers. All transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit 22 AMERICAN SKANDIA ANNUITIES PROSPECTUS transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the Sub-accounts, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. With respect to Optimum and Optimum Four, currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. With respect to Optimum Plus, we deduct the Annual Maintenance Fee regardless of Account Value. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charge: Several states and some municipalities charge premium taxes or similar taxes on annuities that we are required to pay. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2% of your premium and is designed to approximate the taxes that we are required to pay. We generally will deduct the charge at the time the tax is imposed, but may also decide to deduct the charge from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. We will pay company income taxes on the taxable corporate earnings created by this separate account product. While we may consider company income taxes when pricing our products, we do not currently include such income taxes in the tax charges you pay under the contract. We will periodically review the issue of charging for these taxes and may impose a charge in the future. In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets, which are treated as company assets under applicable income tax law. These benefits reduce our overall corporate income tax liability. Under current law, such benefits may include foreign tax credits and corporate dividends received deductions. We do not pass these tax benefits through to holders of the separate account annuity contracts because (i) the contract owners are not the owners of the assets generating these benefits under applicable income tax law and (ii) we do not currently include company income taxes in the tax charges you pay under the contract. Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed against the daily assets allocated to the Sub-accounts and is equal to the amount indicated under "Summary of Contract Fees and Charges". The Insurance Charge is the combination of the Mortality & Expense Risk Charge and the Administration Charge. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under each Annuity, including each Annuity's basic Death Benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under each Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under each Annuity. Distribution Charge: For Optimum and Optimum Plus, we deduct a Distribution Charge daily. The charge is assessed against the average assets allocated to the Sub-accounts and is equal to the amount indicated under "Summary of Contract Fees and Charges" on an annual basis. The Distribution Charge is intended to compensate us for a portion of our acquisition expenses under the Annuity, including promotion and distribution of the Annuity and, with respect to Optimum Plus, the costs associated with offering Credits which are funded through American Skandia's general account. The Distribution Charge is deducted against your Annuity's Account Value and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts will affect the charge. Optional Benefits for which we assess a charge: If you elect to purchase certain optional benefits, we will deduct an additional charge on a daily basis solely from your Account Value 23 AMERICAN SKANDIA ANNUITIES PROSPECTUS Fees and Charges continued allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. We may assess charges for other optional benefits on a different basis. Please refer to the sections entitled "Living Benefit Programs" and "Death Benefit" for a description of the charge for each Optional Benefit. Fees and expenses incurred by the Portfolios: Each Portfolio incurs total annual operating expenses comprised of an investment management fee, other expenses and any distribution and service (12b-1) fees that may apply. These fees and expenses are reflected daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and expenses can be found in the prospectuses for the Portfolios. WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fees or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the Sub-accounts or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will be subject to charges that apply under the variable immediate annuity option. Also, a tax charge may apply (see "Tax Charge" above). The variable annuity payment options are described in detail in a separate prospectus, which is available upon request and which will be provided to you if and when you elect one of the variable annuity payment options. The separate prospectus sets forth the fees and charges under the variable payment option, which may be higher than those set forth in this prospectus. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of any CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; (d) whether an annuity is reinstated pursuant to our rules; and/or (e) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce any fees and charges. 24 AMERICAN SKANDIA ANNUITIES PROSPECTUS Purchasing Your Annuity WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES? Initial Purchase Payment: Unless we agree otherwise and subject to our rules, you must make a minimum initial Purchase Payment as follows: $1,000 for Optimum and $10,000 for Optimum Plus and Optimum Four. However, if you decide to make payments under a systematic investment or an electronic funds transfer program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, your subsequent Purchase Payments plus your initial Purchase Payment total the minimum initial Purchase Payment amount required for the Annuity purchased. Where allowed by law, we must approve any initial and additional Purchase Payments of $1,000,000 or more. We may apply certain limitations and/or restrictions on an Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under an Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under an Annuity or restricting the Sub-accounts or Fixed Allocations that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your Financial Professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an electronic funds transfer arrangement where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: Unless we agree otherwise and subject to our rules, the Owner (or Annuitant if entity owned) must not be older than a maximum issue age as of the Issue Date of the Annuity as follows: age 80 for Optimum, age 75 for Optimum Plus and age 85 for Optimum Four. If an Annuity is owned jointly, the oldest of the Owners must not be older than the maximum issue age on the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. Owner, Annuitant and Beneficiary Designations: We will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. .. Owner: The Owner(s) holds all rights under the Annuity. You may name up to two Owners in which case all ownership rights are held jointly. Generally, joint owners are required to act jointly; however, if each owner provides us with an instruction that we find acceptable, we will permit each owner to act separately. All information and documents that we are required to send you will be sent to the first named owner. This Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." .. Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. .. Beneficiary: The Beneficiary is the person(s) or entity you name to receive the Death Benefit. Your beneficiary designation should be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. If you use a designation of "surviving spouse," we will pay the Death Benefit to the individual that is your spouse at the time of your death (as defined under the federal tax laws and regulations). If no beneficiary is named the Death Benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. 25 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Annuity MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us a request in writing. Upon an ownership change, any automated investment or withdrawal programs will be canceled. The new owner must submit the applicable program enrollment if they wish to participate in such a program. 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 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; .. a new Annuitant subsequent to the Annuity Date; .. for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and .. a change in Beneficiary if the Owner had previously made the designation irrevocable. There may be restrictions on designation changes when you have elected certain optional benefits. SPOUSAL OWNERS/SPOUSAL BENEFICIARIES If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse that was named as the co-owner unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For the Spousal Lifetime Five Income Benefit, the eligible surviving spouse will also be able to assume the benefit with the Annuity. See the description of this benefit in the "Living Benefit Programs" section of this Prospectus. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. CONTINGENT ANNUITANT If an Annuity is owned by an entity and the entity has named a Contingent Annuitant, no Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant will reflect the amount that would have been payable had a Death Benefit been paid. The Annuity is eligible to have a Contingent Annuitant designation if the entity which owns the annuity is a plan described in Internal Revenue Code Section 72(s)(5)(A)(i) or an entity described in Code section 72(u)(1), or any successor Code sections. MAY I RETURN MY ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted, less any applicable federal and state income tax withholding and depending on your state's requirements, any applicable insurance charges deducted. The amount returned to you may be higher or lower than the Purchase Payment(s) applied during the right to cancel period. Where required by law, we will return your Purchase Payment(s), or the greater of your current Account Value and the amount of your Purchase Payment(s) applied during the right to cancel period less any applicable federal and state income tax withholding. With respect to Optimum Plus, if you return your Annuity, we will not return any Credits we applied to your Annuity based on your Purchase Payments. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? Unless we agree otherwise and subject to our rules, the minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic Purchase Payment program. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. Additional Purchase Payments may be paid at any time before the Annuity Date. 26 AMERICAN SKANDIA ANNUITIES PROSPECTUS MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. We call our electronic funds transfer program "American Skandia's Systematic Investment Plan." Purchase Payments made through electronic funds transfer may only be allocated to the Sub-accounts when applied. We may allow you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments through an electronic funds transfer that will equal at least the minimum Purchase Payment set forth above during the first 12 months of your Annuity. We may suspend or cancel electronic funds transfer privileges if sufficient funds are not available from the applicable financial institution on any date that a transaction is scheduled to occur. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to Sub-accounts and the periodic Purchase Payments received in the first year total at least the minimum Purchase Payment set forth above. 27 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your Purchase Payment in your Annuity according to your instructions for allocating your Account Value. The Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. You can allocate Account Value to one or more Sub-accounts or Fixed Allocations. Investment restrictions will apply if you elect certain optional benefits. Subsequent Purchase Payments: Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent Purchase Payments according to any new allocation instructions. Unless you tell us otherwise, Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE OPTIMUM AND OPTIMUM FOUR ANNUITIES? We apply a Loyalty Credit to your Annuity's Account Value at the end of your fifth Annuity Year ("fifth Annuity Anniversary"). With respect to Optimum, for annuities issued on or after February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 0.50% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. With respect to Optimum Four, for annuities issued between June 20, 2005 and February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. For Optimum Four Annuities issued on or after February 13, 2006 (subject to state availability), the Loyalty Credit is equal to 2.75% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. If the total Purchase Payments made during the first four Annuity Years is less than the cumulative amount of withdrawals made on or before the fifth Annuity Anniversary, no Loyalty Credit will be applied to your Annuity. Also, no Loyalty Credit will be applied to your Annuity if your Account Value is zero on the fifth Annuity Anniversary. This would include any situation where the Annuity is still in force due to the fact that payments are being made under an optional benefit such as Lifetime Five, Spousal Lifetime Five or the Guaranteed Minimum Withdrawal Benefit. In addition, no Loyalty Credit will be applied to your Annuity if before the fifth Annuity Anniversary: (i) you have surrendered your Annuity; (ii) you have annuitized your Annuity; (iii) your Beneficiary has elected our Beneficiary Continuation Option; or (iv) we have received due proof of your death (and there has been no spousal continuation election made). If your spouse continues the contract under our spousal continuation option, we will apply the Loyalty Credit to your Annuity only on the fifth Annuity Anniversary measured from the date that we originally issued you the Annuity. Since the Loyalty Credit is applied to the Account Value only, any guarantees that are not based on Account Value will not reflect the Loyalty Credit. Similarly, guarantees that are made against a loss in Account Value will not be triggered in certain very limited circumstances where they otherwise would have been, had no Loyalty Credit been applied to the Account Value. HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE OPTIMUM AND OPTIMUM FOUR ANNUITIES? Any Loyalty Credit that is allocated to your Account Value on the fifth Annuity Anniversary will be allocated to the Fixed Allocations and Sub-accounts in the same percentages as Purchase Payments are then being allocated to your Annuity. EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO OPTIMUM Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. During Annuity Year four (i.e., prior to the fourth Annuity Anniversary) you make an additional $10,000 Purchase Payment. During the early part of Annuity Year five (i.e., prior to the fifth Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year make a withdrawal of $5,000. The Loyalty Credit that we will apply to your Annuity on the fifth Annuity Anniversary is, subject to state availability, equal to 0.50% of $15,000 (this represents the $20,000 of Purchase Payments made during the first four Annuity Years minus the $5,000 withdrawal made in the fifth Annuity Year. The computation disregards the additional $10,000 Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit amount would be equal to $75.00. 28 AMERICAN SKANDIA ANNUITIES PROSPECTUS EXAMPLE OF APPLYING THE LOYALTY CREDIT WITH RESPECT TO OPTIMUM FOUR Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. During Annuity Year four (i.e., prior to the fourth Annuity Anniversary) you make an additional $10,000 Purchase Payment. During the early part of Annuity Year five (i.e., prior to the fifth Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year make a withdrawal of $5,000. The Loyalty Credit that we will apply to your Annuity on the fifth Annuity Anniversary is, subject to state availability, equal to 2.75% of $15,000 (this represents the $20,000 of Purchase Payments made during the first four Annuity Years minus the $5,000 withdrawal made in the fifth Annuity Year. The computation disregards the additional $10,000 Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit amount would be equal to $412.50. HOW DO I RECEIVE CREDITS UNDER THE OPTIMUM PLUS ANNUITY? We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment during the first six (6) Annuity Years. The amount of the Credit is payable from our general account. The amount of the Credit depends on the Annuity Year in which the Purchase Payment(s) is made, according to the table below: For annuities issued prior to February 13, 2006:
ANNUITY YEAR CREDIT ------------------- 1 6.00% 2 5.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00% 7+ 0.00% -------------------
For annuities issued on or after February 13, 2006 (subject to state availability):
ANNUITY YEAR CREDIT ------------------- 1 6.50% 2 5.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00% 7+ 0.00% -------------------
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE OPTIMUM PLUS ANNUITY? Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied. EXAMPLES OF APPLYING CREDITS Initial Purchase Payment Assume you make an initial Purchase Payment of $10,000 and your Annuity is issued on or after February 13, 2006. We would apply a 6.5% Credit to your Purchase Payment and allocate the amount of the Credit ($650 = $10,000 X .065) to your Account Value in the proportion that your Purchase Payment is allocated. Additional Purchase Payment in Annuity Year 2 Assume that you make an additional Purchase Payment of $5,000. We would apply a 5.0% Credit to your Purchase Payment and allocate the amount of the Credit ($250 = $5,000 X .05) to your Account Value. Additional Purchase Payment in Annuity Year 6 Assume that you make an additional Purchase Payment of $15,000. We would apply a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit ($150 = $15,000 X .01) to your Account Value. 29 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued The amount of any Credits applied to your Optimum Plus Annuity Account Value can be taken back by American Skandia under certain circumstances: .. any Credits applied to your Account Value on Purchase Payments made within the 12 months before the Owner's (or Annuitant's if entity owned) date of death will be taken back; .. the amount available under the medically-related surrender portion of the Annuity will not include the amount of any Credits payable on Purchase Payments made within 12 months prior to the date of a request under the medically-related surrender provision; and .. if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits. If you qualify for the 6.5% Credit in the first year (for annuities issued on or after February 13, 2006, subject to state availability), only 6% of that amount will be taken back in connection with the first two bullets described above. However, we will take back the entire 6.5% if you "free-look" your Annuity. The Account Value may be substantially reduced if American Skandia takes back the Credit amount under these circumstances. The amount we take back will equal the Credit amount, without adjustment up or down for investment performance. Therefore, any gain on the Credit amount will not be taken back. But if there was a loss on the Credit amount, the amount we take back will still equal the amount of the Credit. We do not deduct a CDSC in any situation where we take back the Credit amount. During the first 10 Annuity Years, the total asset-based charges on this Annuity (including the Insurance Charge and the Distribution Charge) are higher than many of our other annuities, including other annuities we offer that apply credits to purchase payments. GENERAL INFORMATION ABOUT CREDITS .. We do not consider Credits to be "investment in the contract" for income tax purposes. .. You may not withdraw the amount of any Credits under the Free Withdrawal provision. The Free Withdrawal provision only applies to withdrawals of Purchase Payments. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options subject to the restrictions outlined below. Transfers are not subject to taxation on any gain. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro- rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions (including transfer requests) for certain Portfolios based on the Portfolio's investment and/or transfer restrictions. We may do so to conform to any present or future restriction that is imposed by any portfolio available under an Annuity. Currently, we charge $10.00 for each transfer after the twentieth (20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee. We may also increase the Transfer Fee that we charge to $20.00 for each transfer after the number of free transfers has been used up. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Once you have made 20 transfers among the Sub-accounts during an Annuity Year, we will accept any additional transfer request during that year only if the request is submitted to us in writing with an original signature and otherwise is in good order. For purposes of this 20 transfer limit, we (i) do not view a facsimile transmission as a "writing", (ii) will treat multiple transfer requests submitted on the same business day as a single transfer, and (iii) do not count any transfer that solely involves Sub-accounts corresponding to the AST Money Market Portfolio, or any transfer that involves one of our systematic programs, such as asset allocation and automated withdrawals. Frequent transfers among Sub-accounts in response to short-term fluctuations in markets, sometimes called "market timing," can make it very difficult for a Portfolio manager to manage a Portfolio's investments. Frequent transfers may cause the Portfolio to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect 30 AMERICAN SKANDIA ANNUITIES PROSPECTUS performance. Each Annuity offers Sub-accounts designed for Owners who wish to engage in frequent transfers (i.e., one or more of the Sub-accounts corresponding to the AST Money Market Portfolio), and we encourage Owners seeking frequent transfers to utilize those Sub-accounts. In light of the risks posed to Owners and other investors by frequent transfers, we reserve the right to limit the number of transfers in any Annuity Year for all existing or new Owners and to take the other actions discussed below. 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: (a) we believe that excessive transfer activity (as we define it) or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager) that the purchase or redemption of shares in the Portfolio must be restricted because the Portfolio believes the transfer activity to which such purchase and redemption relates would have a detrimental effect on the share prices of the affected Portfolio. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. In furtherance of our general authority to restrict transfers as described above, and without limiting other actions we may take in the future, we have adopted the following specific restrictions: .. With respect to each Sub-account (other than the AST Money Market Sub-account), we track amounts exceeding a certain dollar threshold that were transferred into the Sub-account. If you transfer such amount into a particular Sub-account, and within 30 calendar days thereafter transfer (the "Transfer Out") all or a portion of that amount into another Sub-account, then upon the Transfer Out, the former Sub-account becomes restricted (the "Restricted Sub-account"). Specifically, we will not permit subsequent transfers into the Restricted Sub-account for 90 calendar days after the Transfer Out if the Restricted Sub-account invests in a non-international Portfolio, or 180 calendar days after the Transfer Out if the Restricted Sub-account invests in an international Portfolio. For purposes of this rule, we (i) do not count transfers made in connection with one of our systematic programs, such as asset allocation and auto-mated withdrawals; (ii) do not count any transfer that solely involves Sub-accounts corresponding to the AST Money Market Portfolio; and (iii) do not categorize as a transfer the first transfer that you make after the Issue Date, if you make that transfer within 30 calendar days after the Issue Date. Even if an amount becomes restricted under the foregoing rules, you are still free to redeem the amount from your Annuity at any time. .. We reserve the right to effect exchanges on a delayed basis for all contracts. That is, we may price an exchange involving the Sub-accounts on the Valuation Day subsequent to the Valuation Day on which the exchange request was received. Before implementing such a practice, we would issue a separate written notice to Owners that explains the practice in detail. If we deny one or more transfer requests under the foregoing rules, we will inform you or your Financial Professional promptly of the circumstances concerning the denial. In addition, there are contract owners of different variable annuity contracts that are funded through the same Separate Account that are not subject to the above-referenced transfer restrictions and, therefore, might make more numerous and frequent transfers than contract owners who are subject to such limitations. Finally, there are contract owners of other variable annuity contracts or variable life contracts that are issued by American Skandia as well as other insurance companies that have the same underlying mutual fund portfolios available to them. Since some contract owners are not subject to the same transfer restrictions, unfavorable consequences associated with such frequent trading within the underlying mutual fund (e.g., greater portfolio turnover, higher transaction costs, or performance or tax issues) may affect all contract owners. Similarly, while contracts managed by a Financial Professional or third party investment advisor are subject to the restrictions on transfers between investment options that are discussed above, if the advisor manages a number of contracts in the same fashion unfavorable consequences may be associated with management activity since it may involve the movement of a substantial portion of an underlying mutual fund's assets which may affect all contract owners invested in the affected options. Apart from jurisdiction- specific and contract differences in transfer restrictions, we will apply these rules uniformly (including contracts managed by a Financial Professional or third party investment advisor), and will not waive a transfer restriction for any contract owner. 31 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount periodically from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. You may elect a Dollar Cost Averaging program that transfers amounts monthly, quarterly, semi-annually, or annually from Sub-accounts, or a program that transfers amounts monthly from Fixed Allocations. By investing amounts on a regular basis instead of investing the total amount at one time, Dollar Cost Averaging may decrease the effect of market fluctuation on the investment of your Purchase Payment. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. There is no minimum Account Value required to enroll in a Dollar Cost Averaging program and we do not deduct a charge for participating in a Dollar Cost Averaging program. You can Dollar Cost Average from Sub-accounts or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: .. You may only use Fixed Allocations with Guarantee Periods of 2 or 3 years. .. You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. .. Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. The Dollar Cost Averaging program is not available if you have elected an automatic rebalancing program or an asset allocation program. Dollar Cost Averaging from Fixed Allocations is not available if you elect the Guaranteed Return Option Plus or the Guaranteed Return Option. American Skandia may offer Fixed Allocations with Guarantee Periods of 6 months or 12 months exclusively for use with a Dollar Cost Averaging program ("DCA Fixed Allocations"). DCA Fixed Allocations are designed to automatically transfer Account Value in either 6 or 12 payments under a Dollar Cost Averaging program. Dollar Cost Averaging transfers will begin on the day following the date the DCA Fixed Allocation is established and each month following until the entire principal amount plus earnings is transferred. DCA Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a DCA Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. Account Value allocated to the DCA Fixed Allocation will be transferred to the Sub-accounts you choose under the Dollar Cost Averaging program. If you terminate the Dollar Cost Averaging program before the entire principal amount plus earnings has been transferred to the Sub-account(s), you must transfer all remaining Account Value to any other investment option. Unless you provide alternate instructions at the time you terminate the Dollar Cost Averaging program, Account Value will be transferred to the AST Money Market Sub-account. Transfers from Fixed Allocations as part of a Dollar Cost Averaging program are not subject to a Market Value Adjustment. However, a Market Value Adjustment will apply if you terminate the Dollar Cost Averaging program before the entire principal amount plus earnings has been transferred to the Sub-account(s). DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer Automatic Rebalancing among the Sub-accounts you choose. You can choose to have your Account Value rebalanced monthly, quarterly, semi-annually, or annually. On the appropriate date, the Sub-accounts you chose are rebalanced to the allocation percentages you requested. With Automatic Rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. For example, over time the performance of the Sub-accounts will differ, causing your percentage allocations to shift. Any transfer to or from any Sub-account that is not part of your Automatic Rebalancing program, will be made; however, that 32 AMERICAN SKANDIA ANNUITIES PROSPECTUS Sub-account will not become part of your rebalancing program unless we receive instructions from you indicating that you would like such option to become part of the program. There is no minimum Account Value required to enroll in Automatic Rebalancing. All rebalancing transfers as part of an Automatic Rebalancing program are not included when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an Automatic Rebalancing program. Participation in the Automatic Rebalancing program may be restricted if you are enrolled in certain other optional programs. Sub-accounts that are part of a Systematic Withdrawal program or Dollar Cost Averaging program will be excluded from an Automatic Rebalancing program. ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? Yes. Certain "static asset allocation programs" are available for use with the Annuity. You may be required to enroll in an available asset allocation program if you purchase one of the Annuities. These programs are considered static because once you have selected a model portfolio, the Sub-accounts and the percentage of contract value allocated to each Sub-account cannot be changed without your consent. The programs are available at no additional charge. Under these programs, the Sub-account for each asset class in each model portfolio is designated for you. Under the programs, the values in the Sub-accounts will be rebalanced periodically back to the indicated percentages for the applicable asset class within the model portfolio that you have selected. For more information on the asset allocation programs see the Appendix entitled "Additional Information on the Asset Allocation Programs." Asset allocation is a sophisticated method of diversification, which allocates assets among asset classes in order to manage investment risk and enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. No personalized investment advice is provided in connection with the asset allocation programs and you should not rely on these programs as providing individualized investment recommendations to you. The asset allocation programs do not guarantee better investment results. We reserve the right to terminate or change the asset allocation programs at any time. You should consult with your Financial Professional before electing any asset allocation program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the Sub-accounts but also wish to protect their principal, as of a specific date in the future. They are the Balanced Investment Program and the Guaranteed Return Option Plus/SM/. (GRO Plus/SM/). GRO Plus/SM/ is not available in all states. In some states where GRO Plus is not available we offer the Guaranteed Return Option (GRO).) Both the Balanced Investment Program and GRO Plus allow you to allocate a portion of your Account Value to the available Sub-accounts while ensuring that your Account Value will at least equal your contributions adjusted for withdrawals and transfers on a specified date. Under GRO Plus, Account Value is allocated to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts or the interest rate environment after the amount is allocated to a Fixed Allocation. Generally, more of your Account Value will be allocated to the Sub-accounts under the GRO Plus program than under the Balanced Investment Program (although in periods of poor market performance, low interest rates and/or as the option progresses to its maturity date, this may not be the case). You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. In addition, as with most return of premium programs, amounts that are available to allocate to the Sub-accounts may be substantially less than they would be if you did not elect a return of premium program. This means that, if investment experience in the Sub-accounts were positive, your Account Value would grow at a slower rate than if you did not elect a return of premium program and allocated all of your Account Value to the Sub-accounts. BALANCED INVESTMENT PROGRAM We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the Sub-accounts that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. 33 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under your Annuity. Account Value you allocate to the Sub-accounts is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. EXAMPLE Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.781198 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $78,120 will be allocated to the Fixed Allocation and the remaining Account Value ($21,880) will be allocated to the Sub-accounts. Assuming that you do not make any withdrawals or transfers from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the Sub-accounts. The Guaranteed Return Option Plus (GRO Plus) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control of your available Account Value among the Sub-accounts to participate in market experience. Under the GRO Plus program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value is the amount not allocated to the Fixed Allocations to support the guarantees provided. There is a fee associated with this program. See "Living Benefit Programs," later in this Prospectus, for more information about this program. MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS? Yes. Your Financial Professional may forward instructions regarding the allocation of your account and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. For annuities issued on or after July 21, 2006, subject to our rules, we will require affirmative consent from you in order to give your Financial Professional such authority. If your Financial Professional has this authority, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Financial Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT? Yes. You may engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Annuities. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make transfers for you, is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your Account Value under any circumstance. As such, we are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow or any specific transfers they make on your behalf. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 34 AMERICAN SKANDIA ANNUITIES PROSPECTUS Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Annuity. If you authorize your investment advisor to withdraw amounts from your Annuity (to the extent permitted) to pay for the investment advisor's fee, as with any other withdrawal from your Annuity, you may incur adverse tax consequences, a CDSC and/or a market value adjustment. Withdrawals to pay your investment advisor generally will also reduce the level of various living and death benefit guarantees provided (e.g. the withdrawals will reduce proportionately your Annuity's guaranteed minimum death benefit.) We are not a party to the agreement you have with your investment advisor and do not verify that amounts withdrawn from your Annuity, including amounts withdrawn to pay for the investment advisor's fee, are within the terms of your agreement with your investment advisor. You will, however, receive confirmations of transactions that affect your Annuity. If your investment advisor has also acted as your Financial Professional with respect to the sale of your Annuity, he or she may be receiving compensation for services provided both as a Financial Professional and investment advisor. Alternatively, the investment advisor may compensate the Financial Professional from whom you purchased your Annuity for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your Financial Professional receive in connection with your Annuity, you should ask them for more details. We or an affiliate of ours may provide administrative support to licensed, registered Financial Professionals or Investment advisors who you authorize to make financial transactions on your behalf. We may require Financial Professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the Financial Professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of a Financial Professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) of American Skandia. Please Note: Annuities where your Financial Professional or investment advisor has the authority to forward instruction on financial transactions are also subject to the restrictions on transfers between investment options that are discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?" Since transfer activity directed by a Financial Professional or third party investment adviser may result in unfavorable consequences to all contract owners invested in the affected options, we reserve the right to limit the investment options available to a particular Owner where such authority as described above has been given to a Financial Professional or investment advisor or impose other transfer restrictions we deem necessary. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your Financial Professional. Your Financial Professional will be informed of all such restrictions on an ongoing basis. We may also require that your Financial Professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.prudential.com). Limitations that we may impose on your Financial Professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED ALLOCATIONS WORK? We credit a fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-752-6342. 35 AMERICAN SKANDIA ANNUITIES PROSPECTUS Managing Your Account Value continued A Guarantee Period for a Fixed Allocation begins: .. when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; .. upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or .. when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. American Skandia may offer Fixed Allocations with Guarantee Periods of 3 months or 6 months exclusively for use as a short-term Fixed Allocation ("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a Short-term Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. On the Maturity Date of the Short-term Fixed Allocation, the Account Value will be transferred to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transferred to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the Annuity or transfer any Account Value from the Short-term Fixed Allocation to any other investment option before the end of the Guarantee Period, a Market Value Adjustment will apply. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. .. "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are 36 AMERICAN SKANDIA ANNUITIES PROSPECTUS separated from ownership of the underlying principal amount or corpus. .. "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. .. "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA FORMULA The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]/N/365/ where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is: [(1 + I)/(1 + J)]/N/365/ MVA EXAMPLES The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: .. You allocate $50,000 into a Fixed Allocation (we refer to this as the "Allocation Date" in these examples) with a Guarantee Period of 5 years (we refer to this as the "Maturity Date" in these examples). .. The Strip Yields for coupon Strips beginning on Allocation Date and maturing on Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%). .. You make no withdrawals or transfers until you decide to withdraw the entire Fixed Allocation after exactly three (3) years, at which point 730 days remain before the Maturity Date (N = 730). EXAMPLE OF POSITIVE MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]/N/365 /= [1.055/1.041]/2 /= 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $59,448.56 EXAMPLE OF NEGATIVE MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]/N/365 /= [1.055/1.071]/2 /= 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. 37 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through partial withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC, if applicable. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations.") DURING THE ACCUMULATION PERIOD A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. DURING THE ANNUITIZATION PERIOD During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in your Annuity. Once the tax basis in your Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in your Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. .. To meet liquidity needs, you can withdraw a limited amount from your Annuity during each Annuity Year without application of any CDSC that might otherwise be applicable being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of your Annuity. The minimum Free Withdrawal you may request is $100. .. You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount that you may withdraw will depend on your Annuity's Surrender Value as of the date we process the withdrawal request. After any partial withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the partial withdrawal request as a request to fully surrender your Annuity. The minimum partial withdrawal you may request is $100. To determine if a CDSC applies to partial withdrawals, we: 1. First determine what, if any, amounts qualify as a Free Withdrawal. These amounts are not subject to the CDSC. 2. Next determine what, if any, remaining amounts are withdrawals of Purchase Payments. Amounts in excess of the Free Withdrawal amount will be treated as withdrawals of Purchase Payments unless all Purchase Payments have been previously withdrawn. These amounts are subject to the CDSC. Purchase Payments are withdrawn on a first in, first out basis. 3. Withdraw any remaining amounts from any other Account Value. These amounts are not subject to the CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 38 AMERICAN SKANDIA ANNUITIES PROSPECTUS HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? The maximum Free Withdrawal amount during each Annuity Year is equal to 10% of all Purchase Payments that are subject to a CDSC. Withdrawals made within an Annuity Year reduce the Free Withdrawal amount available for the remainder of the Annuity Year. If you do not make a withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a partial withdrawal. Systematic Withdrawals can be made from Account Value allocated to the Sub-accounts or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100 (which may occur under a program that provides payment of an amount equal to the earnings in your Annuity for the period requested), we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(T)/72(Q) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b), 408 or 408A 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". For contracts issued as nonqualified annuities, the Internal Revenue Code provides for the same exemption from penalty under Section 72(q) of the Code. Distributions received under these provisions in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to any applicable CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Sections 72(t)/72(q), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t)/72(q) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Sections 72(t)/72(q). The minimum amount for any such withdrawal is $100 and payments may be made monthly, quarterly, semi-annually or annually. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59/1//\\2 \\that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Minimum distribution rules do not apply to Roth IRAs during the Owner's lifetime. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC (if applicable) may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum amount that applies to Systematic Withdrawals applies to monthly minimum distributions but does not apply to Minimum Distributions taken out on a quarterly, semi-annual or annual basis. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a 39 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value continued means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the surrendered Annuity. For purposes of calculating any applicable CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. In that scenario, we would determine the CDSC amount as the applicable percentage of the Purchase Payments being withdrawn, rather than as a percentage of the remaining Account Value or withdrawal request. Thus, the CDSC would be greater than if it were calculated as a percentage of remaining Account Value or withdrawal amount. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender all or part of your Annuity prior to the Annuity Date without application of any otherwise applicable CDSC upon occurrence of a medically-related "Contingency Event" as defined below. We may apply a Market Value Adjustment to any Fixed Allocations. If you request a full surrender, the amount payable will be your Account Value minus, with respect to Optimum Plus, (a) the amount of any Optimum Plus amounts applied within 12 months prior to your request to surrender your Annuity under this provision; and (b) the amount of any Optimum Plus amounts added in conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (e.g. Purchase Payments received at such time pursuant to a salary reduction program). With respect to partial surrenders, we similarly reserve the right to take back Optimum Plus amounts as described above. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: .. The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the "Contingency Event" described below in order to qualify for a medically-related surrender; .. the Annuitant must be alive as of the date we pay the proceeds of such surrender request; .. if the Owner is one or more natural persons, all such Owners must also be alive at such time; .. we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; .. this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant; and .. no additional Purchase Payments can be made to the Annuity. A "Contingency Event" occurs if the Annuitant is: .. first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or .. first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make available annuity options that provide fixed annuity payments, variable annuity payments or adjustable annuity payments. Your contract provides certain fixed annuity payment options. We currently offer variable annuity payment options, which are provided by exchanging the deferred annuity contract described in this prospectus for a separate contract issued as an annuity settlement option and described in a separate prospectus. The variable annuity payment options are described in detail in a separate prospectus, which is available upon request and which will be provided to you if and when you elect one of the variable annuity payment options. The separate prospectus sets forth the fees and charges under the variable payment option, which may be higher than those set forth in this prospectus. We do not guarantee to continue to make available variable annuity payment options or any other option other than the fixed annuity payment options set forth in your contract. Fixed options provide the same amount with each payment. Variable 40 AMERICAN SKANDIA ANNUITIES PROSPECTUS options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts and may include a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. Please refer to the "Guaranteed Minimum Income Benefit," the "Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit," under "Living Benefits" below for a description of annuity options that are available when you elect these benefits. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Please note, with respect to Optimum Plus, you may not annuitize within the first three Annuity Years and with respect to Optimum and Optimum Four, you may not annuitize within the first Annuity Year. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you choose this option on a variable basis, you will be provided with a separate prospectus that describes such variable annuity. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity 41 AMERICAN SKANDIA ANNUITIES PROSPECTUS Access To Account Value continued payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. If you choose this option, you will be provided with a separate prospectus that describes such variable annuity. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. If you choose this option, you will be provided with a separate prospectus that describes such variable annuity. We may make different annuity payment options available in the future. We do not guarantee to continue to make available variable annuity payment options or any other option other than the fixed annuity payment options set forth in your contract. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. You have a right to choose your annuity start date. If you have not provided us with your Annuity Date or annuity payment option in writing, then: .. a default date for the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and .. the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. If you choose to defer the Annuity Date beyond the default date, the IRS may not consider your contract to be an annuity under the tax law. If that should occur, all gain in your Annuity at that time will become immediately taxable to you. Further, each subsequent year's increase in Account Value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your Annuity will not be considered an annuity for federal income tax purposes. HOW ARE ANNUITY PAYMENTS CALCULATED? FIXED ANNUITY PAYMENTS (OPTIONS 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. VARIABLE ANNUITY PAYMENTS Generally, we currently offer three different types of variable annuity payment options. The following is a brief description of the variable annuity payment options. If you choose a variable annuity payment option, you will be provided with a separate prospectus that describes such variable annuity. There is no guarantee that we will continue to make available variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first 42 AMERICAN SKANDIA ANNUITIES PROSPECTUS annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. . Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. . Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. . Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. ADJUSTABLE ANNUITY PAYMENTS We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5/th/) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. 43 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY ARE ALIVE? American Skandia offers different optional benefits, for an additional charge, that can provide investment protection for Owners while they are alive. Notwithstanding the additional protection provided under the optional Living Benefit Programs, the additional cost has the impact of reducing net performance of the investment options. Each optional benefit offers a distinct type of guarantee, regardless of the performance of the Sub-accounts, that may be appropriate for you depending on the manner in which you intend to make use of your Annuity while you are alive. Depending on which optional benefit you choose, you can have flexibility to invest in the Sub-accounts while: .. protecting a principal amount from decreases in value as of specified future dates due to investment performance; .. taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; .. guaranteeing a minimum amount of growth will be applied to your principal, if it is to be used as the basis for certain types of lifetime income payments; or .. providing spousal continuation of certain benefits. The "living benefits" that American Skandia offers are the Guaranteed Return Option Plus (GRO Plus), the Guaranteed Minimum Withdrawal Benefit (GMWB), the Guaranteed Minimum Income Benefit (GMIB), the Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit. Please refer to the benefit descriptions that follow for a complete description of the terms, conditions and limitations of each optional benefit. Investment restrictions apply if you elect certain optional living benefits. You should consult with your Financial Professional to determine if any of these optional benefits may be appropriate for you based on your financial needs. There are many factors to consider, but we note that among them you may want to evaluate the tax implications of these different approaches to meeting your needs, both between these benefits and in comparison to other potential solutions to your needs (e.g., comparing the tax implications of the withdrawal benefit and annuity payments). GUARANTEED RETURN OPTION PLUS/SM / (GRO PLUS/SM/) The Guaranteed Return Option Plus described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program (and it is currently active), the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Spousal Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit, or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period and any applicable subsequent period as the "maturity date") and on each anniversary of the maturity date thereafter while the program remains in effect, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate period following election of the enhanced guarantee and on each anniversary thereafter while this enhanced guarantee amount remains in effect, your Account 44 AMERICAN SKANDIA ANNUITIES PROSPECTUS Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between the Sub-accounts you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the Sub-accounts to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the Sub-accounts and the Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender your Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- PROTECTED PRINCIPAL VALUE/ENHANCED PROTECTED PRINCIPAL VALUE The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. .. Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter that the program remains in effect, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date that the program remains in effect, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. .. Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of a specified period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter that the enhanced guaranteed amount remains in effect, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically create an enhanced guarantee (or increase your enhanced guarantee, if previously elected) on each anniversary of the program (and create a new maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the Protected Principal Value or Enhanced Protected Principal Value by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter that the enhanced guarantee amount remains in effect, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to any Fixed Allocations first and then to the Sub-accounts pro-rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to your Annuity. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. WITHDRAWALS UNDER YOUR ANNUITY Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and, with respect to Optimum Plus, any Credits applied to such Purchase Payments) will reduce the applicable guaranteed 45 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals other than Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any Fixed Allocations up to growth attributable to the Fixed Allocations and thereafter pro-rata solely from the Sub-accounts. Withdrawals will be subject to all other provisions of your Annuity, including any Contingent Deferred Sales Charge and Market Value Adjustment that would apply. Charges for other optional benefits under your Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program and any third party investment advisory service will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO Plus/SM/ program are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes any Credits under Optimum Plus); 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GRO Plus or other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 18, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). . B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE -- ALLOCATION OF ACCOUNT VALUE Account Value is transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). .. If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the Sub-accounts will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the Sub-accounts pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we 46 AMERICAN SKANDIA ANNUITIES PROSPECTUS reallocate Account Value from a Fixed Allocation to the Sub-accounts, which may result in a decrease or increase in your Account Value. .. If your Account Value is less than the reallocation trigger, a portion of your Account Value in the Sub-accounts will be transferred from the Sub-accounts pro-rata according to your allocations to a new Fixed Allocation(s) to support the applicable guaranteed amount. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the Sub-accounts while maintaining the guaranteed protection under the program (as described above). If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the Sub-accounts if there is a subsequent market recovery. During periods closer to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s), causing less of your Account Value to be available to participate in the investment experience of the Sub-accounts. Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value or Enhanced Protected Principal Value are transferred to the Sub-accounts differently than each other because of the different guarantees they support. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. ELECTION OF THE PROGRAM The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated. Termination of the Guaranteed Return Option for the purpose of electing the Guaranteed Return Option Plus will be treated as any other termination of the Guaranteed Return Option (see below), including the termination of any guaranteed amount, and application of any applicable Market Value Adjustment when amounts are transferred to the Sub-accounts as a result of the termination. The 47 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued Guaranteed Return Option Plus program will then be added to your Annuity based on the current Account Value. TERMINATION OF THE PROGRAM You can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. You also can terminate the Guaranteed Return Option Plus program entirely. If you terminate the program entirely, you can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, you could, for example, terminate the program on a given Valuation Day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections (including any election made effective on the Annuity issue date and any election made by a surviving spouse) and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. Upon termination, any Account Value in the Fixed Allocations will be transferred to the Sub-accounts pro-rata based on the Account Values in such Sub-accounts, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option Plus will no longer provide any guarantees. The surviving spouse may elect the benefit at any time, subject to the limitations described above, after the death of the Annuity Owner. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION PLUS This program is subject to certain rules and restrictions, including, but not limited to the following: .. Upon inception of the program, 100% of your Account Value must be allocated to the Sub-accounts. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. .. You cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments under Optimum Plus) or transfer Account Value to or from a Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments under Optimum Plus) may be allocated by us to Fixed Allocations to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a Sub-account. .. Transfers from Fixed Allocations made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under an Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. .. Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under an Annuity. .. Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. .. Low interest rates may require allocation to Fixed Allocations even when the current Account Value exceeds the guarantee. .. As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to Fixed Allocations. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. CHARGES UNDER THE PROGRAM We deduct a charge equal to 0.25% of the average daily net assets of the Sub-accounts for participation in the Guaranteed 48 AMERICAN SKANDIA ANNUITIES PROSPECTUS Return Option Plus program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. GUARANTEED RETURN OPTION (GRO) The Guaranteed Return Option described below is offered only in those jurisdictions where we have not yet received regulatory approval for the Guaranteed Return Option Plus as of the date the election of the option is made. Certain terms and conditions may differ between jurisdictions. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option is not available if you elect the GRO Plus rider, the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Spousal Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit, or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period as the "maturity date") guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program monitors your Account Value daily and, if necessary, systematically transfers amounts between the Sub-accounts you choose and the Fixed Allocation used to support the Protected Principal Value. The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the Sub-accounts to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option program. The guarantee provided by the program exists only on the applicable maturity date. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the Sub-accounts and the Fixed Allocation to support our future guarantee, the program may provide some protection from signifi-cant market losses if you choose to surrender your Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- PROTECTED PRINCIPAL VALUE Under the GRO option, American Skandia guarantees that on the maturity date, your Account Value will be no less than the Protected Principal Value. On the maturity date if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. Any amounts added to your Annuity to support our guarantee under the program will be applied to the Fixed Allocation first and then to the Sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to an Annuity. The Protected Principal Value is generally referred to as the "Guaranteed Amount" in the rider we issue for this benefit. KEY FEATURE -- ALLOCATION OF ACCOUNT VALUE Account Value is transferred to and maintained in a Fixed Allocation to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rate on the Fixed Allocation, the remaining duration until the applicable maturity date and the amount of Account Value allocated to the Fixed Allocation relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from the Fixed Allocation. While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from the Fixed Allocation. .. If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the Sub-accounts will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to the Fixed Allocation to support the guaranteed amount, all or a portion of those amounts may 49 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued be transferred from the Fixed Allocation and re-allocated to the Sub-accounts pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from the Fixed Allocation to the Sub-accounts, which may result in a decrease or increase in your Account Value. .. If your Account Value is less than the reallocation trigger, a portion of your Account Value in the Sub-accounts will be transferred from your Sub-accounts pro-rata according to your allocations to a new Fixed Allocation to support the guaranteed amount. The new Fixed Allocation will have a Guarantee Period equal to the time remaining until the applicable maturity date. The Account Value allocated to the new Fixed Allocation will be credited with the fixed interest rate then being credited to a new Fixed Allocation maturing on the applicable maturity date (rounded to the next highest yearly duration). The Account Value will remain invested in the Fixed Allocation until the maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the Sub-accounts while maintaining the guaranteed protection under the program (as described above). If a significant amount of your Account Value is systematically transferred to the Fixed Allocation to support the Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the Sub-accounts if there is a subsequent market recovery. During periods closer to the maturity date of the guarantee a significant portion of your Account Value may be allocated to the Fixed Allocation to support any applicable guaranteed amount. If your Account Value is less than the reallocation trigger and a new Fixed Allocation must be established during periods where the interest rate being credited to such Fixed Allocation is low, a larger portion of your Account Value may need to be transferred to the Fixed Allocation to support the guaranteed amount, causing less of your Account Value to be available to participate in the investment experience of the Sub-accounts. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between the Fixed Allocation and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. ELECTION OF THE PROGRAM The Guaranteed Return Option can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the Protected Principal Value will be based on your Account Value as of that date. RESTART OF THE PROGRAM Once each Annuity Year you may request to restart the Program. Such a request is an election by you to terminate the existing Program and start a new one. Restarts only take effect on anniversaries of the Issue Date. To make such a request for a restart, you must notify us. If we accept your request, we then terminate the existing Program as of that valuation period, if it is an anniversary of the Issue Date, or, if not, as of the next following anniversary of the Issue Date. The new Program starts at that time. The initial Protected Principal Value for the new Program is the Account Value as of the effective date of the new Program. Unless you tell us otherwise, the duration of the new Program will be the same as that for the existing Program. However, if we do not then make that duration available, you must elect from those we make available at that time. As part of terminating the existing Program, we transfer any amounts in Fixed Allocations, subject to a Market Value Adjustment, to the Sub-accounts on a pro-rata basis. If your entire Account Value was then in Fixed Allocations, you must first provide us instructions as to how to allocate the transferred Account Value among the Sub-accounts. TERMINATION OF THE PROGRAM The Annuity Owner also can terminate the Guaranteed Return Option program. Upon termination, any Account Value in the Fixed Allocation will be transferred to the Sub-accounts pro-rata based 50 AMERICAN SKANDIA ANNUITIES PROSPECTUS on the Account Values in such Sub-accounts, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of your Annuity. If you elect to terminate the program, the Guaranteed Return Option will no longer provide any guarantees. If the surviving spouse assumes your Annuity, he/ she may re-elect the benefit on any anniversary of the Issue Date of the Annuity or, if the deceased Owner had not previously elected the benefit, may elect the benefit at any time. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option program will no longer be deducted from your Account Value upon termination of the program. SPECIAL CONSIDERATIONS UNDER THE GUARANTEED RETURN OPTION This program is subject to certain rules and restrictions, including, but not limited to the following: .. Upon inception of the program, 100% of your Account Value must be allocated to the Sub-accounts. The Fixed Allocation may not be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to the Fixed Allocation as of the effective date of the program under some circumstances. .. Annuity Owners cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments under Optimum Plus) or transfer Account Value to or from the Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments under Optimum Plus) may be allocated by us to the Fixed Allocation to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a Sub-account. .. Transfers from the Fixed Allocation made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under an Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. .. Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed Allocation to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under an Annuity. .. Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. .. Low interest rates may require allocation to the Fixed Allocation even when the current Account Value exceeds the guarantee. .. As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to the Fixed Allocation. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. CHARGES UNDER THE PROGRAM We deduct a charge equal to 0.25% of the average daily net assets of the Sub-accounts for participation in the Guaranteed Return Option program. The annual charge is deducted daily. Account Value allocated to the Fixed Allocation under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. 51 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) The Guaranteed Minimum Withdrawal Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Withdrawal Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit rider or the Lifetime Five Income Benefit or the Spousal Lifetime Five Income Benefit. We offer a program that guarantees your ability to withdraw amounts equal to an initial principal value (called the "Protected Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to protect your principal. You are not required to make withdrawals as part of the program - -- the guarantee is not lost if you withdraw less than the maximum allowable amount of principal each year under the rules of the program. There is an additional charge if you elect the GMWB program; however, the charge may be waived under certain circumstances described below. KEY FEATURE -- PROTECTED VALUE The Protected Value is the total amount that we guarantee will be available to you through withdrawals from your Annuity and/or benefit payments, regardless of the impact of market performance on your Account Value. The Protected Value is reduced with each withdrawal you make until the Protected Value is reduced to zero. When the Protected Value is reduced to zero due to your withdrawals, the GMWB program terminates. Additionally, the Protected Value is used to determine the maximum annual amount that you can withdraw from your Annuity, called the Protected Annual Withdrawal Amount, without triggering an adjustment in the Protected Value on a proportional basis. The Protected Value is referred to as the "Benefit Base" in the rider we issue for this benefit. The Protected Value is determined as of the date you make your first withdrawal under your Annuity following your election of the GMWB program. The initial Protected Value is equal to the greater of (A) the Account Value on the date you elect the GMWB program, plus any additional Purchase Payments (plus any Credits applied to such Purchase Payments under Optimum Plus) before the date of your first withdrawal; or (B) the Account Value as of the date of the first withdrawal from your Annuity. The Protected Value may be enhanced by increases in your Account Value due to market performance during the period between your election of the GMWB program and the date of your first withdrawal. .. If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment (plus any Credits applied to such Purchase Payments under Optimum Plus). .. If we offer the GMWB program to existing Annuity Owners, the Account Value on the anniversary of the Issue Date of your Annuity following your election of the GMWB program will be used to determine the initial Protected Value. .. If you make additional Purchase Payments after your first withdrawal, the Protected Value will be increased by the amount of the additional Purchase Payment (plus any Credits applied to such Purchase Payments under Optimum Plus). You may elect to step-up your Protected Value if, due to positive market performance, your Account Value is greater than the Protected Value. You are eligible to step-up the Protected Value on or after the 5/th /Annuity anniversary following the first withdrawal under the GMWB program. The Protected Value can be stepped up again on or after the 5/th /Annuity anniversary following the preceding step-up. If you elect to step-up the Protected Value, you must do so during the 30-day period prior to your eligibility date. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the GMWB program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we reset the Protected Value to be equal to the then current Account Value. For example, assume your initial Protected Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Value to $60,000. On the date you are eligible to step-up the Protected Value, your Account Value is equal to $75,000. You could elect to 52 AMERICAN SKANDIA ANNUITIES PROSPECTUS step-up the Protected Value to $75,000 on the date you are eligible. Upon election of the step-up, we also reset the Protected Annual Withdrawal Amount (discussed immediately below) to be equal to the greater of (A) the Protected Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the Protected Value immediately after the reset. KEY FEATURE -- PROTECTED ANNUAL WITHDRAWAL AMOUNT The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected Value. Under the GMWB program, if your cumulative withdrawals each Annuity Year are less than or equal to the Protected Annual Withdrawal Amount, your Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected Value is reduced by the actual amount of the withdrawal, including any CDSC or MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the Protected Annual Withdrawal Amount trigger a proportional adjustment to both the Protected Value and the Protected Annual Withdrawal Amount, as described in the rider for this benefit (see the examples of this calculation below). The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual Benefit" in the rider we issue for this benefit. The GMWB program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Protected Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Protected Annual Withdrawal Amount each Annuity Year. .. If, cumulatively, you withdraw an amount less than the Protected Annual Withdrawal Amount in any Annuity Year, you cannot carry-over the unused portion of the Protected Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Protected Annual Withdrawal Amount may extend the period of time until the remaining Protected Value is reduced to zero. .. Additional Purchase Payments will increase the Protected Annual Withdrawal Amount by 7% of the applicable Purchase Payment (and any Credits we apply to such Purchase Payments under Optimum Plus). .. If the Protected Annual Withdrawal Amount after an adjustment exceeds the Protected Value, the Protected Annual Withdrawal Amount will be set equal to the Protected Value. The following examples of dollar-for-dollar and proportional reductions and the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the effective date of the GMWB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits in the case of Optimum Plus); 3.) a Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of $17,500 (7% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GMWB or any other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Protected Annual Withdrawal Amount: .. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining Protected Annual Withdrawal Amount for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $17,500 to $7,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount withdrawn exceeds the remaining Protected Annual Withdrawal Amount of $7,500 from Example 1: .. the Protected Value is first reduced by the remaining Protected Annual Withdrawal Amount (from $240,000 to $232,500); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the remaining Protected Annual Withdrawal Amount ($10,000 - $7,500, or $2,500). . B is the Account Value less the remaining Protected Annual Withdrawal Amount ($220,000 - $7,500, or $212,500). The resulting Protected Value is: $232,500 X (1 - $2,500 / $212,500), or $229,764.71. .. the Protected Annual Withdrawal Amount is also reduced by the ratio of A to B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 - $2,500 / $212,500), or $17,294.12. .. The remaining Protected Annual Withdrawal Amount is set to zero (0) for the balance of the first Annuity Year. 53 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued EXAMPLE 3. RESET OF THE MAXIMUM ANNUAL BENEFIT A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The remaining Protected Annual Withdrawal Amount has been reset to the Protected Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn is less than the remaining Protected Annual Withdrawal Amount: .. the Protected Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $229,764.71 to $219,764.71). .. the remaining Protected Annual Withdrawal Amount for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $17,294.12 to $7,294.12). BENEFITS UNDER THE GMWB PROGRAM .. In addition to any withdrawals you make under the GMWB program, market performance may reduce your Account Value. If your Account Value is equal to zero, and you have not received all of your Protected Value in the form of withdrawals from your Annuity, we will continue to make payments equal to the remaining Protected Value in the form of fixed, periodic payments until the remainder of the Protected Value is paid, at which time the rider terminates. The fixed, periodic payments will each be equal to the Protected Annual Withdrawal Amount, except for the last payment which may be equal to the remaining Protected Value. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. You will not have the right to make additional Purchase Payments or receive the remaining Protected Value in a lump sum. You can elect the frequency of payments, subject to our rules then in effect. .. If the death benefit under your Annuity becomes payable before you have received all of your Protected Value in the form of withdrawals from your Annuity, your Beneficiary has the option to elect to receive the remaining Protected Value as an alternate death benefit payout in lieu of the amount payable under any other death benefit provided under your Annuity. The remaining Protected Value will be payable in the form of fixed, periodic payments. Your beneficiary can elect the frequency of payments, subject to our rules then in effect. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. The Protected Value is not equal to the Account Value for purposes of the Annuity's other death benefit options. The GMWB program does not increase or decrease the amount otherwise payable under the Annuity's other death benefit options. Generally, the GMWB program would be of value to your Beneficiary only when the Protected Value at death exceeds any other amount available as a death benefit. .. If you elect to begin receiving annuity payments before you have received all of your Protected Value in the form of withdrawals from your Annuity, an additional annuity payment option will be available that makes fixed annuity payments for a certain period, determined by dividing the Protected Value by the Protected Annual Withdrawal Amount. If you elect to receive annuity payments calculated in this manner, the assumed interest rate used to calculate such payments will be 0%, which is less than the assumed interest rate on other annuity payment options we offer. This 0% assumed interest rate results in lower annuity payments than what would have been paid if the assumed interest rate was higher than 0%. You can also elect to terminate the GMWB program and begin receiving annuity payments based on your then current Account Value (not the remaining Protected Value) under any of the available annuity payment options. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the GMWB program are subject to all of the terms and conditions of your Annuity, including any CDSC and MVA that may apply. .. Withdrawals made while the GMWB program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under your Annuity. .. The GMWB program does not directly affect your Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the GMWB program. The GMWB program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Value in the form of periodic benefit payments. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment 54 AMERICAN SKANDIA ANNUITIES PROSPECTUS options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. ELECTION OF THE PROGRAM Currently, the GMWB program can only be elected at the time that you purchase your Annuity. In the future, we may offer existing Annuity Owners the option to elect the GMWB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMWB program after the Issue Date of your Annuity, the program will be effective as of the next anniversary date. Your Account Value as of such anniversary date will be used to calculate the initial Protected Value and the initial Protected Annual Withdrawal Amount. We reserve the right to restrict the maximum amount of Protected Value that may be covered under the GMWB program under this Annuity or any other annuities that you own that are issued by American Skandia or its affiliated companies. TERMINATION OF THE PROGRAM The program terminates automatically when your Protected Value reaches zero based on your withdrawals. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of your Annuity, upon due proof of death (unless your surviving spouse elects to continue your Annuity and the GMWB program or your Beneficiary elects to receive the amounts payable under the GMWB program in lieu of the death benefit) or upon your election to begin receiving annuity payments. The charge for the GMWB program will no longer be deducted from your Account Value upon termination of the program. CHARGES UNDER THE PROGRAM Currently, we deduct a charge equal to 0.35% of the average daily net assets of the Sub-accounts per year to purchase the GMWB program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. .. If, during the seven years following the effective date of the program, you do not make any withdrawals, and do not make any additional Purchase Payments after a five-year period following the effective date of the program, the program will remain in effect; however, we will waive the annual charge going forward. If you make an additional Purchase Payment following the waiver of the annual charge, we will begin charging for the program. After year seven (7) following the effective date of the program, withdrawals will not cause a charge to be re-imposed. .. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the program have changed for new purchasers, your program may be subject to the new charge level for the benefit. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5% owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the owner's lifetime. The amount required under the Code may exceed the Protected Annual Withdrawal Amount, which will cause us to recalculate the Protected Value and the Protected Annual Withdrawal Amount, resulting in a lower amount payable in future Annuity Years. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) The Guaranteed Minimum Income Benefit program described below is only being offered in those juris-dictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Income Benefit program is not available if you elect any other optional living benefit. 55 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued We offer a program that, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on a guaranteed minimum value (called the "Protected Income Value") that increases after the waiting period begins, regardless of the impact of market performance on your Account Value. The program may be appropriate for you if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. There is an additional charge if you elect the GMIB program. KEY FEATURE -- PROTECTED INCOME VALUE The Protected Income Value is the minimum amount that we guarantee will be available (net of any applicable tax charge), after a waiting period of at least seven years, as a basis to begin receiving fixed annuity payments. The Protected Income Value is initially established on the effective date of the GMIB program and is equal to your Account Value on such date. Currently, since the GMIB program may only be elected at issue, the effective date is the Issue Date of your Annuity. The Protected Income Value is increased daily based on an annual growth rate of 5%, subject to the limitations described below. The Protected Income Value is referred to as the "Protected Value" in the rider we issue for this benefit. The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the rider we issue for this benefit. The Protected Income Value is subject to a limit of 200% (2X) of the sum of the Protected Income Value established on the effective date of the GMIB program, or the effective date of any step-up value, plus any additional Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of Optimum Plus) made after the waiting period begins ("Maximum Protected Income Value"), minus the sum of any reductions in the Protected Income Value due to withdrawals you make from your Annuity after the waiting period begins. .. Subject to the maximum age/durational limits described immediately below, we will no longer increase the Protected Income Value by the 5% annual growth rate once you reach the Maximum Protected Income Value. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments after you reach the Maximum Protected Income Value. Further, if you make withdrawals after you reach the Maximum Protected Income Value, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. .. Subject to the Maximum Protected Income Value, we will no longer increase the Protected Income Value by the 5% annual growth rate after the later of the anniversary date on or immediately following the Annuitant's 80/th /birthday or the 7/th /anniversary of the later of the effective date of the GMIB program or the effective date of the most recent step-up. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of Optimum Plus). Further, if you make withdrawals after the Annuitant reaches the maximum age/duration limits, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. .. Subject to the Maximum Protected Income Value, if you make an additional Purchase Payment, we will increase the Protected Income Value by the amount of the Purchase Payment (and any Credit that is applied to such Purchase Payment in the case of Optimum Plus) and will apply the 5% annual growth rate on the new amount from the date the Purchase Payment is applied. .. As described below, after the waiting period begins, cumulative withdrawals each Annuity Year that are up to 5% of the Protected Income Value on the prior anniversary of your Annuity will reduce the Protected Income Value by the amount of the withdrawal. Cumulative withdrawals each Annuity Year in excess of 5% of the Protected Income Value on the prior anniversary of your Annuity will reduce the Protected Income Value proportionately. All withdrawals after the Maximum Protected Income Value is reached will reduce the Protected Income Value proportionately. The 5% annual growth rate will be applied to the reduced Protected Income Value from the date of the withdrawal. Stepping-Up the Protected Income Value -- You may elect to "step-up" or "reset" your Protected Income Value if your Account Value is greater than the current Protected Income Value. Upon exercise of the step-up provision, your initial Protected Income Value will be reset equal to your current Account Value. From the date that you elect to step-up the Protected Income Value, we will apply the 5% annual growth rate to the stepped-up Protected Income Value, as described above. You can exercise the step-up provision twice while the GMIB program is in effect, and only while the Annuitant is less than age 76. 56 AMERICAN SKANDIA ANNUITIES PROSPECTUS .. A new seven-year waiting period will be established upon the effective date of your election to step-up the Protected Income Value. You cannot exercise your right to begin receiving annuity payments under the GMIB program until the end of the new waiting period. In light of this waiting period upon resets, it is not recommended that you reset your GMIB if the required beginning date under IRS minimum distribution requirements would commence during the 7 year waiting period. See "Tax Considerations" section in this prospectus for additional information on IRS requirements. .. The Maximum Protected Income Value will be reset as of the effective date of any step-up. The new Maximum Protected Income Value will be equal to 200% of the sum of the Protected Income Value as of the effective date of the step-up plus any subsequent Purchase Payments (and any Credit that is applied to such Purchase Payments in the case of Optimum Plus), minus the impact of any withdrawals after the date of the step-up. .. When determining the guaranteed annuity purchase rates for annuity payments under the GMIB program, we will apply such rates based on the number of years since the most recent step-up. .. If you elect to step-up the Protected Income Value under the program, and on the date you elect to step-up, the charges under the GMIB program have changed for new purchasers, your program may be subject to the new charge going forward. .. A step-up will increase the dollar-for-dollar limit on the anniversary of the Issue Date of the Annuity following such step-up. Impact of Withdrawals on the Protected Income Value -- Cumulative withdrawals each Annuity Year up to 5% of the Protected Income Value will reduce the Protected Income Value on a "dollar-for-dollar" basis (the Protected Income Value is reduced by the actual amount of the withdrawal). Cumulative withdrawals in any Annuity Year in excess of 5% of the Protected Income Value will reduce the Protected Income Value proportionately (see the examples of this calculation below). The 5% annual withdrawal amount is determined on each anniversary of the Issue Date (or on the Issue Date for the first Annuity Year) and applies to any withdrawals during the Annuity Year. This means that the amount available for withdrawals each Annuity Year on a "dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect changes in the Protected Income Value during the prior Annuity Year. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GMIB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits in the case of Optimum Plus); 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here are purely hypothetical and do not reflect the charge for GMIB or any other fees and charges. EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. Immediately prior to the withdrawal, the Protected Income Value is $251,038.10 (the initial value accumulated for 31 days at an annual effective rate of 5%). As the amount withdrawn is less than the dollar-for-dollar limit: .. the Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). Immediately before the withdrawal, the Account Value is $220,000 and the Protected Income Value is $242,006.64. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the Protected Income Value is first reduced by the Remaining Limit (from $242,006.64 to $239,506.64); .. The result is then further reduced by the ratio of A to B, where: . A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). . B is the Account Value less the Remaining Limit ($220,000 - $2,500, or $217,500). The resulting Protected Income Value is: $239,506.64 X (1 - $7,500 / $217,500), or $231,247.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. EXAMPLE 3. RESET OF THE DOLLAR-FOR-DOLLAR LIMIT A $10,000 withdrawal is made on the first anniversary of the Issue Date, October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected Income Value is $240,838.37. The Remaining Limit is reset to 5% of this amount, or $12,041.92. As the amount withdrawn is less than the dollar-for-dollar limit: .. the Protected Income Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $240,838.37 to $230,838.37). 57 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,041.92 to $2,041.92). KEY FEATURE -- GMIB ANNUITY PAYMENTS You can elect to apply the Protected Income Value to one of the available GMIB Annuity Payment Options on any anniversary date following the initial waiting period, or any subsequent waiting period established upon your election to step-up the Protected Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the Annuity anniversary, during which you may elect to begin receiving annuity payments under one of the available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 95/th /birthday, except for Annuities used as a funding vehicle for an IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 92/nd /birthday. The amount of each GMIB Annuity Payment will be determined based on the age and, where permitted by law, sex of the Annuitant by applying the Protected Income Value (net of any applicable tax charge that may be due) to the GMIB Annuity Payment Option you choose. We use special annuity purchase rates to calculate the amount of each payment due under the GMIB Annuity Payment Options. These special rates for the GMIB Annuity Payment Options are calculated using an assumed interest rate factor that provides for lower growth in the value applied to produce annuity payments than if you elected an annuity payment option that is not part of the GMIB program. These special rates also are calculated using other factors such as "age setbacks" (use of an age lower than the Annuitant's actual age) that result in lower payments than would result if you elected an annuity payment option that is not part of the GMIB program. Use of an age setback entails a longer assumed life for the Annuitant which in turn results in lower annuity payments. On the date that you elect to begin receiving GMIB Annuity Payments, we guarantee that your payments will be calculated based on your Account Value and our then current annuity purchase rates if the payment amount calculated on this basis would be higher than it would be based on the Protected Income Value and the special GMIB annuity purchase rates. GMIB ANNUITY PAYMENT OPTION 1 -- PAYMENTS FOR LIFE WITH A CERTAIN PERIOD Under this option, monthly annuity payments will be made until the death of the Annuitant. If the Annuitant dies before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. GMIB ANNUITY PAYMENT OPTION 2 -- PAYMENTS FOR JOINT LIVES WITH A CERTAIN PERIOD Under this option, monthly annuity payments will be made until the death of both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint Annuitant die before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. .. If the Annuitant dies first, we will continue to make payments until the later of the death of the Joint Annuitant and the end of the period certain. However, if the Joint Annuitant is still receiving annuity payments following the end of the certain period, we will reduce the amount of each subsequent payment to 50% of the original payment amount. .. If the Joint Annuitant dies first, we will continue to make payments until the later of the death of the Annuitant and the end of the period certain. You cannot withdraw your Account Value or the Protected Income Value under either GMIB Annuity Payment Option once annuity payments have begun. We may make other payout frequencies available, such as quarterly, semi-annually or annually. OTHER IMPORTANT CONSIDERATIONS .. You should note that GMIB is designed to provide a type of insurance that serves as a safety net only in the event your Account Value declines significantly due to negative investment performance. If your Account Value is not significantly affected by negative investment performance, it is unlikely that the purchase of the GMIB will result in your receiving larger annuity payments than if you had not purchased GMIB. This is because the assumptions that we use in computing the GMIB, such as the annuity purchase rates, (which include assumptions as to age-setbacks and assumed interest rates), are more conservative than the assumptions that we use in computing annuity payout options outside of GMIB. Therefore, you may generate higher income payments if you were to annuitize a lower Account Value at the current annuity purchase rates, than if you were to annuitize under the GMIB with a higher Protected Value than your Account Value but, at the annuity purchase rates guaranteed under the GMIB. The GMIB program 58 AMERICAN SKANDIA ANNUITIES PROSPECTUS does not directly affect an Annuity's Account Value, Surrender Value or the amount payable under either the basic Death Benefit provision of the Annuity or any optional Death Benefit provision. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Income Value. The Protected Income Value is only applicable if you elect to begin receiving annuity payments under one of the GMIB annuity options after the waiting period. .. Each Annuity offers other annuity payment options that you can elect which do not impose an additional charge, but which do not offer to guarantee a minimum value on which to make annuity payments. .. Where allowed by law, we reserve the right to limit subsequent Purchase Payments if we determine, at our sole discretion, that based on the timing of your Purchase Payments and withdrawals, your Protected Income Value is increasing in ways we did not intend. In determining whether to limit Purchase Payments, we will look at Purchase Payments which are disproportionately larger than your initial Purchase Payment and other actions that may artificially increase the Protected Income Value. .. We currently limit the Sub-accounts in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. .. If you change the Annuitant after the effective date of the GMIB program, the period of time during which we will apply the 5% annual growth rate may be changed based on the age of the new Annuitant. If the new Annuitant would not be eligible to elect the GMIB program based on his or her age at the time of the change, then the GMIB program will terminate. .. Annuity payments made under the GMIB program are subject to the same tax treatment as any other annuity payment. .. At the time you elect to begin receiving annuity payments under the GMIB program or under any other annuity payment option we make available, the protection provided by an Annuity's basic Death Benefit or any optional Death Benefit provision you elected will no longer apply. ELECTION OF THE PROGRAM Currently, the GMIB program can only be elected at the time that you purchase your Annuity. The Annuitant must be age 75 or less as of the effective date of the GMIB program. In the future, we may offer existing Annuity Owners the option to elect the GMIB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMIB program after the Issue Date of your Annuity, the program will be effective as of the date of election. Your Account Value as of that date will be used to calculate the Protected Income Value as of the effective date of the program. TERMINATION OF THE PROGRAM The GMIB program cannot be terminated by the Owner once elected. The GMIB program automatically terminates as of the date your Annuity is fully surrendered, on the date the Death Benefit is payable to your Beneficiary (unless your surviving spouse elects to continue your Annuity), or on the date that your Account Value is transferred to begin making annuity payments. The GMIB program may also be terminated if you designate a new Annuitant who would not be eligible to elect the GMIB program based on his or her age at the time of the change. Upon termination of the GMIB program we will deduct the charge from your Account Value for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). CHARGES UNDER THE PROGRAM Currently, we deduct a charge equal to 0.50% per year of the average Protected Income Value for the period the charge applies. Because the charge is calculated based on the average Protected Income Value, it does not increase or decrease based on changes to the Annuity's Account Value due to market performance. The dollar amount you pay each year will increase in any year the Protected Income Value increases, and it will decrease in any year the Protected Income Value decreases due to withdrawal, irrespective of whether your Account Value increases or decreases. The charge is deducted annually in arrears each Annuity Year on the anniversary of the Issue Date of an Annuity. We deduct the amount of the charge pro-rata from the Account Value allocated to the Sub-accounts and the Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed Allocation. If you surrender your Annuity, begin receiving annuity payments under the GMIB program or any other annuity payment option we make available during an Annuity Year, or the GMIB program terminates, we will deduct the charge for the portion of the Annuity 59 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No charge applies after the Annuity Date. LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE) The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Lifetime Five can be elected only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. Currently, if you elect Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Lifetime Five and Spousal Lifetime Five. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect any other optional living benefit. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees your ability to withdraw amounts equal to a percentage of an initial principal value (called the "Protected Withdrawal Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. There are two options -- one is designed to provide an annual withdrawal amount for life (the "Life Income Benefit") and the other is designed to provide a greater annual withdrawal amount as long as there is Protected Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no Protected Withdrawal Value, the withdrawal benefit will be zero. You do not choose between these two options; each option will continue to be available as long as your Annuity has an Account Value and the Lifetime Five is in effect. Certain benefits under Lifetime Five may remain in effect even if the Account Value of your Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive annual payments. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- PROTECTED WITHDRAWAL VALUE The Protected Withdrawal Value is initially used to determine the amount of each initial annual payment under the Life Income Benefit and the Withdrawal Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under your Annuity following your election of Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Lifetime Five growing at 5% per year from the date of your election of the program, or application of the Purchase Payment to your Annuity, as applicable, until the date of your first withdrawal or the 10/th /anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (A) and (C) above each value is increased by the amount of any subsequent Purchase Payments. With respect to Optimum Plus, Credits are added to Purchase Payments for purposes of calculating the Protected Withdrawal Value, the Annual Income Amount and the Annual Withdrawal Amount (see below for a description of Annual Income Amount and Annual Withdrawal Amount). .. If you elect the Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. .. For existing Owners who are electing the Lifetime Five benefit, the Account Value on the date of your election of the Lifetime Five program will be used to determine the initial Protected Withdrawal Value. .. If you make additional Purchase Payments after your first withdrawal, the Protected Withdrawal Value will be increased by the amount of each additional Purchase Payment. You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect, then you are eligible to step-up the Protected Withdrawal Value on or after the 5/th/ anniversary of the first withdrawal under the Lifetime Five program. Under 60 AMERICAN SKANDIA ANNUITIES PROSPECTUS Annuities with Lifetime Five elected prior to March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elected the Lifetime Five program on or after March 20, 2006, then you are eligible to step-up the Protected Withdrawal Value on or after the 3rd anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected on or after March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 3rd anniversary following the preceding step-up. In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. An optional automatic set-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will occur on the 3rd Annuity Anniversary (5th Annuity Anniversary if the benefit was elected prior to March 20, 2006) following the later of the first withdrawal under the benefit or the prior step-up. At this time, your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. If 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 3rd (5th if the benefit was elected prior to March 20, 2006) Annuity Anniversary following the most recent step-up. If, on the date that we implement an Auto Step-Up to your Protected Withdrawal Value, the charge for Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. The Protected Withdrawal Value is reduced each time a withdrawal is made on a dollar-for-dollar basis up to 7% per Annuity Year of the Protected Withdrawal Value and on the greater of a dollar-for-dollar basis or a pro rata basis for withdrawals in an Annuity Year in excess of that amount until the Protected Withdrawal Value is reduced to zero. At that point the Annual Withdrawal Amount will be zero until such time (if any) as the Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or additional Purchase Payments being made into the Annuity). KEY FEATURE -- ANNUAL INCOME AMOUNT UNDER THE LIFE INCOME BENEFIT The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. A withdrawal can be considered Excess Income under the Life Income Benefit even though it does not exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a step-up (or an auto step-up is effected), your Annual Income Amount increases to equal 5% of your Account Value after the step-up if such amount is greater than your Annual Income Amount. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. 61 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued KEY FEATURE -- ANNUAL WITHDRAWAL AMOUNT UNDER THE WITHDRAWAL BENEFIT The initial Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals each Annuity Year are less than or equal to the Annual Withdrawal Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If your cumulative withdrawals are in excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Withdrawal to the Account Value immediately prior to such withdrawal (see the examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. When you elect a step-up (or an auto step-up is effected), your Annual Withdrawal Amount increases to equal 7% of your Account Value after the step-up if such amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 7% of any additional Purchase Payments. A determination of whether you have exceeded your Annual Withdrawal Amount is made at the time of each withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount will not offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount at the time the withdrawal was made. The Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount and the Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Annual Withdrawal Amount or Annual Income Amount in each Annuity Year. .. If, cumulatively, you withdraw an amount less than the Annual Withdrawal Amount under the Withdrawal Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Withdrawal Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. .. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Income Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on February 1, 2010 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for Lifetime Five or any other fees and charges. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a)Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33 (b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of $265,000). The Annual Income Amount is equal to $13,250 under the Life Income Benefit (5% of $265,000). EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $10,000 = $8,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 .. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 .. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000 62 AMERICAN SKANDIA ANNUITIES PROSPECTUS EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS (a) If $15,000 was withdrawn (more than the Annual Income Amount but less than the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $15,000 = $3,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 .. Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000 (b) If $25,000 was withdrawn (more than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Withdrawal Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 = $6,450) reduces Annual Withdrawal Amount for future Annuity Years. .. Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value before Excess Withdrawal X Annual Withdrawal Amount = $6,450 / ($263,000 - $18,550) X $18,550 = $489 Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061 .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 = $11,750) reduces Annual Income Amount for future Annuity Years. .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $11,750 / ($263,000 - $13,250) X $13,250 = $623 Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627 .. Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount ($18,550) from $265,000 to $246,450. It is further reduced by the greater of a dollar-for-dollar reduction or a proportional reduction. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450 .. Proportional reduction = Excess Withdrawal / Account Value before Excess Withdrawal X Protected Withdrawal Value = $6,450 / ($263,000 - $18,550) X $246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450, $6,503} = $239,947 EXAMPLE 3. STEP-UP OF THE PROTECTED WITHDRAWAL VALUE If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on February 1, 2010 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a step-up is elected on February 1, 2010, then the following values would result: .. Protected Withdrawal Value = Account Value on February 1, 2010 = $280,000 .. Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is increased to $14,000. .. If the step-up request on February 1, 2010 was due to the election of the auto step-up feature, we would first check to see if an auto step-up should occur by checking to see if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. 5% of the Account Value is equal to 5% of $280,000, which is $14,000. 5% of the Annual Income Amount ($13,250) is $662.50, which added to the Annual Income Amount is $13,912.50. Since 5% of the Account Value is greater than $13,912.50, the step-up would still occur in this scenario, and all of the values would be increased as indicated above. .. Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual Withdrawal Amount is increased to $19,600. BENEFITS UNDER THE LIFETIME FIVE PROGRAM .. If your Account Value is equal to zero, and the cumulative withdrawals in the current Annuity Year are greater than the 63 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued Annual Withdrawal Amount, the Lifetime Five program will terminate. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under both the Life Income Benefit and the Withdrawal Benefit, you will be given the choice of receiving the payments under the Life Income Benefit or under the Withdrawal Benefit. Thus, in that scenario, the remaining amounts under the Life Income Benefit and the Withdrawal Benefit would be payable even though your Account Value was reduced to zero. Once you make this election we will make an additional payment for that Annuity Year equal to either the remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity Year, if any, depending on the option you choose. In subsequent Annuity Years we make payments that equal either the Annual Income Amount or the Annual Withdrawal Amount as described in this Prospectus. You will not be able to change the option after your election and no further Purchase Payments will be accepted under your Annuity. If you do not make an election, we will pay you annually under the Life Income Benefit. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount but less than or equal to the Annual Withdrawal Amount and amounts are still payable under the Withdrawal Benefit, you will receive the payments under the Withdrawal Benefit. In the year of a withdrawal that reduced your Account Value to zero, we will make an additional payment to equal any remaining Annual Withdrawal Amount and make payments equal to the Annual Withdrawal Amount in each subsequent year (until the Protected Withdrawal Value is depleted). Once your Account Value equals zero no further Purchase Payments will be accepted under your Annuity. .. If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years or any remaining Protected Withdrawal Value, you can elect one of the following three options: (1)apply your Account Value to any annuity option available; or (2)request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We make such annuity payments until the Annuitant's death; or (3)request that, as of the date annuity payments are to begin, we pay out any remaining Protected Withdrawal Value as annuity payments. Each year such annuity payments will equal the Annual Withdrawal Amount or the remaining Protected Withdrawal Value if less. We make such annuity payments until the earlier of the Annuitant's death or the date the Protected Withdrawal Value is depleted. We must receive your request in a form acceptable to us at our office. .. In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a single life fixed annuity with five payments certain using the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1)the present value of future Annual Income Amount payments. Such present value will be calculated using the greater of the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2)the Account Value. .. If no withdrawal was ever taken, we will determine a Protected Withdrawal Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you made your first withdrawal on the date the annuity payments are to begin. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the Lifetime Five program are subject to all of the terms and conditions of your Annuity, including any applicable CDSC. .. Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under your Annuity. The Lifetime Five program does not directly affect your Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Withdrawal Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Lifetime Five program. The Lifetime Five program provides a guarantee that if your Account Value declines due to market 64 AMERICAN SKANDIA ANNUITIES PROSPECTUS performance, you will be able to receive your Protected Withdrawal Value or Annual Income Amount in the form of periodic benefit payments. .. You must allocate your Account Value in accordance with the then permitted and available option(s) with this program in order to elect and maintain the Lifetime Five program. ELECTION OF THE PROGRAM The Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value, the initial Protected Annual Withdrawal Amount, and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect Lifetime Five or elect the Spousal Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. If you elected Lifetime Five prior to March 20, 2006, and you terminate the program, there will be no waiting period before you can re-elect the program or elect Spousal Lifetime Five provided that you had not previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminated Lifetime Five. If you had previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five, you will be able to re-elect the program or elect Spousal Lifetime Five on any date on or after the next anniversary of the Annuity Date. However, once you choose to re-elect/elect, the waiting period described above will apply to subsequent re-elections. We reserve the right to limit the re-election/election frequency in the future. Before making any such change to the re-election/election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. TERMINATION OF THE PROGRAM The program terminates automatically when your Protected Withdrawal Value and Annual Income Amount equal zero. You may terminate the program at any time by notifying us. If you terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. The program terminates upon your surrender of your Annuity, upon the death of the Annuitant (but your surviving spouse may elect a new Lifetime Five if your spouse elects the spousal continuance option and your spouse would then be eligible to elect the benefit if he or she was a new purchaser), upon a change in ownership of your Annuity that changes the tax identification number of the Owner, upon change in the Annuitant or upon your election to begin receiving annuity payments. While you may terminate your program at any time, we may not terminate the program other than in the circumstances listed above. However, we may stop offering the program for new elections or re-elections at any time in the future. terminate the program, any guarantee provided by the benefit will The charge for the Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Withdrawal Amount and the Annual Income Amount, which will cause us to increase the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. Any such payments will reduce your Protected Withdrawal Value. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 65 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE) The Spousal Lifetime Five program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, if you elect Spousal Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Spousal Lifetime Five and Lifetime Five. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must be elected based on two Designated Lives, as described below. Each Designated Life must be at least 55 years old when the benefit is elected. The Spousal Lifetime Five program is not available if you elect any other optional living benefit or Death Benefit. As long as your Spousal Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees until the later death of two natural persons that are each other's spouses at the time of election of Spousal Lifetime Five and at the first death of one of them (the "Designated Lives", each a "Designated Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit") equal to a percentage of an initial principal value (the "Protected Withdrawal Value") regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. The Spousal Life Income Benefit may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity, wish to ensure that market performance will not affect your ability to receive annual payments, and wish either spouse to be able to continue the Spousal Life Income Benefit after the death of the first. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- INITIAL PROTECTED WITHDRAWAL VALUE The initial Protected Withdrawal Value is used to determine the amount of initial annual payment under the Spousal Life Income Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Spousal Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Spousal Lifetime Five, plus any additional Purchase Payments growing at 5% per year from the application of the Purchase Payment to your Annuity, until the date of your first withdrawal or the 10/th /anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (A) and (C) above, each value is increased by the amount of any subsequent Purchase Payments. With respect to Optimum Plus, Credits are added to Purchase Payments for purposes of calculating the Protected Withdrawal Value and the Annual Income Amount (see below for a description of Annual Income Amount). .. If you elect the Spousal Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. .. For existing Owners who are electing the Spousal Lifetime Five benefit, the Account Value on the date of your election of the Spousal Lifetime Five program will be used to determine the initial Protected Withdrawal Value. KEY FEATURE -- ANNUAL INCOME AMOUNT UNDER THE SPOUSAL LIFE INCOME BENEFIT The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. 66 AMERICAN SKANDIA ANNUITIES PROSPECTUS You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 3/rd /anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 3/rd /anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will occur on the 3rd Annuity Anniversary following the later of the first withdrawal under the benefit or the prior step-up. At this time, your Annual Income Amount will only be stepped-up if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. If 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 3rd Annuity Anniversary following the most recent step-up. If, on the date that we implement an Auto Step-Up to your Annual Income Amount, the charge for Spousal Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. The Spousal Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount. Under Spousal Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Spousal Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on February 1, 2010 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for the Spousal Lifetime Five or any other fees and charges. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a)Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05/(393/365/) = $263,484.33 (b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit (5% of $265,000). EXAMPLE 1. DOLLAR-FOR-DOLLAR REDUCTION If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 EXAMPLE 2. DOLLAR-FOR-DOLLAR AND PROPORTIONAL REDUCTIONS If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006, then the following values would result: .. Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. 67 AMERICAN SKANDIA ANNUITIES PROSPECTUS Living Benefit Programs continued .. Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 EXAMPLE 3. STEP-UP OF THE ANNUAL INCOME AMOUNT If a step-up of the Annual Income Amount is requested on February 1, 2010, the request will be accepted because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. If the step-up request was due to the election of the auto step-up feature, the step-up would still occur because 5% of Account Value would exceed the Annual Income Amount by more than 5% (5% of $13,250 = $662.50; $13,250 + $662.50 = $13,912.50; $14,000 (greater than) $13,912.50). BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM .. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under the Spousal Life Income Benefit, we will make an additional payment for that Annuity Year equal to the remaining Annual Income Amount for the Annuity Year, if any. Thus, in that scenario, the remaining Annual Income Amount would be payable even though your Account Value was reduced to zero. In subsequent Annuity Years we make payments that equal the Annual Income Amount as described in this Prospectus. No further Purchase Payments will be accepted under your Annuity. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount, the Spousal Life Income Benefit terminates and no additional payments will be made. .. If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years, you can elect one of the following two options: (1)apply your Account Value to any annuity option available; or (2)request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. We must receive your request in a form acceptable to us at our office. .. In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a joint and survivor or single (as applicable) life fixed annuity with five payments certain using the same basis that is used to calculate the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1)the present value of future Annual Income Amount payments. Such present value will be calculated using the same basis that is used to calculate the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2)the Account Value. .. If no withdrawal was ever taken, we will determine an initial Protected Withdrawal Value and calculate an Annual Income Amount as if you made your first withdrawal on the date the annuity payments are to begin. OTHER IMPORTANT CONSIDERATIONS .. Withdrawals under the Spousal Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. .. Withdrawals made while the Spousal Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Spousal Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value. .. You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Spousal Lifetime Five program. The Spousal Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to 68 AMERICAN SKANDIA ANNUITIES PROSPECTUS receive your Annual Income Amount in the form of periodic benefit payments. .. You must allocate your Account Value in accordance with the then available option(s) that we may permit in order to elect and maintain the Spousal Lifetime Five program. .. There may be circumstances where you will continue to be charged the full amount for the Spousal Lifetime Five program even when the benefit is only providing a guarantee of income based on one life with no survivorship. .. In order for the Surviving Designated Life to continue the Spousal Lifetime Five program upon the death of an owner, the Designated Life must elect to assume ownership of the Annuity under the spousal continuation option. See "Spousal Owners/Spousal Beneficiaries" and "Spousal Beneficiary --Assumption of Annuity" in this Prospectus. ELECTION OF AND DESIGNATIONS UNDER THE PROGRAM Spousal Lifetime Five can only be elected based on two Designated Lives. Designated Lives must be natural persons who are each other's spouses at the time of election of the program and at the death of the first of the Designated Lives to die. Currently, the program may only be elected where the Owner, Annuitant and Beneficiary designations are as follows: .. One Annuity Owner, where the Annuitant and the Owner are the same person and the beneficiary is the Owner's spouse. The Owner/Annuitant and the beneficiary each must be at least 55 years old at the time of election; or .. Co-Annuity Owners, where the Owners are each other's spouses. The Beneficiary designation must be the surviving spouse. The first named Owner must be the Annuitant. Both Owners must each be at least 55 years old at the time of election. No Ownership changes or Annuitant changes will be permitted once this program is elected. However, if the Annuity is co-owned, the Owner that is not the Annuitant may be removed without affecting the benefit. The Spousal Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Spousal Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. TERMINATION OF THE PROGRAM The program terminates automatically when your Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. We reserve the right to further limit the frequency election in the future. The program terminates upon your surrender of the Annuity, upon the first Designated Life to die if the Annuity is not continued, upon the second Designated Life to die or upon your election to begin receiving annuity payments. The charge for the Spousal Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. ADDITIONAL TAX CONSIDERATIONS FOR QUALIFIED CONTRACTS/ARRANGEMENTS If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or employer plan under Code Section 401(a), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Income Amount, which will cause us to increase the Annual Income Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 69 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? Each Annuity provides a Death Benefit during its accumulation period. If an Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. If an 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT Each Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under an Annuity. Each Annuity also offers four different optional Death Benefits that can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. In addition, with respect to Optimum Plus, under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. (See "How are Credits Applied to My Account Value".) The basic Death Benefit is the greater of: .. The sum of all Purchase Payments less the sum of all proportional withdrawals. .. The sum of your Account Value in the Sub-accounts and your Interim Value in the Fixed Allocations. With respect to Optimum Plus, the basic Death Benefit is reduced by the amount of any Credits applied within 12 months prior to the date of death. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Four optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. Currently, these benefits are only offered in those jurisdictions where we have received regulatory approval and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase an optional Death Benefit subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ between jurisdictions once approved and if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit may only be elected individually, and cannot be elected in combination with any other optional Death Benefit. If you elect Spousal Lifetime Five, you are not permitted to elect an optional Death Benefit. With respect to Optimum Plus, under certain circumstances, each Optional Death Benefit that you elect may be reduced by the amount of Credits applied to your Purchase Payments. Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 75 or less. If an Annuity is owned by an entity, the Annuitant must be age 75 or less. 70 AMERICAN SKANDIA ANNUITIES PROSPECTUS CALCULATION OF ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under an Annuity, as defined below. "Growth" means the sum of your Account Value in the Sub-accounts and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments (less the amount of any Credits applied within 12-months prior to the date of death, with respect to Optimum Plus) reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments. The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to an Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. The Enhanced Beneficiary Protection Optional Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. The Enhanced Beneficiary Protection Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit. See Appendix B for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit ("HAV") If an Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Anniversary Value Optional Death Benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 79 or less. If an Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. CALCULATION OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT The HAV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of Optimum Plus) less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Anniversary Value Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" or the "Highest Daily Value " Death Benefit. Please refer to the definition of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer contract anniversaries before the death benefit target date is reached. The death benefit target date under this death benefit is earlier than the death benefit target date under the Combination 5% Roll-up and Highest Anniversary Value Death 71 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued Benefit for Owners who are age 76 or older when an Annuity is issued, which may result in a lower value on the death benefit, since there will be fewer contract anniversaries before the death benefit target date is reached. See Appendix B for examples of how the Highest Anniversary Value Death Benefit is calculated. Combination 5% Roll-up and Highest Anniversary Value Death Benefit If an Annuity has one Owner, the Owner must be age 79 or less at the time the Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under an Annuity are not available if you elect the Combination 5% Roll-up and HAV Death Benefit. If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this Death Benefit. Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death Benefit The Combination 5% Roll-up and HAV Death Benefit equals the greatest of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value Death Benefit described above; and 3. 5% Roll-up described below. The calculation of the 5% Roll-up depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date the 5% Roll up is equal to: .. all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of Optimum Plus) increasing at an annual effective interest rate of 5% starting on the date that each Purchase Payment is made and ending on the Owner's date of death; MINUS .. the sum of all withdrawals, dollar for dollar up to 5% of the Death Benefit's value as of the prior contract anniversary (or Issue Date if the withdrawal is in the first contract year). Any withdrawals in excess of the 5% dollar for dollar limit are proportional. If the Owner dies on or after the Death Benefit Target Date the 5% Roll-up is equal to: .. the 5% Roll-up value as of the Death Benefit Target Date increased by total Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death in the case of Optimum Plus) made after the Death Benefit Target Date; MINUS .. the sum of all withdrawals which reduce the 5% Roll-up proportionally. In the case of Optimum Plus, as indicated, the amounts calculated in Items 1, 2 and 3 above (before, on or after the Death Benefit Target Date) may be reduced by any Credits under certain circumstances. Please refer to the definitions of Death Benefit Target Date below. This Death Benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer Annuity anniversaries before the Death Benefit Target Date is reached. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit is not available if you elect any other optional Death Benefit. See Appendix B for examples of how the Combination 5% Roll-up and Highest Anniversary Value Death Benefit is calculated. Key Terms Used with the Highest Anniversary Value Death Benefit and the Combination 5% Roll-up and Highest Anniversary Value Death Benefit: .. The Death Benefit Target Date for the Highest Anniversary Value Death Benefit is the contract anniversary on or after the 80/th /birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. 72 AMERICAN SKANDIA ANNUITIES PROSPECTUS .. The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death Benefit is the later of the contract anniversary on or after the 80/th /birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of an Annuity. .. The Highest Anniversary Value equals the highest of all previous "Anniversary Values" less proportional withdrawals since such anniversary and plus any Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of Optimum Plus) since such anniversary. .. The Anniversary Value is the Account Value as of each anniversary of the Issue Date of an Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of Optimum Plus) .. Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Anniversary Value or 5% Roll-up value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value or 5% Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($ 125,000) by 10% or $12,500. Highest Daily Value Death Benefit ("HDV") If an Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Daily Value Death Benefit is elected. If an Annuity has joint Owners, the older Owner must be age 79 or less. If there are joint Owners, death of the Owner refers to the first to die of the joint Owners. If an Annuity is owned by an entity, the Annuitant must be age 79 or less and death of the Owner refers to the death of the Annuitant. If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. The HDV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of Optimum Plus); and 2. the HDV as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV on the Death Benefit Target Date plus the sum of all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to the date of death in the case of Optimum Plus) less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The Highest Daily Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Daily Value Death Benefit is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, Spousal Lifetime Five, the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit, or the Highest Anniversary Value Death Benefit. KEY TERMS USED WITH THE HIGHEST DAILY VALUE DEATH BENEFIT: .. The Death Benefit Target Date for the Highest Daily Value Death Benefit is the later of an Annuity anniversary on or after the 80/th /birthday of the current Owner, or the older of either the joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of an Annuity. .. The Highest Daily Value equals the highest of all previous "Daily Values" less proportional withdrawals since such date and plus any Purchase Payments (plus associated Credits in the case of Optimum Plus) since such date. 73 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued .. The Daily Value is the Account Value as of the end of each Valuation Day. The Daily Value on the Issue Date is equal to your Purchase Payment (plus associated Credits applied more than twelve (12) months prior to the date of death in the case of Optimum Plus). .. Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Daily Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Daily Value ($125,000) by 10% or $12,500. Please see Appendix B to this prospectus for a hypothetical example of how the HDV Death Benefit is calculated. ANNUITIES WITH JOINT OWNERS For Annuities with joint Owners, the Death Benefits are calculated as shown above except that the age of the oldest of the joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own your Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of your Annuity and continue the Annuity instead of receiving the Death Benefit. ANNUITIES OWNED BY ENTITIES For Annuities owned by an entity, the Death Benefits are calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). CAN I TERMINATE THE OPTIONAL DEATH BENEFITS? DO THE OPTIONAL DEATH BENEFITS TERMINATE UNDER OTHER CIRCUMSTANCES? You can terminate the Enhanced Beneficiary Protection Death Benefit and the Highest Anniversary Value Death Benefit at any time. The "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated once elected. The optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. WHAT ARE THE CHARGES FOR THE OPTIONAL DEATH BENEFITS? We deduct a charge equal to 0.25% per year of the average daily net assets of the Sub-accounts for each of the Highest Anniversary Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the average daily net assets of the Sub-accounts for each of the "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge for each of these benefits to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. The additional annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS WHAT IS THE ANNUITY REWARDS BENEFIT? The Annuity Rewards Benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than an Annuity's value as of the effective date of the benefit. Under the Annuity Rewards Benefit, American Skandia guarantees that the Death Benefit will not be less than: .. your Account Value in the Sub-accounts plus the Interim Value in any Fixed Allocations as of the effective date of the benefit .. MINUS any proportional withdrawals* following the effective date of the benefit .. PLUS any additional Purchase Payments applied to your Annuity following the effective date of the benefit. The Annuity Rewards Death Benefit enhancement does not affect the calculation of the basic Death Benefit or any Optional Death Benefits available under an Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. WHO IS ELIGIBLE FOR THE ANNUITY REWARDS BENEFIT? Owners can elect the Annuity Rewards Death Benefit enhancement when there is no longer a CDSC associated with your Annuity. However, the Account Value on the date that the Annuity * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. 74 AMERICAN SKANDIA ANNUITIES PROSPECTUS Rewards benefit is effective, must be greater than the amount that would be payable to the Beneficiary under the Death Benefit (including any amounts payable under any Optional Death Benefit then in effect). The effective date must occur before annuity payments begin. There can only be one effective date for the Annuity Rewards Death Benefit enhancement. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS PAYMENT OF DEATH BENEFIT TO BENEFICIARY Except in the case of a spousal assumption as described below, in the event of your death, the Death Benefit must be distributed: .. as a lump sum amount at any time within five (5) years of the date of death; or .. as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to Death Benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." SPOUSAL BENEFICIARY -- ASSUMPTION OF ANNUITY You may name your spouse as your Beneficiary. If you and your spouse own your Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity -- Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. QUALIFIED BENEFICIARY CONTINUATION OPTION The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. .. If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31/st /of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31/st /of the year following the year of death or December 31/st /of the year in which the deceased would have reached age 70 1/2, which ever is later. .. If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. For a Roth IRA, if death occurs before the entire interest is distributed, the Death Benefit must be distributed under the same rules applied to IRAs where death occurs before the date Minimum Distributions must begin under the Code. 75 AMERICAN SKANDIA ANNUITIES PROSPECTUS Death Benefit continued Upon election of this Qualified Beneficiary Continuation option: .. the Owner's Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. .. the Beneficiary will be charged at an amount equal to 1.40% daily against the average daily assets allocated to the Sub-accounts. .. the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. .. the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner, except that the Sub-accounts offered will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. .. the Fixed Allocations will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. .. no additional Purchase Payments can be applied to the Annuity. .. other optional Benefits will be those offered under the Qualified Beneficiary Continuation option at the time of election. .. the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. / / .. the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of any applicable CDSC. .. upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. .. all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Your Beneficiary will be provided with a prospectus and settlement option that will describe this option at the time he or she elects this option. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the Qualified Beneficiary Continuation option. ARE THERE ANY EXCEPTIONS TO THESE RULES FOR PAYING THE DEATH BENEFIT? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date (or within 60 days thereafter) and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including any optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. WHEN DO YOU DETERMINE THE DEATH BENEFIT? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to an eligible annuity payment option. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. 76 AMERICAN SKANDIA ANNUITIES PROSPECTUS Valuing Your Investment HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, your Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. With respect to Optimum and Optimum Four, the Account Value includes any Loyalty Credit we apply. With respect to Optimum Plus, the Account Value includes any Credits we applied to your Purchase Payments which we are entitled to take back under certain circumstances. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is defined under "Glossary of Terms" above. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge, the Distribution Charge (if applicable), and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge, any Distribution Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. EXAMPLE Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day more than 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next Valuation Day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. 77 AMERICAN SKANDIA ANNUITIES PROSPECTUS Valuing Your Investment continued There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: .. trading on the NYSE is restricted; .. an emergency exists making redemption or valuation of securities held in the separate account impractical; or .. the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) business days after we receive all of our requirements at our office to issue an Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) business days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment (and any associated Credit with respect to Optimum Plus) while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue an Annuity within two (2) business days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments (and any associated Credit with respect to Optimum Plus) on the Valuation Day that we receive the Purchase Payment at our office with satisfactory allocation instructions. Scheduled Transactions: Scheduled transactions include transfers made in connection with dollar cost averaging, the asset allocation program, auto-rebalancing, systematic withdrawals, systematic investments, required minimum distributions, substantially equal periodic payments under Section 72(t) or 72(q) of the Code, or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a business day. In that case, the transaction will be processed and valued on the next business day, unless (with respect to required minimum distributions, substantially equal periodic payments under Section 72(t) or 72(q) of the Code, systematic withdrawals and annuity payments only), the next business day falls in the subsequent calendar year, in which case the transaction will be processed and valued on the prior business day. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Death Benefits: Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our office all supporting documentation we require for such transactions and that are satisfactory to us. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Distribution Charge Applicable to Optimum and Optimum Plus: At the end of the Period during which the Distribution Charge applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge (and the charge for any optional benefits you have elected) but not the Distribution Charge. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change 78 AMERICAN SKANDIA ANNUITIES PROSPECTUS in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. Termination of Optional Benefits: Except for the Guaranteed Minimum Income Benefit, the "Combination 5% Roll-up and Highest Anniversary Value Death Benefit" and the Highest Daily Value Death Benefit, which cannot be terminated by the owner once elected, if any optional benefit terminates, we will no longer deduct the charge we apply to purchase the optional benefit. Certain optional benefits may be added after you have purchased your Annuity. On the date a charge no longer applies or a charge for an optional benefit begins to be deducted, your Annuity will become subject to a different daily asset-based charge. This change may result in the number of Units attributed to your Annuity and the value of those Units being different than it was before the change; however, the adjustment in the number of Units and Unit Price will not affect your Account Value (although the change in charges that are deducted will affect your Account Value). 79 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations The tax considerations associated with each Annuity vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan (including contracts held by a non-natural person, such as a trust acting as an agent for a natural person), or (ii) held under a tax-favored retirement plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. The discussion includes a description of certain spousal rights under the contract and under tax-qualified plans. Our administration of such spousal rights and related tax reporting accords with our understanding of the Defense of Marriage Act (which defines a "marriage" as a legal union between a man and a woman and a "spouse" as a person of the opposite sex). The information provided is not intended as tax advice. You should consult with a qualified tax advisor for complete information and advice. References to Purchase Payments below relates to your cost basis in your contract. Generally, your cost basis in a contract not associated with a tax-favored retirement plan is the amount you pay into your contract, or into annuities exchanged for your contract, on an after-tax basis less any withdrawals of such payments. Each Annuity may also be purchased as a non-qualified annuity by a 401(a) trust or custodial IRA or Roth IRA account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for 401(a) plans, IRAs or Roth IRAs, as applicable, are the responsibility of the applicable trustee or custodian. CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS) TAXES PAYABLE BY YOU We believe each Annuity is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract. Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below. It is possible that the Internal Revenue Service (IRS) would assert that some or all of the charges for the optional benefits under the contract should be treated for federal income tax purposes as a partial withdrawal from the contract. If this were the case, the charge for this benefit could be deemed a withdrawal and treated as taxable to the extent there are earnings in the contract. Additionally, for owners under age 59 1/2, the taxable income attributable to the charge for the benefit could be subject to a tax penalty. If the IRS determines that the charges for one or more benefits under the contract are taxable withdrawals, then the sole or surviving owner will be provided with a notice from us describing available alternatives regarding these benefits. If you choose to defer the Annuity Date beyond the default date for your Annuity, the IRS may not consider your contract to be an annuity under the tax law. For more information, see "How and When Do I Choose the Annuity Payment Option?". TAXES ON WITHDRAWALS AND SURRENDER If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of Purchase Payments, until all gain has been withdrawn. You will generally be taxed on any withdrawals from the contract while you are alive even if the withdrawal is paid to someone else. If you assign or pledge all or part of your contract as collateral for a loan, the part assigned generally will be treated as a withdrawal. If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on any gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce. TAXES ON ANNUITY PAYMENTS A portion of each annuity payment you receive will be treated as a partial return of your Purchase Payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your Purchase Payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract. After the full amount of your Purchase Payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your Purchase Payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 80 AMERICAN SKANDIA ANNUITIES PROSPECTUS TAX PENALTY ON WITHDRAWALS AND ANNUITY PAYMENTS Any taxable amount you receive under your contract may be subject to a 10% tax penalty. Amounts are not subject to this tax penalty if: .. the amount is paid on or after you reach age 59 1/2 or die; .. the amount received is attributable to your becoming disabled; .. generally the amount paid or received is in the form of substantially equal payments not less frequently than annually (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.); or .. the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase). SPECIAL RULES IN RELATION TO TAX-FREE EXCHANGES UNDER SECTION 1035 Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits certain tax-free exchanges of a life insurance, annuity or endowment contract for an annuity. If an Annuity is purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any Purchase Payments made to the original contract prior to August 14, 1982 will be treated as made to the new contract prior to that date. (See Federal Tax Status section in the Statement of Additional Information.) Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract into an immediate annuity. As of the date of this prospectus, we will accept a partial 1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% tax penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. TAXES PAYABLE BY BENEFICIARIES The Death Benefit options are subject to income tax to the extent the distribution exceeds the cost basis in the contract. The value of the Death Benefit, as determined under federal law, is also included in the owner's estate. Generally, the same tax rules described above would also apply to amounts received by your beneficiary. Choosing any option other than a lump sum Death Benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below. Tax consequences to the beneficiary vary among the Death Benefit payment options. .. Choice 1: the beneficiary is taxed on earnings in the contract. .. Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case earnings are treated as being distributed first). .. Choice 3: the beneficiary is taxed on each payment (part will be treated as earnings and part as return of premiums). Considerations for Contingent Annuitants: There may be adverse tax consequences if a Contingent Annuitant succeeds an Annuitant when an Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. Continuing the benefit of tax deferral by naming one or more Contingent Annuitants when an 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. REPORTING AND WITHHOLDING ON DISTRIBUTIONS Taxable amounts distributed from an Annuity contract are subject to federal and state income tax reporting and withholding. In general, we will withhold federal income tax from the taxable portion of such distribution based on the type of distribution. In the case of an annuity or similar periodic payment, we will withhold as if you are a married individual with 3 exemptions unless you designate a different withholding status. In the case of 81 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued all other distributions, we will withhold at a 10% rate. You may generally elect not to have tax withheld from your payments. An election out of withholding must be made on forms that we provide. State income tax withholding rules vary and we will withhold based on the rules of your State of residence. Special tax rules apply to withholding for nonresident aliens, and we generally withhold income tax for nonresident aliens at a 30% rate. A different withholding rate may be applicable to a nonresident alien based on the terms of an existing income tax treaty between the United States and the nonresident alien's country. Please refer to the discussion below regarding withholding rules for tax favored plans (for example, an IRA). Regardless of the amount withheld by us, you are liable for payment of federal and state income tax on the taxable portion of annuity distributions. You should consult with your tax advisor regarding the payment of the correct amount of these income taxes and potential liability if you fail to pay such taxes. ANNUITY QUALIFICATION Diversification And Investor Control. In order to qualify for the tax rules applicable to annuity contracts described above, the assets underlying the Sub-accounts of an Annuity must be diversified, according to certain rules. We believe these diversification rules will be met. An additional requirement for qualification for the tax treatment described above is that we, and not you as the contract owner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. While we also believe these investor control rules will be met, 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. It is unclear whether such guidelines, if in fact promulgated, would have retroactive effect. It is also unclear what effect, if any, such guidelines may have on transfers between the investment options offered pursuant to this Prospectus. We will take any action, including modifications to your Annuity or the investment options, required to comply with such guidelines if promulgated. Please refer to the Statement of Additional information for further information on these Diversification and Investor Control issues. Required Distributions Upon Your Death. Upon your death, certain distributions must be made under the contract. The required distributions depend on whether you die before you start taking annuity payments under the contract or after you start taking annuity payments under the contract. If you die on or after the Annuity Date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before the Annuity Date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if a periodic payment option is selected by your designated beneficiary and if such payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom benefit rights under the contract pass by reason of death, and must be a natural person in order to elect a periodic payment option based on life expectancy or a period exceeding five years. If an Annuity is payable to (or for the benefit of) your surviving spouse, that portion of the contract may be continued with your spouse as the owner. Changes In Your Annuity. We reserve the right to make any changes we deem necessary to assure that your Annuity qualifies as an annuity contract for tax purposes. Any such changes will apply to all contract owners and you will be given notice to the extent feasible under the circumstances. ADDITIONAL INFORMATION You should refer to the Statement of Additional Information if: .. The contract is held by a corporation or other entity instead of by an individual or as agent for an individual. .. Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982. .. You transfer your contract to, or designate, a beneficiary who is either 37 1/2 years younger than you or a grandchild. CONTRACTS HELD BY TAX-FAVORED PLANS The following discussion covers annuity contracts held under tax-favored retirement plans. Currently, an Annuity may be purchased for use in connection with individual retirement accounts and annuities (IRAs) which are subject to Sections 408(a) and 408(b) of the Code and Roth IRAs under Section 408A of the Code. In addition, each Annuity may be purchased for use in connection with a corporate Pension or Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities or TDAs), and Section 457 plans (subject 82 AMERICAN SKANDIA ANNUITIES PROSPECTUS to 457 of the Code). This description assumes that you have satisfied the requirements for eligibility for these products. Each Annuity may also be purchased as a non-qualified annuity by a 401(a) trust or custodial IRA or Roth IRA account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for 401(a) plans, IRAs or Roth IRAs, as applicable, are the responsibility of the applicable trustee or custodian. You should be aware that tax favored plans such as IRAs generally provide income tax deferral regardless of whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax benefits (such as income tax deferral and income tax free transfers). TYPES OF TAX-FAVORED PLANS IRAs. If you buy an Annuity for use as an IRA, we will provide you a copy of the prospectus and contract. The "IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars, and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free-look" after making an initial contribution to the contract. During this time, you can cancel the Annuity by notifying us in writing, and we will refund all of the Purchase Payments under the Annuity (or, if provided by applicable state law, the amount credited under the Annuity, if greater), less any applicable federal and state income tax withholding. Contributions Limits/Rollovers. Because of the way each Annuity is designed, you may purchase an Annuity for an IRA in connection with a "rollover" of amounts from a qualified retirement plan or as a transfer from another IRA, as a current contribution in the case of Optimum, or if your are age 50 or older by making a single contribution consisting of your IRA contributions and catch-up contributions attributable to the prior year and the current year from January 1 to April 15 of the current year in the case of Optimum Plus and Optimum Four. In 2006 the contribution limit is $4,000; increasing to $5,000 in 2008. After 2008 the contribution amount will be indexed for inflation. The tax law also provides for a catch-up provision for individuals who are age 50 and above, permitting them to contribute an additional $1,000 each year. The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy an Annuity, you can make regular IRA contributions under the Annuity (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not retain possible favorable tax treatment if you subsequently "roll over" the contract funds originally derived from a qualified retirement plan or TDA into another Section 401(a) plan or TDA. Required Provisions. Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions: .. You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce); .. Your rights as owner are non-forfeitable; .. You cannot sell, assign or pledge the contract; .. The annual contribution you pay cannot be greater than the maximum amount allowed by law, including catch-up contributions if applicable (which does not include any rollover amounts); .. The date on which required minimum distributions must begin cannot be later than April 1st of the calendar year after the calendar year you turn age 70 1/2; and .. Death and annuity payments must meet "minimum distribution requirements" described below. Usually, the full amount of any distribution from an IRA (including a distribution from this contract) which is not a rollover is taxable. As taxable income, these distributions are subject to the general tax withholding rules described earlier. In addition to this normal tax liability, you may also be liable for the following, depending on your actions: .. A 10% "early distribution penalty" described below; .. Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or .. Failure to take a minimum distribution also described below. SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences: .. If you participate in a SEP, you generally do not include in income any employer contributions made to the SEP on your 83 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued behalf up to the lesser of (a) $44,000 in 2006 or (b) 25% of your taxable compensation paid by the contributing employer (not including the employer's SEP contribution as "compensation" for these purposes). However, for these purposes, compensation in excess of certain limits established by the IRS will not be considered. In 2006, this limit is $220,000; .. SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and .. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997 may permit salary deferrals up to $15,000 in 2006 with the employer making these contributions to the SEP. However, no new "salary reduction" or "SARSEPs" can be established after 1996. Individuals participating in a SARSEP who are age 50 or above by the end of the year will be permitted to contribute an additional $5,000 in 2006. Thereafter, the amount is indexed for inflation. These Annuities are not available for SARSEPs. You will also be provided the same information, and have the same "free-look" period, as you would have if you purchased the contract for a standard IRA. ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars and other Roth IRA information. Like standard IRAs, income within a Roth IRA accumulates tax-free, and contributions are subject to specific limits. Roth IRAs have, however, the following differences: .. Contributions to a Roth IRA cannot be deducted from your gross income; .. "Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements: (1) the distribution must be made (a) after the owner of the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's disability; or (d) for a qualified first time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and earnings will be taxed generally in the same manner as distributions from a traditional IRA. .. If eligible (including meeting income limitations and earnings requirements), you may make contributions to a Roth IRA after attaining age 70 1/2, and distributions are not required to begin upon attaining such age or at any time thereafter. Because of the way each Annuity is designed, if you meet certain income limitations you may purchase an Annuity for a Roth IRA, as a current contribution in the case of Optimum, or if you are age 50 or older by making a single contribution consisting of your Roth IRA contributions and catch-up contributions attributable to the prior year and the current year from January 1 to April 15 of the current year in the case of Optimum Plus and Optimum Four. The Code permits persons who meet certain income limitations (generally, adjusted gross income under $100,000), who are not married filing a separate return and who receive certain qualifying distributions from such non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of all or any part of the amount of such distribution to a Roth IRA which they establish. This conversion triggers current taxation (but is not subject to a 10% early distribution penalty). Once an Annuity has been purchased, regular Roth IRA contributions will be accepted to the extent permitted by law. As of January 1, 2006, an individual receiving an eligible rollover distribution from a designated Roth account under an employer plan may roll over the distribution to a Roth IRA even if the individual is not eligible to make regular or conversion contributions to a Roth IRA. If you are considering rolling over funds from your Roth account under an employer plan, please contact your Financial Professional prior to purchase to confirm whether such rollovers are being accepted. TDAs. You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501(c)(3)) or a public educational organization, and you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $15,000 in 2006. Individuals participating in a TDA who are age 50 or above by the end of the year will be permitted to contribute an additional $5,000 in 2006. After 2006, the amount is indexed for inflation. Further, you may roll over TDA amounts to another TDA or an IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP and a 457 government plan. A contract may only qualify as a 84 AMERICAN SKANDIA ANNUITIES PROSPECTUS TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of: .. Your attainment of age 59 1/2; .. Your severance of employment; .. Your death; .. Your total and permanent disability; or .. Hardship (under limited circumstances, and only related to salary deferrals, not including earnings attributable to these amounts). In any event, you must begin receiving distributions from your TDA by April 1/st /of the calendar year after the calendar year you turn age 70 1/2 or retire, whichever is later. These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a mutual fund "custodial account" described under Code Section 403(b)(7). Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans. MINIMUM DISTRIBUTION REQUIREMENTS AND PAYMENT OPTION If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that generally payments must start by April 1 of the year after the year you reach age 70/1//\\2 \\and must be made for each year thereafter. For a Tax Sheltered Annuity or a 401(a) plan for which the participant is not a greater than 5 percent owner of the employer, this required beginning date can generally be deferred to retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount. More information on the mechanics of this calculation is available on request. Please contact us at a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% tax penalty on the amount of any minimum distribution not made in a timely manner. Effective in 2006, in accordance with recent changes in laws and regulations, required minimum distributions will be calculated based on the sum of the contract value and the actuarial value of any additional death benefits and benefits from optional riders that you have purchased under the contract. As a result, the required minimum distributions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution of amounts under the Annuity and an increased amount of taxable income distributed to the Annuity owner, and a reduction of death benefits and the benefits of any optional riders. You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for an Annuity without either beginning annuity payments or surrendering the Annuity. We will distribute to you this minimum distribution amount, less any other partial withdrawals that you made during the year. Although the IRS rules determine the required amount to be distributed from your IRA each year, certain payment alternatives are still available to you. If you own more than one IRA, you can choose to satisfy your minimum distribution requirement for each of your IRAs by withdrawing that amount from any of your IRAs. If you inherit more than one Roth IRA from the same owner, similar rules apply. PENALTY FOR EARLY WITHDRAWALS You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2. Amounts are not subject to this tax penalty if: .. the amount is paid on or after you reach age 59 1/2 or die; .. the amount received is attributable to your becoming disabled; or .. generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59 1/2\\ \\or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.) Other exceptions to this tax may apply. You should consult your tax advisor for further details. WITHHOLDING Unless a distribution is an eligible rollover distribution that is "directly" rolled over into another qualified plan, IRA (including the IRA variations described above), SEP, 457 government plan or TDA, we will withhold federal income tax at the rate of 20%. This 20% withholding does not apply to distributions from IRAs and Roth IRAs. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of 85 AMERICAN SKANDIA ANNUITIES PROSPECTUS Tax Considerations continued withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis: .. For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and .. For all other distributions, we will withhold at a 10% rate. We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes. There may be additional state income tax withholding requirements. ERISA DISCLOSURE/REQUIREMENTS ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit from any party dealing with the plan, as a result of the sale of the contract. Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract. Information about any applicable fees, charges, discounts, penalties or adjustments may be found in the applicable sections of this Prospectus. Information about sales representatives and commissions may be found in the sections of this Prospectus addressing distribution of the Annuities. Please consult your tax advisor if you have any additional questions. SPOUSAL CONSENT RULES FOR RETIREMENT PLANS --QUALIFIED CONTRACTS If you are married at the time your payments commence, you may be required by federal law to choose an income option that provides survivor annuity income to your spouse, unless your spouse waives that right. Similarly, if you are married at the time of your death, federal law may require all or a portion of the Death Benefit to be paid to your spouse, even if you designated someone else as your beneficiary. A brief explanation of the applicable rules follows. For more information, consult the terms of your retirement arrangement. Defined Benefit Plans and Money Purchase Pension Plans. If you are married at the time your payments commence, federal law requires that benefits be paid to you in the form of a "qualified joint and survivor annuity" (QJSA), unless you and your spouse waive that right, in writing. Generally, this means that you will receive a reduced payment during your life and, upon your death, your spouse will receive at least one-half of what you were receiving for life. You may elect to receive another income option if your spouse consents to the election and waives his or her right to receive the QJSA. If your spouse consents to the alternative form of payment, your spouse may not receive any benefits from the plan upon your death. Federal law also requires that the plan pay a Death Benefit to your spouse if you are married and die before you begin receiving your benefit. This benefit must be available in the form of an annuity for your spouse's lifetime and is called a "qualified pre-retirement survivor annuity" (QPSA). If the plan pays Death Benefits to other beneficiaries, you may elect to have a beneficiary other than your spouse receive the Death Benefit, but only if your spouse consents to the election and waives his or her right to receive the QPSA. If your spouse consents to the alternate beneficiary, your spouse will receive no benefits from the plan upon your death. Any QPSA waiver prior to your attaining age 35 will become null and void on the first day of the calendar year in which you attain age 35, if still employed. Defined Contribution Plans (including 401(k) Plans and ERISA 403(b) Annuities). Spousal consent to a distribution is generally not required. Upon your death, your spouse will receive the entire Death Benefit, even if you designated someone else as your beneficiary, unless your spouse consents in writing to waive this right. Also, if you are married and elect an annuity as a periodic income option, federal law requires that you receive a QJSA (as described above), unless you and your spouse consent to waive this right. IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a distribution usually is not required. Upon your death, any Death Benefit will be paid to your designated beneficiary. ADDITIONAL INFORMATION For additional information about federal tax law requirements applicable to IRAs and Roth IRAs, see the "IRA Disclosure Statement" or "Roth IRA Disclosure Statement," as applicable. 86 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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 www.americanskandia.prudential.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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, Systematic Withdrawals (including 72(t) or 72(q) payments and required minimum distributions), electronic funds transfers, Dollar Cost Averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation, a Prudential Financial Company, ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"), whose ultimate parent is Prudential Financial, Inc. American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia offers a wide array of annuities, including (1) deferred and immediate variable annuities that are registered with the SEC, including fixed interest rate annuities that are offered as a companion to certain of our variable annuities and are registered because of their market value adjustment feature and (2) fixed annuities that are not registered with the SEC. In addition, American Skandia has in force a relatively small block of variable life insurance policies, but it no longer actively sells such policies. Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, Prudential Financial exercises significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the Sub-accounts are held in 87 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge, Distribution Charge (when applicable) and the charges for any optional benefits that are offered under the Annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B was consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which was subsequently renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B has multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B had no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuities as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under their Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. SEPARATE ACCOUNT D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We may employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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 88 AMERICAN SKANDIA ANNUITIES PROSPECTUS continue to employ any investment manager(s) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. VOTING RIGHTS We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. This voting procedure is sometimes referred to as "mirror voting" because, as indicated in the immediately preceding sentence, we mirror the votes that are actually cast, rather than decide on our own how to vote. In addition, because all the shares of a given mutual fund held within our separate account are legally owned by us, we intend to vote all of such shares when that underlying fund seeks a vote of its shareholders. As such, all such shares will be counted towards whether there is a quorum at the underlying fund's shareholder meeting and towards the ultimate outcome of the vote. Thus, under "mirror voting," it is possible that the votes of a small percentage of contractholders who actually vote will determine the ultimate outcome. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its co-investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC, subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI, Prudential Investments LLC and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. We may add new Sub-accounts that invest in a series of underlying funds other than the Trust that is managed by an affiliate. Such series of funds may have a similar order from the SEC. You also should review the prospectuses for the other underlying funds in which various Sub-accounts invest as to whether they have obtained similar orders from the SEC. MATERIAL CONFLICTS It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. 89 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued SERVICE FEES PAYABLE TO AMERICAN SKANDIA American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of the underlying Portfolios. Under the terms of these agreements, American Skandia may provide administrative and support services to the Portfolios for which it receives a fee of up to 0.75% (currently) of the average assets allocated to the Portfolios under each Annuity from the investment adviser, distributor and/or the fund. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. In addition, the investment adviser, sub-advisor or distributor of the underlying Portfolios may also compensate us by providing reimbursement or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with each Annuity. These services may include, but are not limited to: co-sponsoring various meetings and seminars attended by broker-dealer firms' registered representatives and creating marketing material discussing each Annuity and the available options. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and co-distributor of American Skandia Trust. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). Each Annuity is offered on a continuous basis. ASM enters into distribution agreements with broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuities but are exempt from registration ("firms"). Applications for each Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuities directly to potential purchasers. Commissions are paid to firms on sales of the Annuities according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of his or her firm. Commissions are generally based on a percentage of Purchase Payments made, up to a maximum of 7.0% for Optimum, 6.0% for Optimum Plus and 5.5% for Optimum Four. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of the Account Value. We may also provide compensation to the distributing firm for providing ongoing service to you in relation to your Annuity. Commissions and other compensation paid in relation to your Annuity do not result in any additional charge to you or to the Separate Account. In addition, in an effort to promote the sale of our products (which may include the placement of American Skandia and/or the Annuities on a preferred or recommended company or product list and/or access to the firm's registered representatives), we or ASM may enter into compensation arrangements with certain broker-dealer firms (including Linsco/Private Ledger, Corp.) with respect to certain or all registered representatives of such firms under which such firms may receive separate compensation or reimbursement for, among other things, training of sales personnel and/or marketing and/or administrative services and/or other services they provide. These services may include, but are not limited to: educating customers of the firm on the Annuitys' features; conducting due diligence and analysis, providing office access, operations and systems support; holding seminars intended to educate the firm's registered representatives and make them more knowledgeable about the Annuities; providing a dedicated marketing coordinator; providing priority sales desk support; and providing expedited marketing compliance approval. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or non-cash compensation. These arrangements may not be offered to all firms and the terms of such arrangements may differ between firms. A list of the firms to whom American Skandia pays an amount of greater than $10,000 under these arrangements is provided in the Statement of Additional Information, which is available upon request. You should note that firms and individual registered representatives and branch managers within some firms participating in one of these compensation arrangements might receive greater compensation for selling the Annuities than for selling a different annuity that is not eligible for these compensation arrangements. While compensation is generally taken into account as an expense in considering the charges applicable to an annuity product, any such compensation will be paid by us or ASM and will not result in any additional charge to you. Overall compensation paid to the distributing firm does not 90 AMERICAN SKANDIA ANNUITIES PROSPECTUS exceed, based on actuarial assumptions, 8.5% of the total Purchase Payments made. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. On July 1, 2003, Prudential Financial combined its retail securities brokerage and clearing operations with those of Wachovia Corporation ("Wachovia") and formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a joint venture headquartered in Richmond, Virginia. Prudential Financial has a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia and Wachovia Securities are key distribution partners for certain products of Prudential Financial affiliates, including mutual funds and individual annuities that are distributed through their financial advisors, bank channel and independent channel. In addition, Prudential Financial is a service provider to the managed account platform and certain wrap-fee programs offered by Wachovia Securities. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by an independent registered public accounting firm. American Skandia's annual report for the year ended December 31, 2005, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia -- Variable Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 100 F Street, N.E. Washington, D.C. 20549. You can obtain information on the operation of the Public Reference Room by calling (202) 551-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. FINANCIAL STATEMENTS The financial statements of the separate account and American Skandia Life Assurance Corporation are included in the Statement of Additional Information. HOW TO CONTACT US You can contact us by: .. calling our Customer Service Team at 1-800-752-6342 during our normal business hours, Monday through Friday, or Skandia's telephone automated response system at 1-800-766-4530. .. writing to us via regular mail at American Skandia -- Variable Annuities, P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American Skandia -- Variable Annuities, 2101 Welsh Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. .. sending an email to customerservice@prudential.com or visiting our Internet Website at www.americanskandia.prudential.com. .. accessing information about your Annuity through our Internet Website at www.americanskandia.prudential.com. You can obtain account information by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or your Financial Professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. Please note that unless you tell us otherwise, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your 91 AMERICAN SKANDIA ANNUITIES PROSPECTUS General Information continued Annuity or you may establish or change your PIN by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS American Skandia is subject to legal and regulatory actions in the ordinary course of its business, including class action lawsuits. American Skandia's pending legal and regulatory actions include proceedings specific to us and proceedings generally applicable to business practices in the industry in which we operate. We are subject to class action lawsuits and other litigation alleging, among other things, that we made improper or inadequate disclosures in connection with the sale of annuity products or charged excessive or impermissible fees on these products, recommended unsuitable products to customers, mishandled customer accounts or breached fiduciary duties to customers. We are also subject to litigation arising out of our general business activities, such as our investments, contracts, leases and labor and employment relationships, including claims of discrimination and harassment. In some of our pending legal and regulatory actions, parties are seeking large and/or indeterminate amounts, including punitive or exemplary damages. The following is a summary of certain pending proceedings. American Skandia is in discussions with various state insurance departments concerning a remediation program to correct errors in the administration of approximately 11,000 annuity contracts issued by us. The owners of these contracts did not receive notification that the contracts were approaching or past their designated annuitization date or default annuitization date (both dates referred to as the "contractual annuity date") and the contracts were not annuitized at their contractual annuity dates. Some of these contracts also were affected by data integrity errors resulting in incorrect contractual annuity dates. The lack of notice and the data integrity errors, as reflected on the annuities administrative system, all occurred before the acquisition of American Skandia by Prudential Financial, Inc. Certain state insurance departments have requested modifications to the remediation program that American Skandia anticipates will impact the overall cost of the program. The remediation and administrative costs of the remediation program would be subject to the indemnification provisions of the agreement pursuant to which Prudential Financial, Inc. acquired American Skandia (the "Acquisition Agreement"). With the approval of Skandia Insurance Company Ltd. (publ) ("Skandia"), an offer was made to the authorities investigating American Skandia and certain affiliated companies, the SEC and New York Attorney General, to settle the matters relating to market timing in variable annuities by paying restitution and a civil penalty of $95 million in the aggregate. While not assured, American Skandia believes these discussions are likely to lead to settlements with these authorities. Any regulatory settlement involving American Skandia or any affiliates of American Skandia that Prudential Financial, Inc. acquired from Skandia would be subject to the indemnification provisions of the Acquisition Agreement. If achieved, settlement of the matters could involve continuing monitoring, changes to and/or supervision of business practices, findings that may adversely affect existing or cause additional litigation, adverse publicity and other adverse impacts to American Skandia's business. 92 AMERICAN SKANDIA ANNUITIES PROSPECTUS American Skandia's litigation is subject to many uncertainties, and given its complexity and scope, its outcome cannot be predicted. It is possible that the results of operations or the cash flow of American Skandia in a particular quarterly or annual period could be materially affected by an ultimate unfavorable resolution of pending litigation and regulatory matters depending, in part, upon the results of operations or cash flow for such period. Management believes, however, that the ultimate outcome of all pending litigation and regulatory matters, after consideration of applicable reserves, should not have a material adverse effect on American Skandia's financial position. It should be noted that the judgments, settlements and expenses associated with many of these lawsuits, administrative and regulatory matters, and contingencies, including the claims described above, may, in whole or in part, after satisfaction of certain retention requirements, fall within Skandia's indemnification obligations to Prudential Financial, Inc. and its subsidiaries under the terms of the Acquisition Agreement. Those obligations of Skandia provide for indemnification of certain judgments, settlements, and costs and expenses associated with lawsuits and other claims against American Skandia ("matters"), and apply only to matters, or groups of related matters, for which the costs and expenses exceed $25,000 individually. Those obligations only apply to such costs and expenses that exceed $10 million in the aggregate, subject to reduction for insurance proceeds, certain accruals and any realized tax benefit applicable to such amounts, and those obligations do not apply to the extent that such aggregate exceeds $1 billion. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia .. American Skandia Life Assurance Corporation .. American Skandia Life Assurance Corporation Variable Account B .. American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor -- American Skandia Marketing, Incorporated Payments Made to Promote Sale of our Products How the Unit Price is Determined Additional Information on Fixed Allocations .. How We Calculate the Market Value Adjustment General Information .. Voting Rights .. Modification .. Deferral of Transactions .. Misstatement of Age or Sex .. Ending the Offer Annuitization Experts Legal Experts Financial Statements 93 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Appendix A -- Condensed Financial Information About Separate Account Separate Account B consists of multiple Sub-accounts that are available as investment options for the American Skandia Annuities. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following tables show for each Annuity: (a) the historical Unit Price, corresponding to the Annuity features bearing the highest and lowest combinations of asset-based charges*, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus**; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. In the tables, "BOP" refers to Beginning of Period and "EOP" refers to End of Period. The period for each year begins on January 1 and ends on December 31. Since November 18, 2002, we have been determining, on a daily basis, multiple Unit Prices for each Sub-account of Separate Account B. We compute multiple Unit Prices because several of our variable annuities invest in the same Sub-accounts, and these annuities deduct varying charges that correspond to each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charges for each optional benefit. Where an asset-based charge corresponding to a particular Sub-account within a new annuity product is identical to that in the same Sub-account within an existing annuity, the Unit Price for the new annuity will be identical to that of the existing annuity. In such cases, we will for reference purposes depict, in the condensed financial information for the new annuity, Unit Prices of the existing annuity. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31/st /of the applicable year. When a Unit Price was first calculated for a particular Sub-account, we set the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2006. * Note: While a unit price is reflected for the maximum combination of asset based charges for each Sub-account, not all Sub-accounts are available if you elect certain optional benefits. ** The remaining unit values appear in the Statement of Additional Information, which you may obtain free of charge by sending in the request form at the end of the Prospectus or contacting us at 1-800-752-6342. A-94 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $8.24 $7.13 $5.53 6.86 8.99 EOP Unit Value 9.04 8.24 7.13 5.53 6.86 8.99 Number of Units 1,051,557 553,542 362,254 153,652 136,976 33,897 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.57 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ---------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $16.42 $14.32 $10.35 14.1 18.68 EOP Unit Value 18.90 16.42 14.32 10.35 14.1 18.68 Number of Units 2,113,594 1,953,908 1,166,396 7,064 5,277 6,782 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $11.20 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ---------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $7.01 $5.86 $4.43 5.41 8.08 EOP Unit Value 7.87 7.01 5.86 4.43 5.41 8.08 Number of Units 402,497 233,045 91,736 32,967 29,954 20,311 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.62 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ---------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $15.97 $17.38 $12.12 18.7 20.25 EOP Unit Value 16.00 15.97 17.38 12.12 18.7 20.25 Number of Units 126,824 107,136 145,364 6,331 2,439 978 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.35 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ---------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $7.41 $6.86 $4.71 6.48 9.17 EOP Unit Value 7.35 7.41 6.86 4.71 6.48 9.17 Number of Units 267,925 293,384 258,089 44,611 41,602 35,743 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ----------------------------------------------------------------------------------------
A-95 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $10.12 $8.33 $4.98 7.12 9.08 EOP Unit Value 10.94 10.12 8.33 4.98 7.12 9.08 Number of Units 1,386,930 1,169,995 859,909 25,040 10,912 243 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.87 -- -- -- -- -- Number of Units -- -- -- -- -- -- - -------------------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $16.64 $14.47 $10.79 12.06 11.41 EOP Unit Value 17.52 16.64 14.47 10.79 12.06 11.41 Number of Units 1,484,712 1,293,786 962,965 66,744 33,608 15,339 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.56 -- -- -- -- -- Number of Units -- -- -- -- -- -- - -------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $4.44 $3.87 $2.98 4.15 7.03 EOP Unit Value 4.60 4.44 3.87 2.98 4.15 7.03 Number of Units 2,666,933 2,232,502 1,535,565 28,812 17,882 2,473 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.49 -- -- -- -- -- Number of Units -- -- -- -- -- -- - -------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $16.76 $13.82 $10.26 11.62 12.13 EOP Unit Value 18.55 16.76 13.82 10.26 11.62 12.13 Number of Units 1,303,740 1,116,503 781,348 69,657 56,219 16,574 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.80 -- -- -- -- -- Number of Units -- -- -- -- -- -- - -------------------------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth With No Optional Benefits BOP Unit Value $6.19 $5.93 $4.86 7.12 8.46 EOP Unit Value 7.12 6.19 5.93 4.86 7.12 8.46 Number of Units 512,012 326,194 263,698 106,056 106,762 97,356 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $12.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- - --------------------------------------------------------------------------------------------
A-96 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------ AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $7.04 $6.44 $5.31 7.48 9.68 EOP Unit Value 7.39 7.04 6.44 5.31 7.48 9.68 Number of Units 1,025,239 791,823 893,170 112,701 47,656 3,089 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.67 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------ AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $9.67 $8.46 $6.50 7.8 10.09 EOP Unit Value 10.20 9.67 8.46 6.5 7.8 10.09 Number of Units 7,048,021 5,717,404 4,075,719 228,033 182,904 114,992 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.82 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------ AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.28 $10.91 $8.61 10.05 -- EOP Unit Value 12.79 12.28 10.91 8.61 10.05 -- Number of Units 635,232 603,508 453,569 82,054 18,453 -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.23 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------ AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.24 $10.25 $7.84 10.35 10.53 EOP Unit Value 11.63 11.24 10.25 7.84 10.35 10.53 Number of Units 5,200,126 4,119,501 3,076,626 142,152 205,232 34,439 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.18 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------ AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $10.25 $8.99 $7.59 9.31 10.32 EOP Unit Value 10.77 10.25 8.99 7.59 9.31 10.32 Number of Units 694,885 417,314 204,589 44,419 44,212 8,596 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.47 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------------
A-97 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------ AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $14.73 $13.73 $12.32 10.84 10.7 EOP Unit Value 13.89 14.73 13.73 12.32 10.84 10.7 Number of Units 938,585 657,913 289,862 36,987 16,390 -0- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.37 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------ AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.71 $11.98 $10.22 10.3 10.13 EOP Unit Value 12.69 12.71 11.98 10.22 10.3 10.13 Number of Units 1,294,706 1,012,739 814,135 43,077 16,628 425 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.87 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $13.72 $13.23 $12.72 11.8 10.97 EOP Unit Value 13.88 13.72 13.23 12.72 11.8 10.97 Number of Units 1,924,370 3,074,732 2,301,863 362,294 275,317 37,918 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.07 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------ AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $12.18 $12.08 $10.09 11.29 10.59 EOP Unit Value 12.22 12.18 12.08 10.09 11.29 10.59 Number of Units 2,996,257 2,189,975 956,856 38,260 112,948 1,940 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $9.98 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------ AST Money Market (1992) With No Optional Benefits BOP Unit Value $10.46 $10.51 $10.57 10.57 10.32 EOP Unit Value 10.62 10.46 10.51 10.57 10.57 10.32 Number of Units 3,179,376 1,663,940 1,245,396 403,604 179,509 29,567 With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.02 -- -- -- -- -- Number of Units -- -- -- -- -- -- - ------------------------------------------------------------------------------------------
A-98 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 2001 2000 ------------------------------------------------------------------------- Evergreen VA - International Equity (2000) With No Optional Benefits BOP Unit Value $12.31 $10.46 -- -- -- EOP Unit Value 14.10 12.31 10.46 -- -- -- Number of Units 130,750 62,400 24,847 -- -- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.92 -- -- -- -- -- Number of Units -- -- -- -- -- -- ------------------------------------------------------------------------- Evergreen VA - Omega (2000) With No Optional Benefits BOP Unit Value $9.75 $9.21 -- 9.04 -- EOP Unit Value 10.00 9.75 9.21 -- 9.04 -- Number of Units 18,356 26,849 15,743 -- -0- -- With LT5, HDV, and EBP BOP Unit Value -- -- -- -- -- EOP Unit Value $10.53 -- -- -- -- -- Number of Units -- -- -- -- -- -- -------------------------------------------------------------------------
A-99 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $12.67 $11.00 $8.56 EOP Unit Value 13.84 12.67 11.00 8.56 Number of Units 5,621,836 3,227,381 2,415,394 2,569,506 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $15.30 $13.39 $9.72 EOP Unit Value 17.54 15.30 13.39 9.72 Number of Units 12,141,522 11,265,469 5,547,558 835,523 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $11.16 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $12.84 $10.79 $8.19 EOP Unit Value 14.36 12.84 10.79 8.19 Number of Units 2,013,544 1,897,469 1,201,268 269,995 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $9.05 $9.89 $6.92 EOP Unit Value 9.04 9.05 9.89 6.92 Number of Units 2,134,730 2,242,129 3,292,593 1,970,250 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.31 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits BOP Unit Value $11.98 $11.13 $7.67 EOP Unit Value 11.83 11.98 11.13 7.67 Number of Units 1,385,430 1,618,719 1,682,193 639,695 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------
A-100 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------------ AST Federated Aggressive Growth (2000) With No Optional Benefits BOP Unit Value $15.42 $12.74 $7.64 EOP Unit Value 16.60 15.42 12.74 7.64 Number of Units 5,464,856 4,808,453 3,085,373 1,255,415 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.84 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------ AST Small-Cap Value (1997) With No Optional Benefits BOP Unit Value $14.22 $12.42 $9.30 EOP Unit Value 14.91 14.22 12.42 9.30 Number of Units 11,285,282 10,785,030 10,183,346 6,141,523 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------ AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits BOP Unit Value $11.80 $10.31 $7.97 EOP Unit Value 12.16 11.80 10.31 7.97 Number of Units 5,391,424 4,375,813 3,027,057 1,273,118 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------ AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits BOP Unit Value $14.51 $12.01 $8.96 EOP Unit Value 15.99 14.51 12.01 8.96 Number of Units 12,260,007 11,461,684 8,530,129 5,118,558 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------ AST T. Rowe Price Large-Cap Growth With No Optional Benefits BOP Unit Value $9.44 $9.08 $7.46 EOP Unit Value 10.81 9.44 9.08 7.46 Number of Units 3,925,740 2,378,881 2,098,873 1,869,353 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $11.98 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------
A-101 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ------------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $9.97 $9.16 $7.58 EOP Unit Value 10.43 9.97 9.16 7.58 Number of Units 5,915,443 4,529,834 4,784,269 2,930,432 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $12.26 $10.78 $8.32 EOP Unit Value 12.88 12.26 10.78 8.32 Number of Units 32,140,125 28,117,310 20,138,164 10,144,317 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.78 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.39 $11.06 $8.76 EOP Unit Value 12.86 12.39 11.06 8.76 Number of Units 4,311,857 4,643,022 3,621,862 6,005,922 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.46 $10.50 $8.06 EOP Unit Value 11.81 11.46 10.50 8.06 Number of Units 31,190,346 25,850,506 21,264,670 6,667,373 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.15 -- -- -- Number of Units -- -- -- -- - ------------------------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $11.17 $9.83 $8.34 EOP Unit Value 11.69 11.17 9.83 8.34 Number of Units 5,245,455 3,717,848 2,647,064 2,110,071 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - -------------------------------------------------------------------------------------------
A-102 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $13.45 $12.59 $11.34 EOP Unit Value 12.64 13.45 12.59 11.34 Number of Units 6,261,824 4,717,822 2,962,471 1,739,313 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $9.34 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.26 $11.61 $9.94 EOP Unit Value 12.20 12.26 11.61 9.94 Number of Units 12,427,806 8,369,008 7,751,236 4,146,530 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $9.84 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $11.31 $10.95 $10.57 EOP Unit Value 11.40 11.31 10.95 10.57 Number of Units 22,436,395 33,208,749 26,287,388 20,544,075 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $10.55 $10.51 $10.34 EOP Unit Value 10.54 10.55 10.51 10.34 Number of Units 28,031,653 21,299,789 15,242,856 11,274,642 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $9.94 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $9.78 $9.86 $9.96 EOP Unit Value 9.88 9.78 9.86 9.96 Number of Units 42,442,274 29,870,576 32,730,501 36,255,772 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------
A-103 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $13.66 $11.65 $8.15 EOP Unit Value 15.59 13.66 11.65 8.15 Number of Units 689,816 414,631 189,143 113,389 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.88 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $11.29 $10.71 $7.78 EOP Unit Value 11.53 11.29 10.71 7.78 Number of Units 281,775 570,123 404,789 39,943 With LT5, HDV and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-104 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM Plus - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 - --------------------------------------------------------------------------------------- AST JP Morgan International Equity With No Optional Benefits BOP Unit Value $12.67 $11.00 $8.56 EOP Unit Value 13.84 12.67 11.00 8.56 Number of Units 5,621,836 3,227,381 2,415,394 2,569,506 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits BOP Unit Value $15.30 $13.39 $9.72 EOP Unit Value 17.54 15.30 13.39 9.72 Number of Units 12,141,522 11,265,469 5,547,558 835,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.16 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST LSV International Value With No Optional Benefits BOP Unit Value $12.84 $10.79 $8.19 EOP Unit Value 14.36 12.84 10.79 8.19 Number of Units 2,013,544 1,897,469 1,201,268 269,995 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.59 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST Small-Cap Growth With No Optional Benefits BOP Unit Value $9.05 $9.89 $6.92 EOP Unit Value 9.04 9.05 9.89 6.92 Number of Units 2,134,730 2,242,129 3,292,593 1,970,250 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.31 -- -- -- Number of Units -- -- -- -- - --------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth With No Optional Benefits BOP Unit Value $11.98 $11.13 $7.67 EOP Unit Value 11.83 11.98 11.13 7.67 Number of Units 1,385,430 1,618,719 1,682,193 639,695 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------
A-105 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 ----------------------------------------------------------------------------- AST Federated Aggressive Growth With No Optional Benefits BOP Unit Value $15.42 $12.74 $7.64 EOP Unit Value 16.60 15.42 12.74 7.64 Number of Units 5,464,856 4,808,453 3,085,373 1,255,415 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.84 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AST Small-Cap Value With No Optional Benefits BOP Unit Value $14.22 $12.42 $9.30 EOP Unit Value 14.91 14.22 12.42 9.30 Number of Units 11,285,282 10,785,030 10,183,346 6,141,523 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.53 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth With No Optional Benefits BOP Unit Value $11.80 $10.31 $7.97 EOP Unit Value 12.16 11.80 10.31 7.97 Number of Units 5,391,424 4,375,813 3,027,057 1,273,118 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.46 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value With No Optional Benefits BOP Unit Value $14.51 $12.01 $8.96 EOP Unit Value 15.99 14.51 12.01 8.96 Number of Units 12,260,007 11,461,684 8,530,129 5,118,558 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.76 -- -- -- Number of Units -- -- -- -- ----------------------------------------------------------------------------- AST T. Rowe Price Large-Cap Growth With No Optional Benefits BOP Unit Value $9.44 $9.08 $7.46 EOP Unit Value 10.81 9.44 9.08 7.46 Number of Units 3,925,740 2,378,881 2,098,873 1,869,353 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $11.98 -- -- -- Number of Units -- -- -- -- -----------------------------------------------------------------------------
A-106 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM Plus - Prospectus
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits BOP Unit Value $9.97 $9.16 $7.58 EOP Unit Value 10.43 9.97 9.16 7.58 Number of Units 5,915,443 4,529,834 4,784,269 2,930,432 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.64 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits BOP Unit Value $12.26 $10.78 $8.32 EOP Unit Value 12.88 12.26 10.78 8.32 Number of Units 32,140,125 28,117,321 20,138,164 10,144,317 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.78 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST AllianceBernstein Core Value (2001) With No Optional Benefits BOP Unit Value $12.39 $11.06 $8.76 EOP Unit Value 12.86 12.39 11.06 8.76 Number of Units 4,311,857 4,643,022 3,621,862 6,005,922 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.20 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST AllianceBernstein Growth & Income (1992) With No Optional Benefits BOP Unit Value $11.46 $10.50 $8.06 EOP Unit Value 11.81 11.46 10.50 8.06 Number of Units 31,190,346 25,850,506 21,264,670 6,667,373 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.15 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------------- AST Large-Cap Value (formerly AST Hotchkis & Wiley Large-Cap Value) With No Optional Benefits BOP Unit Value $11.17 $9.83 $8.34 EOP Unit Value 11.69 11.17 9.83 8.34 Number of Units 5,245,458 3,717,848 2,647,064 2,110,071 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.44 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------------
A-107 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued OPTIMUM Four - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 - ---------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits BOP Unit Value $13.45 $12.59 $11.34 EOP Unit Value 12.64 13.45 12.59 11.34 Number of Units 6,261,824 4,717,822 2,962,471 1,739,313 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.34 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits BOP Unit Value $12.26 $11.61 $9.94 EOP Unit Value 12.20 12.26 11.61 9.94 Number of Units 12,427,806 8,369,008 7,751,236 4,146,530 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.84 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits BOP Unit Value $11.31 $10.95 $10.57 EOP Unit Value 11.40 11.31 10.95 10.57 Number of Units 22,436,395 33,208,749 26,287,388 20,544,075 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.04 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits BOP Unit Value $10.55 $10.51 $10.34 EOP Unit Value 10.54 10.55 10.51 10.34 Number of Units 28,031,653 21,299,789 15,242,856 11,274,642 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.94 -- -- -- Number of Units -- -- -- -- - ---------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits BOP Unit Value $9.78 $9.86 $9.96 EOP Unit Value 9.88 9.78 9.86 9.96 Number of Units 42,442,274 29,870,576 32,730,501 36,255,772 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $9.99 -- -- -- Number of Units -- -- -- -- - ----------------------------------------------------------------------------------
A-108 APPENDIX A AMERICAN SKANDIA ANNUITIES PROSPECTUS OPTIMUM Plus - Prospectus (continued)
SUB-ACCOUNT 2005 2004 2003 2002 --------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits BOP Unit Value $13.66 $11.65 $8.15 EOP Unit Value 15.59 13.66 11.65 8.15 Number of Units 689,816 414,631 189,143 113,389 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.88 -- -- -- Number of Units -- -- -- -- --------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits BOP Unit Value $11.29 $10.71 $7.78 EOP Unit Value 11.53 11.29 10.71 7.78 Number of Units 281,775 570,123 404,789 39,943 With LT5, HDV, and EBP BOP Unit Value -- -- -- EOP Unit Value $10.50 -- -- -- Number of Units -- -- -- -- ---------------------------------------------------------------------------
A-109 Appendix B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Growth = Account Value of variable minus Purchase Payments - investment options plus Interim proportional withdrawals Value of Fixed Allocations (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth =$75,000 - [$50,000 - $0] =$25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth =$25,000 X 0.40 =$10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$85,000
Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth =$45,000 - [$50,000 - $0] =$-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$50,000
B-110 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth =$90,000 - [$50,000 - ($50,000 X $15,000/$75,000)] =$90,000 - [$50,000 - $10,000] =$90,000 - $40,000 =$50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth =$50,000 X 0.40 =$20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit =$110,000
EXAMPLES OF HIGHEST ANNIVERSARY VALUE DEATH BENEFIT CALCULATION The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value =$90,000 - [$90,000 X $15,000/$75,000] =$90,000 - $18,000 =$72,000 Basic Death Benefit =max [$80,000, $50,000 - ($50,000 X $15,000/$75,000)] =max [$80,000, $40,000] =$80,000
The Death Benefit therefore is $80,000. B-111 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value =$80,000 + $15,000 - [($ 80,000 + $15,000) X $5,000/$70,000] =$80,000 + $15,000 - $6,786 =$88,214 Basic Death Benefit =max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $88,214. EXAMPLES OF COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE DEATH BENEFIT CALCULATION The following are examples of how the Combination 5% Roll-Up and Highest Anniversary Value Death Benefit are calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the 7/th /anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $75,000; however, the Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Roll-Up Value is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than both the Roll-Up Value ($67,005) and the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Owner made a withdrawal of $5,000 on the 6/th /anniversary of the Issue Date when the Account Value was $45,000. The Roll-Up Value on the 6/th /anniversary of the Issue Date is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal Limit for the 7/th /annuity year is equal to 5% of the Roll-Up Value as of the 6/th /anniversary of the Issue Date, or $3,350. Therefore, the remaining $1,650 of the withdrawal results in a proportional reduction to the Roll-Up Value. On the 7/th /anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $43,000; however, the Anniversary Value on the 2/nd /anniversary of the Issue Date was $70,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. B-112 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Roll-Up Value ={(67,005 - $3,350) - [($67,005 - $3,350) X $1,650/($45,000 - $3,350)]} X 1.05 =($63,655 - $2,522) X 1.05 =$64,190 Highest Anniversary Value =$70,000 - [$70,000 X $5,000/$45,000] =$70,000 - $7,778 =$62,222 Basic Death Benefit =max [$43,000, $50,000 - ($50,000 X $5,000/$45,000)] =max [$43,000, $44,444] =$44,444
The Death Benefit therefore is $64,190. Example with death after Death Benefit Target Date Assume that the Owner has not made any withdrawals prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Roll-Up Value on the Death Benefit Target Date (the contract anniversary on or following the Owner's 80/th /birthday) is equal to initial Purchase Payment accumulated at 5% for 10 years, or $81,445. The Highest Anniversary Value on the Death Benefit Target Date was $85,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as of the Death Benefit Target Date; each increased by subsequent purchase payments and reduced proportionally for subsequent withdrawals. Roll-Up Value =$81,445 + $15,000 - [($81,445 + 15,000) X $5,000/$70,000] =$81,445 + $15,000 - $6,889 =$89,556 Highest Anniversary Value =$85,000 + $15,000 - [($85,000 + 15,000) X $5,000/$70,000] =$85,000 + $15,000 - $7,143 =$92,857 Basic Death Benefit =max [$75,000, $50,000 + $15,000 - {(50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $92,857. EXAMPLES OF HIGHEST DAILY VALUE DEATH BENEFIT CALCULATION The following are examples of how the HDV Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Highest Daily Value was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value or the basic Death Benefit. The Death Benefit would be the HDV ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). B-113 APPENDIX B AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Highest Daily Value ($90,000) was attained during the fifth Annuity Year. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value (proportionally reduced by the subsequent withdrawal) or the basic Death Benefit. Highest Daily Value =$90,000 - [$90,000 X $15,000/$75,000] =$90,000 - $18,000 =$72,000 Basic Death Benefit =max [$80,000, $50,000 - ($50,000 X $15,000/$75,000)] =max [$80,000, $40,000] =$80,000
The Death Benefit therefore is $80,000. Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Daily Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Daily Value on the Death Benefit Target Date plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Daily Value =$80,000 + $15,000 - [($80,000 + $15,000) X $5,000/$70,000] =$80,000 + $15,000 - $6,786 =$88,214 Basic Death Benefit =max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) X $5,000/$70,000}] =max [$75,000, $60,357] =$75,000
The Death Benefit therefore is $88,214. This prospectus is currently being reviewed by the SEC staff, and it is being provided solely for reference purpose to certain broker-dealers. No offered or sales of any of the features discussed in this draft will be permitted. For internal use only. B-114 This page intentionally left blank APPENDIX C AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix C -- Additional Information on Asset Allocation Programs Program Rules .. You can elect an asset allocator program where the Sub-accounts for each asset class in each model portfolio are designated based on an evaluation of available Sub-accounts. If you elect the Lifetime Five Benefit ("LT5"), Spousal Lifetime Five Benefit ("SLT5") or the Highest Daily Value Death Benefit ("HDV"), you must enroll in one of the eligible model portfolios. Asset allocation is a sophisticated method of diversification that allocates assets among asset classes in order to manage investment risk and potentially enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. How the Asset Allocation Program Works .. Amounts will automatically be allocated in accordance with the percentages and to Sub-accounts indicated for the model portfolio that you choose. If you allocate your Account Value or transfer your Account Value among any Sub-accounts that are outside of your model portfolio, we will allocate these amounts according to the allocation percentages of the applicable model portfolio upon the next rebalancing. You may only choose one model portfolio at a time. When you enroll in the asset allocation program and upon each rebalance thereafter, 100% of your Account Value allocated to the variable Sub-accounts will be allocated to the asset allocation program. Any Account Value not invested in the Sub-accounts will not be part of the program. .. Additional Purchase Payments: Unless otherwise requested, any additional Purchase Payments applied to the variable Sub-accounts in the Annuity will be allocated to the Sub-accounts according to the allocation percentages for the model portfolio you choose. Allocation of additional Purchase Payments outside of your model portfolio but into a Sub-account, will be reallocated according to the allocation percentages of the applicable model portfolio upon the next rebalancing. .. Rebalancing Your Model Portfolio: Changes in the value of the Sub-account will cause your Account Value allocated to the Sub-accounts to vary from the percentage allocations of the model portfolio you select. By selecting the asset allocation program, you have directed us to periodically (e.g., quarterly) rebalance your Account Value allocated to the Sub-accounts in accordance with the percentage allocations assigned to each Sub-account within your model portfolio at the time you elected the program or as later modified with your consent. Some asset allocation programs will only require that a rebalancing occur when the percent of your Account Value allocated to the Sub-accounts are outside of the acceptable range permitted under such asset allocation program. Note -- Any Account Value not invested in the Sub-accounts will not be affected by any rebalance. .. Sub-account Changes Within the Model Portfolios: From time to time you may be notified of a suggested change in a Sub-account or percentage allocated to a Sub-account within your model portfolio. If you consent (in the manner that is then permitted or required) to the suggested change, then it will be implemented upon the next rebalance. If you do not consent then rebalancing will continue in accordance with your unchanged model portfolio, unless the Sub-account is no longer available under your Annuity, in which case your lack of consent will be deemed a request to terminate the asset allocation program and the provisions under "Termination or Modification of the Asset Allocation Program" will apply. .. Owner Changes in Choice of Model Portfolio: You may change from the model portfolio that you have elected to any other currently available model portfolio at any time. The change will be implemented on the date we receive all required information in the manner that is then permitted or required. Termination or Modification of the Asset Allocation Program: .. You may request to terminate your asset allocation program at any time. Any termination will be effective on the date that American Skandia receives your termination request in good order. If you are enrolled in HDV, LT5 or SLT5, termination of your asset allocation program must coincide with enrollment in a then currently available and approved asset allocation program or other approved option. However, if you are enrolled in LT5 or SLT5 you may terminate the LT5 or SLT5 benefit in order to then terminate your asset allocation program. American Skandia reserves the right to terminate or modify the asset allocation program at any time with respect to any programs. Restrictions on Electing the Asset Allocation: .. You cannot participate in auto-rebalancing or a DCA program while enrolled in an asset allocation program. Upon election of an asset allocation program, American Skandia will automatically terminate your enrollment in any auto-rebalancing or DCA program. Finally, Systematic Withdrawals can only be made as flat dollar amounts. C-116 This page intentionally left blank APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You American Skandia Life Assurance Corporation offers several deferred variable annuity products. Each annuity has different features and benefits that may be appropriate for you based on your individual financial situation and how you intend to use the annuity. Not all of these annuities may be available to you, depending on your state of residence and/or the broker-dealer through which your annuity was sold. You can verify which of these annuities is available to you by speaking to your Financial Professional or calling 1-800-752-6342. The different features and benefits may include variations on your ability to access funds in your annuity without the imposition of a withdrawal charge as well as different ongoing fees and charges you pay to stay in the contract. Additionally, differences may exist on various optional benefits such as guaranteed living benefits or death benefit protection. Among the factors you should consider when choosing which annuity product may be most appropriate for your individual needs are the following: .. Your age; .. The amount of your investment and any planned future deposits into the annuity; .. How long you intend to hold the annuity (also referred to as investment time horizon); .. Your desire to make withdrawals from the annuity; .. Your investment return objectives; .. The effect of optional benefits that may be elected, and .. Your desire to minimize costs and/or maximize return associated with the annuity. The following chart outlines some of the different features for each actively sold American Skandia Annuity offered exclusively through Linsco/Private Ledger. The availability of optional features, such as those noted in the chart, may increase the cost of the contract. Therefore you should carefully consider which features you plan to use when selecting your annuity. You should also consider the investment objectives, risks, charges and expenses of an investment carefully before investing. In addition, the hypothetical illustrations below reflect the account value and surrender value of each variable annuity over a variety of holding periods. These charts are meant to reflect how your annuities can grow or decrease depending on market conditions and the comparable value of each of the annuities (which reflects the charges associated with the annuities) under the assumptions noted. Your registered Financial Professional representative can provide you with prospectuses for one or more of these variable annuities noted in this document and can guide you through Selecting the Variable Annuity That's Right for You. AMERICAN SKANDIA ANNUITY PRODUCT COMPARISON Below is a summary of American Skandia's actively sold annuity products offered exclusively through Linsco/Private Ledger. You should consider the investment objectives, risks, charges and expenses of an investment in any Annuity carefully before investing. The prospectus for the Annuities as well as the underlying portfolio prospectuses contain this and other information about the variable annuities and underlying investment options. Your registered Financial Professional can provide you with prospectuses for one or more of these variable annuities and the underlying portfolios and can help you decide upon the Annuity that would be most advantageous for you given your individual needs. Please read the prospectuses carefully before investing. D-118 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS
OPTIMUM FOUR OPTIMUM OPTIMUM PLUS - ------------------------------------------------------------------------------------------------------------------------- Minimum Investment $10,000 $1,000 $10,000 - ------------------------------------------------------------------------------------------------------------------------- Maximum Issue Age 85 80 75 - ------------------------------------------------------------------------------------------------------------------------- Withdrawal Charge 4 Years 8 Years 10 Years Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, 5%, (9%, 9%, 8.5% ,8%, 7%, 6%, 4%, 3%, 2%) 5%, 4%, 3%, 2%) - ------------------------------------------------------------------------------------------------------------------------- Insurance and Distribution 1.65% 1.25% years 1-8; 0.65% 1.65% years 1-10; 0.65% Charge years 9+ years 11+ - ------------------------------------------------------------------------------------------------------------------------- Annual Maintenance Fee Lesser of $35 or Lesser of $35 or Lesser of $35 or 2% of Account Value* 2% of Account Value* 2% of Account Value - ------------------------------------------------------------------------------------------------------------------------- Contract Credit Yes. Generally, we apply a Yes. Effective for Contracts Yes. The amount of the Loyalty Credit to your issued on or after February credit applied to a purchase Annuity's Account Value at 13, 2006, subject to state payment is based on the the end of your fifth contract availability. Generally, we year the purchase payment year (i.e., on your fifth apply a Loyalty Credit to your is received, for the first 6 Contract Anniversary). The Annuity's Account Value at years of the contract as Loyalty Credit is equal to the end of your fifth contract follows: 2.75% (2.25% for contracts year (i.e., on your fifth For contracts issued on or issued between June 20, Contract Anniversary). The after February 13, 2006, 2005 and February 13, Loyalty Credit is equal to subject to state availability, 2006) of total Purchase 0.50% of total Purchase the credit percentages for Payments made during the Payments made during the each year, starting with the first four contract years less first four contract years less first, are 6.50%, 5.00%, the cumulative amount of the cumulative amount of 4.00%, 3.00%, 2.00%, and withdrawals made (including withdrawals made (including 1.00%. the deduction of any CDSC the deduction of any CDSC Generally, for contracts amounts) through the fifth amounts) through the fifth issued prior to February 13, Contract Anniversary Contract Anniversary 2006, the credit percentage for the first year is 6.0%. - ------------------------------------------------------------------------------------------------------------------------- Fixed Allocation (early Fixed Allocation Available Fixed Allocation Available Fixed Allocation Available withdrawals are subject to a (As of May 1, 2005 currently (As of May 1, 2005 currently (As of May 1, 2005 currently Market Value Adjustment) offering durations of: offering durations of: offering durations of: 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) - ------------------------------------------------------------------------------------------------------------------------- Variable Investment All options available All options available All options available Options - ------------------------------------------------------------------------------------------------------------------------- Basic Death Benefit The greater of: purchase The greater of: purchase The greater of: purchase payments less proportional payments less proportional payments less proportional withdrawals or account value withdrawals or account value withdrawals or account value (no MVA Applied). (no MVA Applied). (no MVA Applied) less an amount equal to the credits applied within the 12 months prior to date of death. - -------------------------------------------------------------------------------------------------------------------------
D-119 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued
OPTIMUM FOUR OPTIMUM OPTIMUM PLUS - ------------------------------------------------------------------------------------------------------- Optional Death Benefits (for Enhanced Beneficiary EBP II, EBP II, an additional cost)/1/ Protection (EBPII) HDV, HDV, Highest Daily Value (HDV) HAV, HAV, Highest Anniversary Value Combo 5% Roll-up/HAV Combo 5% Roll-up /HAV (HAV) Combo 5% Roll Up/HAV - ------------------------------------------------------------------------------------------------------- Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, additional cost)/2/ Guaranteed Minimum GMWB, GMWB, Withdrawal Benefit (GMWB), GMIB, GMIB, Guaranteed Minimum Lifetime Five, Spousal Lifetime Five, Spousal Income Benefit (GMIB), Lifetime Five Lifetime Five Lifetime Five, Spousal Lifetime Five - ------------------------------------------------------------------------------------------------------- Annuity Rewards/3/ Available after initial Available after initial Available after initial withdrawal period withdrawal period withdrawal period - -------------------------------------------------------------------------------------------------------
HYPOTHETICAL ILLUSTRATION The following examples outline the value of each annuity as well as the amount that would be available to an investor as a result of full surrender at the end of each of the Annuity. The values shown below are based on the following assumptions: An initial investment of $100,000 is made into each Annuity earning a gross rate of return of 0% and 6% respectively. .. No subsequent deposits or withdrawals are made from the Annuity. .. The hypothetical gross rates of return are reduced by the arithmetic average of the fees and expenses of the underlying portfolios and the charges that are deducted from the Annuity at the Separate Account level as follows/4:/ . 0.99% based on the fees and expenses of the underlying portfolios as of December 31,2005. The arithmetic average of all fund expenses is computed by adding portfolio management fees, 12b-1 fees and other expenses of all of the underlying portfolios and then dividing by the number of portfolios. For purposes of the illustrations, we do not reflect any expense reimbursements or expense waivers that might apply and are described in the prospectus fee table. . The Separate Account level charges include the Insurance Charge and Distribution Charge (as applicable). .. The Annuity Value and Surrender Value are further reduced by the annual maintenance fee. For Optimum Plus, Optimum Four, and Optimum, the Annuity Value and Surrender Value also reflect the addition of any applicable credits. D-120 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS The Contract Value assumes no surrender, while the Surrender Value assumes a 100% surrender two days prior to the anniversary of the Issue Date of the Annuity ("Annuity Anniversary"), therefore reflecting the withdrawal charge applicable to that Annuity year. Note that a withdrawal on the Annuity Anniversary would be subject to the withdrawal charge applicable to the next Annuity year, which usually is lower. The values that you actually experience under an Annuity will be different than what is depicted here if any of the assumptions we make here differ from your circumstances, however the relative values for each product reflected below will remain the same. (We will provide you with a personalized illustration upon request). Shaded cells represent the product with the highest customer Surrender Value for the contract year. Multiple shaded cells represent a tie between two or more annuities. 0% GROSS RATE OF RETURN
OPTIMUM FOUR OPTIMUM OPTIMUM PLUS ------------------------------------------------------------ CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER YR VALUE VALUE VALUE VALUE VALUE VALUE ------------------------------------------------------------ 1 97,383 88,883 97,778 89,278 103,713 95,213 ------------------------------------------------------------ 2 94,794 86,794 95,566 88,566 100,958 91,958 ------------------------------------------------------------ 3 92,273 85,273 93,403 86,903 98,275 89,775 ------------------------------------------------------------ 4 89,818 83,818 91,288 85,288 95,663 87,663 ------------------------------------------------------------ 5 87,428 87,428 89,220 84,220 93,119 86,119 ------------------------------------------------------------ 6 87,778 87,778 87,687 83,687 90,642 84,642 ------------------------------------------------------------ 7 85,441 85,441 85,700 82,700 88,229 83,229 ------------------------------------------------------------ 8 83,165 83,165 83,757 81,757 85,880 81,880 ------------------------------------------------------------ 9 80,949 80,949 82,353 82,353 83,593 80,593 ------------------------------------------------------------ 10 78,791 78,791 80,973 80,973 81,366 79,366 ------------------------------------------------------------ 11 76,690 76,690 79,616 79,616 80,000 80,000 ------------------------------------------------------------ 12 74,643 74,643 78,281 78,281 78,659 78,659 ------------------------------------------------------------ 13 72,651 72,651 76,968 76,968 77,339 77,339 ------------------------------------------------------------ 14 70,711 70,711 75,676 75,676 76,042 76,042 ------------------------------------------------------------ 15 68,821 68,821 74,405 74,405 74,765 74,765 ------------------------------------------------------------ 16 66,982 66,982 73,155 73,155 73,509 73,509 ------------------------------------------------------------ 17 65,190 65,190 71,926 71,926 72,274 72,274 ------------------------------------------------------------ 18 63,446 63,446 70,716 70,716 71,059 71,059 ------------------------------------------------------------ 19 61,747 61,747 69,527 69,527 69,864 69,864 ------------------------------------------------------------ 20 60,093 60,093 68,357 68,357 68,688 68,688 ------------------------------------------------------------ 21 58,482 58,482 67,205 67,205 67,531 67,531 ------------------------------------------------------------ 22 56,914 56,914 66,073 66,073 66,394 66,394 ------------------------------------------------------------ 23 55,386 55,386 64,959 64,959 65,275 65,275 ------------------------------------------------------------ 24 53,899 53,899 63,864 63,864 64,174 64,174 ------------------------------------------------------------ 25 52,451 52,451 62,786 62,786 63,091 63,091 ------------------------------------------------------------
Assumptions: a. $100,000 initial investment b. Fund Expenses = 0.99% c. No optional death benefits or living benefits elected d. Annuity was issued on or after February 13, 2006 e. Surrender value assumes surrender 2 days before policy anniversary D-121 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued 6% GROSS RATE OF RETURN
OPTIMUM 4 OPTIMUM OPTIMUM PLUS ---------------------------------------------------------- CONTRACT SURRENDER CONTRACT SURR CONTRACT SURRENDER VALUE VALUE VALUE VALUE VALUE VALUE ---------------------------------------------------------- 1 103,210 94,710 103,629 95,129 109,919 101,419 ---------------------------------------------------------- 2 106,532 98,532 107,399 100,399 113,421 104,421 ---------------------------------------------------------- 3 109,961 102,961 111,307 104,807 117,035 108,535 ---------------------------------------------------------- 4 113,501 107,501 115,357 109,357 120,767 112,767 ---------------------------------------------------------- 5 117,154 117,154 119,555 114,555 124,618 117,618 ---------------------------------------------------------- 6 123,764 123,764 124,423 120,423 128,593 122,593 ---------------------------------------------------------- 7 127,748 127,748 128,951 125,951 132,696 127,696 ---------------------------------------------------------- 8 131,860 131,860 133,643 131,643 136,932 132,932 ---------------------------------------------------------- 9 136,104 136,104 139,345 139,345 141,303 138,303 ---------------------------------------------------------- 10 140,485 140,485 145,293 145,293 145,815 143,815 ---------------------------------------------------------- 11 145,007 145,007 151,495 151,495 151,999 151,999 ---------------------------------------------------------- 12 149,675 149,675 157,961 157,961 158,450 158,450 ---------------------------------------------------------- 13 154,493 154,493 164,703 164,703 165,177 165,177 ---------------------------------------------------------- 14 159,466 159,466 171,734 171,734 172,191 172,191 ---------------------------------------------------------- 15 164,599 164,599 179,064 179,064 179,504 179,504 ---------------------------------------------------------- 16 169,897 169,897 186,707 186,707 187,130 187,130 ---------------------------------------------------------- 17 175,366 175,366 194,677 194,677 195,081 195,081 ---------------------------------------------------------- 18 181,011 181,011 202,986 202,986 203,371 203,371 ---------------------------------------------------------- 19 186,838 186,838 211,651 211,651 212,015 212,015 ---------------------------------------------------------- 20 192,852 192,852 220,685 220,685 221,029 221,029 ---------------------------------------------------------- 21 199,060 199,060 230,105 230,105 230,427 230,427 ---------------------------------------------------------- 22 205,467 205,467 239,926 239,926 240,226 240,226 ---------------------------------------------------------- 23 212,081 212,081 250,167 250,167 250,443 250,443 ---------------------------------------------------------- 24 218,908 218,908 260,846 260,846 261,097 261,097 ---------------------------------------------------------- 25 225,954 225,954 271,980 271,980 272,205 272,205 ----------------------------------------------------------
Assumptions: a. $100,000 initial investment b. Fund Expenses = 0.99% c. No optional death benefits or living benefits elected d. Annuity was issued on or after February 13, 2006 e. Surrender value assumes surrender 2 days before policy anniversary D-122 APPENDIX D AMERICAN SKANDIA ANNUITIES PROSPECTUS In addition, the following charts indicate the days (measured from the Issue Date) in which each annuity product would have the highest Surrender Value amongst the products listed given the above assumptions. 0% GROSS RATE OF RETURN
PRODUCT NAME TOTAL DAYS YEARS FROM THE ISSUE DAYS WITHIN IN WHICH PRODUCT'S DATE IN WHICH THE THE PERIOD IN WHICH THE SURRENDER VALUE IS HIGHEST SURRENDER VALUE IS HIGHEST SURRENDER VALUE IS HIGHEST - --------------------------------------------------------------------------------------------- Optimum Four 1460 4 1460 5 1461-1825 6 1826-2190 7 2191-2555 8 2556-2919 - --------------------------------------------------------------------------------------------- Optimum 730 8 2920 9 2921-3285 10 3286-3649 - --------------------------------------------------------------------------------------------- Optimum Plus 8760 1-3 1-1095 4 1096-1459 10 3650 11-30 3651-10950 - ---------------------------------------------------------------------------------------------
6% GROSS RATE OF RETURN
PRODUCT NAME TOTAL DAYS YEARS FROM THE ISSUE DAYS WITHIN IN WHICH PRODUCT'S DATE IN WHICH THE THE PERIOD IN WHICH THE SURRENDER VALUE IS HIGHEST SURRENDER VALUE IS HIGHEST SURRENDER VALUE IS HIGHEST - --------------------------------------------------------------------------------------------- Optimum Four 729 6 1826-2190 7 2191-2554 - --------------------------------------------------------------------------------------------- Optimum 656 9 2993-3285 10 3286-3649 - --------------------------------------------------------------------------------------------- Optimum Plus 9565 1-5 1-1825 7 2555 8 2556-2920 9 2921-2993 10 3650 11-30 3651-10950 - ---------------------------------------------------------------------------------------------
Days listed assume 365 days per year and do not account for Leap Years. * Annual maintenance fee is waived for account values of $100,000 or more. 1)For more information on these benefits, refer to the "Death Benefit" section in the Prospectus. 2)For more information on these benefits, refer to the "Living Benefit Programs" section in the Prospectus. 3)The Annuity Rewards benefit offers Owners an ability to increase the guaranteed death benefit so that the death benefit will at least equal the Annuity's account value on the effective date of the Annuity Rewards benefits, if the terms of the Annuity Rewards benefit are met. 4)These reductions result in hypothetical net rates of return corresponding to the 0% and 6% gross rates of return, respectively as follows: Optimum Four -2.62% and 3.22%; Optimum -2.23% and 3.64% in years 1-8 and -1.63% and 4.27% in years 9+, Optimum Plus -2.62% and 3.22% in years 1-10 and -1.63% and 4.27% in years 11+. D-123 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS (PLEASE CHECK ONE) ________ OPTIMUM (05/2006), ________ OPTIMUM FOUR (05/2006), ________ OPTIMUM PLUS (05/2006). ----------------- (print your name) ----------------- (address) ----------------- (city/state/zip code) [LOGO] PRSRT STD The Prudential Insurance Company of America U.S. POSTAGE 751 Broad Street PAID Newark, NJ 07102-3777 LANCASTER, PA PERMIT NO. 1793 Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED A Prudential Financial Company A Prudential Financial Company One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-752-6342 Telephone: 203-926-1888 http://www.americanskandia.prudential.com http://www.americanskandia.prudential.com
MAILING ADDRESSES: AMERICAN SKANDIA -- VARIABLE ANNUITIES P.O. Box 7960 Philadelphia, PA 19176 EXPRESS MAIL: AMERICAN SKANDIA -- VARIABLE ANNUITIES 2101 Welsh Road Dresher, PA 19025 Supplement dated June 30, 2006 to the May 1, 2006 Prospectuses for the following annuity products: American Skandia Advisor Plan III, American Skandia XTra Credit SIX, American Skandia LifeVest(R) II, American Skandia APEX II, Advisors Choice (R)/2000/, Optimum, Optimum Plus, Optimum Four, American Skandia Variable Adjustable Immediate Annuity and American Skandia Variable Immediate Annuity (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable or immediate annuity you own, and is not intended to be a prospectus or offer for any other variable or immediate annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe a change to the above-referenced Prospectuses. This change applies to each Prospectus and will be effective on or about June 30, 2006. The section of the Prospectus entitled "May I Give My Financial Professional Permission to Forward Transaction Instructions?" is replaced with the following: Yes. Subject to our rules, your Financial Professional may forward instructions regarding the allocation of your Account Value, and request financial transactions involving investment options. If your Financial Professional has this authority, we deem that all transactions that are directed by your Financial Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Financial Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. Supplement to Prospectuses Dated May 1, 2006 Supplement dated August 14, 2006 Supplement dated August 14, 2006 to the May 1, 2006 Prospectuses for the following annuity products: American Skandia Advisor Plan III, American Skandia APEX(R) II, American Skandia XTra Credit Six, American Skandia LifeVest(R) II, Advisors Choice (R)/2000/, Optimum, Optimum Four and Optimum Plus, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable annuity you own, and is not intended to be a prospectus or offer for any other variable annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to each Prospectus in order to: (1) describe certain changes regarding the step-up feature of the Lifetime Five Income Benefit and the Spousal Lifetime Five Income Benefit; (2) reflect a change to the non-fundamental investment policies of one American Skandia Trust ("AST") portfolio; (3) reflect the removal of a sub-advisor for one AST portfolio and the addition of sub-advisors for two AST Portfolios; and (4) modify the disclosure concerning certain payment arrangements. All of these changes apply to each Prospectus and will be effective on or about August 14, 2006, unless specifically stated otherwise. 1. Administrative Changes to Certain Optional Benefits --------------------------------------------------- Lifetime Five Income Benefit - ---------------------------- The following prospectus revisions reflect, for elections of this benefit on or after March 20, 2006, a reduced waiting period (i.e. from 3 years to 1 year) for the step-up of certain values associated with the Lifetime Five Income Benefit and a change to the threshold requirement associated with the Auto Step-Up feature of the benefit: A. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit (Lifetime Five)", under the heading "Key Feature - Protected Withdrawal Value" the following replaces the second and third paragraphs: You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program on or after March 20, 2006: . you are eligible to step-up the Protected Withdrawal Value on or after the 1st anniversary of the first withdrawal under the Lifetime Five program . the Protected Withdrawal Value can be stepped up again on or after the 1st anniversary of the preceding step-up If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect: . you are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program . the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary of the preceding step-up In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of step-up. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elected the Lifetime Five program on or after March 20, 2006 and have also elected the Auto Step-Up feature: . the first Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the later of (1) the date of the first withdrawal under the Lifetime Five program or (2) the most recent step-up . your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value is greater than the Annual Income Amount by any amount . if at the time of the first Auto Step-Up opportunity, 5% of the Account Value is not greater than the Annual Income Amount, an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs . once a step-up occurs, the next Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the most recent step-up If you elected the Lifetime Five program prior to March 20, 2006 and have also elected the Auto Step-Up feature: . the first Auto Step-Up opportunity will occur on the Annuity Anniversary that is at least 5 years after the later of (1) the date of the first withdrawal under the Lifetime Five Program benefit or (2) the most recent step-up . your Protected Withdrawal Value will only be stepped-up if 5% of the Account Value is greater than the Annual Income Amount by 5% or more . if at the time of the first Auto Step-Up opportunity, 5% of the Account Value does not exceed the Annual Income Amount by 5% or more, an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs . once a step-up occurs, the next Auto Step-Up opportunity will occur on the Annuity Anniversary that is at least 5 years after the most recent step-up In either scenario (i.e., elections before or after March 20, 2006), if on the date that we implement an Auto Step-Up to your Protected Withdrawal Value, the charge for Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. Subject to our rules and restrictions, you will still be permitted to manually step-up the Protected Withdrawal Value even if you elect the Auto Step-Up feature. B. "Example 3. Step-up of the Protected Withdrawal Value" under the "Lifetime Five Income Benefit (Lifetime Five)" section of each Prospectus is replaced with the following hypothetical example. In addition, in the assumptions that precede the examples, we delete item 5, which states that "the Account Value on February 1, 2010 is equal to $280,000". Example 3. Step-up of the Protected Withdrawal Value If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 3 years, the Protected Withdrawal Value on February 1, 2012 would be reduced to $225,250 {$265,000 - ($13,250 X 3)}. If a step-up is elected on February 1, 2012, and the Account Value on February 1, 2012 is $280,000, then the following values would result: .. Protected Withdrawal Value = Account Value on February 1, 2012 = $280,000 .. Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value is 5% of $280,000, which is $14,000. Therefore, the Annual Income Amount is increased to $14,000. .. Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $280,000, which is $19,600. Therefore the Annual Withdrawal Amount is increased to $19,600. .. Because the Issue Date and Effective Date of Lifetime Five for this example is prior to March 20, 2006, if the step-up request on February 1, 2012 was due to the election of the auto step-up feature, we would first check to see if an auto step-up should occur by checking to see if 5% of the Account Value exceeds the Annual Income Amount by 5% or more. 5% of the Account Value is equal to 5% of $280,000, which is $14,000. 5% of the Annual Income Amount ($13,250) is $662.50, which added to the Annual Income 2 Amount is $13,912.50. Since 5% of the Account Value is greater than $13,912.50, the step-up would still occur in this scenario, and all of the values would be increased as indicated above. Had the Issue Date and Effective Date of the Lifetime Five benefit been on or after March 20, 2006, the step-up would still occur because 5% of the Account Value is greater than the Annual Income Amount. Spousal Lifetime Five Income Benefit - ------------------------------------ The following prospectus revisions reflect a reduced waiting period (i.e. from 3 years to 1 year) for the step-up of the Annual Income Amount and a change to the threshold requirement associated with the Auto Step-Up feature: A. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)", under the heading "Key Feature - Annual Income Amount under the Spousal Life Income Benefit" the following replaces the second and third paragraphs: You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 1st anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 1st anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. An optional automatic step-up ("Auto Step-Up") feature is available for this benefit. This feature may be elected at the time the benefit is elected or at any time while the benefit is in force. If you elect this feature, the first Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least one year after the later of (1) the date of the first withdrawal under the Spousal Lifetime Five program or (2) the most recent step-up. At this time, your Annual Income Amount will be stepped-up if 5% of your Account Value is greater than the Annual Income Amount by any amount. If 5% of the Account Value does not exceed the Annual Income Amount, then an Auto Step-Up opportunity will occur on each successive Annuity Anniversary until a step-up occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at least 1 year after the most recent step-up. If, on the date that we implement an Auto Step-Up to your Annual Income Amount, the charge for Spousal Lifetime Five has changed for new purchasers, you may be subject to the new charge at the time of such step-up. Subject to our rules and restrictions, you will still be permitted to manually step-up the Annual Income Amount even if you elect the Auto Step-Up feature. B. "Example 3. Step-up of the Annual Income Amount" under the "Spousal Lifetime Five Income Benefit (Spousal Lifetime Five)" section of each Prospectus is replaced with the following: Example 3. Step-up of the Annual Income Amount If a step-up of the Annual Income Amount is requested on February 1, 2010 or the Auto Step-Up feature was elected, the step-up would occur because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. 2. Investment Policy Change ------------------------ As a result of an investment policy change to the AST Goldman Sachs Small-Cap Value Portfolio, effective August 25, 2006, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: 3 INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ ------------------------------------------------------------------------------------------------------------ ----------- Small AST Goldman Sachs Small-Cap Value Portfolio: seeks long-term capital appreciation. The Portfolio will Goldman Cap seek its objective through investments primarily in equity securities that are believed to be undervalued in Sachs Asset Value the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their Management, outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, L.P. at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as stocks of companies with market capitalizations that are within the range of the Russell 2000 Value Index at the time of purchase.
3. Sub-advisor Changes/Additions ----------------------------- a. Effective June 16, 2006, Goldman Sachs Asset Management, L.P. (GSAM) is no longer a sub-advisor of the AST High Yield Portfolio. To reflect this change, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" GSAM is deleted from the column entitled "Portfolio Advisor/Sub-Advisor" for the Portfolio. b. Effective on or about November 13, 2006, Marsico Capital Management, LLC (Marsico) will be added as a sub-advisor to the AST William Blair International Growth Portfolio and the name of the Portfolio will be changed to the "AST International Growth Portfolio". As a result, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised to reflect these changes. c. Effective on or about November 13, 2006, Thornburg Investment Management, Inc. (Thornburg) will be added as a sub-advisor to the AST LSV International Value Portfolio and the name of the Portfolio will be changed to the "AST International Value Portfolio". As a result, the chart in the Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised to reflect these changes. 4. Service Fees ------------ In the section of each Prospectus entitled "General Information", sub-section "What Is The Structure Of The Underlying Funds?", under the heading "Service Fees Payable to American Skandia," we replace the second paragraph that begins "[I]n addition, the investment adviser, sub-adviser or distributor . . ." with the following: In addition, an investment adviser, sub-adviser or distributor of the underlying Portfolios may also compensate us by providing reimbursement, defraying the costs of, or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with the Annuity. These services may include, but are not limited to: sponsoring or co-sponsoring various promotional, educational or marketing meetings and seminars attended by distributors, wholesalers, and/or broker dealer firms' registered representatives, and creating marketing material discussing the contract, available options, and underlying Portfolios. The amounts paid depend on the nature of the meetings, the number of meetings attended by the adviser, sub-adviser, or distributor, the number of participants and attendees at the meetings, the costs expected to be incurred, and the level of the adviser's, sub-adviser's or distributor's participation. These payments or reimbursements may not be offered by all advisers, sub-advisers, or distributor and the amounts of such payments may vary between and among each adviser, sub-adviser and distributor depending on their respective participation. 4 AMERICAN SKANDIA STAGECOACH(TM) ADVISOR PLAN(SM) III Flexible Premium Deferred Annuity - -------------------------------------------------------------------------------- PROSPECTUS: MAY 2, 2005 AS REVISED ON JUNE 20, 2005 This Prospectus describes Stagecoach(TM) Advisor Plan(SM) III, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Wells Fargo Bank, N.A. The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. For more information about variations applicable to your state, please refer to your Annuity contract or consult your Investment Professional. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. - -------------------------------------------------------------------------------- American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection and the ability to access your annuity's account value. The fees and charges you pay and compensation paid to your Investment Professional may also be different between each annuity. For more information, please refer to the Appendix entitled "Selecting the Variable Annuity That's Right for You." - -------------------------------------------------------------------------------- The Variable Investment Options - -------------------------------------- The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: Wells Fargo Variable Trust, American Skandia Trust, Gartmore Variable Investment Trust, A I M Advisors, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. Please Read This Prospectus - -------------------------------------- Please read this prospectus and the current prospectus for the underlying mutual funds. Keep them for future reference. If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. Available Information - -------------------------------------- We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 96. This Prospectus is part of the registration statement we filed with the SEC regarding this offering. Additional information on us and this offering is available in the registration statement and the exhibits thereto. You may review and 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. 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. For Further Information call: - -------------------------------------- 1-800-680-8920 These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, or bank subsidiary of Wells Fargo Bank, N.A., are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value, even with respect to amounts allocated to the AST Money Market sub-account. 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. Stagecoach(TM) Advisor Plan(SM) III is a trademark of the Wells Fargo Bank, N.A. and Advisor Plan is a service mark of The Prudential Insurance Company of America. Prospectus Dated: May 2, 2005 as revised on June 20, 2005 Statement of Additional Information Dated: May 2, 2005 WFAS3PR605 WFVASIIIPROS PLEASE SEE OUR PRIVACY POLICY AND IRA DISCLOSURE STATEMENT ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. Contents - ------------------------------------------------------------------------------- Introduction ........................................................................ 1 Why Would I Choose to Purchase This Annuity? ...................................... 1 What Are Some of the Key Features of This Annuity? ................................ 1 How Do I Purchase This Annuity? ................................................... 1 Glossary of Terms ................................................................... 2 Summary of Contract Fees and Charges ................................................ 3 Expense Examples .................................................................... 12 Investment Options .................................................................. 13 What are the Investment Objectives and Policies of the Portfolios? ................ 13 What are the Fixed Allocations? ................................................... 28 Fees and Charges .................................................................... 29 What are the Contract Fees and Charges? ........................................... 29 What Charges Apply Solely to the Variable Investment Options? ..................... 30 What Fees and Expenses are Incurred by the Portfolios? ............................ 31 What Charges Apply to the Fixed Allocations? ...................................... 31 What Charges Apply if I Choose an Annuity Payment Option? ......................... 31 Exceptions/Reductions to Fees and Charges ......................................... 31 Purchasing Your Annuity ............................................................. 32 What are Our Requirements for Purchasing the Annuity? ............................. 32 Managing Your Annuity ............................................................... 33 May I Change the Owner, Annuitant and Beneficiary Designations? ................... 33 May I Return the Annuity if I Change My Mind? ..................................... 33 May I Make Additional Purchase Payments? .......................................... 33 May I Make Scheduled Payments Directly from My Bank Account? ...................... 33 May I Make Purchase Payments Through a Salary Reduction Program? .................. 34 Managing Your Account Value ......................................................... 35 How and When are Purchase Payments Invested? ...................................... 35 Are There Restrictions or Charges on Transfers Between Investment Options? ........ 35 Do You Offer Dollar Cost Averaging? ............................................... 37 Do You Offer Any Automatic Rebalancing Programs? .................................. 37 Are Any Asset Allocation Programs Available? ...................................... 37 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? 38 May I Give My Investment Professional Permission to Manage My Account Value? ...... 39 May I Authorize My Third Party Investment Advisor to Manage My Account? ........... 39 How Do the Fixed Allocations Work? ................................................ 40 How Do You Determine Rates for Fixed Allocations? ................................. 41 How Does the Market Value Adjustment Work? ........................................ 41 What Happens When My Guarantee Period Matures? .................................... 42 Access To Account Value ............................................................. 43 What Types of Distributions are Available to Me? .................................. 43 Are There Tax Implications for Distributions? ..................................... 43 Can I Withdraw a Portion of My Annuity? ........................................... 43 How Much Can I Withdraw as a Free Withdrawal? ..................................... 44 Is There a Charge for a Partial Withdrawal? ....................................... 44 Can I Make Periodic Withdrawals From the Annuity During the Accumulation Period? .. 44 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue Code?............................................................................ 45 What are Minimum Distributions and When Would I Need to Make Them? ................ 45 Can I Surrender My Annuity for Its Value? ......................................... 45 What is a Medically-Related Surrender and How Do I Qualify? ....................... 45 What Types of Annuity Options are Available? ...................................... 46 How and When Do I Choose the Annuity Payment Option? .............................. 47 How are Annuity Payments Calculated? .............................................. 47
(i) Contents - -------------------------------------------------------------------------------- Living Benefit Programs .................................................................. 50 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? ........................................................................... 50 Guaranteed Return Option Plus(SM) (GRO PlusSM) ......................................... 51 Guaranteed Return Option (GRO) ......................................................... 56 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 58 Guaranteed Minimum Income Benefit (GMIB) ............................................... 62 Lifetime Five Income Benefit (Lifetime Five) ........................................... 67 Death Benefit ............................................................................ 73 What Triggers the Payment of a Death Benefit? .......................................... 73 Basic Death Benefit .................................................................... 73 Optional Death Benefits ................................................................ 73 American Skandia's Annuity Rewards ..................................................... 77 Payment of Death Benefits .............................................................. 78 Valuing Your Investment .................................................................. 80 How is My Account Value Determined? .................................................... 80 What is the Surrender Value of My Annuity? ............................................. 80 How and When Do You Value the Sub-Accounts? ............................................ 80 How Do You Value Fixed Allocations? .................................................... 80 When Do You Process and Value Transactions? ............................................ 80 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 81 Tax Considerations ....................................................................... 83 General Information ...................................................................... 90 How Will I Receive Statements and Reports? ............................................. 90 Who is American Skandia? ............................................................... 90 What are Separate Accounts? ............................................................ 90 What is the Legal Structure of the Underlying Funds? ................................... 92 Who Distributes Annuities Offered by American Skandia? ................................. 93 Incorporation of Certain Documents by Reference ........................................ 94 Financial Statements ................................................................... 94 How to Contact Us ...................................................................... 94 Indemnification ........................................................................ 95 Legal Proceedings ...................................................................... 95 Contents of the Statement of Additional Information .................................... 95 Appendix A -- Condensed Financial Information About Separate Account B ................... A-1 Appendix B -- Calculation of Optional Death Benefits ..................................... B-1 Appendix C -- Additional Information on Asset Allocation Programs ........................ C-1 Appendix D -- Selecting the Variable Annuity That's Right for You ........................ D-1
(ii) Introduction - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Why Would I Choose to Purchase This Annuity? - -------------------------------------------------------------------------------- This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers a choice of different optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive and one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed allocations. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 70 1/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. What Are Some of the Key Features of This Annuity? - -------------------------------------------------------------------- .. This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. .. This Annuity offers both variable investment options and Fixed Allocations. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed Allocations of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. .. The Annuity features two distinct periods -- the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. .. During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. .. This Annuity offers optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive. .. This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. .. You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges, although any optional guaranteed benefit you elect may be reduced. Other product features allow you to access your Account Value as necessary, although a charge may apply. After Annuity Year 8, you are allowed to make unlimited withdrawals from your Annuity without any charges. .. Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. How Do I Purchase This Annuity? - -------------------------------------------------------------------- We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $1,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $1,000. If the Annuity is owned by an individual or individuals, the oldest of those Owners must be age 80 or under, as of the Issue Date of the Annuity. If the Annuity is owned by an entity, the annuitant must be age 80 or under, as of the Issue Date of the Annuity. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. 1 Glossary of Terms - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. ACCOUNT VALUE - ------------- The value of each allocation to a Sub-account (also referred to as "variable investment option") or a Fixed Allocation prior to the Annuity Date, plus any earnings, and/or less any losses, distributions and charges. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on a contract anniversary, any fee that is deducted from the contract annually in arrears. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. ANNUITIZATION - ------------- The application of Account Value (or Protected Income Value for the Guaranteed Minimum Income Benefit, if applicable) to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. ANNUITY DATE - ------------ The date you choose for annuity payments to commence. A maximum Annuity Date may apply. ANNUITY YEAR - ------------ A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. CODE - ---- The Internal Revenue Code of 1986, as amended from time to time. FIXED ALLOCATION - ---------------- An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. GUARANTEE PERIOD - ---------------- A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. INTERIM VALUE - ------------- The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. ISSUE DATE - ---------- The effective date of your Annuity. MVA - --- A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day more than 30 days prior to the Maturity Date of such Fixed Allocation. OWNER - ----- With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. SURRENDER VALUE - --------------- The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge, and the charge for any optional benefits. The surrender value may be calculated using a Market Value Adjustment with respect to amounts in any Fixed Allocation. UNIT - ---- A measure used to calculate your Account Value in a Sub-account during the accumulation period. VALUATION DAY - ------------- Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. 2 Summary of Contract Fees and Charges - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the mortality and expense risk charge, the charge for administration of the Annuity, the Distribution Charge and the charge for certain optional benefits you elect, other than the Guaranteed Minimum Income Benefit, which is assessed against the Protected Income Value. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. The following table provides a summary of the fees and charges you will pay if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
YOUR TRANSACTION FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------- (ASSESSED AGAINST THE ANNUITY) FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------- 7.5% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period during which a particular percentage applies is measured from the Issue Date of the Annuity. Contingent Deferred Sales Charge* - ------------------------------------------------------------------------------------------------------------- $10.00 (currently, $15.00 maximum) (Currently, we deduct the fee after the 20th transfer each Annuity Year. We guarantee that the number of charge free transfers per Annuity Year will never be less than 8.) Transfer Fee - ------------------------------------------------------------------------------------------------------------- Up to 3.5% of the value that is annuitized, depending on the requirements of the applicable jurisdiction. This charge is deducted generally at the time you annuitize your contract. Tax Charge - -------------------------------------------------------------------------------------------------------------
* The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. For purposes of calculating this charge we consider the year following the Issue Date of your Annuity as Year 1.
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+ 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
3 Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The following table provides a summary of the periodic fees and charges you will pay while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus.
YOUR PERIODIC FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINST THE ANNUITY FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------------------- Smaller of $35 or 2% of Account Value (Only applicable if Account Value is less than $100,000) (Assessed annually on the Annuity's anniversary date or upon surrender) Annual Maintenance Fee - ------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNT(1) - ------------------------------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------------------- 0.50% Mortality & Expense Risk Charge (2) - ------------------------------------------------------------------------------------------------------------------------- 0.15% Administration Charge (2) - ------------------------------------------------------------------------------------------------------------------------- 0.60% in Annuity Years 1-8 Distribution Charge (3) - ------------------------------------------------------------------------------------------------------------------------- 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option5 ("Qualified BCO") Settlement Service Charge (4) - ------------------------------------------------------------------------------------------------------------------------- 1.25% per year of the value of each Sub-account in Annuity Years 1-8; 0.65% in Annuity Years 9 and later (1.40% per year if you are a beneficiary electing the Qualified BCO) Total Annual Charges of the Sub-accounts - -------------------------------------------------------------------------------------------------------------------------
1: These charges are deducted daily and apply to Variable Investment Options only. 2: The combination of the Mortality and Expense Risk Charge and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. 3: The Distribution Charge in Annuity Years 9+ is 0.00%. 4: The Mortality & Expense Risk Charge, the Administration Charge and the Distribution Charge do not apply if you are a beneficiary under the Qualified Beneficiary Continuation Option. The Settlement Service Charge applies only if your beneficiary elects the Qualified Beneficiary Continuation Option. 5: When an Annuity is used as an IRA, 403(b) or other "qualified investment", upon the Owner's death a beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. If a beneficiary elects this option, the beneficiary will incur the Settlement Service Charge. Please refer to the section of this Prospectus that describes the Qualified Beneficiary Continuation Option for more detailed information about this option, including certain restrictions and limitations that may apply. 4 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The following table provides a summary of the fees and charges you will pay if you elect any of the following optional benefits. Not all optional benefits may be purchased in combination with one another. You may only elect one optional living benefit. The optional living benefits are the Guaranteed Return Option Plus program (and where not available, Guaranteed Return Option), the Guaranteed Minimum Withdrawal Benefit, the Guaranteed Minimum Income Benefit and the Lifetime Five(SM) Income Benefit. For the optional death benefits, you may elect the Highest Anniversary Value Death Benefit or the Highest Daily Value Death Benefit together with the Enhanced Beneficiary Protection Death Benefit, or any of these three benefits individually, but the Combination 5% Roll-up and HAV Death Benefit may only be purchased individually. The fees and charges of each of the optional benefits are described in more detail within this Prospectus. YOUR OPTIONAL BENEFIT FEES AND CHARGES - -------------------------------------------------------------------------------
OPTIONAL BENEFIT FEE/ OPTIONAL BENEFIT CHARGE - -------------------------------------------------------------------------------------------------------- GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM)/GUARANTEED RETURN OPTION - --------------------------------------------------------------------------------------------------------- We offer a program that guarantees a "return of premium" at a future date, 0.25% of average daily while allowing you to allocate all or a portion of your Account Value to net assets of the Sub- certain Sub-accounts. accounts GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - --------------------------------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts over 0.35% of average daily time equal to an initial principal value, regardless of the impact of net assets of the Sub- market performance on your Account Value. accounts GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - --------------------------------------------------------------------------------------------------------- We offer a program that, after a seven-year waiting period, guarantees your 0.50% per year of the ability to begin receiving income from your Annuity in the form of annuity average Protected payments based on your total Purchase Payments and an annual increase Income Value during of 5% on such Purchase Payments adjusted for withdrawals (called the each year; deducted "Protected Income Value"), regardless of the impact of market performance annually in arrears on your Account Value. each Annuity Year LIFETIME FIVE INCOME BENEFIT** - --------------------------------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal 0.60% of average daily to a percentage of an initial principal value, regardless of the impact net assets of the Sub- of market performance on your Account Value, subject to our program rules accounts regarding the timing and amount of withdrawals. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - --------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily protection for your beneficiary(ies) by providing amounts in addition to the net assets of the Sub- basic Death Benefit that can be used to offset federal and state taxes accounts payable on any taxable gains in your Annuity at the time of your death. TOTAL ANNUAL OPTIONAL BENEFIT CHARGE* - --------------------------------------------------------------------------------------------------------- GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM)/GUARANTEED RETURN OPTION - ---------------------------------------------------------------------------------------------------------- We offer a program that guarantees a "return of premium" at a future date, 1.50% in Annuity while allowing you to allocate all or a portion of your Account Value to Years 1-8; 0.90% certain Sub-accounts. in Annuity Years 9 and later; 1.65% for Qualified BCO GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - ---------------------------------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts over 1.60% in Annuity time equal to an initial principal value, regardless of the impact of Years 1-8; 1.00% market performance on your Account Value. in Annuity Years 9 and later; 1.75% for Qualified BCO GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - ---------------------------------------------------------------------------------------------------------- We offer a program that, after a seven-year waiting period, guarantees your 1.25% in Annuity ability to begin receiving income from your Annuity in the form of annuity Years 1-8; 0.65% payments based on your total Purchase Payments and an annual increase of 5% in Annuity Years 9 on such Purchase Payments adjusted for withdrawals (called the and later "Protected Income Value"), regardless of the impact of market PLUS performance on your Account Value. 0.50% per year of average Protected Income Value LIFETIME FIVE INCOME BENEFIT** - ---------------------------------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal 1.85% in Annuity Years to a percentage of an initial principal value, regardless of the impact of 1-8; 1.25% in Annuity market performance on your Account Value, subject to our program rules Years 9 and later regarding the timing and amount of withdrawals. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - ---------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 1.50% in Annuity protection for your beneficiary(ies) by providing amounts in addition to Years 1-8; 0.90% the basic Death Benefit that can be used to offset federal and in Annuity Years 9 state taxes payable on any taxable gains in your Annuity at and later the time of your death.
5 Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
OPTIONAL BENEFIT FEE/ OPTIONAL BENEFIT CHARGE - --------------------------------------------------------------------------------------------------------------------- HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - --------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- greater of the basic Death Benefit and the Highest Anniversary Value, less accounts proportional withdrawals. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** - --------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily protection for your beneficiary(ies) by providing the greater of the Highest net assets of the Sub- Anniversary Value Death Benefit and a 5% annual increase on Purchase accounts Payments adjusted for withdrawals. HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** - --------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- greater of the basic Death Benefit and the Highest Daily Value, less accounts proportional withdrawals. - ---------------------------------------------------------------------------------------------------------------------- Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - --------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL OPTIONAL BENEFIT CHARGE* - -------------------------------------------------------------------------------------------------------------------- HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - -------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 1.50% in Annuity protection for your beneficiary(ies) by providing a death benefit equal to the Years 1-8; 0.90% greater of the basic Death Benefit and the Highest Anniversary Value, less in Annuity Years 9 proportional withdrawals. and later COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** - -------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 1.75% in Annuity protection for your beneficiary(ies) by providing the greater of the Highest Years 1-8; 1.15% Anniversary Value Death Benefit and a 5% annual increase on Purchase in Annuity Years 9 Payments adjusted for withdrawals. and later HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** - -------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 1.75% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to the 1-8; 1.15% in Annuity greater of the basic Death Benefit and the Highest Daily Value, less Years 9 and later proportional withdrawals. - -------------------------------------------------------------------------------------------------------------------- Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - --------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge and Distribution Charge assessed against the average daily net assets allocated the Sub-accounts. If you elect more than one optional benefit, the Total Annual Charge would be increased to include the charge for each optional benefit. ** These optional benefits are not available under the Qualified BCO. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2004. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES
MINIMUM MAXIMUM - ------------------------------------------------------------- Total Portfolio Operating Expense 0.63% 3.06%
The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2004, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee has been waived and/or other expenses have been partially reimbursed. Any such fee waivers and/or reimbursements have been reflected in the footnotes. The "Total Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. 6 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS - -------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES - --------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE NET ASSETS OF THE UNDERLYING PORTFOLIOS)
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES American Skandia Trust:(2), (3) - ---------------------------------------------------------------------------------------------------------------- AST JPMorgan International Equity 1.00% 0.13% None 1.13% AST William Blair International Growth 1.00% 0.22% None 1.22% AST LSV International Value(4) 1.00% 0.37% None 1.37% AST MFS Global Equity 1.00% 0.35% None 1.35% AST Small-Cap Growth(5) 0.90% 0.24% None 1.14% AST DeAM Small-Cap Growth 0.95% 0.22% None 1.17% AST Federated Aggressive Growth 0.95% 0.24% None 1.19% AST Small-Cap Value(6) 0.90% 0.18% None 1.08% AST DeAM Small-Cap Value 0.95% 0.33% None 1.28% AST Goldman Sachs Mid-Cap Growth 1.00% 0.25% None 1.25% AST Neuberger Berman Mid-Cap Growth 0.90% 0.22% None 1.12% AST Neuberger Berman Mid-Cap Value 0.90% 0.15% None 1.05% AST Alger All-Cap Growth 0.95% 0.22% None 1.17% AST Gabelli All-Cap Value 0.95% 0.26% None 1.21% AST T. Rowe Price Natural Resources 0.90% 0.26% None 1.16% AST AllianceBernstein Large-Cap Growth(7) 0.90% 0.23% None 1.13% AST MFS Growth 0.90% 0.20% None 1.10% AST Marsico Capital Growth 0.90% 0.14% None 1.04% AST Goldman Sachs Concentrated Growth 0.90% 0.17% None 1.07% AST DeAM Large-Cap Value 0.85% 0.26% None 1.11% AST AllianceBernstein Growth + Value 0.90% 0.32% None 1.22% AST AllianceBernstein Core Value(8) 0.75% 0.24% None 0.99% AST Cohen & Steers Realty 1.00% 0.22% None 1.22% AST AllianceBernstein Managed Index 500(9) 0.60% 0.17% None 0.77% AST American Century Income & Growth 0.75% 0.24% None 0.99% AST AllianceBernstein Growth & Income(10) 0.75% 0.15% None 0.90% AST Hotchkis & Wiley Large-Cap Value 0.75% 0.19% None 0.94% AST Global Allocation(11) 0.89% 0.26% None 1.15% AST American Century Strategic Balanced 0.85% 0.27% None 1.12% AST T. Rowe Price Asset Allocation 0.85% 0.27% None 1.12% AST T. Rowe Price Global Bond 0.80% 0.27% None 1.07% AST Goldman Sachs High Yield 0.75% 0.18% None 0.93% AST Lord Abbett Bond-Debenture 0.80% 0.22% None 1.02% AST PIMCO Total Return Bond 0.65% 0.16% None 0.81% AST PIMCO Limited Maturity Bond 0.65% 0.17% None 0.82% AST Money Market 0.50% 0.13% None 0.63% Gartmore Variable Investment Trust: - ---------------------------------------------------------------------------------------------------------------- GVIT Developing Markets 1.15% 0.38% 0.25% 1.78%
7 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Summary of Contract Fees and Charges continued - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES Wells Fargo Variable Trust Advantage:(12) - ---------------------------------------------------------------------------------------------------------------- Advantage C&B Large Cap Value 0.55% 0.39% 0.25% 1.19% Advantage Equity Income 0.55% 0.23% 0.25% 1.03% Advantage International Core 0.75% 0.42% 0.25% 1.42% Advantage Small Cap Growth 0.75% 0.24% 0.25% 1.24% Advantage Large Company Core 0.55% 0.33% 0.25% 1.13% Advantage Large Company Growth 0.55% 0.25% 0.25% 1.05% Advantage Asset Allocation 0.55% 0.22% 0.25% 1.02% Advantage Total Return Bond 0.45% 0.26% 0.25% 0.96% AIM Variable Insurance Funds:(13) - ---------------------------------------------------------------------------------------------------------------- AIM V.I. Dynamics Fund -- Series I shares 0.75% 0.39% None 1.14% AIM V.I. Technology Fund -- Series I shares 0.75% 0.40% None 1.15% AIM V.I. Health Sciences Fund -- Series I shares(14) 0.75% 0.36% None 1.11% AIM V.I. Financial Services Fund -- Series I shares 0.75% 0.37% None 1.12% Evergreen Variable Annuity Trust: - ---------------------------------------------------------------------------------------------------------------- International Equity(15) 0.42% 0.30% None 0.72% Growth(16) 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% ProFund VP:(17) - ---------------------------------------------------------------------------------------------------------------- Access VP High Yield 0.75% 1.02% 0.25% 2.02% Bull 0.75% 0.78% 0.25% 1.78% OTC 0.75% 0.87% 0.25% 1.87% Large-Cap Value 0.75% 1.04% 0.25% 2.04% Large-Cap Growth 0.75% 2.06% 0.25% 3.06% Mid-Cap Value 0.75% 0.92% 0.25% 1.92% Mid-Cap Growth 0.75% 0.94% 0.25% 1.94% Small-Cap Value 0.75% 0.95% 0.25% 1.95% Small-Cap Growth 0.75% 0.90% 0.25% 1.90% Asia 30 0.75% 0.86% 0.25% 1.86% Europe 30 0.75% 0.78% 0.25% 1.78% Japan 0.75% 0.85% 0.25% 1.85% UltraBull 0.75% 0.89% 0.25% 1.89% UltraMid-Cap 0.75% 0.94% 0.25% 1.94% UltraSmall-Cap 0.75% 0.94% 0.25% 1.94% UltraOTC 0.75% 0.88% 0.25% 1.88% Bear 0.75% 0.90% 0.25% 1.90% Short Mid-Cap 0.75% 0.80% 0.25% 1.80% Short Small-Cap 0.75% 1.28% 0.25% 2.28% Short OTC 0.75% 0.86% 0.25% 1.86% Banks 0.75% 0.98% 0.25% 1.98% Basic Materials 0.75% 0.96% 0.25% 1.96% Biotechnology 0.75% 0.98% 0.25% 1.98%
8 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES ProFund VP(17) (continued) - ---------------------------------------------------------------------------------------------------------------- Consumer Goods 0.75% 0.99% 0.25% 1.99% Consumer Services 0.75% 1.20% 0.25% 2.20% Financials 0.75% 0.92% 0.25% 1.92% Health Care 0.75% 0.91% 0.25% 1.91% Industrials 0.75% 0.99% 0.25% 1.99% Internet 0.75% 0.94% 0.25% 1.94% Oil & Gas 0.75% 0.92% 0.25% 1.92% Pharmaceuticals 0.75% 0.97% 0.25% 1.97% Precious Metals 0.75% 0.87% 0.25% 1.87% Real Estate 0.75% 0.93% 0.25% 1.93% Semiconductor 0.75% 0.99% 0.25% 1.99% Technology 0.75% 0.87% 0.25% 1.87% Telecommunications 0.75% 0.95% 0.25% 1.95% Utilities 0.75% 0.95% 0.25% 1.95% U.S. Government Plus 0.50% 0.86% 0.25% 1.61% Rising Rates Opportunity 0.75% 0.75% 0.25% 1.75% First Defined Portfolio Fund, LLC: (18), (19) - ------------------------------------------------------------------------------------ First Trust[RegTM] 10 Uncommon Value 0.60% 0.76% 0.25% 1.61% Target Managed VIP 0.60% 1.25% 0.25% 2.10% The Dow(SM) DART (10) 0.60% 1.53% 0.25% 2.38% Global Dividend Target (15) 0.60% 1.85% 0.25% 2.70% S&P[RegTM] Target (24) 0.60% 1.58% 0.25% 2.43% NASDAQ[RegTM] Target (15) 0.60% 1.75% 0.25% 2.60% Value Line[RegTM] Target (25) 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(20) 0.60% 0.62% 0.25% 1.47% The Prudential Series Fund, Inc.: - ---------------------------------------------------------------------------------------- SP William Blair International Gro 0.85% 0.45% 0.25% 1.55%
(1) As noted above, shares of the Portfolios generally are purchased through variable insurance products. Many of the Portfolios and/or their investment advisers and/or distributors have entered into arrangements with us as the issuer of the Annuity under which they compensate us for providing ongoing services in lieu of the Trust providing such services. Amounts paid by a Portfolio under those arrangements are included under "Other Expenses." For more information see the prospectus for each underlying portfolio and, "Service Fees payable to American Skandia," later in this prospectus. 9 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- (2) The Portfolios' total actual annual operating expenses for the year ended December 31, 2004 were less than the amount shown in the table due to fee waivers, reimbursement of expenses AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS and expense offset arrangements. These waivers, reimbursements, and offset arrangements are voluntary and may be terminated by American Skandia Investment Services, Inc. and Prudential Investments LLC at any time. After accounting for the waivers, reimbursements and offset arrangements, the Portfolios' actual annual operating expenses were:
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT AST William Blair International Growth 1.11% AST LSV International Value 1.22% AST DeAM Small-Cap Growth 1.02% AST DeAM Small-Cap Value 1.13% AST Goldman Sachs Mid-Cap Growth 1.13% AST Neuberger Berman Mid-Cap Growth 1.11% AST Neuberger Berman Mid-Cap Value 1.04% AST AllianceBernstein Large-Cap Growth 1.10% AST MFS Growth 1.07% AST Marsico Capital Growth 1.02% AST Goldman Sachs Concentrated Growth 1.00% AST DeAM Large-Cap Value 0.99% AST Cohen & Steers Realty 1.11% AST AllianceBernstein Growth & Income 0.87% AST Hotchkis & Wiley Large-Cap Value 0.90% AST American Century Strategic Balanced 1.09% AST T. Rowe Price Asset Allocation 1.07% AST Lord Abbett Bond-Debenture Portfolio 0.97% AST PIMCO Total Return Bond 0.78% AST PIMCO Limited Maturity Bond 0.79% AST Money Market 0.58%
(3) Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1 to permit an affiliate of the Trust's Investment Managers to receive brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of shares of the Portfolio. The Distribution Plan was terminated effective November 18, 2004. The total annual portfolio operating expenses do not reflect any brokerage commissions paid pursuant to the Distribution Plan prior to the Plan's termination. (4) Effective November 18, 2004, LSV Asset Management became the Sub-advisor of the Portfolio. Prior to November 18, 2004, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM International Equity Portfolio." (5) Effective May 1, 2005, Eagle Asset Management and Neuberger Berman Management, Inc. became Co-Sub-advisors of the Portfolio. Prior to May 1, 2005, State Street Research and Management Company served as Sub-advisor of the Portfolio, then named "AST State Street Research Small-Cap Growth Portfolio." (6) Effective November 18, 2004, Integrity Asset Management, Lee Munder Capital Group, J.P. Morgan Fleming Asset Management became Co-Sub-advisors of the Portfolio. Prior to November 18, 2004, GAMCO Advisors Inc. served as Sub-advisor of the Portfolio, then named "AST Gabelli Small-Cap Value Portfolio." (7) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth Portfolio" to "AST AllianceBernstein Large-Cap Growth Portfolio." (8) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Core Value Portfolio" to "AST AllianceBernstein Core Value Portfolio." (9) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Managed Index 500 Portfolio" to "AST AllianceBernstein Managed Index 500 Portfolio." (10) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth and Income Portfolio" to "AST AllianceBernstein Growth & Income Portfolio." (11) The AST Global Allocation Portfolio invests primarily in shares of other AST Portfolios (the "Underlying Portfolios"). (a) The only management fee directly paid by the Portfolio is a 0.10% fee paid to American Skandia Investment Services, Inc. and Prudential Investments LLC. The management fee shown in the chart for the Portfolio is (i) that 0.10% management fee paid by the Portfolio plus (ii) an estimate of the management fees paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the management fee rates shown in the chart above. (b) The expense information shown in the chart for the Portfolio reflects (i) the expenses of the Portfolio itself plus (ii) an estimate of the expenses paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the expense rates for the Underlying Portfolios shown in the above chart. (c) Effective May 1, 2005, Prudential Investment LLC provides day-to-day management of the Portfolio. Prior to May 1, 2005, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM Global Allocation Portfolio." (12) (a) The Adviser of Wells Fargo Variable Trust has committed through April 30, 2006 to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net operating expenses as shown.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT Advantage C&B Large Cap Value 1.00% Advantage Equity Income 1.00% Advantage International Core 1.00% Advantage Small Cap Growth 1.20% Advantage Large Company Core 1.00% Advantage Large Company Growth 1.00% Advantage Asset Allocation 1.00% Advantage Total Return Bond 0.90%
10 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS - -------------------------------------------------------------------------------- (b) In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Value Advantage C&B Large Cap Value Equity Income Advantage Equity Income International Equity Advantage International Core Small Cap Growth Advantage Small Cap Growth Growth Advantage Large Company Core Large Company Growth Advantage Large Company Growth Asset Allocation Advantage Asset Allocation Total Return Bond Advantage Total Return Bond
(13) The Fund's adviser is entitled to receive reimbursement from the Fund for fees and expenses paid for by the Fund's adviser pursuant to expense limitation commitments between the Fund's adviser and the Fund if such reimbursement does not cause the Fund to exceed its then-current expense limitations and the reimbursement is made within three years after the Fund's adviser incurred the expense. (14) Effective July 1, 2005, the "AIM V.I. Health Sciences Fund" will be renamed "AIM V.I. Global Health Care Fund." (15) Effective May 1, 2005, the name of the Portfolio was changed from "Evergreen VA International Growth" to "Evergreen VA International Equity." (16) Effective May 1, 2005, the name of the Portfolio was changed from "Evergreen VA Special Equity" to "Evergreen VA Growth." (17) ProFund Advisors LLC has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Portfolio Operating Expenses, as a percentage of average daily net assets, exceed 1.98% (1.73% for ProFund VP U.S. Government Plus and 1.78% for ProFund VP Rising Rates Opportunity) through December 31, 2005. After such date, any of the expense limitations may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be repaid to ProFund Advisors LLC within three years of the waiver or reimbursement to the extent that recoupment will not cause the Portfolio's expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to investors. (18) The Funds' Board of Trustees reserves the right to suspend payments under the 12b-1 Plan at any time. On May 1, 2003, 12b-1 payments were suspended for all Funds except the First Trust 10 Uncommon Values Portfolio. Payments under the 12b-1 Plan resumed effective May 1, 2004 for the Target Managed VIP Portfolio, the Dow Dart 10 Portfolio, the Global Dividend Target 15 Portfolio, the S&P Target 24 Portfolio, the Nasdaq Target 15 Portfolio and the Value Line Target 25 Portfolio. (19) For the period September 30, 2004 through December 31, 2007, First Trust has contractually agreed to waive fees and reimburse expenses of the Portfolios to limit the total annual fund operating expenses (excluding brokerage expense and extraordinary expense) to 1.37% for the First Trust 10 Uncommon Values Portfolio and 1.47% for each of the other Portfolios' average daily net assets. First Trust has entered into an agreement with First Defined Portfolio Fund, LLC that will allow First Trust to recover from the Portfolios any fees waived or reimbursed during the three year period of January 1, 2005 through December 31, 2007. However, First Trust's ability to recover such amounts is limited to the extent that it would not exceed the amount reimbursed or waived during such period.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT First Trust[RegTM] 10 Uncommon Values 1.37% Target Managed VIP 1.47% S&P Target 24 1.47% The Dow(SM) DART 10 1.47% Value Line[RegTM] Target 25 1.47% Global Dividend Target 15 1.47% Nasdaq Target 15 1.47% Dow Target Dividend 1.47%
(20) The Dow (SM) Target Dividend Portfolio is newly organized. Accordingly, Other Expenses and Total Annual Portfolio Operating Expenses are based on estimated expenses for the current fiscal year. 11 Expense Examples - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges, Annual Maintenance Fee, Insurance Charge, Distribution Charge (when applicable), and the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product, as well as the maximum charges for the optional benefits that are offered under the Annuity that can be elected in combination with one another. Below are examples showing what you would pay in expenses at the end of the stated time periods had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 0.65% per year; (c) the Distribution Charge is assessed as 0.60% per year in Annuity Years 1 -- 8; (d) the Annual Maintenance Fee is reflected as an asset-based charge based on an assumed average contract size; (e) you make no withdrawals of Account Value during the period shown; (f) you make no transfers, or other transactions for which we charge a fee during the period shown; (g) no tax charge applies; (h) the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product applies; and (i) the charge for each optional benefit is reflected as an additional charge equal to 0.60% per year of the average daily net assets of the Sub-accounts for the Lifetime Five Income Benefit, 0.50% per year of the average daily net assets of the Sub-accounts for the Highest Daily Value Death Benefit and 0.25% of the average daily net assets of the Sub-accounts for the Enhanced Beneficiary Protection Death Benefit. Amounts shown in the examples are rounded to the nearest dollar. 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 will be less than those shown if you elect a different combination of optional benefits than indicated in the examples or if you allocate account value to any other available Sub-accounts. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. A table of accumulation values appears in Appendix A to this Prospectus.
IF YOU ANNUITIZE YOUR ANNUITY AT IF YOU SURRENDER YOUR ANNUITY AT THE END OF THE APPLICABLE TIME THE END OF THE APPLICABLE TIME PERIOD: PERIOD: - ------------------------------------------------------------------------------------ 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS $1,405 $2,724 $3,930 $6,475 $730 $2,139 $3,480 $6,475 IF YOU DO NOT SURRENDER YOUR ANNUITY: - ------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS $730 $2,139 $3,480 $6,475
12 Investment Options - ------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information). Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment managers for AST are American Skandia Investment Services, Incorporated, a Prudential Financial Company, and Prudential Investments LLC, affiliated companies of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day management. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. - -------------------------------------------------------------------------------- Effective May 1, 2004, the SP William Blair International Growth Portfolio (formerly the SP Jennison International Growth Portfolio) is no longer offered as a Sub-account under the Annuity, except as follows: if at any time prior to May 1, 2004 you had any portion of your Account Value allocated to the SP William Blair International Growth Sub-account, you may continue to allocate Account Value and make transfers into and/or out of the SP William Blair International Growth Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. If you never had a portion of your Account Value allocated to the SP William Blair International Growth Sub-account prior to May 1, 2004 or if you purchase your Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP William Blair International Growth Sub-account. This Sub-account may be offered to new Owners at some future date; however, at the present time, there is no intention to do so. We also reserve the right to offer or close this Sub-account to all Owners that owned the Annuity prior to the close date. - -------------------------------------------------------------------------------- 13 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- International AST JPMorgan International Equity: seeks long-term capital growth by J.P. Morgan Equity investing in a diversified portfolio of international equity securities. The Portfolio Fleming Asset seeks to meet its objective by investing, under normal market conditions, at least Management 80% of its assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. - ---------------------------------------------------------------------------------------------------------------------------- International AST William Blair International Growth: Seeks long-term capital appreciation. The William Blair & Equity Portfolio invests primarily in stocks of large and medium-sized companies located Company, L.L.C. in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. - ---------------------------------------------------------------------------------------------------------------------------- International AST LSV International Value (formerly AST DeAM International Equity): seeks LSV Asset Equity capital growth. The Portfolio pursues its objective by primarily investing at least Management 80% of the value of its assets in the equity securities of companies in developed non-U.S. countries that are represented in the MSCI EAFE Index. - ---------------------------------------------------------------------------------------------------------------------------- International AST MFS Global Equity: seeks capital growth. Under normal circumstances the Massachusetts Equity Portfolio invests at least 80% of its assets in equity securities of U.S. and Financial Services foreign issuers (including issuers in developing countries). The Portfolio generally Company seeks to purchase securities of companies with relatively large market capitalizations relative to the market in which they are traded. - ---------------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Growth (formerly AST State Street Research Small-Cap Eagle Asset Growth Growth): seeks long-term capital growth. The Portfolio pursues its objective by Management, primarily investing in the common stocks of small-capitalization companies. Neuberger Berman Management, Inc. - ---------------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital Deutsche Asset Growth from a portfolio of growth stocks of smaller companies. The Portfolio pursues its Management, Inc. objective, under normal circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth[RegTM] Index. - ---------------------------------------------------------------------------------------------------------------------------- Small Cap AST Federated Aggressive Growth: seeks capital growth. The Portfolio Federated Equity Growth pursues its investment objective by investing primarily in the stocks of small Management companies that are traded on national security exchanges, the NASDAQ stock Company of exchange and the over-the-counter market. Pennsylvania/ Federated Global Investment Management Corp. - ---------------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Value (formerly AST Gabelli Small-Cap Value): seeks to provide Integrity Asset Value long-term capital growth by investing primarily in small-capitalization stocks that Management, Lee appear to be undervalued. The Portfolio will have a non-fundamental policy to Munder Capital invest, under normal circumstances, at least 80% of the value of its assets in Group, J.P. Morgan small capitalization companies. Fleming Asset Management - ----------------------------------------------------------------------------------------------------------------------------
14 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. Deutsche Asset Value The Portfolio pursues its objective under normal market conditions, by primarily Management, Inc. investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000[RegTM] Value Index. - ---------------------------------------------------------------------------------------------------------------------------- Mid Cap AST Goldman Sachs Mid-Cap Growth: seeks long-term capital growth. The Goldman Sachs Growth Portfolio pursues its investment objective by investing primarily in equity Asset Management, securities selected for their growth potential, and normally invests at least 80% L.P. of the value of its assets in medium capitalization companies. - ---------------------------------------------------------------------------------------------------------------------------- Mid-Cap AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under Neuberger Berman Growth normal market conditions, the Portfolio primarily invests at least 80% of its net Management Inc. assets in the common stocks of mid-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - ---------------------------------------------------------------------------------------------------------------------------- Mid Cap Value AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market Neuberger Berman conditions, the Portfolio primarily invests at least 80% of its net assets in the Management Inc. common stocks of mid-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise before other investors realize their worth. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio Fred Alger invests primarily in equity securities, such as common or preferred stocks that Management, Inc. are listed on U.S. exchanges or in the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its GAMCO Investors, objective by investing primarily in readily marketable equity securities including Inc. common stocks, preferred stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AST T. Rowe Price Natural Resources: seeks long-term capital growth T. Rowe Price primarily through the common stocks of companies that own or develop natural Associates, Inc. resources (such as energy products, precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Large-Cap Growth (formerly AST Alliance Growth): Alliance Capital Growth seeks long-term capital growth. The Portfolio invests at least 80% of its total Management, L.P. assets in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. - ----------------------------------------------------------------------------------------------------------------------------
15 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST MFS Growth: seeks long-term capital growth and future income. Under Massachusetts Growth normal market conditions, the Portfolio invests at least 80% of its total assets in Financial Services common stocks and related securities, such as preferred stocks, convertible securities Company and depositary receipts, of companies that the Sub-advisor believes offer better than average prospects for long-term growth. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST Marsico Capital Growth: seeks capital growth. Income realization is not Marsico Capital Growth an investment objective and any income realized on the Portfolio's investments, Management, LLC therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST Goldman Sachs Concentrated Growth: seeks growth of capital in a Goldman Sachs Growth manner consistent with the preservation of capital. Realization of income is not Asset Management, L.P. a significant investment consideration 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 equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST DeAM Large-Cap Value: seeks maximum growth of capital by investing Deutsche Asset Value primarily in the value stocks of larger companies. The Portfolio pursues its Management, Inc. objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000[RegTM] Value Index. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth + Value: seeks capital growth by investing Alliance Capital Blend approximately 50% of its assets in growth stocks of large companies and Management, L.P. approximately 50% of its assets in value stocks of large companies. The Portfolio will invest primarily in common stocks of large U.S. companies included in the Russell 1000[RegTM] Index. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Core Value (formerly AST Sanford Bernstein Core Alliance Capital Value Value): seeks long-term capital growth by investing primarily in common stocks. Management, L.P. The Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of large companies that appear to be undervalued. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AST Cohen & Steers Realty: seeks to maximize total return through Cohen & Steers investment in real estate securities. The Portfolio pursues its investment Capital objective by investing, under normal circumstances, at least 80% of its net Management, Inc. assets in securities of real estate issuers. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Managed Index 500 (formerly AST Sanford Bernstein Alliance Capital Blend Managed Index 500): seeks to outperform the S&P 500 through stock selection Management, L.P. resulting in different weightings of common stocks relative to the index. The Portfolio will invest, under normal circumstances, at least 80% of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Index. - ----------------------------------------------------------------------------------------------------------------------------
16 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST American Century Income & Growth: seeks capital growth with current American Century Value income as a secondary objective. The Portfolio invests primarily in common Investment stocks that offer potential for capital growth, and may, consistent with its Management, Inc. investment objective, invest in stocks that offer potential for current income. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth & Income: seeks long-term growth of capital Alliance Capital Value and income while attempting to avoid excessive fluctuations in market value. The Management, L.P. Portfolio normally will invest in common stocks (and securities convertible into common stocks). - ---------------------------------------------------------------------------------------------------------------------------- Large Cap AST Hotchkis & Wiley Large-Cap Value: seeks current income and long-term Hotchkis & Wiley Value growth of income, as well as capital appreciation. The Portfolio invests, under Capital normal circumstances, at least 80% of its net assets plus borrowings for investment Management, LLC purposes in common stocks of large cap U.S. companies that have a high cash dividend or payout yield relative to the market. - ---------------------------------------------------------------------------------------------------------------------------- Asset AST Global Allocation (formerly AST DeAM Global Allocation): seeks to obtain Prudential Allocation/ the highest potential total return consistent with a specified level of risk Investments LLC Balanced tolerance. The Portfolio seeks to achieve its investment objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. - ---------------------------------------------------------------------------------------------------------------------------- Asset AST American Century Strategic Balanced: seeks capital growth and current American Century Allocation/ income. The Sub-advisor intends to maintain approximately 60% of the Portfolio's Investment Balanced assets in equity securities and the remainder in bonds and other fixed income Management, Inc. securities. - ---------------------------------------------------------------------------------------------------------------------------- Asset AST T. Rowe Price Asset Allocation: seeks a high level of total return by T. Rowe Price Allocation/ investing primarily in a diversified portfolio of fixed income and equity securities. Associates, Inc. Balanced The Portfolio normally invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. This mix may vary depending on the Sub-advisor's outlook for the markets. - ---------------------------------------------------------------------------------------------------------------------------- Fixed Income AST T. Rowe Price Global Bond: seeks to provide high current income and T. Rowe Price capital growth by investing in high quality foreign and U.S. dollar-denominated International, Inc. bonds. The Portfolio will invest at least 80% of its total assets in fixed income securities, including high quality bonds issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. - ---------------------------------------------------------------------------------------------------------------------------- Fixed Income AST Goldman Sachs High Yield: seeks a high level of current income and Goldman Sachs may also consider the potential for capital appreciation. The Portfolio invests, Asset Management, under normal circumstances, at least 80% of its net assets plus any borrowings L.P. for investment purposes (measured at time of purchase) ("Net Assets") in high- yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. - ----------------------------------------------------------------------------------------------------------------------------
17 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------- Fixed Income AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity Lord, Abbett & Co. for capital appreciation to produce a high total return. To pursue its objective, LLC the Portfolio will invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible into common stock and preferred stocks. - ----------------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Total Return Bond: seeks to maximize total return consistent with Pacific Investment preservation of capital and prudent investment management. The Portfolio will Management invest in a diversified portfolio of fixed-income securities of varying maturities. Company LLC The average portfolio duration of the Portfolio generally will vary within a three- (PIMCO) to six-year time frame based on the Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with Pacific Investment preservation of capital and prudent investment management. The Portfolio will invest Management in a diversified portfolio of fixed-income securities of varying maturities. Company LLC (PIMCO) The average portfolio duration of the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. - ---------------------------------------------------------------------------------------------------------------------------- Fixed Income AST Money Market: seeks high current income while maintaining high levels Wells Capital of liquidity. The Portfolio attempts to accomplish its objective by maintaining a Management, Inc. dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ---------------------------------------------------------------------------------------------------------------------------- International GVIT Developing Markets: seeks long-term capital appreciation, under normal Gartmore Global Equity conditions by investing at least 80% of its total assets in stocks of companies of Asset Management any size based in the world's developing economies. Under Trust/Gartmore normal market conditions, investments are maintained in at least six countries Global Partners at all times and no more than 35% of total assets in any single one of them. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap Advantage C&B Large Cap Value Fund (formerly Equity Value): Seeks Wells Fargo Funds Value maximum long-term total return, consistent with minimizing risk to principal. Management, LLC The Portfolio will principally invest in large-capitalization securities, which the Sub-advisor defines as securities of companies with market capitalizations of $1 billion or more. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Equity Income Fund (formerly Equity Income): Seeks long-term Wells Fargo Funds Value capital appreciation and above-average dividend income. The Portfolio invests in Management, LLC the common stocks of large U.S. companies with strong return potential and above-average dividend income. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ---------------------------------------------------------------------------------------------------------------------------- International Advantage International Core Fund (formerly International Equity): Seeks Wells Fargo Funds Equity long-term capital appreciation. The Portfolio will principally invest in non-U.S. Management, LLC securities. The Portfolio will focus on companies with strong growth potential that offer good relative values. - ----------------------------------------------------------------------------------------------------------------------------
18 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Small Cap Advantage Small Cap Growth Fund (formerly Small Cap Growth): Seeks Wells Fargo Funds Growth long-term capital appreciation. The Portfolio focuses on companies that the Management, LLC Sub-advisor believes have above-average growth potential, or that may be involved in new or innovative products, services and processes. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Core Fund (formerly Growth): Seeks total return Wells Fargo Funds Blend comprised of long-term capital appreciation and current income. The Portfolio Management, LLC will invest at least 80% of the Fund's assets in securities of large-capitalization companies, which are defined as those with market capitalizations of $3 billion or more. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Growth Fund (formerly Large Company Growth): Wells Fargo Funds Growth Seeks long-term capital appreciation. The Portfolio invests in the common stocks Management, LLC of large U.S. companies that the Sub-advisor believes have superior growth potential. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ---------------------------------------------------------------------------------------------------------------------------- Asset Advantage Asset Allocation Fund (formerly Asset Allocation): Seeks long-term Wells Fargo Funds Allocation/ total return, consistent with reasonable risk. The Portfolio invests in equity and Management, LLC Balanced fixed-income securities in varying proportions, with an emphasis on equity securities. The Portfolio does not select individual securities for investment, rather, it buys substantially all of the securities of various indexes to replicate such indexes. - ---------------------------------------------------------------------------------------------------------------------------- Fixed Income Advantage Total Return Bond Fund (formerly Total Return Bond): Seeks total return Wells Fargo Funds consisting of income and capital appreciation. The Portfolio invests principally in Management, LLC investment-grade debt securities, which include U.S. Government obligations, corporate bonds, mortgage- and other asset-backed securities and money market instruments. Under normal circumstances, the Portfolio is expected to maintain an overall effective duration between 4 and 5.5 years. - ---------------------------------------------------------------------------------------------------------------------------- Mid Cap AIM Variable Insurance Funds -- AIM V.I. Dynamics Fund -- Series I shares (formerly A I M Advisors, Growth an INVESCO fund): seeks long-term capital growth. The Portfolio pursues its Inc. objective by normally investing at least 65% of its assets in common stocks of mid-sized companies that are included in the Russell Midcap Growth[RegTM] Index at the time of purchase. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Technology Fund -- Series I shares A I M Advisors, (formerly an INVESCO fund): seeks capital growth. The Portfolio normally invests at Inc. least 80% of its net assets in the equity securities and equity-related instruments of companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. - ---------------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Health Sciences Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund) (Effective July 1, 2005, AIM V.I. Inc. Health Sciences Fund will be renamed AIM V.I. Global Health Care Fund): seeks capital growth. The Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies related to health care. - ----------------------------------------------------------------------------------------------------------------------------
19 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Financial Services Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund): seeks capital growth. The Portfolio Inc. normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks, insurance companies, investment and miscellaneous industries, and suppliers to financial services companies. - ---------------------------------------------------------------------------------------------------------------------------- International Evergreen VA International Equity (formerly Evergreen VA International Evergreen Equity Growth): seeks long-term capital growth and secondarily, modest income. The Investment Portfolio normally invests 80% of its assets in equity securities issued by Management established, quality, non-U.S. companies located in countries with developed Company, LLC markets and may purchase across all market capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.). - ---------------------------------------------------------------------------------------------------------------------------- Small Cap Evergreen VA Growth (formerly Evergreen VA Special Equity): seeks long-term Evergreen Growth capital growth. The Portfolio invests at least 75% of its assets in common stocks Investment of small- and medium-sized companies (i.e., companies whose market Management capitalizations fall within the range of the Russell 2000[RegTM] Growth Index, at the Company, LLC time of purchase). - ---------------------------------------------------------------------------------------------------------------------------- Specialty Evergreen VA Omega: seeks long-term capital growth. The Portfolio invests Evergreen primarily, and under normal conditions, substantially all of its assets in common Investment stocks and securities convertible into common stocks of U.S. companies across Management all market capitalizations. Company, LLC - ---------------------------------------------------------------------------------------------------------------------------- International ProFund VP Europe 30: seeks daily investment results, before fees and ProFund Advisors Equity expenses, that correspond to the daily performance of the ProFunds Europe 30 LLC Index. The ProFunds Europe 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Asia 30: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the ProFunds Asia 30 Index. The LLC ProFunds Asia 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Japan: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Nikkei 225 Stock Average. Since LLC the Japanese markets are not open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States related to the Nikkei 225 Stock Average. - ----------------------------------------------------------------------------------------------------------------------------
20 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Banks: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones U.S. Banks Index. LLC The Dow Jones U.S. Banks Index measures the performance of the banking industry portion of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Basic Materials: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. Basic LLC Materials Sector Index. The Dow Jones U.S. Basic Materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Biotechnology: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC Biotechnology Index. The Dow Jones U.S. Biotechnology Index measures the performance of the biotechnology industry portion of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Services (formerly ProFund VP Consumer Cyclical): ProFund Advisors seeks daily investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Consumer Services Index. The Dow Jones U.S. Consumer Services Index measures the performance of consumer spending in the services industry of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Goods (formerly ProFund VP Consumer Non-Cyclical): ProFund Advisors seeks daily investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Consumer Goods Index. The Dow Jones U.S. Consumer Goods Index measures the performance of consumer spending in the goods industry of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Oil & Gas (formerly ProFund VP Energy): seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to the daily performance of LLC the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Sector Index measures the performance of the energy sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Financials (formerly ProFund VP Financial): seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to the daily performance of LLC the Dow Jones U.S. Financials Sector Index. The Dow Jones U.S. Financials Sector Index measures the performance of the financial services economic sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Health Care (formerly ProFund VP Healthcare): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the daily LLC performance of the Dow Jones U.S. Health Care Index. The Dow Jones U.S. Health Care Index measures the performance of the healthcare economic sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Industrials (formerly ProFund VP Industrial): seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to the daily performance of LLC the Dow Jones U.S. Industrials Index. The Dow Jones U.S. Industrials Index measures the performance of the industrial economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------------
21 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Internet: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones Composite LLC Internet Index. The Dow Jones Composite Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Pharmaceuticals: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC Pharmaceuticals Index. The Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry portion of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Precious Metals: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones Precious LLC Metals Index. The Dow Jones Precious Metals Index measures the performance of the precious metals mining industry. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Real Estate: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. Real LLC Estate Index. The Dow Jones U.S. Real Estate Index measures the performance of the real estate industry portion of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Semiconductor: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC Semiconductor Index. The Dow Jones U.S. Semiconductor Index measures the performance of the semiconductor industry portion of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Technology: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC Technology Sector Index. The Dow Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Telecommunications: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow Jones U.S. LLC Telecommunications Sector Index. The Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Utilities: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones U.S. Utilities Sector LLC Index. The Dow Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bull: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the S&P 500[RegTM] Index. LLC - ----------------------------------------------------------------------------------------------------------------------------
22 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bear: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the inverse (opposite) of the daily performance of the S&P LLC 500[RegTM] Index. If ProFund VP Bear is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500[RegTM] Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraBull: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the S&P LLC 500[RegTM] Index. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times (150%) the daily performance of the S&P 500[RegTM] Index. If ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500[RegTM] Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP OTC: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the NASDAQ-100 Index[RegTM]. "OTC" in LLC the name of ProFund VP OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short OTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily performance of LLC the NASDAQ-100 Index[RegTM]. If ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index[RegTM] when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraOTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC NASDAQ-100 Index[RegTM]. If ProFund VP UltraOTC is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------------
23 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------- Mid Cap Value ProFund VP Mid-Cap Value: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the S&P MidCap 400/ Barra Value LLC Index[RegTM]. The S&P MidCap400/Barra Value Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ------------------------------------------------------------------------------------------------------------------------------- Mid Cap ProFund VP Mid-Cap Growth: seeks daily investment results, before fees and ProFund Advisors Growth expenses, that correspond to the daily performance of the S&P MidCap 400/ LLC Barra Growth Index[RegTM]. The S&P MidCap 400/Barra Growth Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index[RegTM] that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ------------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraMid-Cap: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the S&P LLC MidCap 400 Index[RegTM]. If ProFund VP UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ------------------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Value: seeks daily investment results, before fees and ProFund Advisors Value expenses, that correspond to the daily performance of the S&P SmallCap 600/ LLC Barra Value Index[RegTM]. The S&P SmallCap 600/Barra Value Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index[RegTM] that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ------------------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Growth: seeks daily investment results, before fees ProFund Advisors Growth and expenses, that correspond to the daily performance of the S&P SmallCap LLC 600/Barra Growth Index[RegTM]. The S&P SmallCap 600/Barra Growth Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index[RegTM] that have comparatively high price-to- book ratios as determined before each semiannual rebalance date. - ------------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraSmall-Cap: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to twice (200%) the daily performance of the Russell LLC 2000[RegTM] Index. If ProFund VP UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - -------------------------------------------------------------------------------------------------------------------------------
24 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP U.S. Government Plus: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to one and one-quarter times (125%) the daily LLC price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Rising Rates Opportunity: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to one and one-quarter times (125%) the LLC inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP Rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Growth: seeks daily investment results, before fees ProFund Advisors Growth and expenses, that correspond to the daily performance of the S&P 500/Barra LLC Growth Index[RegTM]. The S&P 500/Barra Growth Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ---------------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Value: seeks daily investment results, before fees and ProFund Advisors Value expenses, that correspond to the daily performance of the S&P 500/Barra Value LLC Index[RegTM]. The S&P 500/Barra Value Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Small-Cap: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily performance of LLC the Russell 2000[RegTM] Index. If ProFund VP Short Small-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the Russell 2000 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ----------------------------------------------------------------------------------------------------------------------------
25 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Mid-Cap: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily performance of LLC the S&P MidCap 400 Index[RegTM]. If ProFund VP Short Mid-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the S&P MidCap 400 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ---------------------------------------------------------------------------------------------------------------------------- Specialty Access VP High Yield: seeks to provide investment results that correspond ProFund Advisors generally to the total return of the high yield market consistent with maintaining LLC reasonable liquidity. The Access VP High Yield, created by ProFund Advisors, will achieve its high yield exposure primarily through CDSs but may invest in high yield debt instruments ("junk bonds"), Interest rate swap agreements and futures contracts, and other debt and money market instruments without limitation, consistent with applicable regulations. Under normal market conditions, the fund will invest at least 80% of its net assets in credit default swaps and other financial instruments that in combination have economic characteristics similar to the high yield debt market and/or in high yield debt securities. The fund seeks to maintain exposure to the high yield bond markets regardless of market conditions and without taking defensive positions. - ---------------------------------------------------------------------------------------------------------------------------- Specialty First Trust[RegTM] 10 Uncommon Values: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing primarily in L.P. the ten common stocks selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - ---------------------------------------------------------------------------------------------------------------------------- Specialty Target Managed VIP: seeks to provide above-average total return. The Portfolio seeks First Trust Advisors to achieve its objective by investing in common stocks of the most attractive companies L.P. that are identified by a model based on six uniquely specialized strategies -- The Dow(SM) DART 5, the European Target 20, the Nasdaq[RegTM] Target 15, the S&P Target 24, the Target Small Cap and the Value Line[RegTM] Target 25. - ---------------------------------------------------------------------------------------------------------------------------- Specialty The Dow(SM)DART 10: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks issued by L.P. companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the ten companies in the DJIA that have the highest combined dividend yields and buyback ratios on or about the applicable stock selection date. - ----------------------------------------------------------------------------------------------------------------------------
26 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- Specialty Global Dividend Target 15 (formerly Global Target 15): seeks to provide above- First Trust Advisors average total return. The Portfolio seeks to achieve its objective by investing in L.P. common stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the companies which are components of the DJIA, the Financial Times Industrial Ordinary Share Index ("FT Index") and the Hang Seng Index. The Portfolio primarily consists of common stocks of the five companies with the lowest per share stock prices of the ten companies in each of the DJIA, FT Index and Hang Seng Index, respectively, that have the highest dividend yield in the respective index on or about the applicable stock selection date. - ---------------------------------------------------------------------------------------------------------------------------- Specialty S&P[RegTM] Target 24: seeks to provide above-average total return. The Portfolio First Trust Advisors seeks to achieve its objective by investing in common stocks issued by L.P. companies that have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of twenty-four companies selected from a subset of the stocks included in the Standard & Poor's 500 Composite Stock Price Index[RegTM]. The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index[RegTM] based on the sector's market capitalization. - ---------------------------------------------------------------------------------------------------------------------------- Specialty The Dow (SM) Target Dividend seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks issued by L.P. companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the 20 common stocks from the Dow Jones Select Dividend Index (SM) with the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio as of the close of business on or about the applicable stock selection date. - ---------------------------------------------------------------------------------------------------------------------------- Specialty Value Line[RegTM] Target 25: seeks to provide above-average capital appreciation. First Trust Advisors The Portfolio seeks to achieve its objective by investing in 25 of the 100 common L.P. stocks that Value Line[RegTM] gives a #1 ranking for TimelinessTM which have recently exhibited certain positive financial attributes as of the close of business on the applicable stock selection date through a multi-step process. - ---------------------------------------------------------------------------------------------------------------------------- Specialty Nasdaq[RegTM] Target 15: seeks to provide above-average total return. The Portfolio First Trust Advisors seeks to achieve its objective by investing in common stocks issued by companies L.P. that are expected to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of fifteen companies selected from a pre-screened subset of the stocks included in the Nasdaq-100 Index[RegTM] on or about the applicable stock selection date through a multi-step process. - ----------------------------------------------------------------------------------------------------------------------------
27 Investment Options continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- International The Prudential Series Fund, Inc. -- SP William Blair International Growth: Prudential Equity Seeks long-term capital appreciation. The Portfolio invests primarily in Investments LLC/ stocks of large and medium-sized companies located in countries included William Blair & in the Morgan Stanley Capital International All Country World Ex-U.S. Index. Company, LLC Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. - ----------------------------------------------------------------------------------------------------------------------------
"Standard & Poor's[RegTM]," "S&P[RegTM]," "S&P 500[RegTM]," "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. 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. "Dow Jones Industrial Average(SM)", "DJIA(SM)", "Dow Industrials(SM)", "Dow Jones Select Dividend Index(SM)", and "The Dow 10(SM)", are service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The portfolios, including, and in particular the Target Managed VIP portfolio The Dow(SM) DART 10 portfolio, and The Dow (SM) Target Dividend Portfolio are not endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. "The Nasdaq 100[RegTM]", "Nasdaq-100 Index[RegTM]", "Nasdaq Stock Market[RegTM]", and "Nasdaq[RegTM]" are trade or service marks of The Nasdaq Stock Market, Inc. (which with its affiliates are the "Corporations") and have been licensed for use by First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio have not been passed on by the Corporations as to its legality or suitability. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not issued, endorsed, sponsored, managed, sold or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Nasdaq Target 15 Portfolio or the Target Managed VIP Portfolio. "Value Line[RegTM]," "The Value Line Investment Survey," and "Value Line TimelinessTM Ranking System" are registered trademarks of Value Line Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP[RegTM] Portfolio is not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the Portfolio. The First Trust[RegTM] 10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust[RegTM] 10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED ALLOCATIONS? We offer Fixed Allocations of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-680-8920 to determine availability of Fixed Allocations in your state and for your annuity product. 28 Fees and Charges - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The charges under the contracts are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the contracts. They are also designed, in the aggregate, to compensate us for the risks of loss we assume pursuant to the contracts. If, as we expect, the charges that we collect from the contracts exceed our total costs in connection with the contracts, we will earn a profit. Otherwise we will incur a loss. For example, American Skandia may make a profit on the Insurance Charge if, over time, the actual costs of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity. The rates of certain of our charges have been set with reference to estimates of the amount of specific types of expenses or risks that we will incur. In most cases, this prospectus identifies such expenses or risks in the name of the charge; however, the fact that any charge bears the name of, or is designed primarily to defray a particular expense or risk does not mean that the amount we collect from that charge will never be more than the amount of such expense or risk, nor does it mean that we may not also be compensated for such expense or risk out of any other charges we are permitted to deduct by the terms of the contract. A portion of the proceeds that American Skandia receives from charges that apply solely to the variable investment options may include amounts based on market appreciation of the variable investment option values. WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages are shown below. YEARS 1 2 3 4 5 6 7 8 9+ - -------------------------------------------------------------------------------------------------------------------- CHARGE (%) 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
The CDSC period is based on the Issue Date of the Annuity, not on the date each Purchase Payment is applied to the Annuity. Purchase Payments applied to the Annuity after the Issue Date do not have their own CDSC period. During the first eight (8) Annuity Years, under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." After eight (8) complete Annuity Years, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 8. For purposes of calculating the CDSC on a surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program when we count the twenty free transfers. All transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to 29 Fees and Charges continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. Currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charge: Several states and some municipalities charge premium taxes or similar taxes on annuities that we are required to pay. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2% of your premium and is designed to approximate the taxes that we are required to pay. We generally will deduct the charge at the time the tax is imposed, but may also decide to deduct the charge from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. We will pay company income taxes on the taxable corporate earnings created by this separate account product. While we may consider company income taxes when pricing our products, we do not currently include such income taxes in the tax charges you pay under the contract. We will periodically review the issue of charging for these taxes and may impose a charge in the future. In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets, which are treated as company assets under applicable income tax law. These benefits reduce our overall corporate income tax liability. Under current law, such benefits may include foreign tax credits and corporate dividends received deductions. We do not pass these tax benefits through to holders of the separate account annuity contracts because (i) the contract owners are not the owners of the assets generating these benefits under applicable income tax law and (ii) we do not currently include company income taxes in the tax charges you pay under the contract. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed against the average daily assets allocated to the Sub-accounts and is equal to 0.65% on an annual basis. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (0.50%) and the Administration Charge (0.15%). The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Distribution Charge: We deduct a Distribution Charge daily. The charge is assessed against the average assets allocated to the Sub-accounts and is equal to 0.60% on an annual basis in Annuity Years 1 through 8. After the end of the first eight Annuity Years, the 0.60% charge for distribution will no longer be assessed. The Distribution Charge is intended to compensate us for a portion of our acquisition expenses under the Annuity, including promotion and distribution of the Annuity. The Distribution Charge is deducted against your Annuity's Account 30 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Value and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts will affect the charge. Optional Benefits for which we assess a charge solely against the variable investment options: If you elect to purchase certain optional benefits, we will deduct an additional charge on a daily basis solely from your Account Value allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. We may assess charges for other optional benefits on a different basis as described elsewhere in the prospectus. Please refer to the sections entitled "Living Benefit Programs" and "Death Benefit" for a description of the charge for each Optional Benefit. WHAT FEES AND EXPENSES ARE INCURRED BY THE PORTFOLIOS? Each Portfolio incurs total annual operating expenses comprised of an investment management fee, other expenses and any distribution and service (12b-1) fees that may apply. These fees and expenses are reflected daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and expenses can be found in the prospectuses for the Portfolios. WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will be subject to charges that apply under the variable immediate annuity option. Also, a tax charge may apply (see "Tax Charge" above). EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce any fees and charges. 31 Purchasing Your Annuity - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $1,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $1,000 in total Purchase Payments. Where allowed by law, we must approve any initial and additional Purchase Payments of $1,000,000 or more. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts or Fixed Allocations that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We call our bank drafting program "Auto Saver". We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 80 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 80 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 80 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. Owner, Annuitant and Beneficiary Designations: We will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. o Owner: The Owner(s) holds all rights under the Annuity. You may name up to two Owners in which case all ownership rights are held jointly. Generally, joint owners are required to act jointly; however, if each owner provides us with an instruction that we find acceptable, we will permit each owner to act separately. All information and documents that we are required to send you will be sent to the first named owner. This Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." o Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. o Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. Your beneficiary designation should be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. If you use a designation of "surviving spouse" we will pay the death benefit to the individual that is your spouse at the time of your death (as defined under the federal tax laws and regulations). If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. 32 Managing Your Annuity - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us a request in writing. Upon an ownership change, any automated investment or withdrawal programs will be canceled. The new owner must submit the applicable program enrollment if they wish to participate in such a program. 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: o 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; o a new Annuitant subsequent to the Annuity Date; o for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and o a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse that was named as the co-owner unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse that was named as the Contingent Annuitant will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted, and depending on your state's requirements, any applicable insurance charges deducted. The amount returned to you may be higher or lower than the Purchase Payment(s) applied during the right to cancel period. Where required by law, we will return your Purchase Payment(s), or the greater of your current Account Value and the amount of your Purchase Payment(s) applied during the right to cancel period. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in "Auto Saver" or a periodic Purchase Payment program. Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent purchase payments according to any new allocation instructions. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. Additional Purchase Payments may be paid at any time before the Annuity Date. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account 33 Managing Your Annuity continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "Auto Saver." Purchase Payments made through Auto Saver may only be allocated to the variable investment options when applied. Auto Saver allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $1,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $1,000. 34 Managing Your Account Value - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. Subsequent Purchase Payments: Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent Purchase Payments according to any new allocation instructions. Unless you tell us otherwise, Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro-rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions (including transfer requests) for certain Portfolios based on the Portfolio's investment and/or transfer restrictions. We may do so to conform to any present or future restriction that is imposed by any portfolio available under this Annuity. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year. Transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may also increase the Transfer Fee that we charge to $15.00 for each transfer after the number of free transfers has been used up. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Once you have made 20 transfers among the Sub-accounts during an Annuity Year, we will accept any additional transfer request during that year only if the request is submitted to us in writing with an original signature and otherwise is in good order. For purposes of this 20 transfer limit, we (i) do not view a facsimile transmission as a "writing", (ii) will treat multiple transfer requests submitted on the same business day as a single transfer, and (iii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio, or any transfer that involves one of our systematic programs, such as asset allocation and automated withdrawals. Frequent transfers among Sub-accounts in response to short-term fluctuations in markets, sometimes called "market timing," can make it very difficult for a Portfolio manager to manage a Portfolio's investments. Frequent transfers may cause the Portfolio to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect performance. The Annuity offers Sub-accounts designed for Owners who wish to engage in frequent transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund Portfolios and the AST Money Market Portfolio), and we encourage Owners seeking frequent transfers to utilize those Sub-accounts. In light of the risks posed to Owners and other investors by frequent transfers, we reserve the right to limit the number of 35 Managing Your Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS transfers in any Annuity Year for all existing or new Owners and to take the other actions discussed below. 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: (a) we believe that excessive transfer activity (as we define it) or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager) that the purchase or redemption of shares in the Portfolio must be restricted because the Portfolio believes the transfer activity to which such purchase and redemption relates would have a detrimental effect on the share prices of the affected Portfolio. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. In furtherance of our general authority to restrict transfers as described above, and without limiting other actions we may take in the future, we have adopted the following specific restrictions: o With respect to each Sub-account (other than the AST Money Market Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we track amounts exceeding a certain dollar threshold that were transferred into the Sub-account. If you transfer such amount into a particular Sub-account, and within 30 calendar days thereafter transfer (the "Transfer Out") all or a portion of that amount into another Sub-account, then upon the Transfer Out, the former Sub-account becomes restricted (the "Restricted Sub-account"). Specifically, we will not permit subsequent transfers into the Restricted Sub-account for 90 calendar days after the Transfer Out if the Restricted Sub-account invests in a non-international Portfolio, or 180 calendar days after the Transfer Out if the Restricted Sub-account invests in an international Portfolio. For purposes of this rule, we (i) do not count transfers made in connection with one of our systematic programs, such as asset allocation and automated withdrawals; (ii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio; and (iii) do not categorize as a transfer the first transfer that you make after the Issue Date, if you make that transfer within 30 calendar days after the Issue Date. Even if an amount becomes restricted under the foregoing rules, you are still free to redeem the amount from your Annuity at any time. o We reserve the right to effect exchanges on a delayed basis for all contracts. That is, we may price an exchange involving the Sub-accounts on the Valuation Day subsequent to the Valuation Day on which the exchange request was received. Before implementing such a practice, we would issue a separate written notice to Owners that explains the practice in detail. o If we deny one or more transfer requests under the foregoing rules, we will inform you or your investment professional promptly of the circumstances concerning the denial. o Contract owners in New York who purchased their contracts prior to March 15, 2004 are not subject to the specific restrictions outlined in bulleted paragraphs immediately above. In addition, there are contract owners of different variable annuity contracts that are funded through the same Separate Account that are not subject to the above-referenced transfer restrictions and, therefore, might make more numerous and frequent transfers than contract owners who are subject to such limitations. Finally, there are contract owners of other variable annuity contracts or variable life contracts that are issued by American Skandia as well as other insurance companies that have the same underlying mutual fund portfolios available to them. Since some contract owners are not subject to the same transfer restrictions, unfavorable consequences associated with such frequent trading within the underlying mutual fund (e.g., greater portfolio turnover, higher transaction costs, or performance or tax issues) may affect all contract owners. Similarly, while contracts managed by an investment professional or third party investment advisor are subject to the restrictions on transfers between investment options that are discussed above, if the advisor manages a number of contracts in the same fashion unfavorable consequences may be associated with management activity since it may involve the movement of a substantial portion of an underlying mutual fund's assets which may affect all contract owners invested in the affected options. Apart from jurisdiction-specific and contract differences in transfer restrictions, we will apply these rules uniformly (including contracts managed by an investment professional or third party investment advisor), and will not waive a transfer restriction for any contract owner. Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity. 36 - ------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount periodically from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. You may elect a Dollar Cost Averaging program that transfers amounts monthly, quarterly, semi-annually, or annually from variable investment options, or a program that transfers amounts monthly from Fixed Allocations. By investing amounts on a regular basis instead of investing the total amount at one time, Dollar Cost Averaging may decrease the effect of market fluctuation on the investment of your Purchase Payment. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. There is no minimum Account Value required to enroll in a Dollar Cost Averaging program and we do not deduct a charge for participating in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: o You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. o You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. o Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. The Dollar Cost Averaging program is not available if you elect the Guaranteed Return Option Plus(SM), the Guaranteed Return Option or the automatic rebalancing programs when it involves transfers out of the Fixed Allocations and is also not available when you have elected an asset allocation program. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced monthly, quarterly, semi-annually, or annually. On the appropriate date, the variable investment options you chose are rebalanced to the allocation percentages you request. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you requested. For example, over time the performance of the variable investment options will differ, causing your percentages allocations to shift. Any transfer to or from any variable investment option that is not part of your automatic rebalancing program, will be made, however that variable investment option will not become part of your rebalancing program unless we receive instructions from you indicating that you would like such option to become part of the program. There is no minimum Account Value required to enroll in automatic rebalancing. All rebalancing transfers as part of an Automatic Rebalancing program are not included when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. Participation in the Automatic Rebalancing program may be restricted if you are enrolled in certain other optional programs. ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? Yes. Certain "static asset allocation programs" are available for use with the Annuity. These programs are considered static because once you have selected a model portfolio, the Sub-accounts and the percentage of contract value allocated to each Sub-account cannot be changed without your consent. The programs are available at no additional charge. Under these programs, the Sub-account for each asset class in each model portfolio is designated for you. Under the programs, the values in the Sub-accounts will be rebalanced periodically back to the indicated percentages for the applicable asset class within the model portfolio that you have selected. For more information on the asset allocation programs, see the Appendix entitled "Additional Information on the Asset Allocation Programs." 37 Managing Your Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Asset allocation is a sophisticated method of diversification, which allocates assets among asset classes in order to manage investment risk and enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. No personalized investment advice is provided in connection with the asset allocation programs and you should not rely on these programs as providing individualized investment recommendations to you. The asset allocation programs do not guarantee better investment results. We reserve the right to terminate or change the asset allocation programs at any time. You should consult with your Investment Professional before electing any asset allocation program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, as of a specific date in the future. They are the Balanced Investment Program and the Guaranteed Return Option Plus(SM). (The Guaranteed Return Option Plus (GRO Plus(SM) is not available in all states. In some states where GRO Plus is not available we offer the Guaranteed Return Option (GRO).) Both the Balanced Investment Program and GRO Plus allow you to allocate a portion of your Account Value to the available variable investment options while ensuring that your Account Value will at least equal your contributions adjusted for withdrawals and transfers on a specified date. Under GRO Plus, Account Value is allocated to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts or the interest rate environment after the amount is allocated to a Fixed Allocation. Generally, more of your Account Value will be allocated to the variable investment options under the GRO Plus program than under the Balanced Investment Program (although in periods of poor market performance, low interest rates and/or as the option progresses to its maturity date, this may not be the case). You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. In addition, as with most return of premium programs, amounts that are available to allocate to the variable investment options may be substantially less than they would be if you did not elect a return of premium program. This means that, if investment experience in the variable investment options were positive, your Account Value would grow at a slower rate than if you did not elect a return of premium program and allocated all of your Account Value to the variable investment options. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.781198 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $78,120 will be allocated to the Fixed Allocation and the remaining Account Value ($21,880) will be allocated to the variable investment options. Assuming that you do not make any withdrawals or transfers from the Fixed Allocation, it will * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 38 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. The Guaranteed Return Option Plus (GRO Plus) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control of your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value is the amount not allocated to the Fixed Allocations to support the guarantees provided. There is a fee associated with this program. See "Living Benefit Programs," later in this Prospectus, for more information about this program. MAY I GIVE MY INVESTMENT PROFESSIONAL PERMISSION TO MANAGE MY ACCOUNT VALUE? Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. If your Investment Professional has this authority, we deem that all transactions that are directed by your Investment Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Investment Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT? Yes. You may engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Annuity. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make transfers for you, is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your Account Value under any circumstance. As such, we are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow or any specific transfers they make on your behalf. Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Annuity. If you authorize your investment advisor to withdraw amounts from your Annuity (to the extent permitted) to pay for the investment advisor's fee, as with any other withdrawal from your Annuity, you may incur adverse tax consequences, a CDSC and/or a Market Value Adjustment. Withdrawals to pay your investment advisor generally will also reduce the level of various living and death benefit guarantees provided (e.g. the withdrawals will reduce proportionately the Annuity's guaranteed minimum death benefit.) We are not a party to the agreement you have with your investment advisor and do not verify that amounts withdrawn from your Annuity, including amounts withdrawn to pay for the investment advisor's fee, are within the terms of your agreement with your investment advisor. You will, however, receive confirmations of transactions that affect your Annuity. If your investment advisor has also acted as your Investment Professional with respect to the sale of your Annuity, he or she may be receiving compensation for services provided both as an Investment Professional and investment advisor. Alternatively, the investment advisor may compensate the Investment Professional from whom you purchased your Annuity for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your Investment Professional receive in connection with your Annuity, you should ask them for more details. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. We may require Investment Professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of 39 Managing Your Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) of American Skandia. Contracts managed by your investment professional also are subject to the restrictions on transfers between investment options that are discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?". Since transfer activity under contracts managed by an investment professional or third party investment advisor may result in unfavorable consequences to all contract owners invested in the affected options we reserve the right to limit the investment options available to a particular Owner whose contract is managed by the advisor or impose other transfer restrictions we deem necessary. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.prudential.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED ALLOCATIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-680-8920. A Guarantee Period for a Fixed Allocation begins: o when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; o upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or o when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. - -------------------------------------------------------------------------------- American Skandia may offer Fixed Allocations with Guarantee Periods of 3 months or 6 months exclusively for use as a short-term Fixed Allocation ("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a Short-term Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. - -------------------------------------------------------------------------------- On the Maturity Date of the Short-term Fixed Allocation, the Account Value will be transferred to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transferred to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the 40 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Annuity or transfer any Account Value from the Short-term Fixed Allocation to any other investment option before the end of the Guarantee Period, a Market Value Adjustment will apply. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. o "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. o "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. o "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: N/365 [(1+I) / (1+J+0.0010)] where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is: N/365. [(1 + I)/(1 + J)] 41 Managing Your Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: o You allocate $50,000 into a Fixed Allocation (we refer to this as the "Allocation Date" in these examples) with a Guarantee Period of 5 years (we refer to this as the "Maturity Date" in these examples). o The Strip Yields for coupon Strips beginning on the Allocation Date and maturing on the Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%). o You make no withdrawals or transfers until you decide to withdraw the entire Fixed Allocation after exactly three (3) years, at which point 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: N/365 MVA Factor = [(1+I)/(1+J+0.0010)] = 2 [1.055/1.041] = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: N/365 MVA Factor = [(1+I)/(1+J+0.0010)] = 2 [1.055/1.071] = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. 42 Access To Account Value - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through partial withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. The CDSC will be assessed on the amount of Purchase Payments, not on the Account Value at the time of the withdrawal or surrender. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. o To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-8 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. o You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount that you may withdraw will depend on the Annuity's Surrender Value as of the date we process the withdrawal request. After any partial withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the partial withdrawal request as a request to fully surrender your Annuity. The minimum partial withdrawal you may request is $100. When we determine if a CDSC applies to partial withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. 43 Access To Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Years 1-8 The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payments) is 10% of all Purchase Payments. We may apply a Market Value Adjustment to any Fixed Allocations. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 8. If, during Annuity Years 1 through 8, all Purchase Payments withdrawn are subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Years 9+ After Annuity Year 8, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first eight (8) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first eight Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $5,000 in Annuity Year 6. The maximum Free Withdrawal amount during Annuity Years 7 and 8 would be 10% of $15,000, or $1,500. Beginning in Annuity Year 9 and thereafter, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. 3. Assume you make an initial Purchase Payment of $10,000 and take a Free Withdrawal of $500 in Annuity Year 6 and $1,000 in Annuity Year 7. If you surrender your Annuity in Annuity Year 8, the CDSC will be assessed against the initial Purchase Payment amount ($10,000), not the amount of Purchase Payments reduced by the amounts that were withdrawn under the Free Withdrawal provision. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a partial withdrawal during the first eight (8) Annuity Years. Whether a CDSC applies and the amount to be charged depends on whether the partial withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Issue Date of the Annuity. 1. If you request a partial withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount, we determine if a CDSC will apply to the partial withdrawal based on the number of years that have elapsed since the Annuity was issued. The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 is 10% of all Purchase Payments. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. If, during Annuity Years 1 through 8, all Purchase Payments are withdrawn subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals during the first eight (8) Annuity Years may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100 (which may occur under a program that provides payment of an amount equal to the earnings in the annuity for the 44 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS period requested), we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2 that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum amount that applies to Systematic Withdrawals applies to monthly minimum distributions but does not apply to minimum distributions taken out on a quarterly, semi-annual or annual basis. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: o The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 45 Access To Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS "Contingency Event" described below in order to qualify for a medically-related surrender. o the Annuitant must be alive as of the date we pay the proceeds of such surrender request; o if the Owner is one or more natural persons, all such Owners must also be alive at such time; o we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and o this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. A "Contingency Event" occurs if the Annuitant is: o first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or o first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future other than those fixed annuitization options guaranteed in your Annuity. Please refer to the "Guaranteed Minimum Income Benefit" and the "Lifetime Five Income Benefit" under "Living Benefits" below for a description of annuity options that are available when you elect these benefits. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. 46 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the Annuity and receive its then current cash value (if any) subject to our rules. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the Annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, choosing an Annuity Date within eight (8) years of the Issue Date of the Annuity may limit the available annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. You have a right to choose your annuity start date. If you have not provided us with your Annuity Date or annuity payment option in writing, then: o a default date for the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and o the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. If you choose to defer the Annuity Date beyond the default date, the IRS may not consider your contract to be an annuity under the tax law. If that should occur, all gain in your Annuity at that time will become immediately taxable to you. Further, each subsequent year's increase in Account Value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your Annuity will not be considered an annuity for federal income tax purposes. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table with an assumed interest 47 Access To Account Value continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 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. Variable Annuity Payments Generally, we offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. o Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. o Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. o Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity 48 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS payments will not be less than the initial annuity pay- ment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. 49 Living Benefit Programs - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY ARE ALIVE? American Skandia offers different optional benefits, for an additional charge, that can provide investment protection for Owners while they are alive. Notwithstanding the additional protection provided under the optional Living Benefit Programs, the additional cost has the impact of reducing net performance of the investment options. Each optional benefit offers a distinct type of guarantee, regardless of the performance of variable investment options, that may be appropriate for you depending on the manner in which you intend to make use of your annuity while you are alive. Depending on which optional benefit you choose, you can have substantial flexibility to invest in variable investment options while: o protecting a principal amount from decreases in value as of specified future dates due to investment performance; o taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; or o guaranteeing a minimum amount of growth will be applied to your principal, if it is to be used as the basis for lifetime income payments beginning after a waiting period. Below is a brief summary of the "living benefits" that American Skandia offers. Please refer to the benefit description for a complete description of the terms, conditions and limitations of each optional benefit. You should consult with your investment professional to determine if any of these optional benefits may be appropriate for you based on your financial needs. There are many factors to consider, but we note that among them you may want to evaluate the tax implications of these different approaches to meeting your needs, both between these benefits and in comparison to other potential solutions to your needs (e.g. comparing the tax implications of the withdrawal benefit and annuity payments). I. The Guaranteed Return Option Plus(SM) (GRO Plus(SM) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus(SM) program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control by allocating and transferring your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus(SM) program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value that may be allocated among your variable investment options are those amounts not allocated to the Fixed Allocations to support the guarantees provided. II. The Guaranteed Minimum Withdrawal Benefit (GMWB) guarantees your ability to make cumulative withdrawals over time equal to an initial principal value (called the "Protected Value"), regardless of decreases in your Account Value due to market losses. The GMWB program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive guaranteed minimum withdrawals. Taking income as withdrawals, rather than annuity payments, may be less tax efficient for non-qualified uses of the Annuity, but provides greater control over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. III.The Guaranteed Minimum Income Benefit (GMIB) guarantees your ability, after a minimum seven-year waiting period, to begin receiving income from the Annuity in the form of annuity payments based on your total purchase payments under the Annuity and an annual increase of 5% on such Purchase Payments, adjusted for withdrawals, regardless of the impact of market performance on your Account Value. The GMIB program may be appropriate if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. IV. The Lifetime Five Income Benefit guarantees your ability to withdraw amounts equal to a percentage of a "Protected Withdrawal Value" regardless of decreases in your Account Value due to market losses. The Lifetime Five Benefit may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive guaranteed minimum withdrawals. Taking income as withdrawals, rather than annuity 50 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS payments, may be less tax efficient for non-qualified uses of the Annuity, but provides greater control over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program (and it is currently active), the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period and any applicable subsequent period as the "maturity date") and on each anniversary of the maturity date thereafter while the program remains in effect, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate period following election of the enhanced guarantee and on each anniversary thereafter while this enhanced guarantee amount remains in effect, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. o Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter that the program remains in effect, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date that the program remains in effect, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. o Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of a specified period following the election 51 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter that the enhanced guaranteed amount remains in effect, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically create an enhanced guarantee (or increase your enhanced guarantee, if previously elected) on each anniversary of the program (and create a new maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the protected principal value or enhanced protected principal value by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter that the enhanced guarantee amount remains in effect, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to any Fixed Allocations first and then to the sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals other than Systematic Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the variable investment options and any fixed allocations up to growth attributable to the Fixed Allocations and thereafter pro-rata solely from the variable investment options. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge and Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for any third party investment advisory service will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO Plus(SM) program are October 13, 2004; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o The base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); 52 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x (1 - $7,500 / $177,500), or $227,464.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation(s) to support the applicable guaranteed amount. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the 53 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS variable investment options while maintaining the guaran- teed protection under the program (as described above). - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s), causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value or Enhanced Protected Principal Value are transferred to the variable investment options differently than each other because of the different guarantees they support. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated. Termination of the Guaranteed Return Option for the purpose of electing the Guaranteed Return Option Plus will be treated as any other termination of the Guaranteed Return Option (see below), including the termination of any guaranteed amount, and application of any applicable Market Value Adjustment when amounts are transferred to the variable investment options as a result of the termination. The Guaranteed Return Option Plus program will then be added to your Annuity based on the current Account Value. Termination of the Program You can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. You also can terminate the Guaranteed Return Option Plus program entirely. If you terminate the program entirely, you can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, you could, for example, terminate the program on a given Valuation Day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections (including any election made effective on the Annuity issue date and any election made by a surviving spouse) and (B) a program reinstatement cannot be effected on the same business day on 54 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS which a program termination was effected. Upon termination, any Account Value in the Fixed Allocations will be transferred to the variable investment options pro-rata based on the Account Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option Plus will no longer provide any guarantees. The surviving spouse may elect the benefit at any time, subject to the limitations described above, after the death of the Annuity Owner. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. o You cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments may be allocated by us to Fixed Allocations to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a variable investment option. o Transfers from Fixed Allocations made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to Fixed Allocations even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to Fixed Allocations. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the sub-accounts for participation in the Guaranteed Return Option Plus program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. 55 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS GUARANTEED RETURN OPTION (GRO) - -------------------------------------------------------------------------------- The Guaranteed Return Option described below is offered only in those jurisdictions where we have not yet received regulatory approval for the Guaranteed Return Option Plus as of the date the election of the option is made. Certain terms and conditions may differ between jurisdictions. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option is not available if you elect the GRO Plus rider, the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period as the "maturity date") guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and the Fixed Allocation used to support the Protected Principal Value. The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option program. The guarantee provided by the program exists only on the applicable maturity date. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocation to support our future guarantee, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value o Under the GRO option, American Skandia guarantees that on the maturity date, your Account Value will be no less than the Protected Principal Value. On the maturity date if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. Any amounts added to your Annuity to support our guarantee under the program will be applied to the Fixed Allocation first and then to the Sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is generally referred to as the "Guaranteed Amount" in the rider we issue for this benefit. KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in a Fixed Allocation to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rate on the Fixed Allocation, the remaining duration until the applicable maturity date and the amount of Account Value allocated to the Fixed Allocation relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from the Fixed Allocation. While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from the Fixed Allocation. o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to the Fixed Allocation to support the guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from the Fixed Allocation to 56 - ------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation to support the guaranteed amount. The new Fixed Allocation will have a Guarantee Period equal to the time remaining until the applicable maturity date. The Account Value allocated to the new Fixed Allocation will be credited with the fixed interest rate then being credited to a new Fixed Allocation maturing on the applicable maturity date (rounded to the next highest yearly duration). The Account Value will remain invested in the Fixed Allocation until the maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to the Fixed Allocation to support the Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the guarantee a significant portion of your Account Value may be allocated to the Fixed Allocation to support any applicable guaranteed amount. If your Account Value is less than the reallocation trigger and a new Fixed Allocation must be established during periods where the interest rate being credited to such Fixed Allocation is low, a larger portion of your Account Value may need to be transferred to the Fixed Allocation to support the guaranteed amount, causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between the Fixed Allocation and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. Termination of the Program The Annuity Owner also can terminate the Guaranteed Return Option program. Upon termination, any Account Value in the Fixed Allocation will be transferred to the variable investment options pro rata based on the Account Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option will no longer provide any guarantees. If the surviving spouse assumes the Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date of the Annuity or, if the deceased Owner had not previously elected the benefit, may elect the benefit at any time. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option program will no longer be deducted from your Account Value upon termination of the program. 57 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. The Fixed Allocation may not be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to the Fixed Allocation as of the effective date of the program under some circumstances. o Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from the Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments may be allocated by us to the Fixed Allocation to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from the Fixed Allocation to a variable investment option. o Transfers from the Fixed Allocation made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed Allocation to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to the Fixed Allocation even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to the Fixed Allocation. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the sub-accounts for participation in the Guaranteed Return Option program. The annual charge is deducted daily. In those states where the daily deduction of the charge has not yet been approved, the annual charge is deducted annually, in arrears. Account Value allocated to the Fixed Allocation under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Withdrawal Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Withdrawal Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit rider or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to an initial principal value (called the "Protected Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to protect your principal. You are not required to make withdrawals as part of the program -- the 58 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS guarantee is not lost if you withdraw less than the maximum allowable amount of principal each year under the rules of the program. There is an additional charge if you elect the GMWB program; however, the charge may be waived under certain circumstances described below. KEY FEATURE -- Protected Value The Protected Value is the total amount that we guarantee will be available to you through withdrawals from your Annuity and/or benefit payments, regardless of the impact of market performance on your Account Value. The Protected Value is reduced with each withdrawal you make until the Protected Value is reduced to zero. When the Protected Value is reduced to zero due to your withdrawals, the GMWB program terminates. Additionally, the Protected Value is used to determine the maximum annual amount that you can withdraw from your Annuity, called the Protected Annual Withdrawal Amount, without triggering an adjustment in the Protected Value on a proportional basis. The Protected Value is referred to as the "Benefit Base" in the rider we issue for this benefit. The Protected Value is determined as of the date you make your first withdrawal under the Annuity following your election of the GMWB program. The initial Protected Value is equal to the greater of (A) the Account Value on the date you elect the GMWB program, plus any additional Purchase Payments before the date of your first withdrawal; or (B) the Account Value as of the date of the first withdrawal from your Annuity. The Protected Value may be enhanced by increases in your Account Value due to market performance during the period between your election of the GMWB program and the date of your first withdrawal. o If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. o If we offer the GMWB program to existing Annuity Owners, the Account Value on the anniversary of the Issue Date of your Annuity following your election of the GMWB program will be used to determine the initial Protected Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Value will be increased by the amount of the additional Purchase Payment. You may elect to step-up your Protected Value if, due to positive market performance, your Account Value is greater than the Protected Value. You are eligible to step-up the Protected Value on or after the 5th Annuity anniversary following the first withdrawal under the GMWB program. The Protected Value can be stepped up again on or after the 5th Annuity anniversary following the preceding step-up. If you elect to step-up the Protected Value, you must do so during the 30-day period prior to your eligibility date. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the GMWB program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we reset the Protected Value to be equal to the then current Account Value. For example, assume your initial Protected Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Value to $60,000. On the date you are eligible to step-up the Protected Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Value to $75,000 on the date you are eligible. Upon election of the step-up, we also reset the Protected Annual Withdrawal Amount (discussed immediately below) to be equal to the greater of (A) the Protected Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the Protected Value immediately after the reset. KEY FEATURE -- Protected Annual Withdrawal Amount The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected Value. Under the GMWB program, if your cumulative withdrawals each Annuity Year are less than or equal to the Protected Annual Withdrawal Amount, your Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected Value is reduced by the actual amount of the withdrawal, including any CDSC or MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the Protected Annual Withdrawal Amount trigger a proportional adjustment to both the Protected Value and the Protected Annual Withdrawal Amount, as described in the rider for this benefit (see the examples of this calculation below). The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual Benefit" in the rider we issue for this benefit. The GMWB program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Protected 59 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Protected Annual Withdrawal Amount each Annuity Year. o If, cumulatively, you withdraw an amount less than the Protected Annual Withdrawal Amount in any Annuity Year, you cannot carry-over the unused portion of the Protected Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Protected Annual Withdrawal Amount may extend the period of time until the remaining Protected Value is reduced to zero. o Additional Purchase Payments will increase the Protected Annual Withdrawal Amount by 7% of the applicable Purchase Payment. o If the Protected Annual Withdrawal Amount after an adjustment exceeds the Protected Value, the Protected Annual Withdrawal Amount will be set equal to the Protected Value. The following examples of dollar-for-dollar and proportional reductions and the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the effective date of the GMWB program are October 13, 2004; 2.) an initial Purchase Payment of $250,000; 3.) a Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of $17,500 (7% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Protected Annual Withdrawal Amount: o The Protected Value is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining Protected Annual Withdrawal Amount for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $17,500 to $7,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount withdrawn exceeds the remaining Protected Annual Withdrawal Amount of $7,500 from Example 1: o the Protected Value is first reduced by the remaining Protected Annual Withdrawal Amount (from $240,000 to $232,500); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the remaining Protected Annual Withdrawal Amount ($10,000 - $7,500, or $2,500). o B is the Account Value less the remaining Protected Annual Withdrawal Amount ($220,000 - $7,500, or $212,500). The resulting Protected Value is: $232,500 x (1 - $2,500 / $212,500), or $229,764.71. o the Protected Annual Withdrawal Amount is also reduced by the ratio of A to B: The resulting Protected Annual Withdrawal Amount is: $17,500 x (1 - $2,500 / $212,500), or $17,294.12. o The remaining Protected Annual Withdrawal Amount is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Maximum Annual Benefit A $10,000 withdrawal is made on October 13, 2005 (second Annuity Year). The remaining Protected Annual Withdrawal Amount has been reset to the Protected Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn is less than the remaining Protected Annual Withdrawal Amount: o the Protected Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $229,764.71 to $219,764.71). o The remaining Protected Annual Withdrawal Amount for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $17,294.12 to $7,294.12). BENEFITS UNDER THE GMWB PROGRAM o In addition to any withdrawals you make under the GMWB program, market performance may reduce your Account Value. If your Account Value is equal to zero, and you have not received all of your Protected Value in the form of withdrawals from your Annuity, we will continue to make payments equal to the remaining Protected Value in the form of fixed, periodic payments until the remainder of the Protected Value is paid, at which time the rider terminates. The fixed, periodic payments will each be equal to the Protected Annual Withdrawal Amount, except for the last payment which may be equal to the remaining Protected Value. We will determine the duration for which periodic 60 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. You will not have the right to make additional Purchase Payments or receive the remaining Protected Value in a lump sum. You can elect the frequency of payments, subject to our rules then in effect. o If the death benefit under the Annuity becomes payable before you have received all of your Protected Value in the form of withdrawals from your Annuity, your Beneficiary has the option to elect to receive the remaining Protected Value as an alternate death benefit payout in lieu of the amount payable under any other death benefit provided under the Annuity. The remaining Protected Value will be payable in the form of fixed, periodic payments. Your beneficiary can elect the frequency of payments, subject to our rules then in effect. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. The Protected Value is not equal to the Account Value for purposes of the Annuity's other death benefit options. The GMWB program does not increase or decrease the amount otherwise payable under the Annuity's other death benefit options. Generally, the GMWB program would be of value to your Beneficiary only when the Protected Value at death exceeds any other amount available as a death benefit. o If you elect to begin receiving annuity payments before you have received all of your Protected Value in the form of withdrawals from your Annuity, an additional annuity payment option will be available that makes fixed annuity payments for a certain period, determined by dividing the Protected Value by the Protected Annual Withdrawal Amount. If you elect to receive annuity payments calculated in this manner, the assumed interest rate used to calculate such payments will be 0%, which is less than the assumed interest rate on other annuity payment options we offer. This 0% assumed interest rate results in lower annuity payments than what would have been paid if the assumed interest rate was higher than 0%. You can also elect to terminate the GMWB program and begin receiving annuity payments based on your then current Account Value (not the remaining Protected Value) under any of the available annuity payment options. Other Important Considerations o Withdrawals under the GMWB program are subject to all of the terms and conditions of the Annuity, including any CDSC and MVA that may apply. o Withdrawals made while the GMWB program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. o The GMWB program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the GMWB program. The GMWB program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Value in the form of periodic benefit payments. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Election of the Program Currently, the GMWB program can only be elected at the time that you purchase your Annuity. In the future, we may offer existing Annuity Owners the option to elect the GMWB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMWB program after the Issue Date of your Annuity, the program will be effective as of the next anniversary date. Your Account Value as of such anniversary date will be used to calculate the initial Protected Value and the initial Protected Annual Withdrawal Amount. We reserve the right to restrict the maximum amount of Protected Value that may be covered under the GMWB program under this Annuity or any other annuities that you own that are issued by American Skandia or its affiliated companies. 61 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Termination of the Program The program terminates automatically when your Protected Value reaches zero based on your withdrawals. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon due proof of death (unless your surviving spouse elects to continue the Annuity and the GMWB program or your Beneficiary elects to receive the amounts payable under the GMWB program in lieu of the death benefit) or upon your election to begin receiving annuity payments. The charge for the GMWB program will no longer be deducted from your Account Value upon termination of the program. Charges under the Program Currently, we deduct a charge equal to 0.35% of the average daily net assets of the Sub-accounts per year to purchase the GMWB program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. o If, during the seven years following the effective date of the program, you do not make any withdrawals, and do not make any additional Purchase Payments after a five-year period following the effective date of the program, the program will remain in effect; however, we will waive the annual charge going forward. If you make an additional Purchase Payment following the waiver of the annual charge, we will begin charging for the program. After year seven (7) following the effective date of the program, withdrawals will not cause a charge to be re-imposed. o If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the program have changed for new purchasers, your program may be subject to the new charge level for the benefit. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. The amount required under the Code may exceed the Protected Annual Withdrawal Amount, which will cause us to recalculate the Protected Value and the Protected Annual Withdrawal Amount, resulting in a lower amount payable in future Annuity Years. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Income Benefit program is not available if you elect the Guaranteed Return Option program, Guaranteed Return Option Plus program, the Guaranteed Minimum Withdrawal Benefit rider or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on a guaranteed minimum value (called the "Protected Income Value") that increases after the waiting period begins, regardless of the impact of market performance on your Account Value. The program may be appropriate for you if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. There is an additional charge if you elect the GMIB program. KEY FEATURE -- Protected Income Value The Protected Income Value is the minimum amount that we guarantee will be available (net of any applicable tax charge), after a waiting period of at least seven years, as a basis to begin receiving fixed annuity payments. The Protected Income Value is initially established on the effective date of the GMIB 62 - ----------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS program and is equal to your Account Value on such date. Currently, since the GMIB program may only be elected at issue, the effective date is the Issue Date of the Annuity. The Protected Income Value is increased daily based on an annual growth rate of 5%, subject to the limitations described below. The Protected Income Value is referred to as the "Protected Value" in the rider we issue for this benefit. The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the rider we issue for this benefit. The Protected Income Value is subject to a limit of 200% (2X) of the sum of the Protected Income Value established on the effective date of the GMIB program, or the effective date of any step-up value, plus any additional Purchase Payments made after the waiting period begins ("Maximum Protected Income Value"), minus the sum of any reductions in the Protected Income Value due to withdrawals you make from the Annuity after the waiting period begins. o Subject to the maximum age/durational limits described immediately below, we will no longer increase the Protected Income Value by the 5% annual growth rate once you reach the Maximum Protected Income Value. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments after you reach the Maximum Protected Income Value. Further, if you make withdrawals after you reach the Maximum Protected Income Value, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, we will no longer increase the Protected Income Value by the 5% annual growth rate after the later of the anniversary date on or immediately following the Annuitant's 80th birthday or the 7th anniversary of the later of the effective date of the GMIB program or the effective date of the most recent step-up. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments. Further, if you make withdrawals after the Annuitant reaches the maximum age/duration limits, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, if you make an additional Purchase Payment, we will increase the Protected Income Value by the amount of the Purchase Payment and will apply the 5% annual growth rate on the new amount from the date the Purchase Payment is applied. o As described below, after the waiting period begins, cumulative withdrawals each Annuity Year that are up to 5% of the Protected Income Value on the prior anniversary of the Annuity will reduce the Protected Income Value by the amount of the withdrawal. Cumulative withdrawals each Annuity Year in excess of 5% of the Protected Income Value on the prior anniversary of the Annuity, will reduce the Protected Income Value proportionately. All withdrawals after the Maximum Protected Income Value is reached will reduce the Protected Income Value proportionately. The 5% annual growth rate will be applied to the reduced Protected Income Value from the date of the withdrawal. Stepping-Up the Protected Income Value -- You may elect to "step-up" or "reset" your Protected Income Value if your Account Value is greater than the current Protected Income Value. Upon exercise of the step-up provision, your initial Protected Income Value will be reset equal to your current Account Value. From the date that you elect to step-up the Protected Income Value, we will apply the 5% annual growth rate to the stepped-up Protected Income Value, as described above. You can exercise the step-up provision twice on any business day while the GMIB program is in effect, and only while the Annuitant is less than age 76. o A new seven-year waiting period will be established upon the effective date of your election to step-up the Protected Income Value. You cannot exercise your right to begin receiving annuity payments under the GMIB program until the end of the new waiting period. o The Maximum Protected Income Value will be reset as of the effective date of any step-up. The new Maximum Protected Income Value will be equal to 200% of the sum of the Protected Income Value as of the effective date of the step-up plus any subsequent Purchase Payments, minus the impact of any withdrawals after the date of the step-up. o When determining the guaranteed annuity purchase rates for annuity payments under the GMIB program, we will apply such rates based on the number of years since the most recent step-up. o If you elect to step-up the Protected Income Value under the program, and on the date you elect to step-up, the 63 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS charges under the GMIB program have changed for new purchasers, your program may be subject to the new charge going forward. o A step-up will increase the dollar for dollar limit on the anniversary of the Issue Date of the Annuity following such step-up. Impact of Withdrawals on the Protected Income Value -- Cumulative withdrawals each Annuity Year up to 5% of the Protected Income Value will reduce the Protected Income Value on a "dollar-for-dollar" basis (the Protected Income Value is reduced by the actual amount of the withdrawal). Cumulative withdrawals in any Annuity Year in excess of 5% of the Protected Income Value will reduce the Protected Income Value proportionately (see the examples of this calculation below). The 5% annual withdrawal amount is determined on each anniversary of the Issue Date (or on the Issue Date for the first Annuity Year) and applies to any withdrawals during the Annuity Year. This means that the amount available for withdrawals each Annuity Year on a "dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect changes in the Protected Income Value during the prior Annuity Year. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GMIB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000; 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. Immediately prior to the withdrawal, the Protected Income Value is $251,038.10 (the initial value accumulated for 31 days at an annual effective rate of 5%). As the amount withdrawn is less than the dollar-for-dollar limit: o The Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). Immediately before the withdrawal, the Account Value is $220,000 and the Protected Income Value is $242,006.64. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o The Protected Income Value is first reduced by the Remaining Limit (from $242,006.64 to $239,506.64); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($220,000 - $2,500, or $217,500). The resulting Protected Income Value is: $239,506.64 x (1 - $7,500 / $217,500), or $231,247.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on the first anniversary of the Issue Date, October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected Income Value is $240,838.37. The Remaining Limit is reset to 5% of this amount, or $12,041.92. As the amount withdrawn is less than the dollar-for-dollar limit: o The Protected Income Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $240,838.37 to $230,838.37). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,041.92 to $2,041.92). KEY FEATURE -- GMIB Annuity Payments You can elect to apply the Protected Income Value to one of the available GMIB Annuity Payment Options on any anniversary date following the initial waiting period, or any subsequent waiting period established upon your election to step-up the Protected Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the Annuity anniversary, during which you may elect to begin receiving annuity payments under one of the available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 95th birthday, except for Annuities used as a funding vehicle for an IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 92nd birthday. 64 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The amount of each GMIB Annuity Payment will be determined based on the age and, where permitted by law, sex of the Annuitant by applying the Protected Income Value (net of any applicable tax charge that may be due) to the GMIB Annuity Payment Option you choose. We use special annuity purchase rates to calculate the amount of each payment due under the GMIB Annuity Payment Options. These special rates for the GMIB Annuity Payment Options are calculated using an assumed interest rate factor that provides for lower growth in the value applied to produce annuity payments than if you elected an annuity payment option that is not part of the GMIB program. These special rates also are calculated using other factors such as "age setbacks" (use of an age lower than the Annuitant's actual age) that result in lower payments than would result if you elected an annuity payment option that is not part of the GMIB program. Use of an age setback entails a longer assumed life for the Annuitant which in turn results in lower annuity payments. On the date that you elect to begin receiving GMIB Annuity Payments, we guarantee that your payments will be calculated based on your Account Value and our then current annuity purchase rates if the payment amount calculated on this basis would be higher than it would be based on the Protected Income Value and the special GMIB annuity purchase rates. GMIB Annuity Payment Option 1 -- Payments for Life with a Certain Period Under this option, monthly annuity payments will be made until the death of the Annuitant. If the Annuitant dies before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. GMIB Annuity Payment Option 2 -- Payments for Joint Lives with a Certain Period Under this option, monthly annuity payments will be made until the death of both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint Annuitant die before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. o If the Annuitant dies first, we will continue to make payments until the later of the death of the Joint Annuitant and the end of the period certain. However, if the Joint Annuitant is still receiving annuity payments following the end of the certain period, we will reduce the amount of each subsequent payment to 50% of the original payment amount. o If the Joint Annuitant dies first, we will continue to make payments until the later of the death of the Annuitant and the end of the period certain. You cannot withdraw your Account Value or the Protected Income Value under either GMIB Annuity Payment Option once annuity payments have begun. We may make other payout frequencies available, such as quarterly, semi-annually or annually. Other Important Considerations o You should note that GMIB is designed to provide a type of insurance that serves as a safety net only in the event your Account Value declines significantly due to negative investment performance. If your contract value is not significantly affected by negative investment performance, it is unlikely that the purchase of the GMIB will result in your receiving larger annuity payments than if you had not purchased GMIB. This is because the assumptions that we use in computing the GMIB, such as the annuity purchase rates, (which include assumptions as to age-setbacks and assumed interest rates), are more conservative than the assumptions that we use in computing annuity payout options outside of GMIB. Therefore, you may generate higher income payments if you were to annuitize a lower Account Value at the current annuity purchase rates, than if you were to annuitize under the GMIB with a higher Protected Value than your Account Value but, at the annuity purchase rates guaranteed under the GMIB. The GMIB program does not directly affect the Annuity's Account Value, Surrender Value or the amount payable under either the basic death benefit provision of the Annuity or any optional death benefit provision. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Income Value. The Protected Income Value is only applicable if you elect to begin receiving annuity payments under one of the GMIB annuity options after the waiting period. o The Annuity offers other annuity payment options that you can elect which do not impose an additional charge, but which do not offer to guarantee a minimum value on which to make annuity payments. o Where allowed by law, we reserve the right to limit subsequent purchase payments if we determine, at our sole discretion, that based on the timing of your Purchase Payments and withdrawals, your Protected Income Value is increasing in ways we did not intend. In determining 65 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS whether to limit Purchase Payments, we will look at Purchase Payments which are disproportionately larger than your initial Purchase Payment and other actions that may artificially increase the Protected Income Value. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. o If you change the Annuitant after the effective date of the GMIB program, the period of time during which we will apply the 5% annual growth rate may be changed based on the age of the new Annuitant. If the new Annuitant would not be eligible to elect the GMIB program based on his or her age at the time of the change, then the GMIB program will terminate. o Annuity payments made under the GMIB program are subject to the same tax treatment as any other annuity payment. o At the time you elect to begin receiving annuity payments under the GMIB program or under any other annuity payment option we make available, the protection provided by the Annuity's basic death benefit or any optional death benefit provision you elected will no longer apply. Election of the Program Currently, the GMIB program can only be elected at the time that you purchase your Annuity. The Annuitant must be age 75 or less as of the effective date of the GMIB program. In the future, we may offer existing Annuity Owners the option to elect the GMIB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMIB program after the Issue Date of your Annuity, the program will be effective as of the date of election. Your Account Value as of that date will be used to calculate the Protected Income Value as of the effective date of the program. Termination of the Program The GMIB program cannot be terminated by the Owner once elected. The GMIB program automatically terminates as of the date the Annuity is fully surrendered, on the date the death benefit is payable to your Beneficiary (unless your surviving spouse elects to continue the Annuity), or on the date that your Account Value is transferred to begin making annuity payments. The GMIB program may also be terminated if you designate a new Annuitant who would not be eligible to elect the GMIB program based on his or her age at the time of the change. Upon termination of the GMIB program we will deduct the charge from your Account Value for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). Charges under the Program Currently, we deduct a charge equal to 0.50% per year of the average Protected Income Value for the period the charge applies. Because the charge is calculated based on the average Protected Income Value, it does not increase or decrease based on changes to the Annuity's Account Value due to market performance. The dollar amount you pay each year will increase in any year the Protected Income Value increases, and it will decrease in any year the Protected Income Value decreases due to withdrawal, irrespective of whether your Account Value increases or decreases. The charge is deducted annually in arrears each Annuity Year on the anniversary of the Issue Date of the Annuity. We deduct the amount of the charge pro-rata from the Account Value allocated to the variable investment options and the Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed Allocation. If you surrender your Annuity, begin receiving annuity payments under the GMIB program or any other annuity payment option we make available during an Annuity Year, or the GMIB program terminates, we will deduct the charge for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No charge applies after the Annuity Date. 66 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE) - -------------------------------------------------------------------------------- The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, Lifetime Five can be elected only once each Annuity Year, and only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. We reserve the right to limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, Guaranteed Minimum Withdrawal Benefit or the Guaranteed Minimum Income Benefit rider. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with an eligible model under our asset allocation programs, which are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to a percentage of an initial principal value (called the "Protected Withdrawal Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. There are two options -- one is designed to provide an annual withdrawal amount for life (the "Life Income Benefit") and the other is designed to provide a greater annual withdrawal amount as long as there is Protected Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no Protected Withdrawal Value, the withdrawal benefit will be zero. You do not choose between these two options; each option will continue to be available as long as the Annuity has an Account Value and the Lifetime Five is in effect. Certain benefits under Lifetime Five may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive annual payments. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Protected Withdrawal Value The Protected Withdrawal Value is initially used to determine the amount of each initial annual payment under the Life Income Benefit and the Withdrawal Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Lifetime Five, plus any additional Purchase Payments each growing at 5% per year from the date of your election of the program, or application of the Purchase Payment to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. Each value is increased by the amount of any subsequent Purchase Payments. o If you elect the Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. o For existing Owners who are electing the Lifetime Five benefit, the Account Value on the date of your election of the Lifetime Five program will be used to determine the initial Protected Withdrawal Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Withdrawal Value will be increased by the amount of each additional Purchase Payment. You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. You are eligible 67 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. The Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. The Protected Withdrawal Value is reduced each time a withdrawal is made on a dollar-for-dollar basis up to 7% per Annuity Year of the Protected Withdrawal Value and on the greater of a dollar-for-dollar basis or a pro rata basis for withdrawals in an Annuity Year in excess of that amount until the Protected Withdrawal Value is reduced to zero. At that point the Annual Withdrawal Amount will be zero until such time (if any) as the Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or additional Purchase Payments being made into the Annuity). KEY FEATURE -- Annual Income Amount under the Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. A withdrawal can be considered Excess Income under the Life Income Benefit even though it does not exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up if such amount is greater than your Annual Income Amount. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. KEY FEATURE -- Annual Withdrawal Amount under the Withdrawal Benefit The initial Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals each Annuity Year are less than or equal to the Annual Withdrawal Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If your cumulative withdrawals are in excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Withdrawal to the Account Value immediately prior to such withdrawal (see the examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. When you elect a step-up, your Annual Withdrawal Amount increases to equal 7% of your Account Value after the step-up if such amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 7% of any additional Purchase Payments. A determination of whether you have exceeded your Annual Withdrawal Amount is made at the time of each withdrawal; therefore, a subsequent increase 68 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS in the Annual Withdrawal Amount will not offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount at the time the withdrawal was made. The Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount and the Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Annual Withdrawal Amount or Annual Income Amount in each Annuity Year. o If, cumulatively, you withdraw an amount less than the Annual Withdrawal Amount under the Withdrawal Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Withdrawal Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. o If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Income Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2011 is equal to $240,000. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase payment accumulated at 5% per year from February 1, 2005 (393/365) until March 1, 2006 (393 days) = $250,000 x 1.05 = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of $265,000). The Annual Income Amount is equal to $13,250 under the Life Income Benefit (5% of $265,000). Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $10,000 = $8,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 o Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 o Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount but less than the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $15,000 = $3,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $1,750 / ($263,000 - $13,250) x $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 o Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000 69 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS (b) If $25,000 was withdrawn (more than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 = $6,450) reduces Annual Withdrawal Amount for future Annuity Years. o Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value before Excess Withdrawal x Annual Withdrawal Amount = $6,450 / ($263,000 - $18,550) x $18,550 = $489 Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 = $11,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $11,750 / ($263,000 - $13,250) x $13,250 = $623 Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627 o Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount ($18,550) from $265,000 to $246,450. It is further reduced by the greater of a dollar-for-dollar reduction or a proportional reduction. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450 o Proportional reduction = Excess Withdrawal / Account Value before Excess Withdrawal x Protected Withdrawal Value = $6,450 / ($263,000 - $18,550) x $246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450, $6,503} = $239,947 Example 3. Step-up of the Protected Withdrawal Value If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 5 years, the Protected Withdrawal Value on March 1, 2011 would be reduced to $198,750 {$265,000 - ($13,250 x 5)}. If a step-up is elected on March 1, 2011, then the following values would result: o Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 o Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped-up Protected Withdrawal Value is 5% of $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. o Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $240,000, which is $16,800. Therefore, the Annual Withdrawal Amount remains $18,550. BENEFITS UNDER THE LIFETIME FIVE PROGRAM o If your Account Value is equal to zero, and the cumulative withdrawals in the current Annuity Year are greater than the Annual Withdrawal Amount, the Lifetime Five program will terminate. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under both the Life Income Benefit and the Withdrawal Benefit, you will be given the choice of receiving the payments under the Life Income Benefit or under the Withdrawal Benefit. Once you make this election we will make an additional payment for that Annuity Year equal to either the remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity Year, if any, depending on the option you choose. In subsequent Annuity Years we make payments that equal either the Annual Income Amount or the Annual Withdrawal Amount as described in this Prospectus. You will not be able to change the option after your election and no further Purchase Payments will be accepted under your Annuity. If you do not make an election, we will pay you annually under the Life Income Benefit. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount but less than or equal to the Annual Withdrawal Amount and amounts are still payable under the Withdrawal Benefit, you will receive the payments under the Withdrawal Benefit. In the year of a withdrawal that reduced your Account Value to zero, we will make an additional payment to equal any remaining Annual Withdrawal Amount and make payments equal to the Annual Withdrawal Amount in each subsequent year (until the Protected Withdrawal Value is depleted). Once your Account Value equals zero no further Purchase Payments will be accepted under your Annuity. 70 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS o If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years or any remaining Protected Withdrawal Value, you can elect one of the following three options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We make such annuity payments until the Annuitant's death; or (3) request that, as of the date annuity payments are to begin, we pay out any remaining Protected Withdrawal Value as annuity payments. Each year such annuity payments will equal the Annual Withdrawal Amount or the remaining Protected Withdrawal Value if less. We make such annuity payments until the earlier of the Annuitant's death or the date the Protected Withdrawal Value is depleted. We must receive your request in a form acceptable to us at our office. o In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a single life fixed annuity with five payments certain using the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the greater of the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. o If no withdrawal was ever taken, we will determine a Protected Withdrawal Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations o Withdrawals under the Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. o Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Withdrawal Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Lifetime Five program. The Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Withdrawal Value or Annual Income Amount in the form of periodic benefit payments. o You must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit in order to elect and maintain the Lifetime Five program. Our asset allocation programs are described generally in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. Election of the Program The Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value, the initial Protected Annual Withdrawal Amount, and the Annual Income Amount. Termination of the Program The program terminates automatically when your Protected Withdrawal Value and Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon the death of the Annuitant (but your surviving spouse may elect a new Lifetime Five if your spouse elects the spousal continuance option and your spouse would then be eligible to elect the benefit if he or she was a new purchaser), upon a change in ownership of the Annuity that changes the tax identification number of the Owner, upon change in the Annuitant or upon your election to begin receiving annuity payments. The charge for the Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. 71 Living Benefit Programs continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. The amount required under the Code may exceed the Annual Withdrawal Amount and the Annual Income Amount, which will cause us to increase the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. Any such payments will reduce your Protected Withdrawal Value. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 72 Death Benefit - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers three different optional Death Benefits that can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. The basic Death Benefit is the greater of: o The sum of all Purchase Payments less the sum of all proportional withdrawals. o The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Three optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - -------------------------------------------------------------------------------- Currently, these benefits are only offered in those jurisdictions where we have received regulatory approval and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase an optional Death Benefit subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ between jurisdictions once approved and if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit may only be elected individually, and cannot be elected in combination with any other optional death benefit. - -------------------------------------------------------------------------------- Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. 73 Death Benefit continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. The Enhanced Beneficiary Protection Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit ("HAV") If the Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of Highest Anniversary Value Death Benefit The HAV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Anniversary Value Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" or the "Highest Daily Value" Death Benefit. - -------------------------------------------------------------------------------- Please refer to the definition of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer contract anniversaries before the death benefit target date is reached. The death benefit target date under this death benefit is earlier than the death benefit target date under the Combination 5% Roll-up and Highest Anniversary Value Death Benefit for Owners who are age 76 or older when the Annuity is issued, which may result in a lower value on the death benefit, since there will be fewer contract anniversaries before the death benefit target date is reached. 74 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS See Appendix B for examples of how the Highest Anniver-sary Value Death Benefit is calculated. Combination 5% Roll-up and Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time the Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Combination 5% Roll-up and HAV Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death Benefit The Combination 5% Roll-up and HAV Death Benefit equals the greatest of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value death benefit described above, and 3. 5% Roll-up described below. The calculation of the 5% Roll-up depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date the 5% Roll up is equal to: o all Purchase Payments increasing at an annual effective interest rate of 5% starting on the date that each Purchase Payment is made and ending on the Owner's date of death; MINUS o the sum of all withdrawals, dollar for dollar up to 5% of the death benefit's value as of the prior contract anniversary (or issue date if the withdrawal is in the first contract year). Any withdrawals in excess of the 5% dollar for dollar limit are proportional. If the Owner dies on or after the Death Benefit Target Date the 5% Roll-up is equal to: o the 5% Roll-up value as of the Death Benefit Target Date increased by total Purchase Payments made after the Death Benefit Target Date; MINUS o the sum of all withdrawals which reduce the 5% Roll-up proportionally. Please refer to the definitions of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer Annuity anniversaries before the Death Benefit Target Date is reached. - -------------------------------------------------------------------------------- The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit is not available if you elect any other optional death benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Combination 5% Roll-up and Highest Anniversary Value Death Benefit is calculated. Key Terms Used with the Highest Anniversary Value Death Benefit and the Combination 5% Roll-up and Highest Anniversary Value Death Benefit: o The Death Benefit Target Date for the Highest Anniversary Value Death Benefit is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. o The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death Benefit is the later of the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Anniversary Value equals the highest of all previous "Anniversary Values" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. o The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Anniversary Value or 5% Roll-up value by reducing such value in the same proportion as the Account Value was reduced by the 75 Death Benefit continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value or 5% Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Highest Daily Value Death Benefit ("HDV") - -------------------------------------------------------------------------------- If the Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Daily Value Death Benefit is elected. If the Annuity has joint Owners, the older Owner must be age 79 or less. If there are Joint Owners, death of the Owner refers to the first to die of the Joint Owners. If the Annuity is owned by an entity, the Annuitant must be age 79 or less and death of the Owner refers to the death of the Annuitant. If you elect this benefit, you must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit. Because this benefit, once elected, may not be terminated, you must keep your Account Value allocated to an eligible model throughout the life of the Annuity. You may, however, switch from one eligible model to another eligible model. Our asset allocation programs are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- The HDV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Daily Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Daily Value Death Benefit is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit, or the Highest Anniversary Value Death Benefit. - -------------------------------------------------------------------------------- Key Terms Used with the Highest Daily Value Death Benefit: o The Death Benefit Target Date for the Highest Daily Value Death Benefit is the later of the Annuity anniversary on or after the 80th birthday of the current Owner, or the older of either the joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Daily Value equals the highest of all previous "Daily Values" less proportional withdrawals since such date and plus any Purchase Payments since such date. o The Daily Value is the Account Value as of the end of each Valuation Day. The Daily Value on the Issue Date is equal to your Purchase Payment. o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Daily Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Daily Value ($125,000) by 10% or $12,500. Please see Appendix B to this prospectus for a hypothetical example of how the HDV Death Benefit is calculated. 76 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Annuities with Joint Owners For Annuities with Joint Owners, the Death Benefits are calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the Annuity instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefits are calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Death Benefit and the Highest Anniversary Value Death Benefit at any time. The "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated once elected. The optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year of the average daily net assets of the Sub-accounts for each of the Highest Anniversary Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the average daily net assets of the Sub-accounts for the "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge for each of these benefits to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS What is the Annuity Rewards benefit? The Annuity Rewards benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than the Annuity's value as of the effective date of the benefit. Under the Annuity Rewards benefit, American Skandia guarantees that the Death Benefit will not be less than: o your Account Value in the variable investment options plus the Interim Value in any Fixed Allocations as of the effective date of the benefit o MINUS any proportional withdrawals* following the effective date of the benefit o PLUS any additional Purchase Payments applied to the Annuity following the effective date of the benefit. The Annuity Rewards Death Benefit enhancement does not affect the calculation of the basic Death Benefit or any Optional Death Benefits available under the Annuity to the extent such benefit provides for a change in the method of calculation based on the age of the decedent as of the date of death. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. Who is eligible for the Annuity Rewards benefit? Owners can elect the Annuity Rewards Death Benefit enhancement following the eighth (8th) anniversary of the Annuity's Issue Date. However, the Account Value on the date that the Annuity Rewards Benefit is effective must be greater than the amount that would be payable to their Beneficiary under the Death Benefit (including any amounts payable under any Optional Death Benefit then in effect). The effective date must occur before annuity payments begin. There can only be one effective date for the Annuity Rewards Death Benefit enhancement. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. 77 Death Benefit continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal assumption as described below, in the event of your death, the death benefit must be distributed: o as a lump sum amount at any time within five (5) years of the date of death; or o as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary -- Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity -- Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. Qualified Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. o If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. o If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. Upon election of this Qualified Beneficiary Continuation option: o the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. o the Beneficiary will be charged at an amount equal to 1.40% daily against the average daily assets allocated to the Sub-accounts. o the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. o the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner, except that the Sub-accounts offered will be 78 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS those offered under the Qualified Beneficiary Continuation option at the time the option is elected. o the Fixed Allocations will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. o no additional Purchase Payments can be applied to the Annuity. o other optional Benefits will be those offered under the Qualified Beneficiary Continuation option at the time of election. o the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. o the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. o upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. o all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Your Beneficiary will be provided with a prospectus and settlement option that will describe this option at the time he or she elects this option. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the Qualified Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including any optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. 79 Valuing Your Investment - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is defined under "Glossary of Terms" above. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge, the Distribution Charge (if applicable), and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge, Distribution Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day more than 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next Valuation Day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. 80 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: o trading on the NYSE is restricted; o an emergency exists making redemption or valuation of securities held in the separate account impractical; or o the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) business days after we receive all of our requirements at our office to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) business days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) business days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment at our office with satisfactory allocation instructions. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions if none are provided. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on the next Valuation Day, unless the next Valuation Day falls in the subsequent calendar year, in which case the transaction will be processed and valued on the prior Valuation Day. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). You cannot request a transaction involving the purchase, redemption or transfer of units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Distribution Charge: The Distribution Charge is deducted under your Annuity during Annuity Years 1-8. At the end of the 8th Annuity Year, we will no longer deduct the Distribution Charge. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge 81 Valuing Your Investment continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS (and the charge for any optional benefits you have elected) but not the Distribution Charge. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. Termination of Optional Benefits: Except for the Guaranteed Minimum Income Benefit, the Combination 5% Roll-up and Highest Anniversary Value Death Benefit and the Highest Daily Value Death Benefit, which cannot be terminated by the owner once elected, if any optional benefit terminates, we will no longer deduct the charge we apply to purchase the optional benefit. Certain optional benefits may be added after you have purchased your Annuity. On the date a charge no longer applies or a charge for an optional benefit begins to be deducted, your Annuity will become subject to a different daily asset-based charge. This change may result in the number of Units attributed to your Annuity and the value of those Units being different than it was before the change, however, the adjustment in the number of Units and Unit Price will not affect your Account Value (although the change in charges that are deducted will affect your Account Value). 82 Tax Considerations - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The tax considerations associated with the Annuity vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan (including contracts held by a non-natural person, such as a trust acting as an agent for a natural person), or (ii) held under a tax-favored retirement plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. The discussion includes a description of certain spousal rights under the contract and under tax-qualified plans. Our administration of such spousal rights and related tax reporting accords with our understanding of the Defense of Marriage Act (which defines a "marriage" as a legal union between a man and a woman and a "spouse" as a person of the opposite sex). The information provided is not intended as tax advice. You should consult with a qualified tax advisor for complete information and advice. References to purchase payments below relates to your cost basis in your contract. Generally, your cost basis in a contract not associated with a tax-favored retirement plan is the amount you pay into your contract, or into annuities exchanged for your contract, on an after-tax basis less any withdrawals of such payments. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS) Taxes Payable by You We believe the contract is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract. Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below. It is possible that the Internal Revenue Service (IRS) would assert that some or all of the charges for the optional benefits under the contract should be treated for federal income tax purposes as a partial withdrawal from the contract. If this were the case, the charge for this benefit could be deemed a withdrawal and treated as taxable to the extent there are earnings in the contract. Additionally, for owners under age 59 1/2, the taxable income attributable to the charge for the benefit could be subject to a tax penalty. If the IRS determines that the charges for one or more benefits under the contract are taxable withdrawals, then the sole or surviving owner will be provided with a notice from us describing available alternatives regarding these benefits. If you choose to defer the Annuity Date beyond the default date for your Annuity, the IRS may not consider your contract to be an annuity under the tax law. For more information, see "How and When Do I Choose the Annuity Payment Option?". Taxes on Withdrawals and Surrender If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of purchase payments, until all gain has been withdrawn. You will generally be taxed on any withdrawals from the contract while you are alive even if the withdrawal is paid to someone else. If you assign or pledge all or part of your contract as collateral for a loan, the part assigned generally will be treated as a withdrawal. If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on any gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce. Taxes on Annuity Payments A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your purchase payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract. After the full amount of your purchase payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 83 Tax Considerations continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Tax Penalty on Withdrawals and Annuity Payments Any taxable amount you receive under your contract may be subject to a 10% tax penalty. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59 1/2 or die; o the amount received is attributable to your becoming disabled; o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.); or o the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase). Special Rules in Relation to Tax-Free Exchanges Under Section 1035 Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits certain tax-free exchanges of a life insurance, annuity or endowment contract for an annuity. If the annuity is purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any purchase payments made to the original contract prior to August 14, 1982 will be treated as made to the new contract prior to that date. (See Federal Tax Status section in the Statement of Additional Information.) Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract into an immediate annuity. As of the date of this prospectus, we will accept a partial 1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% tax penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. Taxes Payable by Beneficiaries The death benefit options are subject to income tax to the extent the distribution exceeds the cost basis in the contract. The value of the death benefit, as determined under federal law, is also included in the owner's estate. Generally, the same tax rules described above would also apply to amounts received by your beneficiary. Choosing any option other than a lump sum death benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below. Tax consequences to the beneficiary vary among the death benefit payment options. o Choice 1: the beneficiary is taxed on earnings in the contract. o Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case earnings are treated as being distributed first). o Choice 3: the beneficiary is taxed on each payment (part will be treated as earnings and part as return of premiums). Considerations for Contingent Annuitants: There may be adverse tax consequences if a Contingent Annuitant succeeds an Annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. Reporting and Withholding on Distributions Taxable amounts distributed from your annuity contracts are subject to federal and state income tax reporting and withholding. In general, we will withhold federal income tax from the 84 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS taxable portion of such distribution based on the type of distri- bution. In the case of an annuity or similar periodic payment, we will withhold as if you are a married individual with 3 exemptions unless you designate a different withholding status. In the case of all other distributions, we will withhold at a 10% rate. You may generally elect not to have tax withheld from your payments. An election out of withholding must be made on forms that we provide. State income tax withholding rules vary and we will withhold based on the rules of your State of residence. Special tax rules apply to withholding for nonresident aliens, and we generally withhold income tax for nonresident aliens at a 30% rate. A different withholding rate may be applicable to a nonresident alien based on the terms of an existing income tax treaty between the United States and the nonresident alien's country. Please refer to the discussion below regarding withholding rules for tax favored plans (for example, an IRA). Regardless of the amount withheld by us, you are liable for payment of federal and state income tax on the taxable portion of annuity distributions. You should consult with your tax advisor regarding the payment of the correct amount of these income taxes and potential liability if you fail to pay such taxes. Annuity Qualification Diversification And Investor Control. In order to qualify for the tax rules applicable to annuity contracts described above, the assets underlying the variable investment options of the annuity contract must be diversified, according to certain rules. We believe these diversification rules will be met. An additional requirement for qualification for the tax treatment described above is that we, and not you as the contract owner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. While we also believe these investor control rules will be met, 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. It is unclear whether such guidelines, if in fact promulgated, would have retroactive effect. It is also unclear what effect, if any, such guidelines may have on transfers between the investment options offered pursuant to this Prospectus. We will take any action, including modifications to your Annuity or the investment options, required to comply with such guidelines if promulgated. Please refer to the Statement of Additional information for further information on these Diversification and Investor Control issues. Required Distributions Upon Your Death. Upon your death, certain distributions must be made under the contract. The required distributions depend on whether you die before you start taking annuity payments under the contract or after you start taking annuity payments under the contract. If you die on or after the annuity date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before the annuity date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if a periodic payment option is selected by your designated beneficiary and if such payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom benefit rights under the contract pass by reason of death, and must be a natural person in order to elect a periodic payment option based on life expectancy or a period exceeding five years. If the contract is payable to (or for the benefit of) your surviving spouse, that portion of the contract may be continued with your spouse as the owner. Changes In The Contract. We reserve the right to make any changes we deem necessary to assure that the contract qualifies as an annuity contract for tax purposes. Any such changes will apply to all contract owners and you will be given notice to the extent feasible under the circumstances. Additional Information You should refer to the Statement of Additional Information if: o The contract is held by a corporation or other entity instead of by an individual or as agent for an individual. o Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982. o You transfer your contract to, or designate, a beneficiary who is either 37 1/2 years younger than you or a grandchild. o You purchased more than one annuity contract from the same insurer within the same calendar year (other than contracts held by tax favored plans). 85 Tax Considerations continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS CONTRACTS HELD BY TAX FAVORED PLANS The following discussion covers annuity contracts held under tax-favored retirement plans. Currently, the contract may be purchased for use in connection with individual retirement accounts and annuities (IRAs) which are subject to Sections 408(a), 408(b) and 408A of the Code. In addition, this contract may be purchased for use in connection with a corporate Pension and Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities or TDAs), and Section 457 plans (subject to 457 of the Code). This description assumes that you have satisfied the requirements for eligibility for these products. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. You should be aware that tax favored plans such as IRAs generally provide income tax deferral regardless of whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax benefits (such as income tax deferral and income tax free transfers). Types of Tax Favored Plans IRAs. If you buy a contract for use as an IRA, we will provide you a copy of the prospectus and contract. The "IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars, and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free look" after making an initial contribution to the contract. During this time, you can cancel the contract by notifying us in writing, and we will refund all of the purchase payments under the contract (or, if provided by applicable state law, the amount credited under the contract, if greater), less any applicable federal and state income tax withholding. Contributions Limits/Rollovers. Because of the way the contract is designed, you may purchase a contract for an IRA in connection with a "rollover" of amounts from a qualified retirement plan, as a transfer from another IRA or as a current contribution. In 2005 the limit is $4,000; increasing to $5,000 in 2008. After 2008 the contribution amount will be indexed for inflation. The tax law also provides for a catch-up provision for individuals who are age 50 and above. These taxpayers will be permitted to contribute an additional $500, increasing to $1,000 in 2006 and years thereafter. The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy the contract, you can make regular IRA contributions under the contract (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not retain possible favorable tax treatment if you subsequently "roll over" the contract funds originally derived from a qualified retirement plan or TDA into another Section 401(a) plan or TDA. Required Provisions. Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions: o You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce); o Your rights as owner are non-forfeitable; o You cannot sell, assign or pledge the contract; o The annual contribution you pay cannot be greater than the maximum amount allowed by law, including catch-up contributions if applicable (which does not include any rollover amounts); o The date on which annuity payments must begin cannot be later than April 1st of the calendar year after the calendar year you turn age 70 1/2; and o Death and annuity payments must meet "minimum distribution requirements" described below. Usually, the full amount of any distribution from an IRA (including a distribution from this contract) which is not a rollover is taxable. As taxable income, these distributions are subject to the general tax withholding rules described earlier. In addition to this normal tax liability, you may also be liable for the following, depending on your actions: o A 10% "early distribution penalty" described below; o Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or 86 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS o Failure to take a minimum distribution also described below. SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences: o If you participate in a SEP, you generally do not include in income any employer contributions made to the SEP on your behalf up to the lesser of (a) $42,000 in 2005 or (b) 25% of the employee's earned income (not including contribution as "earned income" for these purposes). However, for these purposes, compensation in excess of certain limits established by the IRS will not be considered. In 2005, this limit is $210,000; o SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and o SEPs for small employers permit salary deferrals up to $14,000 in 2005 with the employer making these contributions to the SEP. However, no new "salary reduction" or "SARSEPs" can be established after 1996. Individuals participating in a SARSEP who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. You will also be provided the same information, and have the same "free look" period, as you would have if you purchased the contract for a standard IRA. ROTH IRAs. Like standard IRAs, income within a Roth IRA accumulates tax-free, and contributions are subject to specific limits. Roth IRAs have, however, the following differences: o Contributions to a Roth IRA cannot be deducted from your gross income; o "Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements: (1) the distribution must be made (a) after the owner of the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's disability; or (d) for a qualified first time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and taxed generally in the same manner as distributions from a traditional IRA. o If eligible (including meeting income limitations and earnings requirements), you may make contributions to a Roth IRA after attaining age 70 1/2, and distributions are not required to begin upon attaining such age or at any time thereafter. Because of the way the contract is designed, you may purchase a contract for a Roth IRA in connection with a "rollover" of amounts of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA, a Roth IRA or with a current contribution. The Code permits persons who meet certain income limitations (generally, adjusted gross income under $100,000), and who receive certain qualifying distributions from such non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of all or any part of the amount of such distribution to a Roth IRA which they establish. This conversion triggers current taxation (but is not subject to a 10% early distribution penalty). Once the contract has been purchased, regular Roth IRA contributions will be accepted to the extent permitted by law. TDAs. You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501 (c)(3)) or a public educational organization, and you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $14,000 in 2005. Individuals participating in a TDA who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. Further, you may roll over TDA amounts to another TDA or an IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP and a 457 government plan. A contract may only qualify as a TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of: o Your attainment of age 59 1/2; o Your severance of employment; o Your death; o Your total and permanent disability; or 87 Tax Considerations continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS o Hardship (under limited circumstances, and only related to salary deferrals and any earnings attributable to these amounts). In any event, you must begin receiving distributions from your TDA by April 1st of the calendar year after the calendar year you turn age 70 1/2 or retire, whichever is later. These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a mutual fund "custodial account" described under Code Section 403(b)(7). Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans. Minimum Distribution Requirements and Payment Option If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that generally payments must start by April 1 of the year after the year you reach age 70 1/2 and must be made for each year thereafter. The amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount. More information on the mechanics of this calculation is available on request. Please contact us at a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% tax penalty on the amount of any minimum distribution not made in a timely manner. Effective in 2006, in accordance with recent changes in laws and regulations, required minimum distributions will be calculated based on the sum of the contract value and the actuarial value of any additional death benefits and benefits from optional riders that you have purchased under the contract. As a result, the required minimum distributions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution under the Contract and an increased amount of taxable income distributed to the contract owner, and a reduction of death benefits and the benefits of any optional riders. You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for this contract without either beginning annuity payments or surrendering the contract. We will distribute to you this minimum distribution amount, less any other partial withdrawals that you made during the year. Although the IRS rules determine the required amount to be distributed from your IRA each year, certain payment alternatives are still available to you. If you own more than one IRA, you can choose to satisfy your minimum distribution requirement for each of your IRAs by withdrawing that amount from any of your IRAs. Penalty for Early Withdrawals You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59 1/2 or die; o the amount received is attributable to your becoming disabled; or o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.) Other exceptions to this tax may apply. You should consult your tax advisor for further details. Withholding Unless a distribution is an eligible rollover distribution that is "directly" rolled over into another qualified plan, IRA (including the IRA variations described above), SEP, 457 government plan or TDA, we will withhold federal income tax at the rate of 20%. This 20% withholding does not apply to distributions from IRAs and Roth IRAs. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis: o For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and 88 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS o For all other distributions, we will withhold at a 10% rate. We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes. There may be additional state income tax withholding requirements. ERISA Disclosure/Requirements ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit from any party dealing with the plan, as a result of the sale of the contract. Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract. Information about any applicable fees, charges, discounts, penalties or adjustments may be found in the applicable sections of this Prospectus. Information about sales representatives and commissions may be found in the sections of this Prospectus addressing distribution of the Annuity. Please consult your tax advisor if you have any additional questions. Spousal Consent Rules for Retirement Plans -- Qualified Contracts If you are married at the time your payments commence, you may be required by federal law to choose an income option that provides survivor annuity income to your spouse, unless your spouse waives that right. Similarly, if you are married at the time of your death, federal law may require all or a portion of the death benefit to be paid to your spouse, even if you designated someone else as your beneficiary. A brief explanation of the applicable rules follows. For more information, consult the terms of your retirement arrangement. Defined Benefit Plans and Money Purchase Pension Plans. If you are married at the time your payments commence, federal law requires that benefits be paid to you in the form of a "qualified joint and survivor annuity" (QJSA), unless you and your spouse waive that right, in writing. Generally, this means that you will receive a reduced payment during your life and, upon your death, your spouse will receive at least one-half of what you were receiving for life. You may elect to receive another income option if your spouse consents to the election and waives his or her right to receive the QJSA. If your spouse consents to the alternative form of payment, your spouse may not receive any benefits from the plan upon your death. Federal law also requires that the plan pay a death benefit to your spouse if you are married and die before you begin receiving your benefit. This benefit must be available in the form of an annuity for your spouse's lifetime and is called a "qualified pre-retirement survivor annuity" (QPSA). If the plan pays death benefits to other beneficiaries, you may elect to have a beneficiary other than your spouse receive the death benefit, but only if your spouse consents to the election and waives his or her right to receive the QPSA. If your spouse consents to the alternate beneficiary, your spouse will receive no benefits from the plan upon your death. Any QPSA waiver prior to your attaining age 35 will become null and void on the first day of the calendar year in which you attain age 35, if still employed. Defined Contribution Plans (including 401(k) Plans and ERISA 403(b) Annuities). Spousal consent to a distribution is generally not required. Upon your death, your spouse will receive the entire death benefit, even if you designated someone else as your beneficiary, unless your spouse consents in writing to waive this right. Also, if you are married and elect an annuity as a periodic income option, federal law requires that you receive a QJSA (as described above), unless you and your spouse consent to waive this right. IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a distribution is not required. Upon your death, any death benefit will be paid to your designated beneficiary. Additional Information For additional information about federal tax law requirements applicable to tax favored plans, see the IRA Disclosure Statement. 89 General Information - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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.prudential.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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation, a Prudential Financial Company ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"), whose ultimate parent is Prudential Financial, Inc. American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; and (c) both fixed and variable immediate adjustable annuities. Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, Prudential Financial exercises significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options 90 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge, Distribution Charge (when applicable) and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B was consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which was subsequently renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B has multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B had no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion of Separate Account D. From time to time 91 General Information continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS additional investment managers may be employed or invest- ment managers may cease being employed. We are under no obligation to employ or continue to employ any investment manager(s) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its co-investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC, subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI, Prudential Investments LLC and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. We may add new Sub-accounts that invest in a series of underlying funds other than the Trust that is managed by an affiliate. Such series of funds may have a similar order from the SEC. You also should review the prospectuses for the other underlying funds in which various Sub-accounts invest as to whether they have obtained similar orders from the SEC. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of the underlying Portfolios. Under the terms of these agreements, American Skandia may provide administrative and support services to the Portfolios for which it receives a fee of up to 0.75% (currently) of the average assets allocated to the Portfolios under the Annuity from the investment adviser, distributor and/or the fund. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. 92 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS In addition, the investment adviser, sub-advisor or distribu- tor of the underlying Portfolios may also compensate us by providing reimbursement or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with the Annuity. These services may include, but are not limited to: co-sponsoring various meetings and seminars attended by broker-dealer firms' registered representatives and creating marketing material discussing the Annuity and the available options. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and co-distributor of American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration ("firms"). Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Commissions are paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of his or her firm. Commissions are generally based on a percentage of Purchase Payments made, up to a maximum of 5.5%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation to the distributing firm for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, in an effort to promote the sale of our products (which may include the placement of American Skandia and/or the Annuity on a preferred or recommended company or product list and/or access to the firm's registered representatives), we or ASM may enter into compensation arrangements with certain broker-dealer firms with respect to certain or all registered representatives of such firms under which such firms may receive separate compensation or reimbursement for, among other things, training of sales personnel and/or marketing and/or administrative services and/or other services they provide. These services may include, but are not limited to: educating customers of the firm on the Annuity's features; conducting due diligence and analysis, providing office access, operations and systems support; holding seminars intended to educate the firm's registered representatives and make them more knowledgeable about the Annuity; providing a dedicated marketing coordinator; providing priority sales desk support; and providing expedited marketing compliance approval. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or non-cash compensation. These arrangements may not be offered to all firms and the terms of such arrangements may differ between firms. A list of the firms to whom American Skandia pays an amount of greater than $10,000 under these arrangements is provided in the Statement of Additional Information, which is available upon request. You should note that firms and individual registered representatives and branch managers within some firms participating in one of these compensation arrangements might receive greater compensation for selling the Annuity than for selling a different annuity that is not eligible for these compensation arrangements. While compensation is generally taken into account as an expense in considering the charges applicable to an annuity product, any such compensation will be paid by us or ASM and will not result in any additional charge to you. Overall compensation paid to the distributing firm does not exceed, based on actuarial assumptions, 8.5% of the total Purchase Payments made. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. 93 General Information continued - ------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by an independent registered public accounting firm. American Skandia's annual report for the year ended December 31, 2004, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia -- Variable Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room by calling (202) 942-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. FINANCIAL STATEMENTS The financial statements of the separate account and American Skandia Life Assurance Corporation are included in the Statement of Additional Information. HOW TO CONTACT US You can contact us by: o calling our Customer Service Team at 1-800-680-8920 during our normal business hours, 8:30 a.m. EST to 8:00 p.m. EST, Monday through Friday, or Skandia's telephone automated response system at 1-800-766-4530. o writing to us via regular mail at American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, 2101 Welsh Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. o sending an email to service@prudential.com or visiting our Internet Website at www.americanskandia.prudential.com. o accessing information about your Annuity through our Internet Website at www.americanskandia.prudential.com. You can obtain account information by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. Please note that unless you tell us otherwise, we deem that all transactions that are directed by your investment professional with respect to your Annuity have been authorized by you. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. 94 - ------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia o American Skandia Life Assurance Corporation o American Skandia Life Assurance Corporation Variable Account B o American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor -- American Skandia Marketing, Incorporated Payments made to Promote Sale of our Products How the Unit Price is Determined Additional Information on Fixed Allocations o How We Calculate the Market Value Adjustment General Information o Voting Rights o Modification o Deferral of Transactions o Misstatement of Age or Sex o Ending the Offer Annuitization Experts Legal Experts Financial Statements 95 This page intentionally left blank APPENDIX A Appendix A -- Condensed Financial Information About Separate Account B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. Since November 18, 2002, we have been determining, on a daily basis, multiple Unit Prices for each Sub-account of Separate Account B. We compute multiple Unit Prices because several of our variable annuities invest in the same Sub-accounts, and these annuities deduct varying charges that correspond to each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charges for each optional benefit. Where an asset-based charge corresponding to a particular Sub-account within a new annuity product is identical to that in the same Sub-account within an existing annuity, the Unit Price for the new annuity will be identical to that of the existing annuity. In such cases, we will for reference purposes depict, in the condensed financial information for the new annuity, Unit Prices of the existing annuity. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. When a Unit Price was first calculated for a particular Sub-account, we set the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2005. A-1 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- International Equity 1 (2000) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Small-Cap Growth (2) (1999) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------
A-2 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Growth (3) (1994) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $11.01 -- -- -- -- Number of Units 714 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Large Company Growth (4) (1999) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $10.50 -- -- -- -- Number of Units 6,708 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------
A-3 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, ------------------------------------------------------ Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Equity Value (5) (1998) With No Optional Benefits Unit Price $9.99 $9.10 -- -- -- Number of Units 1,661 1,838 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $13.37 -- -- -- -- Number of Units 931 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Equity Income (6) (1999) With No Optional Benefits Unit Price $17.32 $15.79 -- -- -- Number of Units 19,612 10,586 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $13.48 $12.32 -- -- -- Number of Units 42,381 17,889 -- -- -- With GMWB Unit Value $11.74 -- -- -- -- Number of Units 2,400 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $13.40 $12.28 -- -- -- Number of Units 4,433 1,089 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $13.33 $12.25 -- -- -- Number of Units 39,530 5,900 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------
A-4 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Asset Allocation (7) (1994) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $11.07 -- -- -- -- Number of Units 5,863 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Total Return Bond (8) (1999) With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $10.26 -- -- -- -- Number of Units 1,190 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------
A-5 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST JP Morgan International Equity Portfolio With No Optional Benefits Unit Price $ 8.24 $ 7.13 5.53 6.86 8.99 Number of Units 553,542 362,254 153,652 136,976 33,897 With any one of GRO Plus, EBP or HAV Unit Price $ 14.78 $ 12.81 9.96 -- -- Number of Units 192,576 57,874 19,651 -- -- With GMWB Unit Value $ 12.46 $ 10.81 -- -- -- Number of Units 32,632 1,808 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.70 $ 12.77 9.95 -- -- Number of Units 22,423 8,138 293 -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.42 $ 10.81 -- -- -- Number of Units 1,120 106 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.62 $ 12.74 -- -- -- Number of Units 217,166 17,098 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits Unit Price $ 16.42 $ 14.32 10.35 14.1 18.68 Number of Units 1,953,908 1,166,396 7,064 5,277 6,782 With any one of GRO Plus, EBP or HAV Unit Price $ 15.35 $ 13.41 9.72 -- -- Number of Units 1,986,105 470,320 19,565 -- -- With GMWB Unit Value $ 12.07 $ 10.56 -- -- -- Number of Units 216,886 18,507 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.26 $ 13.38 9.72 -- -- Number of Units 291,719 54,833 16,068 -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.03 $ 10.56 -- -- -- Number of Units 38,033 6,110 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.18 $ 13.34 -- -- -- Number of Units 1,821,923 103,740 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.00 -- -- -- -- Number of Units 19,719 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-6 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST LSV International Value (1994) With No Optional Benefits Unit Price $ 7.01 $ 5.86 4.43 5.41 8.08 Number of Units 233,045 91,736 32,967 29,954 20,311 With any one of GRO Plus, EBP or HAV Unit Price $ 15.40 $ 12.92 9.8 -- -- Number of Units 76,147 20,245 4,776 -- -- With GMWB Unit Value $ 12.85 -- -- -- -- Number of Units 5,183 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.32 $ 12.88 9.79 -- -- Number of Units 6,471 632 279 -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.81 -- -- -- -- Number of Units 6,010 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.24 $ 12.85 -- -- -- Number of Units 69,494 5,504 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price $ 10.98 $ 9.40 7.48 8.64 9.72 Number of Units 213,485 123,219 46,925 49,536 23,151 With any one of GRO Plus, EBP or HAV Unit Price $ 14.42 $ 12.36 9.87 -- -- Number of Units 143,889 34,777 1,488 -- -- With GMWB Unit Value $ 12.54 $ 10.76 -- -- -- Number of Units 17,891 421 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.34 $ 12.33 -- -- -- Number of Units 19,007 416 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.50 -- -- -- -- Number of Units 3,805 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.26 $ 12.29 -- -- -- Number of Units 98,046 4,306 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-7 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST State Street Research Small-Cap Growth (9) With No Optional Benefits Unit Price $ 15.97 $ 17.38 12.12 18.7 20.25 Number of Units 107,136 145,364 6,331 2,439 978 With any one of GRO Plus, EBP or HAV Unit Price $ 12.43 $ 13.56 9.48 -- -- Number of Units 82,128 52,103 6,251 -- -- With GMWB Unit Value $ 9.43 $ 10.30 -- -- -- Number of Units 8,600 3,356 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.37 $ 13.53 -- -- -- Number of Units 40,854 8,575 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 9.40 -- -- -- -- Number of Units 3,927 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.30 $ 13.49 -- Number of Units 113,913 9,676 -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits Unit Price $ 7.41 $ 6.86 4.71 6.48 9.17 Number of Units 293,384 258,089 44,611 41,602 35,743 With any one of GRO Plus, EBP or HAV Unit Price $ 15.23 $ 14.13 9.72 -- -- Number of Units 78,039 27,101 2,506 -- -- With GMWB Unit Value $ 11.15 $ 10.36 -- -- -- Number of Units 15,137 1,850 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.15 $ 14.09 9.72 -- -- Number of Units 35,100 7,018 277 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.12 $ 10.35 -- -- -- Number of Units 3,898 1,939 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.07 $ 14.05 -- -- -- Number of Units 56,414 1,850 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-8 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $ 10.12 $ 8.33 4.98 7.12 9.08 Number of Units 1,169,995 859,909 25,040 10,912 243 With any one of GRO Plus, EBP or HAV Unit Price $ 19.97 $ 16.47 9.87 -- -- Number of Units 633,435 164,946 14,007 -- -- With GMWB Unit Value $ 12.78 $ 10.55 -- -- -- Number of Units 70,619 8,491 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 19.86 $ 16.42 9.86 -- -- Number of Units 77,506 18,658 5,370 -- -- With any one of EBP or HAV and GMW B Unit Price $ 12.74 $ 10.55 -- -- -- Number of Units 12,031 1,546 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 19.75 $ 16.38 -- -- -- Number of Units 562,771 37,078 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.70 -- -- -- -- Number of Units 6,328 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits Unit Price $ 16.64 $ 14.47 10.79 12.06 11.41 Number of Units 1,293,786 962,965 66,744 33,608 15,339 With any one of GRO Plus, EBP or HAV Unit Price $ 15.47 $ 13.49 10.09 -- -- Number of Units 1,067,140 344,340 32,914 -- -- With GMWB Unit Value $ 12.24 $ 10.69 -- -- -- Number of Units 120,010 14,484 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.39 $ 13.45 10.08 -- -- Number of Units 141,679 37,207 6,048 -- -- With any one of EBP or HAV and GMW B Unit Price $ 12.21 $ 10.68 -- -- -- Number of Units 16,803 2,140 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.31 $ 13.41 -- -- -- Number of Units 1,007,926 100,155 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.17 -- -- -- -- Number of Units 7,974 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-9 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits Unit Price $ 13.13 $ 10.89 7.69 -- -- Number of Units 138,078 131,066 124 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 17.14 $ 14.25 10.09 -- -- Number of Units 91,275 30,696 1,519 -- -- With GMWB Unit Value $ 12.85 $ 10.70 -- -- -- Number of Units 9,395 1,456 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 17.05 $ 14.21 -- -- -- Number of Units 39,619 7,542 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.81 -- -- -- -- Number of Units 4,319 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 16.96 $ 14.17 -- -- -- Number of Units 236,402 10,756 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits Unit Price $ 4.44 $ 3.87 2.98 4.15 7.03 Number of Units 2,232,502 1,535,565 28,812 17,882 2,473 With any one of GRO Plus, EBP or HAV Unit Price $ 14.68 $ 12.81 9.88 -- -- Number of Units 633,571 170,457 11,936 -- -- With GMWB Unit Value $ 12.05 $ 10.52 -- -- -- Number of Units 55,808 4,600 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.60 $ 12.77 9.88 -- -- Number of Units 102,613 20,463 5,904 -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.01 $ 10.51 -- -- -- Number of Units 10,211 2,424 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.52 $ 12.73 -- -- -- Number of Units 516,261 37,400 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.97 -- -- -- -- Number of Units 5,270 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-10 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits Unit Price $ 7.14 $ 6.23 4.83 7.11 9.71 Number of Units 555,160 371,267 56,712 51,711 36,882 With any one of GRO Plus, EBP or HAV Unit Price $ 13.99 $ 12.24 9.52 -- -- Number of Units 238,963 96,132 4,640 -- -- With GMWB Unit Value $ 11.83 -- -- -- -- Number of Units 20,882 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.92 $ 12.20 9.51 -- -- Number of Units 25,256 12,416 915 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.80 -- -- -- -- Number of Units 4,925 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.84 $ 12.17 -- -- -- Number of Units 153,923 16,702 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits Unit Price $ 16.76 $ 13.82 10.26 11.62 12.13 Number of Units 1,116,503 781,348 69,657 56,219 16,574 With any one of GRO Plus, EBP or HAV Unit Price $ 16.22 $ 13.40 9.98 -- -- Number of Units 989,311 268,150 16,671 -- -- With GMWB Unit Value $ 13.12 $ 10.86 -- -- -- Number of Units 108,730 7,071 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 16.13 $ 13.37 9.98 -- -- Number of Units 173,241 40,022 5,947 -- -- With any one of EBP or HAV and GMWB Unit Price $ 13.08 $ 10.85 -- -- -- Number of Units 22,361 4,186 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 16.04 $ 13.33 -- -- -- Number of Units 937,314 87,253 -- -- -- With HAV, EBP and GMWB Unit Value $ 13.04 -- -- -- -- Number of Units 6,141 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-11 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $ 6.49 $ 6.06 4.53 7.14 8.68 Number of Units 214,092 200,264 61,001 56,649 30,915 With any one of GRO Plus, EBP or HAV Unit Price $ 13.36 $ 12.50 9.37 -- -- Number of Units 123,773 34,250 1,959 -- -- With GMWB Unit Value $ 10.85 -- -- -- -- Number of Units 6,727 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.29 $ 12.47 -- -- -- Number of Units 7,519 2,323 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.22 $ 12.43 -- -- -- Number of Units 119,566 10,356 -- -- -- With HAV, EBP and GMWB Unit Value $ 10.79 -- -- -- -- Number of Units 964 -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $ 11.63 $ 10.21 7.61 9.72 10.07 Number of Units 256,401 140,873 38,982 26,857 12,895 With any one of GRO Plus, EBP or HAV Unit Price $ 15.27 $ 13.44 10.05 -- -- Number of Units 122,314 33,721 2,516 -- -- With GMWB Unit Value $ 12.24 $ 10.79 -- -- -- Number of Units 4,942 1,880 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.19 $ 13.41 -- -- -- Number of Units 9,727 2,046 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.21 -- -- -- -- Number of Units 6,426 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.11 $ 13.37 -- -- -- Number of Units 116,474 12,627 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.17 -- -- -- -- Number of Units 1,376 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------
A-12 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $ 17.81 $ 13.75 10.42 11.18 11.24 Number of Units 192,336 75,013 4,994 1,879 -- With any one of GRO Plus, EBP or HAV Unit Price $ 17.75 $ 13.74 10.44 -- -- Number of Units 148,837 20,929 1,940 -- -- With GMWB Unit Value $ 14.52 $ 11.25 -- -- -- Number of Units 15,011 1,184 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 17.65 $ 13.70 -- -- -- Number of Units 37,223 1,910 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 14.48 -- -- -- -- Number of Units 1,819 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 17.56 $ 13.66 -- -- -- Number of Units 172,186 24,634 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Alliance Growth (10) (1996) With No Optional Benefits Unit Price $ 6.19 $ 5.93 4.86 7.12 8.46 Number of Units 326,194 263,698 106,056 106,762 97,356 With any one of GRO Plus, EBP or HAV Unit Price $ 11.86 $ 11.39 9.35 -- -- Number of Units 70,775 28,954 1,038 -- -- With GMWB Unit Value $ 10.69 $ 10.27 -- -- -- Number of Units 21,990 7,530 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 11.80 $ 11.35 9.34 -- -- Number of Units 7,799 4,138 618 -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.66 -- -- -- -- Number of Units 941 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.73 $ 11.32 -- -- -- Number of Units 84,417 2,206 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-13 APPENDIX A Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, --------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits Unit Price $ 7.04 $ 6.44 5.31 7.48 9.68 Number of Units 791,823 893,170 112,701 47,656 3,089 With any one of GRO Plus, EBP or HAV Unit Price $ 12.50 $ 11.47 9.47 -- -- Number of Units 305,582 188,109 18,241 -- -- With GMWB Unit Value $ 11.13 $ 10.22 -- -- -- Number of Units 21,410 7,308 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.43 $ 11.43 -- -- -- Number of Units 26,773 6,479 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.09 $ 10.21 -- -- -- Number of Units 4,350 1,319 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.37 $ 11.40 -- -- -- Number of Units 304,760 18,900 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $ 9.67 $ 8.46 6.5 7.8 10.09 Number of Units 5,717,404 4,075,719 228,033 182,904 114,992 With any one of GRO Plus, EBP or HAV Unit Price $ 14.07 $ 12.35 9.52 -- -- Number of Units 3,543,456 1,021,520 78,038 -- -- With GMWB Unit Value $ 11.74 $ 10.31 -- -- -- Number of Units 386,737 35,775 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.00 $ 12.32 9.52 -- -- Number of Units 479,057 126,883 26,662 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.70 $ 10.31 -- -- -- Number of Units 73,444 10,353 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.92 $ 12.28 -- -- -- Number of Units 3,136,818 215,988 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.66 -- -- -- -- Number of Units 32,384 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------
A-14 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits Unit Price $ 4.68 $ 4.57 3.69 5.33 7.9 Number of Units 733,920 604,491 405,437 404,404 235,747 With any one of GRO Plus, EBP or HAV Unit Price $ 11.93 $ 11.68 9.47 -- -- Number of Units 162,830 30,932 1,309 -- -- With GMWB Unit Value $ 10.66 -- -- -- -- Number of Units 8,927 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 11.86 $ 11.65 -- -- -- Number of Units 25,285 2,681 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.63 -- -- -- -- Number of Units 884 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.80 $ 11.61 -- -- -- Number of Units 122,739 17,452 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- AST DeAM Large-Cap Value (2000) With No Optional Benefits Unit Price $ 11.18 $ 9.58 7.67 9.17 9.83 Number of Units 191,637 85,554 7,126 1,696 442 With any one of GRO Plus, EBP or HAV Unit Price $ 14.49 $ 12.45 9.98 -- -- Number of Units 114,540 40,259 4,779 -- -- With GMWB Unit Value $ 12.39 $ 10.66 -- -- -- Number of Units 19,713 2,495 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.41 $ 12.41 -- -- -- Number of Units 46,811 6,103 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.35 -- -- -- -- Number of Units 6,736 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.33 $ 12.38 -- -- -- Number of Units 175,087 9,674 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------
A-15 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Alliance/Bernstein Growth + Value (11) (2001) With No Optional Benefits Unit Price $ 9.66 $ 8.89 7.14 9.64 -- Number of Units 194,363 137,293 37,810 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.19 $ 12.16 9.79 -- -- Number of Units 71,486 29,927 2,021 -- -- With GMWB Unit Value $ 11.28 -- -- -- -- Number of Units 16,087 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.12 $ 12.13 -- -- -- Number of Units 9,651 2,379 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.24 -- -- -- -- Number of Units 1,922 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.05 $ 12.09 -- -- -- Number of Units 72,365 5,118 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Sanford Bernstein Core Value (12) (2001) With No Optional Benefits Unit Price $ 12.28 $ 10.91 8.61 10.05 -- Number of Units 603,508 453,569 82,054 18,453 -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.30 $ 12.75 10.09 -- -- Number of Units 243,464 91,128 65,721 -- -- With GMWB Unit Value $ 12.00 $ 10.70 -- -- -- Number of Units 45,483 4,032 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.23 $ 12.71 10.08 -- -- Number of Units 51,451 16,568 25,273 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.96 $ 10.70 -- -- -- Number of Units 7,978 1,276 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.15 $ 12.67 -- -- -- Number of Units 220,419 11,518 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.92 -- -- -- -- Number of Units 1,051 -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------------
A-16 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $ 22.03 $ 16.17 11.91 11.75 11.57 Number of Units 281,181 149,582 25,464 16,487 16,557 With any one of GRO Plus, EBP or HAV Unit Price $ 19.00 $ 13.99 10.33 -- -- Number of Units 304,865 61,714 1,341 -- -- With GMWB Unit Value $ 14.23 $ 10.48 -- -- -- Number of Units 36,159 4,313 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 18.90 $ 13.95 -- -- -- Number of Units 41,357 5,221 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 14.19 -- -- -- -- Number of Units 2,049 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 18.80 $ 13.91 -- -- -- Number of Units 184,027 13,615 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Sanford Bernstein Managed Index 500 (13) (1998) With No Optional Benefits Unit Price $ 8.99 $ 8.28 6.59 8.41 9.46 Number of Units 642,882 554,156 90,506 39,414 9,941 With any one of GRO Plus, EBP or HAV Unit Price $ 13.33 $ 12.31 9.81 -- -- Number of Units 220,398 82,843 3,351 -- -- With GMWB Unit Value $ 11.44 $ 10.57 -- -- -- Number of Units 18,801 853 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.26 $ 12.27 9.81 -- -- Number of Units 12,699 2,937 681 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.41 $ 10.57 -- -- -- Number of Units 4,398 644 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.19 $ 12.24 -- -- -- Number of Units 389,368 16,957 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------
A-17 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits Unit Price $ 9.48 $ 8.52 6.7 8.47 9.36 Number of Units 613,910 339,653 124,168 113,372 70,887 With any one of GRO Plus, EBP or HAV Unit Price $ 13.92 $ 12.56 9.9 -- -- Number of Units 233,605 63,878 813 -- -- With GMWB Unit Value $ 11.85 $ 10.70 -- -- -- Number of Units 45,084 2,828 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.85 $ 12.52 -- -- -- Number of Units 39,945 11,533 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.82 $ 10.69 -- -- -- Number of Units 3,722 2,487 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.77 $ 12.48 -- -- -- Number of Units 198,789 2,386 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST Alliance Growth and Income (14) (1992) With No Optional Benefits Unit Price $ 11.24 $ 10.25 7.84 10.35 10.53 Number of Units 4,119,501 3,076,626 142,152 205,232 34,439 With any one of GRO Plus, EBP or HAV Unit Price $ 14.03 $ 12.83 9.84 -- -- Number of Units 3,211,199 932,323 18,189 -- -- With GMWB Unit Value $ 11.63 $ 10.64 -- -- -- Number of Units 361,569 38,248 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.96 $ 12.80 9.83 -- -- Number of Units 421,261 106,644 717 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.59 $ 10.64 -- -- -- Number of Units 53,860 10,811 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.88 $ 12.76 -- -- -- Number of Units 2,899,917 187,011 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.55 -- -- -- -- Number of Units 32,525 -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------
A-18 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AST Hotchkis & Wiley Large-Cap Value With No Optional Benefits Unit Price $ 10.25 $ 8.99 7.59 9.31 10.32 Number of Units 417,314 204,589 44,419 44,212 8,596 With any one of GRO Plus, EBP or HAV Unit Price $ 13.30 $ 11.70 9.9 -- -- Number of Units 126,725 38,215 5,087 -- -- With GMWB Unit Value $ 11.88 -- -- -- -- Number of Units 27,234 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.23 $ 11.67 9.9 -- -- Number of Units 49,033 11,538 200 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.84 $ 10.45 -- -- -- Number of Units 9,024 1,288 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.16 $ 11.63 -- -- -- Number of Units 173,888 21,961 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------------------- AST DeAM Global Allocation (15) (1993) With No Optional Benefits Unit Price $ 9.55 $ 8.71 7.38 8.84 10.14 Number of Units 78,619 61,801 34,451 38,208 30,678 With any one of GRO Plus, EBP or HAV Unit Price $ 12.81 $ 11.70 9.94 -- -- Number of Units 16,079 1,832 67 -- -- With GMWB Unit Value $ 11.35 -- -- -- -- Number of Units 4,895 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.74 $ 11.67 -- -- -- Number of Units 14,649 1,259 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.67 $ 11.64 -- -- -- Number of Units 35,622 483 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------------
A-19 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $ 10.56 $ 9.81 8.36 9.38 9.87 Number of Units 146,721 115,095 5,490 4,905 1,725 With any one of GRO Plus, EBP or HAV Unit Price $ 12.54 $ 11.68 9.97 -- -- Number of Units 102,109 30,366 2,914 -- -- With GMWB Unit Value $ 11.10 -- -- -- -- Number of Units 2,728 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.47 $ 11.64 -- -- -- Number of Units 10,605 1,824 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.06 -- -- -- -- Number of Units 2,700 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.40 $ 11.61 -- -- -- Number of Units 175,763 18,977 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $ 11.39 $ 10.37 8.47 9.52 10.12 Number of Units 357,085 222,150 13,799 13,152 2,412 With any one of GRO Plus, EBP or HAV Unit Price $ 13.33 $ 12.18 9.97 -- -- Number of Units 202,648 83,496 4,012 -- -- With GMWB Unit Value $ 11.48 $ 10.49 -- -- -- Number of Units 57,827 427 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.26 $ 12.14 -- -- -- Number of Units 27,099 12,666 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.44 $ 10.49 -- -- -- Number of Units 4,487 2,847 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.19 $ 12.11 -- -- -- Number of Units 349,177 27,414 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.41 -- -- -- -- Number of Units 1,537 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-20 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits Unit Price $ 14.73 $ 13.73 12.32 10.84 10.7 Number of Units 657,913 289,862 36,987 16,390 -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.27 $ 11.47 10.32 -- -- Number of Units 759,419 92,875 2,954 -- -- With GMWB Unit Value $ 11.06 $ 10.35 -- -- -- Number of Units 85,967 7,131 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.21 $ 11.44 10.31 -- -- Number of Units 103,452 13,487 4,861 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.03 $ 10.34 -- -- -- Number of Units 9,789 1,457 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.14 $ 11.40 -- -- -- Number of Units 712,411 24,361 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.00 -- -- -- -- Number of Units 9,975 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ AST Goldman Sachs High Yield Portfolio With No Optional Benefits Unit Price $ 12.06 $ 10.99 9.16 9.27 9.37 Number of Units 957,756 906,947 73,614 45,297 12,929 With any one of GRO Plus, EBP or HAV Unit Price $ 13.46 $ 12.30 10.27 -- -- Number of Units 395,118 144,343 2,990 -- -- With GMWB Unit Value $ 11.37 $ 10.40 -- -- -- Number of Units 51,737 11,264 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.38 $ 12.26 -- -- -- Number of Units 46,959 12,603 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.34 $ 10.40 -- -- -- Number of Units 6,217 3,250 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.31 $ 12.23 -- -- -- Number of Units 426,333 27,535 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-21 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $ 12.71 $ 11.98 10.22 10.3 10.13 Number of Units 1,012,739 814,135 43,077 16,628 425 With any one of GRO Plus, EBP or HAV Unit Price $ 12.67 $ 11.97 10.24 -- -- Number of Units 733,436 309,328 27,024 -- -- With GMWB Unit Value $ 11.00 $ 10.41 -- -- -- Number of Units 92,187 12,397 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.60 $ 11.94 10.23 -- -- Number of Units 108,071 20,920 274 -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.97 $ 10.41 -- -- -- Number of Units 14,516 1,266 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.53 $ 11.90 -- -- -- Number of Units 904,128 42,593 -- -- -- With HAV, EBP and GMWB Unit Value $ 10.94 -- -- -- -- Number of Units 4,145 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $ 13.72 $ 13.23 12.72 11.8 10.97 Number of Units 3,074,732 2,301,863 362,294 275,317 37,918 With any one of GRO Plus, EBP or HAV Unit Price $ 10.91 $ 10.55 10.17 -- -- Number of Units 3,124,509 1,067,126 87,940 -- -- With GMWB Unit Value $ 10.43 $ 10.10 -- -- -- Number of Units 329,463 37,841 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 10.85 $ 10.52 10.17 -- -- Number of Units 356,784 93,573 11,308 -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.40 $ 10.09 -- -- -- Number of Units 35,761 3,287 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.79 $ 10.49 -- -- -- Number of Units 3,495,678 378,676 -- -- -- With HAV, EBP and GMWB Unit Value $ 10.37 -- -- -- -- Number of Units 19,700 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-22 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $ 12.18 $ 12.08 10.09 11.29 10.59 Number of Units 2,189,975 956,856 38,260 112,948 1,940 With any one of GRO Plus, EBP or HAV Unit Price $ 10.32 $ 10.26 10.09 -- -- Number of Units 1,926,546 238,601 3,018 -- -- With GMWB Unit Value $ 10.07 $ 10.03 -- -- -- Number of Units 264,755 23,203 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 10.26 $ 10.23 -- -- -- Number of Units 295,271 30,532 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.04 $ 10.02 -- -- -- Number of Units 23,826 1,299 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.21 $ 10.21 -- -- -- Number of Units 2,764,809 36,640 -- -- -- With HAV, EBP and GMWB Unit Value $ 10.01 -- -- -- -- Number of Units 11,324 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits Unit Price $ 10.46 $ 10.51 10.57 10.57 10.32 Number of Units 1,663,940 1,245,396 403,604 179,509 29,567 With any one of GRO Plus, EBP or HAV Unit Price $ 9.84 $ 9.91 9.99 -- -- Number of Units 860,728 432,412 69,199 -- -- With GMWB Unit Value $ 9.90 $ 9.98 -- -- -- Number of Units 167,246 5,609 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 9.79 $ 9.88 9.99 -- -- Number of Units 118,431 40,239 11,113 -- -- With any one of EBP or HAV and GMWB Unit Price $ 9.87 -- -- -- -- Number of Units 6,752 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 9.73 $ 9.85 -- -- -- Number of Units 1,312,018 81,304 -- -- -- With HAV, EBP and GMWB Unit Value $ 9.84 -- -- -- -- Number of Units 521 -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-23 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits Unit Price $ 12.52 $ 10.59 6.71 7.53 8.19 Number of Units 264,541 122,136 6,530 6,555 3,293 With any one of GRO Plus, EBP or HAV Unit Price $ 18.44 $ 15.63 -- -- -- Number of Units 118,837 20,956 -- -- -- With GMWB Unit Value $ 12.85 $ 10.90 -- -- -- Number of Units 31,734 1,863 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 18.35 $ 15.59 -- -- -- Number of Units 26,850 167 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.81 -- -- -- -- Number of Units 629 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 18.25 $ 15.54 -- -- -- Number of Units 161,653 12,503 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ AIM V.I. -- Dynamics (1999) With No Optional Benefits Unit Price $ 6.96 $ 6.22 4.57 6.8 9.99 Number of Units 188,184 137,600 18,808 15,825 22,264 With any one of GRO Plus, EBP or HAV Unit Price $ 14.71 $ 13.18 9.71 -- -- Number of Units 117,657 27,792 1,332 -- -- With GMWB Unit Value $ 11.76 -- -- -- -- Number of Units 7,898 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.64 $ 13.14 -- -- -- Number of Units 8,375 1,003 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.56 $ 13.11 -- -- -- Number of Units 61,543 4,848 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-24 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits Unit Price $ 3.32 $ 3.21 2.24 4.27 7.98 Number of Units 78,567 42,720 30,448 35,767 25,984 With any one of GRO Plus, EBP or HAV Unit Price $ 13.83 -- -- -- -- Number of Units 216 -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------ AIM V.I. -- Health Sciences (1999) With No Optional Benefits Unit Price $ 11.34 $ 10.68 8.46 11.35 13.14 Number of Units 92,506 59,116 19,405 27,104 32,969 With any one of GRO Plus, EBP or HAV Unit Price $ 12.69 $ 11.98 9.52 -- -- Number of Units 39,343 16,675 892 -- -- With GMWB Unit Value $ 11.50 $ 10.87 -- -- -- Number of Units 8,859 1,773 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.63 $ 11.95 9.52 -- -- Number of Units 6,838 2,812 223 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.47 -- -- -- -- Number of Units 63 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.56 $ 11.91 -- -- -- Number of Units 87,037 2,077 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-25 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, ------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits Unit Price $ 12.72 $ 11.85 9.26 11.02 12.38 Number of Units 44,091 48,538 7,204 8,536 9,786 With any one of GRO Plus, EBP or HAV Unit Price $ 13.56 $ 12.67 9.93 -- -- Number of Units 19,908 9,201 979 -- -- With GMWB Unit Value $ 11.20 -- -- -- -- Number of Units 4,380 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.49 $ 12.63 9.92 -- -- Number of Units 8,738 2,426 190 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.17 -- -- -- -- Number of Units 1,383 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.42 $ 12.60 -- -- -- Number of Units 67,581 20,268 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------------- Evergreen VA -- International Equity (2000) With No Optional Benefits Unit Price $ 12.31 $ 10.46 -- -- -- Number of Units 62,400 24,847 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.27 $ 10.45 -- -- -- Number of Units 24,314 5,552 -- -- -- With GMWB Unit Value $ 12.26 -- -- -- -- Number of Units 14,337 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.24 $ 10.45 -- -- -- Number of Units 7,296 1,075 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- $ 10.45 -- -- -- Number of Units -- 970 -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.21 $ 10.45 -- -- -- Number of Units 32,858 827 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------------
A-26 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, --------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- Evergreen VA -- Special Equity (16) (1999) With No Optional Benefits Unit Price $ 9.57 $ 9.16 6.1 8.49 9.35 Number of Units 92,559 69,344 5,427 5,085 -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.38 $ 14.76 9.86 -- -- Number of Units 71,520 19,312 295 -- -- With GMWB Unit Value $ 10.64 $ 10.22 -- -- -- Number of Units 8,000 2,186 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.30 $ 14.71 -- -- -- Number of Units 27,564 1,917 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.22 $ 14.67 -- -- -- Number of Units 46,748 3,620 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits Unit Price $ 9.75 $ 9.21 -- 9.04 -- Number of Units 26,849 15,743 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.01 $ 13.27 -- -- -- Number of Units 22,947 3,320 -- -- -- With GMWB Unit Value $ 11.04 -- -- -- -- Number of Units 1,787 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.93 $ 13.23 -- -- -- Number of Units 263 27 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.00 -- -- -- -- Number of Units 3,387 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.86 $ 13.19 -- -- -- Number of Units 31,153 283 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------------------
A-27 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, ------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - -------------------------------------------------------------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits Unit Price $ 7.90 $ 7.00 5.11 6.97 9.3 Number of Units 201,444 75,543 2,539 7,317 -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.93 $ 13.26 9.7 -- -- Number of Units 13,634 2,495 69 -- -- With GMWB Unit Value $ 12.49 -- -- -- -- Number of Units 2,913 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.85 -- -- -- -- Number of Units 19,592 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.45 -- -- -- -- Number of Units 140 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.77 $ 13.18 -- -- -- Number of Units 99,557 13,365 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.41 -- -- -- -- Number of Units 562 -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits Unit Price $ 12.43 $ 12.66 -- -- -- Number of Units 63,254 47,272 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.71 $ 16.03 -- -- -- Number of Units 20,171 6,176 -- -- -- With GMWB Unit Value $ 10.22 -- -- -- -- Number of Units 7,026 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.62 $ 15.99 -- -- -- Number of Units 18,117 173 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.19 -- -- -- -- Number of Units 98 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.54 $ 15.94 -- -- -- Number of Units 74,988 10,432 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------
A-28 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits Unit Price $ 9.65 $ 9.09 -- -- -- Number of Units 87,251 28,579 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.52 $ 12.76 -- -- -- Number of Units 11,573 7,868 -- -- -- With GMWB Unit Value $ 10.44 -- -- -- -- Number of Units 3,086 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.45 -- -- -- -- Number of Units 19,547 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.38 $ 12.69 -- -- -- Number of Units 35,968 1,883 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------- ProFund VP -- Banks (2002) With No Optional Benefits Unit Price $ 12.11 $ 10.97 -- -- -- Number of Units 12,480 8,886 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.22 $ 12.92 -- -- -- Number of Units 12,919 4,576 -- -- -- With GMWB Unit Value $ 11.67 -- -- -- -- Number of Units 2,773 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.15 -- -- -- -- Number of Units 2,561 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.07 -- -- -- -- Number of Units 8,847 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------
A-29 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits Unit Price $ 12.00 $ 11.02 -- -- -- Number of Units 42,597 53,759 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.56 $ 13.41 10.35 -- -- Number of Units 17,377 3,940 70 -- -- With GMWB Unit Value $ 12.54 -- -- -- -- Number of Units 9,417 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.48 -- -- -- -- Number of Units 648 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.40 $ 13.33 -- -- -- Number of Units 23,555 8,054 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits Unit Price $ 7.73 $ 7.14 5.17 8.38 -- Number of Units 32,726 20,329 460 3,279 -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------
A-30 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Consumer Services (2002) With No Optional Benefits Unit Price $ 9.67 $ 9.10 -- -- -- Number of Units 20,288 13,935 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.41 $ 11.71 9.38 -- -- Number of Units 27,094 2,321 686 -- -- With GMWB Unit Value $ 10.78 -- -- -- -- Number of Units 10,848 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.35 -- -- -- -- Number of Units 65 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.28 -- -- -- -- Number of Units 17,197 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------- ProFund VP -- Consumer Goods (2002) With No Optional Benefits Unit Price $ 10.47 $ 9.71 -- -- -- Number of Units 7,578 3,821 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.44 $ 11.56 9.91 -- -- Number of Units 8,109 1,762 74 -- -- With GMWB Unit Value $ 11.49 -- -- -- -- Number of Units 3,092 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.37 $ 11.53 -- -- -- Number of Units 147 1,780 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.31 $ 11.49 -- -- -- Number of Units 8,437 954 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------
A-31 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits Unit Price $ 11.62 $ 9.10 -- 9.2 -- Number of Units 186,654 50,155 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.53 $ 12.19 10.12 -- -- Number of Units 66,223 2,523 641 -- -- With GMWB Unit Value $ 13.91 -- -- -- -- Number of Units 8,976 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.45 $ 12.16 -- -- -- Number of Units 23,701 239 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.37 $ 12.12 -- -- -- Number of Units 58,804 4,007 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------ ProFund VP -- Financials (2001) With No Optional Benefits Unit Price $ 10.77 $ 9.88 7.76 9.23 -- Number of Units 70,662 32,283 3,258 8,154 -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.60 $ 12.51 9.85 -- -- Number of Units 33,262 3,980 73 -- -- With GMWB Unit Value $ 11.36 -- -- -- -- Number of Units 6,588 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.52 $ 12.47 9.84 -- -- Number of Units 20,343 388 401 -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.45 $ 12.44 -- -- -- Number of Units 17,749 1,060 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------
A-32 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits Unit Price $ 8.38 $ 8.29 7.15 9.37 -- Number of Units 91,641 23,591 1,235 2,564 -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.19 $ 11.10 9.6 -- -- Number of Units 43,276 11,578 1,177 -- -- With GMWB Unit Value $ 10.74 -- -- -- -- Number of Units 490 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 11.13 $ 11.07 9.6 -- -- Number of Units 31,097 402 416 -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.07 $ 11.04 -- -- -- Number of Units 8,570 1,969 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits Unit Price $ 11.27 $ 10.08 -- -- -- Number of Units 22,333 11,186 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.40 $ 12.91 10.21 -- -- Number of Units 15,368 3,639 72 -- -- With GMWB Unit Value $ 12.18 -- -- -- -- Number of Units 6,290 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.32 -- -- -- -- Number of Units 3,396 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.24 -- -- -- -- Number of Units 4,426 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------
A-33 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits Unit Price $ 18.08 $ 15.10 -- -- -- Number of Units 20,851 8,287 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits Unit Price $ 8.02 $ 8.95 -- -- -- Number of Units 27,913 24,743 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 8.96 $ 10.02 -- -- -- Number of Units 40,402 6,951 -- -- -- With GMWB Unit Value $ 9.51 $ 10.65 -- -- -- Number of Units 2,904 955 -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 8.91 -- -- -- -- Number of Units 32 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 8.86 $ 9.96 -- -- -- Number of Units 23,137 2,871 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------
A-34 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits Unit Price $ 11.90 $ 13.38 9.73 -- -- Number of Units 102,230 89,687 1,179 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.76 $ 15.51 11.31 -- -- Number of Units 18,961 6,099 65 -- -- With GMWB Unit Value $ 10.26 -- -- -- -- Number of Units 5,163 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.69 $ 15.46 -- -- -- Number of Units 22,059 158 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.23 -- -- -- -- Number of Units 842 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.61 -- -- -- -- Number of Units 42,627 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits Unit Price $ 17.58 $ 14.00 10.65 10.78 -- Number of Units 53,006 18,355 2,230 2,306 -- With any one of GRO Plus, EBP or HAV Unit Price $ 16.78 $ 13.39 10.21 -- -- Number of Units 32,379 5,332 73 -- -- With GMWB Unit Value $ 13.17 -- -- -- -- Number of Units 9,348 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 16.69 $ 13.35 -- -- -- Number of Units 2,337 850 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 16.60 $ 13.31 -- -- -- Number of Units 58,062 3,835 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------
A-35 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Semiconductor (2002) With No Optional Benefits Unit Price $ 7.23 $ 9.58 -- -- -- Number of Units 52,485 17,621 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------- ProFund VP -- Technology (2001) With No Optional Benefits Unit Price $ 4.91 $ 5.00 -- 5.92 -- Number of Units 88,720 74,180 -- 12,704 -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.10 -- -- -- -- Number of Units 114 -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------
A-36 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits Unit Price $ 5.04 $ 4.41 -- 7.11 -- Number of Units 118,731 30,179 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.53 $ 10.13 -- -- -- Number of Units 16,606 4,026 -- -- -- With GMWB Unit Value $ 12.64 -- -- -- -- Number of Units 3,263 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 11.47 $ 10.10 -- -- -- Number of Units 24,292 334 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.40 -- -- -- -- Number of Units 6,379 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits Unit Price $ 8.75 $ 7.32 6.11 8.13 -- Number of Units 79,702 18,902 491 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.13 $ 12.69 10.62 -- -- Number of Units 74,584 7,430 836 -- -- With GMWB Unit Value $ 12.61 -- -- -- -- Number of Units 7,469 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.05 $ 12.65 -- -- -- Number of Units 4,044 2,920 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.97 $ 12.62 -- -- -- Number of Units 57,208 8,137 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------
A-37 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits Unit Price $ 10.65 $ 9.91 -- -- -- Number of Units 412,259 394,427 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.93 $ 12.07 -- -- -- Number of Units 182,468 18,458 -- -- -- With GMWB Unit Value $ 11.34 -- -- -- -- Number of Units 26,383 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.86 $ 12.03 -- -- -- Number of Units 15,572 2,154 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.31 -- -- -- -- Number of Units 40 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 12.79 $ 12.00 -- -- -- Number of Units 171,187 1,179 -- -- -- With HAV, EBP and GMWB Unit Value $ 11.27 -- -- -- -- Number of Units 1,158 -- -- -- -- - ------------------------------------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits Unit Price $ 9.09 $ 10.26 13.78 11.55 -- Number of Units 16,155 28,299 2,012 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 6.65 $ 7.53 10.14 -- -- Number of Units 5,797 3,186 658 -- -- With GMWB Unit Value $ 8.21 -- -- -- -- Number of Units 1,186 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 6.62 $ 7.51 -- -- -- Number of Units 42,157 2,165 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 8.19 -- -- -- -- Number of Units 532 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 6.58 -- -- -- -- Number of Units 41,480 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------
A-38 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- UltraBull (2001) With No Optional Benefits Unit Price $ 8.25 $ 7.13 4.72 7.48 -- Number of Units 305,666 56,257 2,988 -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits Unit Price $ 5.44 $ 5.07 -- 5.77 -- Number of Units 293,311 257,947 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.47 $ 13.54 9.36 -- -- Number of Units 105,135 12,607 205 -- -- With GMWB Unit Value $ 11.00 -- -- -- -- Number of Units 32,794 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.39 $ 13.50 -- -- -- Number of Units 67,576 4,836 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 14.31 $ 13.46 -- -- -- Number of Units 128,923 5,378 -- -- -- With HAV, EBP and GMWB Unit Value $ 10.94 -- -- -- -- Number of Units 2,991 -- -- -- -- - -------------------------------------------------------------------------------------------------------------
A-39 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------------------ ProFund VP -- Short OTC (2002) With No Optional Benefits Unit Price $ 5.99 $ 6.83 11.03 -- -- Number of Units 77,280 40,617 934 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 5.64 $ 6.45 -- -- -- Number of Units 7,841 10,811 -- -- -- With GMWB Unit Value $ 8.31 -- -- -- -- Number of Units 265 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 5.61 -- -- -- -- Number of Units 36 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 5.58 -- -- -- -- Number of Units 7,191 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits Unit Price $ 0.87 $ 0.77 -- 1.25 4.06 Number of Units 6,405,048 890,270 -- 58,556 3,787 With any one of GRO Plus, EBP or HAV Unit Price $ 19.53 -- -- -- -- Number of Units 90 -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ---------------------------------------------------------------------------------------------------------------
A-40 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
x Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits Unit Price $ 11.80 $ 10.30 -- -- -- Number of Units 87,968 59,964 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.38 $ 13.46 10.07 -- -- Number of Units 64,251 18,261 2,821 -- -- With GMWB Unit Value $ 12.30 -- -- -- -- Number of Units 3,276 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.29 -- -- -- -- Number of Units 10,601 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.26 -- -- -- -- Number of Units 215 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.21 $ 13.39 -- -- -- Number of Units 110,312 4,164 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.23 -- -- -- -- Number of Units 216 -- -- -- -- - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits Unit Price $ 10.70 $ 9.75 -- -- -- Number of Units 80,520 24,107 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.54 $ 12.38 9.82 -- -- Number of Units 55,896 17,202 2,879 -- -- With GMWB Unit Value $ 11.21 -- -- -- -- Number of Units 2,696 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.47 -- -- -- -- Number of Units 27,151 -- -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.18 -- -- -- -- Number of Units 88 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 13.39 $ 12.31 -- -- -- Number of Units 53,472 2,028 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------------------
A-41 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits Unit Price $ 12.13 $ 9.62 -- -- -- Number of Units 115,073 34,556 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 20.80 $ 16.53 -- -- -- Number of Units 28,117 5,328 -- -- -- With GMWB Unit Value $ 13.97 -- -- -- -- Number of Units 4,794 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 20.68 $ 16.49 -- -- -- Number of Units 853 1,873 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 13.92 -- -- -- -- Number of Units 19 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 20.57 $ 16.44 -- -- -- Number of Units 101,493 3,746 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits Unit Price $ 11.22 $ 9.46 -- -- -- Number of Units 123,988 105,751 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.93 $ 13.47 10.15 -- -- Number of Units 75,890 27,349 568 -- -- With GMWB Unit Value $ 12.63 -- -- -- -- Number of Units 18,991 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.85 $ 13.43 -- -- -- Number of Units 24,538 4,300 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.59 -- -- -- -- Number of Units 45 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.76 $ 13.39 -- -- -- Number of Units 163,443 24,769 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.55 -- -- -- -- Number of Units 974 -- -- -- -- - -------------------------------------------------------------------------------------------------------------
A-42 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits Unit Price $ 12.11 $ 10.23 -- -- -- Number of Units 237,000 65,882 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.47 $ 13.11 -- -- -- Number of Units 63,321 24,983 -- -- -- With GMWB Unit Value $ 12.32 -- -- -- -- Number of Units 14,604 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 15.39 $ 13.07 -- -- -- Number of Units 32,374 4,774 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 12.29 -- -- -- -- Number of Units 162 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 15.31 $ 13.04 -- -- -- Number of Units 170,800 21,997 -- -- -- With HAV, EBP and GMWB Unit Value $ 12.25 -- -- -- -- Number of Units 938 -- -- -- -- - ------------------------------------------------------------------------------------------------------------ ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits Unit Price $ 12.28 $ 9.49 4.82 8.5 9.32 Number of Units 143,175 60,051 953 -- 3,174 With any one of GRO Plus, EBP or HAV Unit Price $ 25.20 -- -- -- -- Number of Units 4,066 -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------
A-43 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits Unit Price $ 11.91 $ 11.15 11.59 -- -- Number of Units 42,782 20,058 1,005 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.43 $ 9.79 10.2 -- -- Number of Units 11,478 6,691 592 -- -- With GMWB Unit Value $ 10.89 -- -- -- -- Number of Units 3,036 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 10.38 $ 9.76 -- -- -- Number of Units 1,887 818 -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.32 $ 9.73 -- -- -- Number of Units 120,311 14,956 -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------ ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits Unit Price $ 6.70 $ 7.61 -- -- -- Number of Units 266,169 78,428 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 8.04 $ 9.16 9.7 -- -- Number of Units 168,043 31,892 3,456 -- -- With GMWB Unit Value $ 8.37 -- -- -- -- Number of Units 25,505 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 8.00 $ 9.13 -- -- -- Number of Units 21,280 1,988 -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 8.35 -- -- -- -- Number of Units 7,572 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 7.95 $ 9.11 -- -- -- Number of Units 333,355 4,991 -- -- -- With HAV, EBP and GMWB Unit Value $ 8.32 -- -- -- -- Number of Units 307 -- -- -- -- - ------------------------------------------------------------------------------------------------------------
A-44 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------- ProFund VP -- Large-Cap Growth With No Optional Benefits Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $10.38 -- -- -- -- Number of Units 368 -- -- -- -- With GMWB Unit Value $10.38 -- -- -- -- Number of Units 1,497 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $10.37 -- -- -- -- Number of Units 2,860 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Large-Cap Value With No Optional Benefits Unit Price $10.37 -- -- -- -- Number of Units 3,839 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $10.37 -- -- -- -- Number of Units 1,527 -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price $10.36 -- -- -- -- Number of Units 3,802 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------
A-45 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------- ProFund VP -- Short Mid-Cap With No Optional Benefits Unit Price $9.70 -- -- -- -- Number of Units 571 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------- ProFund VP -- Short Small-Cap With No Optional Benefits Unit Price $9.55 -- -- -- -- Number of Units ,859 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------
A-46 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------------------------------------------------------------------------------- First Trust[RegTM] (10) Uncommon Values (2000) With No Optional Benefits Unit Price $ 4.38 $ 3.99 2.95 4.73 7.44 Number of Units 33,075 22,064 23,080 31,543 32,451 With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------------------------ First Trust Target Managed VIP (1999) With No Optional Benefits Unit Price $ 14.64 $ 13.20 -- -- -- Number of Units 695,591 476,951 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 14.56 -- -- -- -- Number of Units 246,099 -- -- -- -- With GMWB Unit Value $ 11.33 -- -- -- -- Number of Units 142,741 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.48 -- -- -- -- Number of Units 168,841 -- -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.31 -- -- -- -- Number of Units 8,734 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.30 -- -- -- -- Number of Units 1,057,901 -- -- -- -- With HAV, EBP and GMWB Unit Value $ 11.29 -- -- -- -- Number of Units 16,433 -- -- -- -- - --------------------------------------------------------------------------------------------------------------------
A-47 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------------------------------------------------------------- First Trust The Dow DART(SM) (10) (1999) With No Optional Benefits Unit Price $ 12.35 $ 12.05 -- -- -- Number of Units 24,245 10,069 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.29 -- -- -- -- Number of Units 25,135 -- -- -- -- With GMWB Unit Value $ 10.48 -- -- -- -- Number of Units 4,769 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.22 -- -- -- -- Number of Units 19,324 -- -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.47 -- -- -- -- Number of Units 1,597 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.46 -- -- -- -- Number of Units 78,082 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------- First Trust Global Target 15 (17) (1999) With No Optional Benefits Unit Price $ 16.05 $ 12.96 -- -- -- Number of Units 22,405 8,569 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 15.96 -- -- -- -- Number of Units 22,182 -- -- -- -- With GMWB Unit Value $ 11.85 -- -- -- -- Number of Units 927 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.88 -- -- -- -- Number of Units 16,155 -- -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.83 -- -- -- -- Number of Units 638 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 11.82 -- -- -- -- Number of Units 108,014 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - --------------------------------------------------------------------------------------------------
A-48 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------ First Trust S&P Target 24 (1999) With No Optional Benefits Unit Price $ 13.34 $ 11.89 -- -- -- Number of Units 43,536 5,532 -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.27 -- -- -- -- Number of Units 37,547 -- -- -- -- With GMWB Unit Value $ 10.75 -- -- -- -- Number of Units 5,280 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.20 -- -- -- -- Number of Units 27,172 -- -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.73 -- -- -- -- Number of Units 1,630 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.72 -- -- -- -- Number of Units 38,677 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ------------------------------------------------------------------------------------------------- First Trust Nasdaq Target 15 (1999) With No Optional Benefits Unit Price $ 12.54 -- -- -- -- Number of Units 7,266 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -------------------------------------------------------------------------------------------------
A-49 Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ------------------------------------------------------------------------------------------------------- First Trust Value Line[RegTM] -- Target 25 (1999) With No Optional Benefits Unit Price $ 16.61 -- -- -- -- Number of Units 33,213 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- -- -- Number of Units -- -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - ----------------------------------------------------------------------------------------------------- SP William Blair International Growth With No Optional Benefits Unit Price $ 10.53 -- -- -- -- Number of Units 18,568 -- -- -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.53 -- -- -- -- Number of Units 18,201 -- -- -- -- With GMWB Unit Value $ 10.53 -- -- -- -- Number of Units 89 -- -- -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.53 -- -- -- -- Number of Units 3 -- -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.53 -- -- -- -- Number of Units 2,276 -- -- -- -- With HAV, EBP and GRO Plus Unit Price $ 10.53 -- -- -- -- Number of Units 73,031 -- -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- -- -- Number of Units -- -- -- -- -- - -----------------------------------------------------------------------------------------------------
A-50 - -------------------------------------------------------------------------------- APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 1: Effective May 2, 2005 the name of the Wells Fargo Variable Trust International Equity Portfolio has changed to Wells Fargo Variable Trust Advantage International Core Portfolio. 2: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Small-Cap Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Small-Cap Growth Portfolio. 3: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Core Portfolio. 4: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Large Company Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Growth Portfolio. 5: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Value Portfolio has changed to Wells Fargo Variable Trust Advantage C&B Large-Cap Value Portfolio. 6: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Income Portfolio has changed to Wells Fargo Variable Trust Advantage Equity Income Portfolio. 7: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Asset Allocation Portfolio has changed to Wells Fargo Variable Trust Advantage Asset Allocation Portfolio. 8: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Total Return Bond Portfolio has changed to Wells Fargo Variable Trust Advantage Total Return Bond Portfolio. 9: Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 10: Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 11: Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 12: Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 13: Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 14: Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 15: Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 16: Effective April 15, 2005 the name of the Evergreen VA--Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 17: Effective May 2, 2005 the name of the First Trust Global Target 15 Portfolio has changed to First Trust Global Dividend Target 15 Portfolio. A-51 This page intentionally left blank Appendix B -- Calculation of Optional Death Benefits - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS APPENDIX B Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Account Value of variable investment options plus Interim Purchase Payments - Growth = minus Value of Fixed Allocations proportional withdrawals (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 x 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $ 85,000
Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $50,000
B-1 Appendix B -- Calculation of Optional Death Benefits continued - -------------------------------------------------------------------------------- APPENDIX B AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 x $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 x 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000
Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value = $90,000 - [$90,000 x $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 x $15,000/$75,000)] = max [$80,000, $40,000] = $80,000 The Death Benefit therefore is $80,000.
B-2 - -------------------------------------------------------------------------------- APPENDIX B AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [($80,000 + $15,000) x $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $ 88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $ 75,000 The Death Benefit therefore is $88,214.
Examples of Combination 5% Roll-Up and Highest Anniversary Value Death Benefit Calculation The following are examples of how the Combination 5% Roll-Up and Highest Anniversary Value Death Benefit are calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the 7th anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Roll-Up Value is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than both the Roll-Up Value ($67,005) and the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Roll-Up Value = {($67,005 - $3,350) - [($67,005 - $3,350) x $1,650/($45,000 - $3,350)]} x 1.05 = ($63,655 - $2,522) x 1.05 = $64,190 Highest Anniversary Value = $70,000 - [$70,000 x $5,000/$45,000] = $70,000 - $7,778 = $62,222 Basic Death Benefit = max [$43,000, $50,000 - ($50,000 x $5,000/$45,000)] = max [$43,000, $44,444] = $44,444 The Death Benefit therefore is $64,190.
B-3 Appendix B -- Calculation of Optional Death Benefits continued - -------------------------------------------------------------------------------- APPENDIX B AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Example with death after Death Benefit Target Date Assume that the Owner has not made any withdrawals prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Roll-Up Value on the Death Benefit Target Date (the contract anniversary on or following the Owner's 80th birthday) is equal to initial Purchase Payment accumulated at 5% for 10 years, or $81,445. The Highest Anniversary Value on the Death Benefit Target Date was $85,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as of the Death Benefit Target Date; each increased by subsequent purchase payments and reduced proportionally for subsequent withdrawals. Roll-Up Value = $81,445 + $15,000 - [($81,445 + $15,000) x $5,000/$70,000] = $81,445 + $15,000 - $6,889 = $89,556 Highest Anniversary Value = $85,000 + $15,000 - [($85,000 + $15,000) x $5,000/$70,000] = $85,000 + $15,000 - $7,143 = $92,857 Basic Death Benefit = max [$75,000, $50,000 + $15,000 - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000 The Death Benefit therefore is $92,857.
Examples of Highest Daily Value Death Benefit Calculation The following are examples of how the HDV Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Highest Daily Value was $90,000. Assume, as well, that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value or the basic Death Benefit. The Death Benefit would be the HDV ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Highest Daily Value ($90,000) was attained during the fifth Annuity Year. Assume, as well, that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value (proportionally reduced by the subsequent withdrawal) or the basic Death Benefit. Highest Daily Value = $90,000 - [$90,000 x $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 x $15,000/$75,000)] = max [$80,000, $40,000] = $80,000 The Death Benefit therefore is $80,000.
B-4 - -------------------------------------------------------------------------------- APPENDIX B AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Daily Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Daily Value on the Death Benefit Target Date plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) x $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000 The Death Benefit therefore is $88,214.
B-5 This page intentionally left blank Appendix C -- Additional Information on Asset Allocation Programs - -------------------------------------------------------------------------------- APPENDIX C AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Program Rules - ------------- o You can elect an asset allocator program where the Sub-accounts for each asset class in each model portfolio are designated based on an evaluation of available Sub-accounts. If you elect the Lifetime Five Benefit ("LT5") or the Highest Daily Value Death Benefit ("HDV"), you must enroll in one of the eligible model portfolios. Asset allocation is a sophisticated method of diversification that allocates assets among asset classes in order to manage investment risk and potentially enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. How the Asset Allocation Program Works o Amounts will automatically be allocated in accordance with the percentages and to Sub-accounts indicated for the model portfolio that you choose. If you allocate your Account Value or transfer your Account Value among any Sub-accounts that are outside of your model portfolio, we will allocate these amounts according to the allocation percentages of the applicable model portfolio upon the next rebalancing. You may only choose one model portfolio at a time. When you enroll in the asset allocation program and upon each rebalance thereafter, 100% of your Account Value allocated to the variable Sub-accounts will be allocated to the asset allocation program. Any Account Value not invested in the Sub-accounts will not be part of the program. o Additional Purchase Payments: Unless otherwise requested, any additional Purchase Payments applied to the variable Sub-accounts in the Annuity will be allocated to the Sub-accounts according to the allocation percentages for the model portfolio you choose. Allocation of additional Purchase Payments outside of your model portfolio but into a Sub-account, will be reallocated according to the allocation percentages of the applicable model portfolio upon the next rebalancing. o Rebalancing Your Model Portfolio: Changes in the value of the Sub-account will cause your Account Value allocated to the Sub-accounts to vary from the percentage allocations of the model portfolio you select. By selecting the asset allocation program, you have directed us to periodically (e.g., quarterly) rebalance your Account Value allocated to the Sub-accounts in accordance with the percentage allocations assigned to each Sub-account within your model portfolio at the time you elected the program or as later modified with your consent. Some asset allocation programs will only require that a rebalancing occur when the percent of your Account Value allocated to the Sub-accounts are outside of the acceptable range permitted under such asset allocation program. Note -- Any Account Value not invested in the Sub-accounts will not be affected by any rebalance. o Sub-account Changes Within the Model Portfolios: From time to time you may be notified of a suggested change in a Sub-account or percentage allocated to a Sub-account within your model portfolio. If you consent (in the manner that is then permitted or required) to the suggested change, then it will be implemented upon the next rebalance. If you do not consent then rebalancing will continue in accordance with your unchanged model portfolio, unless the Sub-account is no longer available under your Annuity, in which case your lack of consent will be deemed a request to terminate the asset allocation program and the provisions under "Termination or Modification of the Asset Allocation Program" will apply. o Owner Changes in Choice of Model Portfolio: You may change from the model portfolio that you have elected to any other currently available model portfolio at any time. The change will be implemented on the date we receive all required information in the manner that is then permitted or required. Termination or Modification of the Asset Allocation Program: o You may request to terminate your asset allocation program at any time. Any termination will be effective on the date that American Skandia receives your termination request in good order. If you are enrolled in HDV or LT5, termination of your asset allocation program must coincide with enrollment in a then currently available and approved asset allocation program or other approved option. However, if you are enrolled in LT5 you may terminate the LT5 benefit in order to then terminate your asset allocation program. American Skandia reserves the right to terminate or modify the asset allocation program at any time with respect to any programs. Restrictions on Electing the Asset Allocation: o You cannot participate in auto-rebalancing or a DCA program while enrolled in an asset allocation program. Upon election of an asset allocation program, American Skandia will automatically terminate your enrollment in any auto-rebalancing or DCA program. Finally, Systematic Withdrawals can only be made as flat dollar amounts. C-1 This page intentionally left blank Appendix D -- Selecting the Variable Annuity That's Right for You - -------------------------------------------------------------------------------- APPENDIX D AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS American Skandia Life Assurance Corporation offers several deferred variable annuity products. Each annuity has different features and benefits that may be appropriate for you based on your individual financial situation and how you intend to use the annuity. The different features and benefits may include variations on your ability to access funds in your annuity without the imposition of a withdrawal charge as well as different ongoing fees and charges you pay to stay in the contract. Additionally, differences may exist on various optional benefits such as guaranteed living benefits or death benefit protection. Among the factors you should consider when choosing which annuity product may be most appropriate for your individual needs are the following: o Your age; o The amount of your investment and any planned future deposits into the annuity; o How long you intend to hold the annuity (also referred to as investment time horizon); o Your desire to make withdrawals from the annuity; o Your investment return objectives; o The effect of optional benefits that may be elected, and o Your desire to minimize costs and/or maximize return associated with the annuity. The following chart outlines some of the different features for each American Skandia Annuity. The availability of optional features, such as those noted in the chart, may increase the cost of the contract. Therefore you should carefully consider which features you plan to use when selecting your annuity. You should also consider the investment objectives, risks, charges and expenses of an investment carefully before investing. In addition, the hypothetical illustrations below reflect the account value and surrender value of each variable annuity over a variety of holding periods. These charts are meant to reflect how your annuities can grow or decrease depending on market conditions and the comparable value of each of the annuities (which reflects the charges associated with the annuities) under the assumptions noted. Your registered representative can provide you with prospectuses of one or more of these variable annuities noted in this document and can guide you to Selecting the Variable Annuity That's Right for You. American Skandia Annuity Product Comparison - ------------------------------------------- Below is a summary of American Skandia's annuity products. ASL II refers to American Skandia Lifevest[RegTM] II, APEX II refers to American Skandia APEX(SM) II, Stagecoach APEX II refers to American Skandia Stagecoach(TM) APEX(SM) II, ASAP III refers to American Skandia Advisor Plan(SM) III, Stagecoach ASAP III refers to American Skandia Stagecoach(TM) ASAP(SM) III, Xtra Credit SIX refers to American Skandia Xtra Credit(SM) SIX and Stagecoach(TM) Xtra Credit(SM) SIX refers to American Skandia Stagecoach(TM) Xtra Credit(SM) SIX. You should consider the investment objectives, risks, charges and expenses of an investment in any Annuity carefully before investing. Each product prospectus as well as the underlying portfolio prospectuses contains this and other information about the variable annuities and underlying investment options. Your Investment Professional can provide you with prospectuses for one or more of these variable annuities and the underlying portfolios and can help you decide upon the product that would be most advantageous for you given your individual needs. Please read the prospectuses carefully before investing. D-1 Appendix D -- Selecting the Variable Annuity That's Right for You continued - -------------------------------------------------------------------------------- APPENDIX D AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------- Minimum Investment $15,000 $10,000 $10,000 $10,000 - ------------------------------------------------------------------------------------------------------------------------------- Maximum Issue Age No Maximum Age 85 80 75 - ------------------------------------------------------------------------------------------------------------------------------- Withdrawal Charge None 4 Years 8 Years 10 Years Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, (9%, 9%, 8.5% ,8%, 5%, 4%, 3%, 2%) 7%, 6%, 5%, 4%, 3%, 2%) - ------------------------------------------------------------------------------------------------------------------------------- Insurance and 1.65% 1.65% 1.25% years 1-8; 1.65% years 1-10; Distribution Charge 0.65% years 9+ 0.65% years 11+ - ------------------------------------------------------------------------------------------------------------------------------- Contract Charges Lesser of $35 or Lesser of $35 or Lesser of $35 or Lesser of $35 or 2% of Account Value* 2% of Account Value* 2% of Account Value* 2% of Account Value* - ------------------------------------------------------------------------------------------------------------------------------- Contract Credit No Yes. Effective for No Yes based on year Contracts issued on or purchase payment after June 20, 2005. received for first 6 Generally, we apply a years of contract Loyalty Credit to your (6%, 5%, 4%, 3%, Annuity's Account 2%, 1%) Value at the end of your fifth contract year (i.e., on your fifth Contract Anniversary). The Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four contract years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Contract Anniversary - ------------------------------------------------------------------------------------------------------------------------------- Fixed Rate Account Fixed Rates Available Fixed Rates Available Fixed Rates Available Fixed Rates Available (early withdrawals are (As of May 1, 2005 (As of May 1, 2005 (As of May 1, 2005 (As of May 1, 2005 subject to a Market currently offering currently offering currently offering currently offering Value Adjustment) durations of: durations of: durations of: durations of: 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) - ------------------------------------------------------------------------------------------------------------------------------- Variable Investment All options available All options available All options available All options available Options(1) - -------------------------------------------------------------------------------------------------------------------------------
D-2 - -------------------------------------------------------------------------------- APPENDIX D AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------- Standard Death Prior to age 85: The The greater of: The greater of: The greater of: Benefit greater of: purchase purchase payments purchase payments purchase payments payments less less proportional less proportional less proportional proportional withdrawals or account withdrawals or account withdrawals or withdrawals or account value (no MVA value (no MVA account value (no value (no MVA Applied). Applied). MVA Applied) less Applied). an amount equal to On or after age 85: the credits applied account value within the 12 months prior to date of death. - ------------------------------------------------------------------------------------------------------------------------------- Optional Death Enhanced Beneficiary EBP II, EBP II, EBP II, Benefits (for an Protection (EBPII) HDV, HDV, HDV, additional cost)(2) Highest Daily HAV, HAV, HAV, Value (HDV) Combo 5% Combo 5% Combo 5% Highest Account Roll-up/HAV Roll-up/HAV Roll-up/HAV Value (HAV) Combo 5% Roll-up/HAV - ------------------------------------------------------------------------------------------------------------------------------- Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, additional cost)(3) Guaranteed Minimum GMWB, GMWB, GMWB, Withdrawal Benefit GMIB, GMIB, GMIB, (GMWB), Lifetime Five Lifetime Five Lifetime Five Guaranteed Minimum Income Benefit (GMIB), Lifetime Five - ------------------------------------------------------------------------------------------------------------------------------- Annuity Rewards(4) Not Available Available after initial Available after initial Available after initial withdrawal period withdrawal period withdrawal period - -------------------------------------------------------------------------------------------------------------------------------
Hypothetical Illustration The following examples outline the value of each annuity as well as the amount that would be available to an investor as a result of full surrender at the end of each of the contract years specified. The values shown below are based on the following assumptions: An initial investment of $100,000 is made into each contract earning a gross rate of return of 0% and 6% respectively. o No subsequent deposits or withdrawals are made from the contract. o The hypothetical gross rates of return are reduced by the arithmetic average of the fees and expenses of the underlying portfolios and the charges that are deducted from the Annuity at the Separate Account level as follows(5): o 1.55% based on the fees and expenses of the underlying portfolios as of December 31, 2004.(1) The arithmetic average of all fund expenses are computed by adding portfolio management fees, 12b-1 fees and other expenses of all of the underlying portfolios and then dividing by the number of portfolios. For purposes of the illustrations, we do not reflect any expense reimbursements or expense waivers that might apply and are described in the prospectus fee table. o The Separate Account level charges include the Insurance Charge and Distribution Charge (as applicable). o The Annuity Value and Surrender Value are further reduced by the annual maintenance fee. For XTra Credit SIX, Stagecoach XTra Credit SIX, APEX II, and Stagecoach APEX II, the Annuity Value and Surrender Value also reflect the addition of any applicable bonus credits. D-3 Appendix D -- Selecting the Variable Annuity That's Right for You continued - -------------------------------------------------------------------------------- APPENDIX D AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS The Annuity Value displays the current account value assuming no surrender while the Surrender Value assumes a 100% surrender on the day after the contract anniversary, therefore, reflecting the decrease in surrender charge where applicable. The values that you actually experience under an Annuity will be different what is depicted here if any of the assumptions we make here differ from your circumstances, however the relative values for each product reflected below will remain the same. (We will provide you with a personalized illustration upon request). Shaded cells represent the product with the highest customer Surrender Value for the contract year. Multiple shaded cells represent a tie between two or more annuities. 0% Gross Rate of Return
- ------------------------------------------------------------------------------------------------------------------------------- XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - ------------------------------------------------------------------------------------------------------------------------------- Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- 1 $96,791 $ 96,791 $96,791 $ 88,791 $97,184 $ 90,184 $102,600 $ 93,600 - ------------------------------------------------------------------------------------------------------------------------------- 2 $93,683 $ 93,683 $93,683 $ 86,683 $94,447 $ 87,947 $ 99,308 $ 90,808 - ------------------------------------------------------------------------------------------------------------------------------- 3 $90,674 $ 90,674 $90,674 $ 84,674 $91,786 $ 85,786 $ 96,121 $ 88,121 - ------------------------------------------------------------------------------------------------------------------------------- 4 $87,761 $ 87,761 $87,761 $ 87,761 $89,199 $ 84,199 $ 93,034 $ 86,034 - ------------------------------------------------------------------------------------------------------------------------------- 5 $84,940 $ 84,940 $84,940 $ 84,940 $86,683 $ 82,683 $ 90,046 $ 84,046 - ------------------------------------------------------------------------------------------------------------------------------- 6 $82,208 $ 82,208 $84,387 $ 84,387 $84,238 $ 81,238 $ 87,153 $ 82,153 - ------------------------------------------------------------------------------------------------------------------------------- 7 $79,564 $ 79,564 $81,673 $ 81,673 $81,861 $ 79,861 $ 84,351 $ 80,351 - ------------------------------------------------------------------------------------------------------------------------------- 8 $77,003 $ 77,003 $79,046 $ 79,046 $79,549 $ 79,549 $ 81,638 $ 78,638 - ------------------------------------------------------------------------------------------------------------------------------- 9 $74,524 $ 74,524 $76,501 $ 76,501 $77,772 $ 77,772 $ 79,012 $ 77,012 - ------------------------------------------------------------------------------------------------------------------------------- 10 $72,123 $ 72,123 $74,038 $ 74,038 $76,034 $ 76,034 $ 76,469 $ 76,469 - ------------------------------------------------------------------------------------------------------------------------------- 11 $69,799 $ 69,799 $71,653 $ 71,653 $74,334 $ 74,334 $ 74,759 $ 74,759 - ------------------------------------------------------------------------------------------------------------------------------- 12 $67,548 $ 67,548 $69,343 $ 69,343 $72,671 $ 72,671 $ 73,087 $ 73,087 - ------------------------------------------------------------------------------------------------------------------------------- 13 $65,369 $ 65,369 $67,107 $ 67,107 $71,045 $ 71,045 $ 71,451 $ 71,451 - ------------------------------------------------------------------------------------------------------------------------------- 14 $63,259 $ 63,259 $64,942 $ 64,942 $69,454 $ 69,454 $ 69,852 $ 69,852 - ------------------------------------------------------------------------------------------------------------------------------- 15 $61,215 $ 61,215 $62,845 $ 62,845 $67,898 $ 67,898 $ 68,287 $ 68,287 - ------------------------------------------------------------------------------------------------------------------------------- 16 $59,237 $ 59,237 $60,815 $ 60,815 $66,376 $ 66,376 $ 66,756 $ 66,756 - ------------------------------------------------------------------------------------------------------------------------------- 17 $57,322 $ 57,322 $58,850 $ 58,850 $64,887 $ 64,887 $ 65,260 $ 65,260 - ------------------------------------------------------------------------------------------------------------------------------- 18 $55,467 $ 55,467 $56,946 $ 56,946 $63,431 $ 63,431 $ 63,795 $ 63,795 - ------------------------------------------------------------------------------------------------------------------------------- 19 $53,671 $ 53,671 $55,104 $ 55,104 $62,007 $ 62,007 $ 62,363 $ 62,363 - ------------------------------------------------------------------------------------------------------------------------------- 20 $51,933 $ 51,933 $53,319 $ 53,319 $60,614 $ 60,614 $ 60,963 $ 60,963 - ------------------------------------------------------------------------------------------------------------------------------- 21 $50,249 $ 50,249 $51,592 $ 51,592 $59,252 $ 59,252 $ 59,593 $ 59,593 - ------------------------------------------------------------------------------------------------------------------------------- 22 $48,619 $ 48,619 $49,919 $ 49,919 $57,919 $ 57,919 $ 58,253 $ 58,253 - ------------------------------------------------------------------------------------------------------------------------------- 23 $47,041 $ 47,041 $48,299 $ 48,299 $56,616 $ 56,616 $ 56,942 $ 56,942 - ------------------------------------------------------------------------------------------------------------------------------- 24 $45,512 $ 45,512 $46,731 $ 46,731 $55,341 $ 55,341 $ 55,660 $ 55,660 - ------------------------------------------------------------------------------------------------------------------------------- 25 $44,033 $ 44,033 $45,213 $ 45,213 $54,094 $ 54,094 $ 54,406 $ 54,406 - -------------------------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected D-4 - -------------------------------------------------------------------------------- APPENDIX D AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 6% Gross Rate of Return
- ------------------------------------------------------------------------------------------------------------------------------- XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - ------------------------------------------------------------------------------------------------------------------------------- Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - ------------------------------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------- 1 $102,635 $ 102,635 $102,635 $ 94,635 $103,053 $ 96,053 $108,758 $ 99,758 - ------------------------------------------------------------------------------------------------------------------------------- 2 $105,340 $ 105,340 $105,340 $ 98,340 $106,198 $ 99,698 $111,589 $ 103,089 - ------------------------------------------------------------------------------------------------------------------------------- 3 $108,115 $ 108,115 $108,115 $ 102,115 $109,440 $ 103,440 $114,495 $ 106,495 - ------------------------------------------------------------------------------------------------------------------------------- 4 $110,964 $ 110,964 $110,964 $ 110,964 $112,781 $ 107,781 $117,477 $ 110,477 - ------------------------------------------------------------------------------------------------------------------------------- 5 $113,888 $ 113,888 $113,888 $ 113,888 $116,223 $ 112,223 $120,537 $ 114,537 - ------------------------------------------------------------------------------------------------------------------------------- 6 $116,890 $ 116,890 $119,199 $ 119,199 $119,771 $ 116,771 $123,679 $ 118,679 - ------------------------------------------------------------------------------------------------------------------------------- 7 $119,970 $ 119,970 $122,340 $ 122,340 $123,427 $ 121,427 $126,903 $ 122,903 - ------------------------------------------------------------------------------------------------------------------------------- 8 $123,131 $ 123,131 $125,564 $ 125,564 $127,195 $ 127,195 $130,212 $ 127,212 - ------------------------------------------------------------------------------------------------------------------------------- 9 $126,376 $ 126,376 $128,872 $ 128,872 $131,874 $ 131,874 $133,608 $ 131,608 - ------------------------------------------------------------------------------------------------------------------------------- 10 $129,706 $ 129,706 $132,268 $ 132,268 $136,725 $ 136,725 $137,094 $ 137,094 - ------------------------------------------------------------------------------------------------------------------------------- 11 $133,124 $ 133,124 $135,754 $ 135,754 $141,755 $ 141,755 $142,102 $ 142,102 - ------------------------------------------------------------------------------------------------------------------------------- 12 $136,632 $ 136,632 $139,331 $ 139,331 $146,970 $ 146,970 $147,294 $ 147,294 - ------------------------------------------------------------------------------------------------------------------------------- 13 $140,232 $ 140,232 $143,003 $ 143,003 $152,376 $ 152,376 $152,678 $ 152,678 - ------------------------------------------------------------------------------------------------------------------------------- 14 $143,927 $ 143,927 $146,771 $ 146,771 $157,982 $ 157,982 $158,259 $ 158,259 - ------------------------------------------------------------------------------------------------------------------------------- 15 $147,720 $ 147,720 $150,638 $ 150,638 $163,793 $ 163,793 $164,046 $ 164,046 - ------------------------------------------------------------------------------------------------------------------------------- 16 $151,613 $ 151,613 $154,608 $ 154,608 $169,819 $ 169,819 $170,046 $ 170,046 - ------------------------------------------------------------------------------------------------------------------------------- 17 $155,608 $ 155,608 $158,682 $ 158,682 $176,066 $ 176,066 $176,266 $ 176,266 - ------------------------------------------------------------------------------------------------------------------------------- 18 $159,708 $ 159,708 $162,863 $ 162,863 $182,543 $ 182,543 $182,716 $ 182,716 - ------------------------------------------------------------------------------------------------------------------------------- 19 $163,917 $ 163,917 $167,155 $ 167,155 $189,258 $ 189,258 $189,402 $ 189,402 - ------------------------------------------------------------------------------------------------------------------------------- 20 $168,236 $ 168,236 $171,560 $ 171,560 $196,220 $ 196,220 $196,335 $ 196,335 - ------------------------------------------------------------------------------------------------------------------------------- 21 $172,669 $ 172,669 $176,081 $ 176,081 $203,438 $ 203,438 $203,522 $ 203,522 - ------------------------------------------------------------------------------------------------------------------------------- 22 $177,219 $ 177,219 $180,720 $ 180,720 $210,922 $ 210,922 $210,974 $ 210,974 - ------------------------------------------------------------------------------------------------------------------------------- 23 $181,889 $ 181,889 $185,483 $ 185,483 $218,681 $ 218,681 $218,700 $ 218,700 - ------------------------------------------------------------------------------------------------------------------------------- 24 $186,682 $ 186,682 $190,370 $ 190,370 $226,726 $ 226,726 $226,710 $ 226,710 - ------------------------------------------------------------------------------------------------------------------------------- 25 $191,601 $ 191,601 $195,387 $ 195,387 $235,066 $ 235,066 $235,015 $ 235,015 - -------------------------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected * Contract charges are waived for account values greater than $100,000. 1) If you are purchasing your Annuity through an Investment Professional that is associated with Wells Fargo, your variable investment option choices are different than those that are offered through other broker-dealers. In addition, due to the differences in the variable investment option choices, the expenses for the underlying portfolios that are available under the "Stagecoach" products are slightly lower and if those expenses were reflected, the values illustrated would be slightly higher. 2) For more information on these benefits, refer to the "Death Benefit" section in the Prospectus. 3) For more information on these benefits, refer to the "Living Benefit Programs" section in the Prospectus. 4) The Annuity Rewards benefit offers Owners an ability to increase the guaranteed death benefit so that the death benefit will at least equal the Annuity's account value on the effective date of the Annuity Rewards benefits, if the terms of the Annuity Rewards benefit are met. 5) These reductions result in hypothetical net rates of return corresponding to the 0% and 6% gross rates of return, respectively as follows: ASLII -1.55% and 4.36%; APEX II and Stagecoach APEX II -3.17% and 2.64%; ASAP III and Stagecoach ASAP III -2.78% and 3.05% in years 1-8 and -2.19% and 3.68% in years 9+, XTra Credit SIX and Stagecoach XTra Credit SIX -3.17% and 2.64% in years 1-10 and -2.19% and 3.68% in years 11+. D-5 - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVASAPIII-PROS (06/2005). -------------------------------------- (print your name) -------------------------------------- (address) -------------------------------------- (city/state/zip code) - -------------------------------------------------------------------------------- This page intentionally left blank - -------------------------------------------------------------------------------- Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED A Prudential Financial Company A Prudential Financial Company One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-680-8920 Telephone: 203-926-1888 http://www.americanskandia.prudential.com http://www.americanskandia.prudential.com
MAILING ADDRESSES: ------------------ AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity P.O. Box 7960 Philadelphia, PA 19176 EXPRESS MAIL: AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity 2101 Welsh Road Dresher, PA 19025 Supplement dated December 5, 2005 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia Advisor Plan III, Stagecoach Advisor Plan III, American Skandia XTra Credit SIX, Stagecoach XTra Credit SIX, American Skandia LifeVest(R) II, American Skandia APEX II, Stagecoach APEX II, Advisors Choice (R)/2000/, American Skandia Variable Adjustable Immediate Annuity, and American Skandia Variable Immediate Annuity, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable or immediate annuity you own, and is not intended to be a prospectus or offer for any other variable or immediate annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST") and to announce five additional AST portfolios (the "AST Asset Allocation Portfolios") that are being offered as new variable investment options under each of the above-referenced products. We are announcing the closure of the asset allocation programs offered in each of the above-referenced products. All of these changes apply to each Prospectus and will be effective on or about December 5, 2005, unless specifically stated otherwise. 1. PORTFOLIO MERGERS The Trustees of AST and shareholders have approved these mergers to be effective as of December 5, 2005: The AST Alger All-Cap Growth Portfolio has merged into the AST Neuberger Berman Mid-Cap Growth Portfolio. As a result of the merger, the AST Alger All-Cap Growth Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST Neuberger Berman Mid-Cap Growth Portfolio remain unchanged. The AST AllianceBernstein Growth + Value Portfolio merged into the AST AllianceBernstein Managed Index 500 Portfolio. As a result of the merger, the AST AllianceBernstein Growth + Value Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST AllianceBernstein Managed Index 500 Portfolio remain unchanged. The following information for the successor portfolios replaces the information previously indicated for these portfolios under the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust" to reflect estimates of what the expenses of the portfolio will be as a result of the mergers:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------------------- Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Neuberger Berman Mid-Cap Growth/1/ 0.90% 0.18% None 1.08% AST AllianceBernstein Managed Index 500/2/ 0.60% 0.16% None 0.76%
- -------- 1 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST Neuberger Berman Mid-Cap Growth Portfolio prior to the Merger were as follows: Management Fee: 0.90%; 12b-1 Fee: None; Other Expenses: 0.22%; Total Annual Portfolio Operating Expenses: 1.12%. 2 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST AllianceBernstein Managed Index 500 Portfolio prior to the Merger were as follows: Management Fee: 0.60%; 12b-1 Fee: None; Other Expenses: 0.17%; Total Annual Portfolio Operating Expenses: 0.77%. 2. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST and, where necessary, shareholders have approved the following sub-advisor and portfolio name changes to be effective as of December 5, 2005: AST Gabelli All-Cap Value Portfolio EARNEST Partners LLC and Wedge Capital Management, LLP replaced GAMCO Investors, Inc. as Sub-advisors to the AST Gabelli All-Cap Value Portfolio. As a result, the Portfolio's name has changed to the AST Mid-Cap Value Portfolio. Under normal circumstances, the Portfolio will now invest at least 80% of the value its net assets in mid-capitalization companies. AST AllianceBernstein Large-Cap Growth Portfolio T. Rowe Price Associates, Inc. replaced Alliance Capital Management as Sub-advisor to the AST AllianceBernstein Large-Cap Growth Portfolio. As a result, the Portfolio's name has changed to the AST T. Rowe Price Large-Cap Growth Portfolio. AST Hotchkis & Wiley Large-Cap Value Portfolio J.P. Morgan Investment Management, Inc. has been added as a Sub-advisor to the AST Hotchkis & Wiley Large-Cap Value Portfolio and will manage a portion of the Portfolio. Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST Large-Cap Value Portfolio. AST Small-Cap Value Portfolio Salomon Brothers Asset Management Inc. has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. Each of Integrity Asset Management, J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Money Market Portfolio Prudential Investment Management, Inc. replaced Wells Capital Management, Inc. as Sub-advisor to the AST Money Market Portfolio. The name of the Portfolio remains unchanged. As a result of the above sub-advisor, investment objective/policies and name changes, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------ -------------------------------------------- ------------------- Mid Cap AST Mid-Cap Value (formerly AST Gabelli EARNEST Partners Value All-Cap Value): seeks to provide capital LLC/Wedge Capital growth by investing primarily in Management, LLP mid-capitalization stocks that appear to be undervalued. The Portfolio has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its net assets in mid-capitalization companies. Large Cap AST T. Rowe Price Large-Cap Growth (formerly T. Rowe Price Growth AST AllianceBernstein Large-Cap Growth): Associates, Inc. seeks long-term growth of capital by investing predominantly in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. The Portfolio takes a growth approach to investment selection and normally invests at least 80% of its net assets in the common stocks of large cap companies. Large Cap AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Value Wiley Large-Cap Value): seeks current income Capital Management, and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc. its net assets in common stocks of large-cap U.S. companies. The Portfolio focuses on common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small Cap AST Small-Cap Value: seeks to provide Integrity Asset Value long-term capital growth by investing Management; Lee primarily in small-capitalization stocks Munder Investments, that appear to be undervalued. The Portfolio Ltd; J.P. Morgan has a non-fundamental policy to invest, Investment under normal circumstances, at least 80% of Management, Inc.; the value of its net assets in Salomon Brothers small-capitalization stocks. The Portfolio Asset Management will focus on common stocks that appear to Inc. be undervalued. Fixed Income AST Money Market: seeks high current income Prudential while maintaining high levels of liquidity. Investment The Portfolio attempts to accomplish its Management, Inc. objective by maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. 2 Effective January 1, 2006, The Prudential Series Fund, Inc. will be reorganized as a Delaware statutory trust which will be named The Prudential Series Fund. Effective January 1, 2006, all references to The Prudential Series Fund, Inc. within each Prospectus shall be deemed to refer to The Prudential Series Fund. 3. AST ASSET ALLOCATION PORTFOLIOS Effective December 5, 2005, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", the following information is added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) ------------------------------------------------ Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Aggressive Asset Allocation /1/,/2/ 1.04% 0.26% None 1.30% AST Capital Growth Asset Allocation /1/,/2/ 0.99% 0.25% None 1.24% AST Balanced Asset Allocation /1/,/2/ 0.95% 0.24% None 1.19% AST Conservative Asset Allocation /1/,/2/ 0.93% 0.23% None 1.16% AST Preservation Asset Allocation /1/,/2/ 0.88% 0.22% None 1.10%
- -------- 1. Management Fees are based in part on estimated amounts for the current fiscal year. Each Asset Allocation Portfolio invests primarily in shares of one or more Underlying Portfolios. The only management fee directly paid by an Asset Allocation Portfolio is a 0.15% fee paid to the Investment Managers. The management fee shown in the chart for each Asset Allocation Portfolio is (i) the 0.15% management fee to be paid by the Asset Allocation Portfolios to the Investment Managers plus (ii) a weighted average estimate of the management fees to be paid by the Underlying Portfolios to the Investment Managers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the management fees to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocations for the applicable Asset Allocation Portfolio and the management fee rates for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolios. The management fees paid by an Asset Allocation Portfolio may be greater or less than those indicated above. 2. Other Expenses are based in part on estimated amounts for the current fiscal year. The other expenses shown in the chart for each Asset Allocation Portfolio include: (i) the other expenses expected to be paid by the Asset Allocation Portfolio to the Investment Managers and other service providers plus (ii) a weighted average estimate of the other expenses to be paid by the Underlying Portfolios to the Investment Managers and other service providers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the other expenses to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocation for the applicable Asset Allocation Portfolio and the annual operating expense ratios for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolio. The other expenses paid by an Asset Allocation Portfolio may be greater or less than those indicated above. A description of the types of costs that are included as other expenses for the Underlying Portfolios is set forth under the caption "Management of the Trust - Other Expenses" in the Underlying Portfolio Prospectus. B. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Aggressive Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 92.5% to 100% of its net assets to underlying portfolios investing primarily in equity securities, and 0% to 7.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Capital Growth Asset Allocation American Skandia Allocation/ Portfolio: seeks the highest potential total Investment Balanced return consistent with its specified level Services, Inc./ of risk tolerance. The Portfolio will invest Prudential its assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 72.5% to 87.5% of its net assets to underlying portfolios investing primarily in equity securities, and 12.5% to 27.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 3 PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Balanced Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in equity securities, and 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Conservative Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 47.5% to 62.5% of its net assets to underlying portfolios investing primarily in equity securities, and 37.5% to 52.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Preservation Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in equity securities, and 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 4. CLOSURE OF ASSET ALLOCATION PROGRAMS Effective December 5, 2005, the asset allocation programs that had been made available for use with your Annuity are being closed for new enrollments. As a result, in order to reflect the closure of the programs, the following changes are made to each Prospectus: A. The first paragraph in the section of the Prospectus entitled "Managing Your Account Value", under the sub-section "Are Any Asset Allocation Programs Available?" is replaced with the following: ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? We currently do not offer any asset allocation programs for use with your Annuity. Prior to December 5, 2005, we made certain asset allocation programs available. If you enrolled in one of the asset allocation programs prior to December 5, 2005, see the Appendix entitled "Additional Information on the Asset Allocation Programs" for more information on how the programs are administered. B. The Appendix entitled "Additional Information on Asset Allocation Programs" is revised to reflect the following changes to the Program Rules for those contract owners that choose to remain in their asset allocation program after December 5, 2005: . The asset allocation program will only perform the function of periodic rebalancing of your Account Value allocated to the variable Sub-accounts in accordance with the percentage allocations for the model portfolio you previously chose. . You will not be permitted to change from one model portfolio to another. Depending on what asset allocation program you had enrolled in, you may be permitted to transfer Account Value among the currently available sub-accounts that are part of the model (e.g., from one large-cap growth sub-account to another large-cap growth sub-account). . If you terminate your asset allocation program, you will not be permitted to re-enroll in the program. If you are enrolled in the Highest Daily Value Death Benefit ("HDV") or the Lifetime Five Income Benefit ("LT5"), or with respect to the American Skandia Variable Adjustable Immediate Annuity you have elected the Guarantee feature, termination of your asset allocation program must coincide with (i) the enrollment in a then currently available and approved asset allocation program or other approved option; or (ii) the allocation of your entire Account Value (or Income Base with respect to the American Skandia Variable Adjustable Immediate Annuity) to the then required investment option(s) available with these benefits or feature. 4 C. In each Prospectus, with the exception of the American Skandia Variable Immediate Annuity and the American Skandia Variable Adjustable Immediate Annuity, the following revisions are made: (i) In the section entitled "Living Benefit Programs", under the sub-section "Lifetime Five Income Benefit (Lifetime Five)": . the last two sentences in the box are replaced with the following: As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. . under the heading "Other Important Considerations", the fourth bullet is replaced with the following: You must allocate your Account Value in accordance with the then permitted and available option(s) with this program in order to elect and maintain the Lifetime Five program. (ii) In the section entitled "Death Benefit", under the sub-section "Highest Daily Value Death Benefit ("HDV")", the second paragraph within the first box is replaced with the following: If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. Because this benefit, once elected, may not be terminated you must keep your Account Value allocated to a permitted option throughout the life of the Annuity. D. In the Prospectus for the American Skandia Variable Adjustable Immediate Annuity, the sub-section entitled "Am I Required to Participate in an Asset Allocation Program?" under the section entitled "Managing Your Annuity", is replaced with the following: Am I Required to Participate in an Asset Allocation Program? If you purchased your Annuity prior to December 5, 2005 and chose the Optional Guarantee Feature, your Net Premium (plus any applicable Credit) was required to be allocated in accordance with an asset allocation model, and your Income Base also had to be allocated in accordance with such model. If you purchase your Annuity on or after December 5, 2005 and you choose the Optional Guarantee Feature, you must allocate your Net Premium/Income Base in accordance with the then permitted and available investment option(s) with this feature. 5. OTHER MATTERS A. In the Prospectus for the American Skandia LifeVest(R) II Annuity, in the section entitled "Summary of Contract Fees and Charges" in the table under the sub-section "Your Optional Benefit Fees and Charges", under the heading "Highest Daily Value Death Benefit ("HDV")", the Total Annual Charge in the third column is replaced and corrected as follows: HIGHEST DAILY VALUE DEATH BENEFIT ("HDV") ** 0.50% of average 2.15% We offer an Optional Death Benefit that provides an daily net assets of enhanced level of protection for your the Sub-accounts beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Daily Value, less proportional withdrawals. B. In the Prospectus for the American Skandia Xtra Credit SIX Annuity, in the section entitled "Managing Your Account Value", sub-section "May I Give My Investment Professional Permission To Manage My Account Value?", the first two sentences are replaced and corrected as follows: Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. 5 Supplement to Prospectus Dated May 2, 2005 Supplement dated March 20, 2006 Supplement dated March 20, 2006 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia Advisor Plan III and Stagecoach Advisor Plan III, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable annuity you own, and is not intended to be a prospectus or offer for any other variable annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST"), the addition of three AST portfolios that are being offered as new variable investment options and a new living benefit. All of these changes apply to each Prospectus and will be effective on or about March 20, 2006, unless specifically stated otherwise. 1. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST have approved the following sub-advisor and portfolio name changes to be effective as of March 20, 2006: AST Goldman Sachs High Yield Portfolio Pacific Investment Management Company LLC has been added as a Sub-advisor to the AST Goldman Sachs High Yield Portfolio and will manage a portion of the Portfolio. Goldman Sachs Asset Management, L.P. will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST High Yield Portfolio. AST Large-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Large-Cap Value Portfolio and will manage a portion of the Portfolio. Both J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Small-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. In addition, Integrity Asset Management will no longer be a Sub-advisor to the Portfolio. Each of Salomon Brothers Asset Management Inc., J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. As a result, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- ------------------- Fixed Income AST High Yield (formerly AST Goldman Sachs Goldman Sachs Asset High Yield): seeks a high level of current Management, L.P.; income and may also consider the potential Pacific Investment for capital appreciation. The Portfolio Management Company invests, under normal circumstances, at LLC (PIMCO) least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in high yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. Large Cap AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Value Wiley Large-Cap Value): seeks current income Capital Management, and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc.; its net assets in common stocks of large-cap Dreman Value U.S. companies. The Portfolio focuses on Management LLC common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small Cap AST Small-Cap Value: seeks to provide Lee Munder Value long-term capital growth by investing Investments, Ltd; primarily in small-capitalization stocks J.P. Morgan that appear to be undervalued. The Portfolio Investment has a non-fundamental policy to invest, Management, Inc.; under normal circumstances, at least 80% of Salomon Brothers the value of its net assets in Asset Management small-capitalization stocks. The Portfolio Inc.; Dreman Value will focus on common stocks that appear to Management LLC be undervalued. 2. NEW SUB-ACCOUNTS Effective March 20, 2006, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- ------------------- Asset AST First Trust Balanced Target: seeks First Trust Allocation/ long-term capital growth balanced by current Advisors L.P. Balanced income. The portfolio normally invests approximately 65% of its total assets in equity securities and 35% in fixed income securities. Depending on market conditions, the equity portion may range between 60-70% and the fixed income portion between 30-40%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST First Trust Capital Appreciation Target: First Trust Allocation/ seeks long-term growth of capital. The Advisors L.P. Balanced portfolio normally invests approximately 80% of its total assets in equity securities and 20% in fixed income securities. Depending on market conditions, the equity portion may range between 75-85% and the fixed income portion between 15-25%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST Advanced Strategies: seeks a high level Marsico Capital Allocation/ of absolute return. The Portfolio invests Management, LLC; T. Balanced primarily in a diversified portfolio of Rowe Price equity and fixed income securities across Associates, Inc.; different investment categories and LSV Asset investment managers. The Portfolio pursues a Management; William combination of traditional and Blair & Company, non-traditional investment strategies. L.L.C.; Pacific Investment Management Company LLC (PIMCO); B. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", following portfolios have been added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - ----------------------------------------------------------------------------------------------- Total Annual UNDERLYING PORTFOLIO Management Other Portfolio Operating American Skandia Trust: Fees Expenses 12b-1 Fees Expenses - ----------------------- ---------- -------- ---------- ------------------- AST First Trust Balanced Target 0.85% 0.19% None 1.04% AST First Trust Capital Appreciation Target 0.85% 0.19% None 1.04% AST Advanced Strategies 0.85% 0.18% None 1.03%
2 3. NEW INSURANCE FEATURE We are adding the Spousal Lifetime Five(SM) Income Benefit ("Spousal Lifetime Five"), that guarantees until the later death of two designated lives the ability to withdraw an annual amount of an initial principal value regardless of market-based declines in account value. As a result, the following revisions are made to the Prospectus: A. The following information has been added to "YOUR OPTIONAL BENEFIT FEES AND CHARGES" table in the "Summary of Contract Fees and Charges" section of the Prospectus:
OPTIONAL BENEFIT FEE/ TOTAL ANNUAL CHARGE CHARGE ------------------- ---------------- SPOUSAL LIFETIME FIVE INCOME BENEFIT* We offer a program that guarantees until the 0.75% of average 2.00% in Annuity later death of two Designated Lives (as defined daily net assets of Years 1-8; 1.40% in this Prospectus) the ability to withdraw an the Sub-accounts in Annuity Years annual amount equal to 5% of an initial principal 9 and later value regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals.
- -------- * This optional benefit is not available under the Qualified BCO. B. The Spousal Lifetime Five program is not available if you elect any other optional living or optional death benefit, therefore all references in the Prospectus that reflect the availability of the optional living benefits are revised accordingly. C. The following description of the new optional living benefit is added as the last section under "Living Benefit Programs" in the Prospectus: SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE) The Spousal Lifetime Five program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, if you elect Spousal Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Spousal Lifetime Five and Lifetime Five. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must be elected based on two Designated Lives, as described below. Each Designated Life must be at least 55 years old when the benefit is elected. The Spousal Lifetime Five program is not available if you elect any other optional living benefit or Death Benefit. As long as your Spousal Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees until the later death of two natural persons that are each other's spouses at the time of election of Spousal Lifetime Five and at the first death of one of them (the "Designated Lives", each a "Designated Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit") equal to a percentage of an initial principal value (the "Protected Withdrawal Value") regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. The Spousal Life Income Benefit may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity, wish to ensure that market performance will not affect your ability to receive annual payments and wish either spouse to be able to continue the Spousal Life Income Benefit after the death of the first. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Initial Protected Withdrawal Value The initial Protected Withdrawal Value is used to determine the amount of initial annual payment under the Spousal Life Income Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Spousal Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Spousal Lifetime Five, plus any additional Purchase Payments growing at 5% per year from the date of your election of the program, (or application of the Purchase Payment if later) to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (B) and (C) above, each value is increased by the amount of any subsequent Purchase Payments. . If you elect the Spousal Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. 3 . For existing Owners who are electing the Spousal Lifetime Five benefit, the Account Value on the date of your election of the Spousal Lifetime Five program will be used to determine the initial Protected Withdrawal Value. KEY FEATURE -- Annual Income Amount under the Spousal Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in the Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 3rd anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Spousal Lifetime Five or after you have elected Spousal Lifetime Five. If, on the date that we implement an auto step-up to your Annual Income Amount, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such auto step-up. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary on or next following the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program, and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is affected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. The Spousal Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount. Under Spousal Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Spousal Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2009 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for the Spousal Lifetime Five. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05 (393/365) = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit (5% of $265,000). Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006, then the following values would result: 4 . Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006, then the following values would result: . Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. . Reduction to Annual Income Amount = Excess Income/Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 Example 3. Step-up of the Annual Income Amount If a step-up of the Annual Income Amount is requested on March 1, 2009, the request will be accepted because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM . To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under the Spousal Life Income Benefit, we will make an additional payment for that Annuity Year equal to the remaining Annual Income Amount for the Annuity Year, if any. Thus, in that scenario, the remaining Annual Income Amount would be payable even though your Account Value was reduced to zero. In subsequent Annuity Years we make payments that equal the Annual Income Amount as described in this Prospectus. No further Purchase Payments will be accepted under your Annuity. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount, the Spousal Life Income Benefit terminates and no additional payments will be made. . If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years, you can elect one of the following two options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. We must receive your request in a form acceptable to us at our office. . In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a joint and survivor or single (as applicable) life fixed annuity with five payments certain using the same basis that is used to calculate the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the same basis that is used to calculate the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. . If no withdrawal was ever taken, we will determine an initial Protected Withdrawal Value and calculate an Annual Income Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations . Withdrawals under the Spousal Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. . Withdrawals made while the Spousal Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Spousal Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value. 5 . You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Spousal Lifetime Five program. The Spousal Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Annual Income Amount in the form of periodic benefit payments. . You must allocate your Account Value in accordance with the then available option(s) that we may permit in order to elect and maintain the Spousal Lifetime Five program. . There may be circumstances where you will continue to be charged the full amount for the Spousal Lifetime Five program even when the benefit is only providing a guarantee of income based on one life with no survivorship. . In order for the Surviving Designated Life to continue the Spousal Lifetime Five program upon the death of an owner, the Designated Life must elect to assume ownership of the Annuity under the spousal continuation option. See "Spousal Owners/Spousal Beneficiaries", "Spousal Beneficiary -- Assumption of Annuity" and "Qualified Beneficiary Continuation Option" in this Prospectus. Election of and Designations under the Program Spousal Lifetime Five can only be elected based on two Designated Lives. Designated Lives must be natural persons who are each other's spouses at the time of election of the program and at the death of the first of the Designated Lives to die. Currently, the program may only be elected where the Owner, Annuitant and Beneficiary designations are as follows: . One Annuity Owner, where the Annuitant and the Owner are the same person and the beneficiary is the Owner's spouse. The Owner/Annuitant and the beneficiary each must be at least 55 years old at the time of election; or . Co-Annuity Owners, where the Owners are each other's spouses. The Beneficiary designation must be the surviving spouse. The first named Owner must be the Annuitant. Both Owners must each be 55 years old at the time of election. No Ownership changes or Annuitant changes will be permitted once this program is elected. However, if the Annuity is co-owned, the Owner that is not the Annuitant may be removed without affecting the benefit. The Spousal Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Spousal Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Termination of the Program The program terminates automatically when your Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. We reserve the right to further limit the frequency election in the future. The program terminates upon your surrender of the Annuity, upon the first Designated Life to die if the Annuity is not continued, upon the second Designated Life to die or upon your election to begin receiving annuity payments. The charge for the Spousal Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity, this required beginning date can generally be deferred to after retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Income Amount, which will cause us to increase the Annual Income Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 6 4. LIFETIME FIVE INCOME BENEFIT In order to reflect certain administrative changes to the Lifetime Five Income Benefit, the box in the section of the prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), is replaced with: The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Lifetime Five can be elected only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. Currently, if you elect Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Lifetime Five and Spousal Lifetime Five. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect any other optional living benefit. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), under the heading "Key Feature - Protected Withdrawal Value" the following information is added after the 3rd paragraph: You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect, then you are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected prior to March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elected the Lifetime Five program on or after March 20, 2006, then you are eligible to step-up the Protected Withdrawal Value on or after the 3rd anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected on or after March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 3rd anniversary following the preceding step-up. In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Under the same heading "Key Feature - Protected Withdrawal Value", before the last paragraph, the following information is added: We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Lifetime Five or after you have elected Lifetime Five. If, on the date that we implement an auto step-up to your Protected Withdrawal Value, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the first withdrawal under the Lifetime Five program (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is effected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. Under the heading "Election of the Program", the following information is added: Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Spousal Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. If you elected Lifetime Five prior to March 20, 2006, and you terminate the program, there will be no waiting period before you can re-elect the program or elect Spousal Lifetime Five provided that you had not previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five. If you had previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five, you will be able to re-elect the program or elect Spousal Lifetime Five on any date on or after the next anniversary of the Annuity Date. However, once you choose to re-elect/elect, the waiting period described above will apply to subsequent re-elections. We reserve the right to limit the re-election/election frequency in the future. Before making any such change to the re-election/election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. 7 Under the heading "Termination of the Program", the following sentence was added to the end of the first paragraph: While you may terminate Lifetime Five at any time, we may not terminate the benefit other than in the circumstances listed above. However, we may stop offering the program for new elections or re-elections at any time in the future. 5. WACHOVIA SECURITIES In the section entitled "General Information", the following paragraph was added to the end of the heading entitled "Who Distributes Annuities Offered by American Skandia?": On July 1, 2003, Prudential Financial combined its retail securities brokerage and clearing operations with those of Wachovia Corporation ("Wachovia") and formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a joint venture headquartered in Richmond, Virginia. Prudential Financial has a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia and Wachovia Securities are key distribution partners for certain products of Prudential Financial affiliates, including mutual funds and individual annuities that are distributed through their financial advisors, bank channel and independent channel. In addition, Prudential Financial is a service provider to the managed account platform and certain wrap-fee programs offered by Wachovia Securities. 8 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 ---------------------------------------------- AMERICAN SKANDIA STAGECOACH[RegTM] APEX(SM) II Flexible Premium Deferred Annuity - -------------------------------------------------------------------------------- PROSPECTUS: MAY 2, 2005 AS REVISED ON JUNE 20, 2005 This Prospectus describes Stagecoach[RegTM] APEX(SM) II, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Wells Fargo Bank, N.A. The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. For more information about variations applicable to your state, please refer to your Annuity contract or consult your Investment Professional. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. - -------------------------------------------------------------------------------- American Skandia offers several different annuities which your Investment Professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection and the ability to access your annuity's account value. The fees and charges you pay and compensation paid to your investment professional may also be different between each annuity. For more information, please refer to the Appendix entitled "Selecting the Variable Annuity That's Right for You." - -------------------------------------------------------------------------------- The Variable Investment Options - -------------------------------------------------------------------------------- The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: Wells Fargo Variable Trust, American Skandia Trust, Gartmore Variable Investment Trust, A I M Advisors, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. Please Read This Prospectus - -------------------------------------------------------------------------------- Please read this prospectus and the current prospectus for the underlying mutual funds. Keep them for future reference. If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. Available Information - -------------------------------------------------------------------------------- We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 97. This Prospectus is part of the registration statement we filed with the SEC regarding this offering. Additional information on us and this offering is available in the registration statement and the exhibits thereto. You may review and 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. 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. For Further Information call: - -------------------------------------------------------------------------------- [GRAPHIC] 1-800-680-8920 These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, or bank subsidiary of Wells Fargo Bank, N.A., are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value, even with respect to amounts allocated to the AST Money Market sub-account. 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. American Skandia Stagecoach[RegTM] APEX(SM) II are registered trademarks/ servicemarks of A Wells Fargo Bank, N.A. and The Prudential Insurance Company of America, respectively. Prospectus Dated: May 2, 2005 as revised on June 20, 2005 Statement of Additional Information Dated: May 2, 2005 WFAPX2PR605 WFVAPEXIIPROS PLEASE SEE OUR PRIVACY POLICY AND IRA DISCLOSURE STATEMENT ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. Contents - -------------------------------------------------------------------------------- Introduction ............................................................................. 1 Why Would I Choose to Purchase This Annuity? ........................................... 1 What Are Some of the Key Features of This Annuity? ..................................... 1 How Do I Purchase This Annuity? ........................................................ 1 Glossary of Terms ........................................................................ 2 Summary of Contract Fees and Charges ..................................................... 3 Expense Examples ......................................................................... 12 Investment Options ....................................................................... 13 What Are the Investment Objectives and Policies of the Portfolios? ..................... 13 What Are the Fixed Allocations? ........................................................ 29 Fees and Charges ......................................................................... 30 What Are the Contract Fees and Charges? ................................................ 30 What Charges Apply Solely to the Variable Investment Options? .......................... 31 What Fees and Expenses Are Incurred by the Portfolios? ................................. 32 What Charges Apply to the Fixed Allocations? ........................................... 32 What Charges Apply if I Choose an Annuity Payment Option? .............................. 32 Exceptions/Reductions to Fees and Charges .............................................. 32 Purchasing Your Annuity .................................................................. 33 What Are Our Requirements for Purchasing the Annuity? .................................. 33 Managing Your Annuity .................................................................... 34 May I Change the Owner, Annuitant and Beneficiary Designations? ........................ 34 May I Return the Annuity if I Change My Mind? .......................................... 34 May I Make Additional Purchase Payments? ............................................... 34 May I Make Scheduled Payments Directly From My Bank Account? ........................... 34 May I Make Purchase Payments Through a Salary Reduction Program? ....................... 35 Managing Your Account Value .............................................................. 36 How and When Are Purchase Payments Invested? ........................................... 36 How Do I Receive a Loyalty Credit ...................................................... 36 How are Loyalty Credits Applied to My Account Value .................................... 36 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 36 Do You Offer Dollar Cost Averaging? .................................................... 38 Do You Offer Any Automatic Rebalancing Programs? ....................................... 39 Are Any Asset Allocation Programs Available? ........................................... 39 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 39 May I Give My Investment Professional Permission to Manage My Account Value? ........... 40 May I Authorize My Third Party Investment Advisor to Manage My Account? ................ 41 How Do the Fixed Allocations Work? ..................................................... 41 How Do You Determine Rates For Fixed Allocations? ...................................... 42 How Does the Market Value Adjustment Work? ............................................. 43 What Happens When My Guarantee Period Matures? ......................................... 44 Access To Account Value .................................................................. 45 What Types of Distributions Are Available to Me? ....................................... 45 Are There Tax Implications for Distributions? .......................................... 45 Can I Withdraw a Portion of My Annuity? ................................................ 45 How Much Can I Withdraw as a Free Withdrawal? .......................................... 46 Is There a Charge for a Partial Withdrawal? ............................................ 46 Can I Make Periodic Withdrawals from the Annuity During the Accumulation Period? ....... 46 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue Code? .................................................................................. 47 What are Minimum Distributions and When Would I Need to Make Them? ..................... 47 Can I Surrender My Annuity for its Value? .............................................. 47 What is a Medically-Related Surrender and How Do I Qualify? ............................ 47 What Types of Annuity Options Are Available? ........................................... 48
(i) Contents - -------------------------------------------------------------------------------- How and When Do I Choose the Annuity Payment Option? ................................... 49 How Are Annuity Payments Calculated? ................................................... 49 Living Benefit Programs .................................................................. 52 Do You Offer Programs Designed to Provide Investment Protection for Owners While They Are Alive? ........................................................................... 52 Guaranteed Return Option Plus(SM) (GRO Plus(SM)) ....................................... 53 Guaranteed Return Option (GRO) ......................................................... 58 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 60 Guaranteed Minimum Income Benefit (GMIB) ............................................... 64 Lifetime Five Income Benefit (Lifetime Five) ........................................... 69 Death Benefit ............................................................................ 75 What Triggers the Payment of a Death Benefit? .......................................... 75 Basic Death Benefit .................................................................... 75 Optional Death Benefits ................................................................ 75 American Skandia's Annuity Rewards ..................................................... 79 Payment of Death Benefits .............................................................. 79 Valuing Your Investment .................................................................. 82 How is My Account Value Determined? .................................................... 82 What is the Surrender Value of My Annuity? ............................................. 82 How and When Do You Value the Sub-Accounts? ............................................ 82 How Do You Value Fixed Allocations? .................................................... 82 When Do You Process and Value Transactions? ............................................ 82 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 83 Tax Considerations ....................................................................... 85 General Information ...................................................................... 92 How Will I Receive Statements and Reports? ............................................. 92 Who is American Skandia? ............................................................... 92 What are Separate Accounts? ............................................................ 92 What is the Legal Structure of the Underlying Funds? ................................... 94 Who Distributes Annuities Offered by American Skandia? ................................. 95 Incorporation of Certain Documents by Reference ........................................ 96 Financial Statements ................................................................... 96 How to Contact Us ...................................................................... 96 Indemnification ........................................................................ 97 Legal Proceedings ...................................................................... 97 Contents of the Statement of Additional Information .................................... 97 Appendix A -- Condensed Financial Information About Separate Account B ................... A-1 Appendix B -- Calculation of Optional Death Benefits ..................................... B-1 Appendix C -- Additional Information on Asset Allocation Programs ........................ C-1 Appendix D -- Selecting the Variable Annuity That's Right for You ........................ D-1
(ii) AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Introduction - -------------------------------------------------------------------------------- Why Would I Choose to Purchase This Annuity? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers a choice of different optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive and one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed allocations. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 70 1/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. What Are Some of the Key Features of This Annuity? o This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. o This Annuity offers both variable investment options and Fixed Allocations. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed Allocations of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. o The Annuity features two distinct periods -- the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. o During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. o For annuities issued on or after June 20, 2005, this Annuity offers a Loyalty Credit which we add to your Account Value after it has been in effect for five full contract years (i.e., on your fifth Contract Anniversary), subject to our rules and state availability. o This Annuity offers optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive. o This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. o You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges, although any optional guaranteed benefit you elect may be reduced. Other product features allow you to access your Account Value as necessary, although a charge may apply. After Annuity Year 4, you are allowed to make unlimited withdrawals from your Annuity without any charges. o Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. How Do I Purchase This Annuity? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $10,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $10,000. If the Annuity is owned by an individual or individuals, the oldest of those Owners must be age 85 or under, as of the Issue Date of the Annuity. If the Annuity is owned by an entity, the annuitant must be age 85 or under, as of the Issue Date of the Annuity. The availability and level of protection of certain optional benefits may vary based on the age of the Owner, on the Issue Date of the Annuity or the date of the Owner's death. 1 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Glossary of Terms - -------------------------------------------------------------------------------- Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. ACCOUNT VALUE The value of each allocation to a Sub-account (also referred to as "variable investment option") or a Fixed Allocation prior to the Annuity Date, plus any earnings, and/or less any losses, distributions and charges. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on a contract anniversary, any fee that is deducted from the contract annually in arrears. The Account Value includes any Loyalty Credit we apply. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. ANNUITIZATION The application of Account Value (or Protected Income Value for the Guaranteed Minimum Income Benefit, if applicable) to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. ANNUITY DATE The date you choose for annuity payments to commence. A maximum Annuity Date may apply. ANNUITY YEAR A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. CODE The Internal Revenue Code of 1986, as amended from time to time. FIXED ALLOCATION An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. GUARANTEE PERIOD A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. INTERIM VALUE The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. ISSUE DATE The effective date of your Annuity. MVA A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day more than 30 days prior to the Maturity Date of such Fixed Allocation. OWNER With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. SURRENDER VALUE The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge, the charge for any optional benefits. The surrender value may be calculated using a Market Value Adjustment with respect to amounts in any Fixed Allocation. UNIT A measure used to calculate your Account Value in a Sub-account during the accumulation period. VALUATION DAY Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. 2 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Summary of Contract Fees and Charges - -------------------------------------------------------------------------------- Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the mortality and expense risk charge, the charge for administration of the Annuity, and the charge for certain optional benefits you elect, other than the Guaranteed Minimum Income Benefit, which is assessed against the Protected Income Value. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. The following table provides a summary of the fees and charges you will pay if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
YOUR TRANSACTION FEES AND CHARGES - ----------------------------------------------------------------------------------------------------------- (ASSESSED AGAINST THE ANNUITY) FEE/CHARGE AMOUNT DEDUCTED - ----------------------------------------------------------------------------------------------------------- 8.5% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period during which a particular percentage applies is measured from the Issue Date of the Contingent Deferred Sales Charge* Annuity. - ----------------------------------------------------------------------------------------------------------- $10.00 (Currently, $15.00 maximum) (Currently we deduct the fee after the 20th transfer each Annuity Year. We guarantee that the number of charge free transfers Transfer Fee per Annuity Year will never be less than 8.) - ----------------------------------------------------------------------------------------------------------- Up to 3.5% of the value that is annuitized, depending on the requirements of the applicable jurisdiction. This charge is deducted Tax Charge generally at the time you annuitize your contract. - -----------------------------------------------------------------------------------------------------------
* The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. For purposes of calculating this charge we consider the year following the Issue Date of your Annuity as Year 1.
- -------------------------------------------------------------------------------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5+ - -------------------------------------------------------------------------------- 8.5% 8.0% 7.0% 6.0% 0.0% - --------------------------------------------------------------------------------
3 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- The following table provides a summary of the periodic fees and charges you will pay while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus.
YOUR PERIODIC FEES AND CHARGES - --------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINST THE ANNUITY FEE/CHARGE AMOUNT DEDUCTED - --------------------------------------------------------------------------------------------------------------------------- Smaller of $35 or 2% of Account Value (Only applicable if Account Value is less than $100,000) (Assessed annually on the Annuity's anniversary date or upon surrender) Annual Maintenance Fee - --------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS(1) - --------------------------------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE AMOUNT DEDUCTED - --------------------------------------------------------------------------------------------------------------------------- 1.50% Mortality & Expense Risk Charge(2) - --------------------------------------------------------------------------------------------------------------------------- 0.15% Administration Charge(2) - --------------------------------------------------------------------------------------------------------------------------- 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option(4) ("Qualified BCO") Settlement Service Charge(3) - --------------------------------------------------------------------------------------------------------------------------- 1.65% per year of the value of each Sub-account (1.40% per year if you are a beneficiary electing the Qualified BCO) Total Annual Charges of the Sub-accounts - ---------------------------------------------------------------------------------------------------------------------------
1: These charges are deducted daily and apply to Variable Investment Options only. 2: The combination of the Mortality and Expense Risk Charge and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. 3: The Mortality & Expense Risk Charge and the Administration Charge do not apply if you are a beneficiary under the Qualified Beneficiary Continuation Option. The Settlement Service Charge applies only if your beneficiary elects the Qualified Beneficiary Continuation Option. 4: When an Annuity is used as an IRA, 403(b) or other "qualified investment", upon the Owner's death a beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. If a beneficiary elects this option, the beneficiary will incur the Settlement Service Charge. Please refer to the section of this prospectus that describes the Qualified Beneficiary Continuation Option for more detailed information about this option, including certain restrictions and limitations that may apply. 4 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- The following table provides a summary of the fees and charges you will pay if you elect any of the following optional benefits. Not all optional benefits may be purchased in combination with one another. You may only elect one optional living benefit. The optional living benefits are the Guaranteed Return Option Plus program (and where not available, Guaranteed Return Option), the Guaranteed Minimum Withdrawal Benefit, the Guaranteed Minimum Income Benefit and the Lifetime Five(SM) Income Benefit. For the optional death benefits, you may elect the Highest Anniversary Value Death Benefit or the Highest Daily Value Death Benefit together with the Enhanced Beneficiary Protection Death Benefit, or any of these three benefits individually, but the Combination 5% Roll-up and HAV Death Benefit may only be purchased individually. The fees and charges and each of the optional benefits are described in more detail within this Prospectus.
YOUR OPTIONAL BENEFIT FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ OPTIONAL BENEFIT FEE/ TOTAL ANNUAL OPTIONAL BENEFIT CHARGE CHARGE* - ------------------------------------------------------------------------------------------------------------------------------------ GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM))/GUARANTEED RETURN OPTION - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees a "return of premium" at a future date, 0.25% of average daily 1.90%; while allowing you to allocate all or a portion of your Account Value to net assets of the Sub- 1.65% for certain Sub-accounts. accounts Qualified BCO GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts over 0.35% of average daily 2.00%; time equal to an initial principal value, regardless of the impact of market net assets of the Sub- 1.75% for Qualified BCO performance on your Account Value. accounts GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that, after a seven-year waiting period, guarantees your 0.50% per year of the 1.65% PLUS ability to begin receiving income from your Annuity in the form of annuity average Protected 0.50% per year of payments based on your total Purchase Payments and an annual increase of Income Value during average Protected 5% on such Purchase Payments adjusted for withdrawals (called the each year; deducted Income Value "Protected Income Value"), regardless of the impact of market performance annually in arrears each on your Account Value. Annuity Year LIFETIME FIVE INCOME BENEFIT** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts equal 0.60% of average daily 2.25% to a percentage of an initial principal value, regardless of the impact net assets of the Sub- of market performance on your Account Value, subject to our program rules accounts regarding the timing and amount of withdrawals. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily 1.90% protection for your beneficiary(ies) by providing amounts in addition to the net assets of the Sub- basic Death Benefit that can be used to offset federal and state taxes accounts payable on any taxable gains in your Annuity at the time of your death. HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily 1.90% protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- greater of the basic Death Benefit and the Highest Anniversary Value, less accounts proportional withdrawals.
5 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Summary of Contract Fees and Charges continued - --------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ OPTIONAL BENEFIT FEE/ TOTAL ANNUAL OPTIONAL BENEFIT CHARGE CHARGE* - ------------------------------------------------------------------------------------------------------------------------------------ COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily 2.15% protection for your beneficiary(ies) by providing the greater of the Highest net assets of the Sub- Anniversary Value Death Benefit and a 5% annual increase on Purchase Payments accounts adjusted for withdrawals. HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily 2.15% protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- greater of the basic Death Benefit and the Highest Daily Value, less accounts proportional withdrawals. - ------------------------------------------------------------------------------------------------------------------------------------ Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply.
* The Total Annual Charge includes the Insurance Charge assessed against the average daily net assets allocated to the Sub-accounts. If you elect more than one optional benefit, the Total Annual Charge would be increased to include the charge for each optional benefit. ** These optional benefits are not available under the Qualified BCO. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2004. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets.
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES - -------------------------------------------------------------------------------- MINIMUM MAXIMUM - -------------------------------------------------------------------------------- Total Portfolio Operating Expense 0.63% 3.06%
The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2004, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee has been waived and/or other expenses have been partially reimbursed. Any such fee waivers and/or reimbursements have been reflected in the footnotes. The "Total Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. 6 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES - -------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE NET ASSETS OF THE UNDERLYING PORTFOLIOS)
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES American Skandia Trust:(2,3) - --------------------------------------------------------------------------------------------------- AST JPMorgan International Equity 1.00% 0.13% None 1.13% AST William Blair International Growth 1.00% 0.22% None 1.22% AST LSV International Value(4) 1.00% 0.37% None 1.37% AST MFS Global Equity 1.00% 0.35% None 1.35% AST Small-Cap Growth(5) 0.90% 0.24% None 1.14% AST DeAM Small-Cap Growth 0.95% 0.22% None 1.17% AST Federated Aggressive Growth 0.95% 0.24% None 1.19% AST Small-Cap Value(6) 0.90% 0.18% None 1.08% AST DeAM Small-Cap Value 0.95% 0.33% None 1.28% AST Goldman Sachs Mid-Cap Growth 1.00% 0.25% None 1.25% AST Neuberger Berman Mid-Cap Growth 0.90% 0.22% None 1.12% AST Neuberger Berman Mid-Cap Value 0.90% 0.15% None 1.05% AST Alger All-Cap Growth 0.95% 0.22% None 1.17% AST Gabelli All-Cap Value 0.95% 0.26% None 1.21% AST T. Rowe Price Natural Resources 0.90% 0.26% None 1.16% AST AllianceBernstein Large-Cap Growth(7) 0.90% 0.23% None 1.13% AST MFS Growth 0.90% 0.20% None 1.10% AST Marsico Capital Growth 0.90% 0.14% None 1.04% AST Goldman Sachs Concentrated Growth 0.90% 0.17% None 1.07% AST DeAM Large-Cap Value 0.85% 0.26% None 1.11% AST AllianceBernstein Growth + Value 0.90% 0.32% None 1.22% AST AllianceBernstein Core Value(8) 0.75% 0.24% None 0.99% AST Cohen & Steers Realty 1.00% 0.22% None 1.22% AST AllianceBernstein Managed Index 500(9) 0.60% 0.17% None 0.77% AST American Century Income & Growth 0.75% 0.24% None 0.99% AST AllianceBernstein Growth & Income(10) 0.75% 0.15% None 0.90% AST Hotchkis & Wiley Large-Cap Value 0.75% 0.19% None 0.94% AST Global Allocation(11) 0.89% 0.26% None 1.15% AST American Century Strategic Balanced 0.85% 0.27% None 1.12% AST T. Rowe Price Asset Allocation 0.85% 0.27% None 1.12% AST T. Rowe Price Global Bond 0.80% 0.27% None 1.07% AST Goldman Sachs High Yield 0.75% 0.18% None 0.93% AST Lord Abbett Bond-Debenture 0.80% 0.22% None 1.02% AST PIMCO Total Return Bond 0.65% 0.16% None 0.81% AST PIMCO Limited Maturity Bond 0.65% 0.17% None 0.82% AST Money Market 0.50% 0.13% None 0.63% Gartmore Variable Investment Trust: - --------------------------------------------------------------------------------------------------- GVIT Developing Markets 1.15% 0.38% 0.25% 1.78%
7 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Summary of Contract Fees and Charges continued - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES Wells Fargo Variable Trust Advantage:(12) - --------------------------------------------------------------------------------------------------------- Advantage C&B Large Cap Value 0.55% 0.39% 0.25% 1.19% Advantage Equity Income 0.55% 0.23% 0.25% 1.03% Advantage International Core 0.75% 0.42% 0.25% 1.42% Advantage Small Cap Growth 0.75% 0.24% 0.25% 1.24% Advantage Large Company Core 0.55% 0.33% 0.25% 1.13% Advantage Large Company Growth 0.55% 0.25% 0.25% 1.05% Advantage Asset Allocation 0.55% 0.22% 0.25% 1.02% Advantage Total Return Bond 0.45% 0.26% 0.25% 0.96% AIM Variable Insurance Funds:(13) - --------------------------------------------------------------------------------------------------------- AIM V.I. Dynamics Fund -- Series I shares 0.75% 0.39% None 1.14% AIM V.I. Technology Fund -- Series I shares 0.75% 0.40% None 1.15% AIM V.I. Health Sciences Fund -- Series I shares(14) 0.75% 0.36% None 1.11% AIM V.I. Financial Services Fund -- Series I shares 0.75% 0.37% None 1.12% Evergreen Variable Annuity Trust: - --------------------------------------------------------------------------------------------------------- International Equity(15) 0.42% 0.30% None 0.72% Growth(16) 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% ProFund VP:(17) - --------------------------------------------------------------------------------------------------------- Access VP High Yield 0.75% 1.02% 0.25% 2.02% Bull 0.75% 0.78% 0.25% 1.78% OTC 0.75% 0.87% 0.25% 1.87% Large-Cap Value 0.75% 1.04% 0.25% 2.04% Large-Cap Growth 0.75% 2.06% 0.25% 3.06% Mid-Cap Value 0.75% 0.92% 0.25% 1.92% Mid-Cap Growth 0.75% 0.94% 0.25% 1.94% Small-Cap Value 0.75% 0.95% 0.25% 1.95% Small-Cap Growth 0.75% 0.90% 0.25% 1.90% Asia 30 0.75% 0.86% 0.25% 1.86% Europe 30 0.75% 0.78% 0.25% 1.78% Japan 0.75% 0.85% 0.25% 1.85% UltraBull 0.75% 0.89% 0.25% 1.89% UltraMid-Cap 0.75% 0.94% 0.25% 1.94% UltraSmall-Cap 0.75% 0.94% 0.25% 1.94% UltraOTC 0.75% 0.88% 0.25% 1.88% Bear 0.75% 0.90% 0.25% 1.90% Short Mid-Cap 0.75% 0.80% 0.25% 1.80% Short Small-Cap 0.75% 1.28% 0.25% 2.28% Short OTC 0.75% 0.86% 0.25% 1.86% Banks 0.75% 0.98% 0.25% 1.98%
8 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES ProFund VP:(17) continued - --------------------------------------------------------------------------------------------------------- Basic Materials 0.75% 0.96% 0.25% 1.96% Biotechnology 0.75% 0.98% 0.25% 1.98% Consumer Goods 0.75% 0.99% 0.25% 1.99% Consumer Services 0.75% 1.20% 0.25% 2.20% Financials 0.75% 0.92% 0.25% 1.92% Health Care 0.75% 0.91% 0.25% 1.91% Industrials 0.75% 0.99% 0.25% 1.99% Internet 0.75% 0.94% 0.25% 1.94% Oil & Gas 0.75% 0.92% 0.25% 1.92% Pharmaceuticals 0.75% 0.97% 0.25% 1.97% Precious Metals 0.75% 0.87% 0.25% 1.87% Real Estate 0.75% 0.93% 0.25% 1.93% Semiconductor 0.75% 0.99% 0.25% 1.99% Technology 0.75% 0.87% 0.25% 1.87% Telecommunications 0.75% 0.95% 0.25% 1.95% Utilities 0.75% 0.95% 0.25% 1.95% U.S. Government Plus 0.50% 0.86% 0.25% 1.61% Rising Rates Opportunity 0.75% 0.75% 0.25% 1.75% First Defined Portfolio Fund, LLC:(18, 19) - --------------------------------------------------------------------------------------------------------- First Trust[RegTM] 10 Uncommon Value 0.60% 0.76% 0.25% 1.61% Target Managed VIP 0.60% 1.25% 0.25% 2.10% The Dowsm DART 10 0.60% 1.53% 0.25% 2.38% Global Dividend Target 15 0.60% 1.85% 0.25% 2.70% S&P[RegTM] Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ[RegTM] Target 15 0.60% 1.75% 0.25% 2.60% Value Line[RegTM] Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(20) 0.60% 0.62% 0.25% 1.47% The Prudential Series Fund, Inc.: - --------------------------------------------------------------------------------------------------------- SP William Blair International Growth 0.85% 0.45% 0.25% 1.55%
(1) As noted above, shares of the Portfolios generally are purchased through variable insurance products. Many of the Portfolios and/or their investment advisers and/or distributors have entered into arrangements with us as the issuer of the Annuity under which they compensate us for providing ongoing services in lieu of the Trust providing such services. Amounts paid by a Portfolio under those arrangements are included under "Other Expenses." For more information see the prospectus for each underlying portfolio and, "Service Fees payable to American Skandia," later in this prospectus. 9 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- (2) The Portfolios' total actual annual operating expenses for the year ended December 31, 2004 were less than the amount shown in the table due to fee waivers, reimbursement of expenses and expense offset arrangements. These waivers, reimbursements, and offset arrangements are voluntary and may be terminated by American Skandia Investment Services, Inc. and Prudential Investments LLC at any time. After accounting for the waivers, reimbursements and offset arrangements, the Portfolios' actual annual operating expenses were:
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT AST William Blair International Growth 1.11% AST LSV International Value 1.22% AST DeAM Small-Cap Growth 1.02% AST DeAM Small-Cap Value 1.13% AST Goldman Sachs Mid-Cap Growth 1.13% AST Neuberger Berman Mid-Cap Growth 1.11% AST Neuberger Berman Mid-Cap Value 1.04% AST AllianceBernstein Large-Cap Growth 1.10% AST MFS Growth 1.07% AST Marsico Capital Growth 1.02% AST Goldman Sachs Concentrated Growth 1.00% AST DeAM Large-Cap Value 0.99% AST Cohen & Steers Realty 1.11% AST AllianceBernstein Growth & Income 0.87% AST Hotchkis & Wiley Large-Cap Value 0.90% AST American Century Strategic Balanced 1.09% AST T. Rowe Price Asset Allocation 1.07% AST Lord Abbett Bond-Debenture Portfolio 0.97% AST PIMCO Total Return Bond 0.78% AST PIMCO Limited Maturity Bond 0.79% AST Money Market 0.58%
(3) Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1 to permit an affiliate of the Trust's Investment Managers to receive brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of shares of the Portfolio. The Distribution Plan was terminated effective November 18, 2004. The total annual portfolio operating expenses do not reflect any brokerage commissions paid pursuant to the Distribution Plan prior to the Plan's termination. (4) Effective November 18, 2004, LSV Asset Management became the Sub-advisor of the Portfolio. Prior to November 18, 2004, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM International Equity Portfolio." (5) Effective May 1, 2005, Eagle Asset Management and Neuberger Berman Management, Inc. became Co-Sub-advisors of the Portfolio. Prior to May 1, 2005, State Street Research and Management Company served as Sub-advisor of the Portfolio, then named "AST State Street Research Small-Cap Growth Portfolio." (6) Effective November 18, 2004, Integrity Asset Management, Lee Munder Capital Group, J.P. Morgan Fleming Asset Management became Co-Sub-advisors of the Portfolio. Prior to November 18, 2004, GAMCO Advisors Inc. served as Sub-advisor of the Portfolio, then named "AST Gabelli Small-Cap Value Portfolio." (7) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth Portfolio" to "AST AllianceBernstein Large-Cap Growth Portfolio." (8) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Core Value Portfolio" to "AST AllianceBernstein Core Value Portfolio." (9) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Managed Index 500 Portfolio" to "AST AllianceBernstein Managed Index 500 Portfolio." (10) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth and Income Portfolio" to "AST AllianceBernstein Growth & Income Portfolio." (11) The AST Global Allocation Portfolio invests primarily in shares of other AST Portfolios (the "Underlying Portfolios"). (a) The only management fee directly paid by the Portfolio is a 0.10% fee paid to American Skandia Investment Services, Inc. and Prudential Investments LLC. The management fee shown in the chart for the Portfolio is (i) that 0.10% management fee paid by the Portfolio plus (ii) an estimate of the management fees paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the management fee rates shown in the chart above. (b) The expense information shown in the chart for the Portfolio reflects (i) the expenses of the Portfolio itself plus (ii) an estimate of the expenses paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the expense rates for the Underlying Portfolios shown in the above chart. (c) Effective May 1, 2005, Prudential Investment LLC provides day-to-day management of the Portfolio. Prior to May 1, 2005, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM Global Allocation Portfolio." 10 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- (12) (a) The Adviser of Wells Fargo Variable Trust has committed through April 30, 2006 to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net operating expenses as shown.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT Advantage C&B Large Cap Value 1.00% Advantage Equity Income 1.00% Advantage International Core 1.00% Advantage Small Cap Growth 1.20% Advantage Large Company Core 1.00% Advantage Large Company Growth 1.00% Advantage Asset Allocation 1.00% Advantage Total Return Bond 0.90%
(b) In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Value Advantage C&B Large Cap Value Equity Income Advantage Equity Income International Equity Advantage International Core Small Cap Growth Advantage Small Cap Growth Growth Advantage Large Company Core Large Company Growth Advantage Large Company Growth Asset Allocation Advantage Asset Allocation Total Return Bond Advantage Total Return Bond
(13) The Fund's adviser is entitled to receive reimbursement from the Fund for fees and expenses paid for by the Fund's adviser pursuant to expense limitation commitments between the Fund's adviser and the Fund if such reimbursement does not cause the Fund to exceed its then-current expense limitations and the reimbursement is made within three years after the Fund's adviser incurred the expense. (14) Effective July 1, 2005, the "AIM V.I. Health Sciences Fund" will be renamed "AIM V.I. Global Health Care Fund." (15) Effective May 1, 2005, the name of the Portfolio was changed from "Evergreen VA International Growth" to "Evergreen VA International Equity." (16) Effective May 1, 2005, the name of the Portfolio was changed from "Evergreen VA Special Equity" to "Evergreen VA Growth." (17) ProFund Advisors LLC has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Portfolio Operating Expenses, as a percentage of average daily net assets, exceed 1.98% (1.73% for ProFund VP U.S. Government Plus and 1.78% for ProFund VP Rising Rates Opportunity) through December 31, 2005. After such date, any of the expense limitations may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be repaid to ProFund Advisors LLC within three years of the waiver or reimbursement to the extent that recoupment will not cause the Portfolio's expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to investors. (18) The Funds' Board of Trustees reserves the right to suspend payments under the 12b-1 Plan at any time. On May 1, 2003, 12b-1 payments were suspended for all Funds except the First Trust 10 Uncommon Values Portfolio. Payments under the 12b-1 Plan resumed effective May 1, 2004 for the Target Managed VIP Portfolio, the Dow Dart 10 Portfolio, the Global Dividend Target 15 Portfolio, the S&P Target 24 Portfolio, the Nasdaq Target 15 Portfolio and the Value Line Target 25 Portfolio. (19) For the period September 30, 2004 through December 31, 2007, First Trust has contractually agreed to waive fees and reimburse expenses of the Portfolios to limit the total annual fund operating expenses (excluding brokerage expense and extraordinary expense) to 1.37% for the First Trust 10 Uncommon Values Portfolio and 1.47% for each of the other Portfolios' average daily net assets. First Trust has entered into an agreement with First Defined Portfolio Fund, LLC that will allow First Trust to recover from the Portfolios any fees waived or reimbursed during the three year period of January 1, 2005 through December 31, 2007. However, First Trust's ability to recover such amounts is limited to the extent that it would not exceed the amount reimbursed or waived during such period.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT First Trust[RegTM] 10 Uncommon Values 1.37% Target Managed VIP 1.47% S&P Target 24 1.47% The Dow(SM) DART 10 1.47% Value Line[RegTM] Target 25 1.47% Global Dividend Target 15 1.47% Nasdaq Target 15 1.47% Dow Target Dividend 1.47%
(20) The Dow (SM) Target Dividend Portfolio is newly organized. Accordingly, Other Expenses and Total Annual Portfolio Operating Expenses are based on estimated expenses for the current fiscal year. 11 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Expense Examples - -------------------------------------------------------------------------------- These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges (when applicable), Annual Maintenance Fee, Insurance Charge, and the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product, as well as the maximum charges for the optional benefits that are offered under the Annuity that can be elected in combination with one another. Below are examples showing what you would pay in expenses at the end of the stated time periods had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.65% per year; (c) the Annual Maintenance Fee is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers or other transactions for which we charge a fee for during the period shown; (f) no tax charge applies; (g) the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product applies; (h) the charge for each optional benefit is reflected as an additional charge equal to 0.60% per year of the average daily net assets of the Sub-accounts for the Lifetime Five Income Benefit, 0.50% per year of the average daily net assets of the Sub-accounts for the Highest Daily Value Death Benefit and 0.25% of the average daily net assets of the Sub-accounts for the Enhanced Beneficiary Protection Death Benefit; and (i) assumes no Loyalty Credit. Amounts shown in the examples are rounded to the nearest dollar. 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 will be less than those shown if you elect a different combination of optional benefits than indicated in the examples or if you allocate Account Value to any other available Sub-accounts. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. A table of accumulation values appears in Appendix A to this Prospectus.
IF YOU SURRENDER YOUR ANNUITY AT IF YOU ANNUITIZE YOUR ANNUITY AT IF YOU DO NOT SURRENDER THE END OF THE APPLICABLE TIME PERIOD: THE END OF THE APPLICABLE TIME PERIOD: YOUR ANNUITY: - ---------------------------------------------------------------------------------------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS $1,533 $2,871 $3,632 $6,785 $768 $2,241 $3,632 $6,785 $768 $2,241 $3,632 $6,785
12 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options - -------------------------------------------------------------------------------- WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information). Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment managers for AST are American Skandia Investment Services, Incorporated, a Prudential Financial Company, and Prudential Investments LLC, affiliated companies of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day management. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. - -------------------------------------------------------------------------------- Effective May 1, 2004, the SP William Blair International Growth Portfolio (formerly the SP Jennison International Growth Portfolio) is no longer offered as a Sub-account under the Annuity, except as follows: if at any time prior to May 1, 2004 you had any portion of your Account Value allocated to the SP William Blair International Growth Sub-account, you may continue to allocate Account Value and make transfers into and/or out of the SP William Blair International Growth Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. If you never had a portion of your Account Value allocated to the SP William Blair International Growth Sub-account prior to May 1, 2004 or if you purchase your Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP William Blair International Growth Sub-Account. This Sub-account may be offered to new Owners at some future date; however, at the present time, there is no intention to do so. We also reserve the right to offer or close this Sub-account to all Owners that owned the Annuity prior to the close date. - -------------------------------------------------------------------------------- 13 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- International AST JPMorgan International Equity: seeks long-term capital growth by J.P. Morgan Equity investing in a diversified portfolio of international equity securities. The Fleming Asset Portfolio seeks to meet its objective by investing, under normal market Management conditions, at least 80% of its assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. - ----------------------------------------------------------------------------------------------------------------------- International AST William Blair International Growth: Seeks long-term capital William Blair & Equity appreciation. The Portfolio invests primarily in stocks of large and Company, L.L.C. medium-sized companies located in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. - ----------------------------------------------------------------------------------------------------------------------- International AST LSV International Value (formerly AST DeAM International Equity): LSV Asset Equity seeks capital growth. The Portfolio pursues its objective by primarily Management investing at least 80% of the value of its assets in the equity securities of companies in developed non-U.S. countries that are represented in the MSCI EAFE Index. - ----------------------------------------------------------------------------------------------------------------------- International AST MFS Global Equity: seeks capital growth. Under normal Massachusetts Equity circumstances the Portfolio invests at least 80% of its assets in equity Financial Services securities of U.S. and foreign issuers (including issuers in developing Company countries). The Portfolio generally seeks to purchase securities of companies with relatively large market capitalizations relative to the market in which they are traded. - ----------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Growth (formerly AST State Street Research Small- Eagle Asset Growth Cap Growth): seeks long-term capital growth. The Portfolio pursues Management, its objective by primarily investing in the common stocks of small- Neuberger Berman capitalization companies. Management, Inc. - ----------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Growth: seeks maximum growth of investors' Deutsche Asset Growth capital from a portfolio of growth stocks of smaller companies. The Management, Inc. Portfolio pursues its objective, under normal circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth[RegTM] Index. - ----------------------------------------------------------------------------------------------------------------------- Small Cap AST Federated Aggressive Growth: seeks capital growth. The Portfolio Federated Equity Growth pursues its investment objective by investing primarily in the stocks of Management small companies that are traded on national security exchanges, the Company of NASDAQ stock exchange and the over-the-counter market. Pennsylvania/ Federated Global Investment Management Corp. - ----------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Value (formerly AST Gabelli Small-Cap Value): seeks to Integrity Asset Value provide long-term capital growth by investing primarily in small- Management, Lee capitalization stocks that appear to be undervalued. The Portfolio will Munder Capital have a non-fundamental policy to invest, under normal circumstances, at Group, J.P. Morgan least 80% of the value of its assets in small capitalization companies. Fleming Asset Management - -----------------------------------------------------------------------------------------------------------------------
14 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. Deutsche Asset Value The Portfolio pursues its objective under normal market conditions, by Management, Inc. primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000[RegTM] Value Index. - ----------------------------------------------------------------------------------------------------------------------- Mid Cap AST Goldman Sachs Mid-Cap Growth: seeks long-term capital growth. Goldman Sachs Growth The Portfolio pursues its investment objective by investing primarily in Asset Management, equity securities selected for their growth potential, and normally invests L.P. at least 80% of the value of its assets in medium capitalization companies. - ----------------------------------------------------------------------------------------------------------------------- Mid Cap AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under Neuberger Berman Growth normal market conditions, the Portfolio primarily invests at least 80% of Management Inc. its net assets in the common stocks of mid-cap companies. The Sub-advisor looks for fast growing companies that are in new or rapidly evolving industries. - ----------------------------------------------------------------------------------------------------------------------- Mid Cap AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under Neuberger Berman Value normal market conditions, the Portfolio primarily invests at least 80% of Management Inc. its net assets in the common stocks of mid-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise before other investors realize their worth. - ----------------------------------------------------------------------------------------------------------------------- Specialty AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio Fred Alger invests primarily in equity securities, such as common or preferred stocks Management, Inc. that are listed on U.S. exchanges or in the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ----------------------------------------------------------------------------------------------------------------------- Specialty AST Gabelli All-Cap Value: seeks capital growth. The Portfolio GAMCO Investors, pursues its objective by investing primarily in readily marketable Inc. equity securities including common stocks, preferred stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ----------------------------------------------------------------------------------------------------------------------- Specialty AST T. Rowe Price Natural Resources: seeks long-term capital growth T. Rowe Price primarily through the common stocks of companies that own or develop Associates, Inc. natural resources (such as energy products, precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. - -----------------------------------------------------------------------------------------------------------------------
15 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Large-Cap Growth (formerly AST Alliance Growth): Alliance Capital Growth seeks long-term capital growth. The Portfolio invests at least 80% of its Management, L.P. total assets in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST MFS Growth: seeks long-term capital growth and future income. Massachusetts Growth Under normal market conditions, the Portfolio invests at least 80% of its Financial Services total assets in common stocks and related securities, such as preferred Company stocks, convertible securities and depositary receipts, of companies that the Sub-advisor believes offer better than average prospects for long-term growth. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Marsico Capital Growth: seeks capital growth. Income realization is Marsico Capital Growth not an investment objective and any income realized on the Portfolio's Management, LLC investments, therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Goldman Sachs Concentrated Growth: seeks growth of capital in a Goldman Sachs Growth manner consistent with the preservation of capital. Realization of income Asset Management, is not a significant investment consideration and any income realized on L.P. the Portfolio's investments, therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST DeAM Large-Cap Value: seeks maximum growth of capital by Deutsche Asset Value investing primarily in the value stocks of larger companies. The Portfolio Management, Inc. pursues its objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000[RegTM] Value Index. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth + Value: seeks capital growth by investing Alliance Capital Blend approximately 50% of its assets in growth stocks of large companies and Management, L.P. approximately 50% of its assets in value stocks of large companies. The Portfolio will invest primarily in common stocks of large U.S. companies included in the Russell 1000[RegTM] Index. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Core Value (formerly AST Sanford Bernstein Core Alliance Capital Value Value): seeks long-term capital growth by investing primarily in common Management, L.P. stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of large companies that appear to be undervalued. - ----------------------------------------------------------------------------------------------------------------------- Specialty AST Cohen & Steers Realty: seeks to maximize total return through Cohen & Steers investment in real estate securities. The Portfolio pursues its investment Capital objective by investing, under normal circumstances, at least 80% of its Management, Inc. net assets in securities of real estate issuers. - -----------------------------------------------------------------------------------------------------------------------
16 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Managed Index 500 (formerly AST Sanford Alliance Capital Blend Bernstein Managed Index 500): seeks to outperform the S&P 500 through Management, L.P. stock selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest, under normal circumstances, at least 80% of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Index. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST American Century Income & Growth: seeks capital growth with American Century Value current income as a secondary objective. The Portfolio invests primarily Investment in common stocks that offer potential for capital growth, and may, Management, Inc. consistent with its investment objective, invest in stocks that offer potential for current income. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth & Income: seeks long-term growth of Alliance Capital Value capital and income while attempting to avoid excessive fluctuations in Management, L.P. market value. The Portfolio normally will invest in common stocks (and securities convertible into common stocks). - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Hotchkis & Wiley Large-Cap Value: seeks current income and long-term Hotchkis & Wiley Value growth of income, as well as capital appreciation. The Portfolio invests, Capital under normal circumstances, at least 80% of its net assets plus borrowings for Management, LLC investment purposes in common stocks of large cap U.S. companies that have a high cash dividend or payout yield relative to the market. - ----------------------------------------------------------------------------------------------------------------------- Asset AST Global Allocation (formerly AST DeAM Global Allocation): seeks to Prudential Allocation/ obtain the highest potential total return consistent with a specified level Investments LLC Balanced of risk tolerance. The Portfolio seeks to achieve its investment objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. - ----------------------------------------------------------------------------------------------------------------------- Asset AST American Century Strategic Balanced: seeks capital growth and American Century Allocation/ current income. The Sub-advisor intends to maintain approximately 60% Investment Balanced of the Portfolio's assets in equity securities and the remainder in bonds Management, Inc. and other fixed income securities. - ----------------------------------------------------------------------------------------------------------------------- Asset AST T. Rowe Price Asset Allocation: seeks a high level of total return by T. Rowe Price Allocation/ investing primarily in a diversified portfolio of fixed income and equity Associates, Inc. Balanced securities. The Portfolio normally invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. This mix may vary depending on the Sub-advisor's outlook for the markets. - -----------------------------------------------------------------------------------------------------------------------
17 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST T. Rowe Price Global Bond: seeks to provide high current income T. Rowe Price and capital growth by investing in high quality foreign and U.S. dollar- International, Inc. denominated bonds. The Portfolio will invest at least 80% of its total assets in fixed income securities, including high quality bonds issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Goldman Sachs High Yield: seeks a high level of current income and may Goldman Sachs Asset also consider the potential for capital appreciation. The Portfolio invests, Management, L.P. under normal circumstances, at least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) ("Net Assets") in high-yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Lord Abbett Bond-Debenture: seeks high current income and the Lord, Abbett & Co. opportunity for capital appreciation to produce a high total return. To pursue LLC its objective, the Portfolio will invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible into common stock and preferred stocks. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Total Return Bond: seeks to maximize total return consistent Pacific Investment with preservation of capital and prudent investment management. The Portfolio Management will invest in a diversified portfolio of fixed-income securities of Company LLC (PIMCO) varying maturities. The average portfolio duration of the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent Pacific Investment with preservation of capital and prudent investment management. The Portfolio Management will invest in a diversified portfolio of fixed-income securities of varying Company LLC (PIMCO) maturities. The average portfolio duration of the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Money Market: seeks high current income while maintaining high Wells Capital levels of liquidity. The Portfolio attempts to accomplish its objective by Management, Inc. maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ----------------------------------------------------------------------------------------------------------------------- International GVIT Developing Markets: seeks long-term capital appreciation, under Gartmore Global Equity normal conditions by investing at least 80% of its total assets in stocks of Asset Management companies of any size based in the world's developing economies. Under normal Trust/Gartmore market conditions, investments are maintained in at least six countries at Global Partners all times and no more than 35% of total assets in any single one of them. - -----------------------------------------------------------------------------------------------------------------------
18 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage C&B Large Cap Value Fund (formerly Equity Value): Seeks Wells Fargo Funds Value maximum long-term total return, consistent with minimizing risk to Management, LLC principal. The Portfolio will principally invest in large-capitalization securities, which the Sub-advisor defines as securities of companies with market capitalizations of $1 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Equity Income Fund (formerly Equity Income): Seeks long-term Wells Fargo Funds Value capital appreciation and above-average dividend income. The Portfolio Management, LLC invests in the common stocks of large U.S. companies with strong return potential and above-average dividend income. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- International Advantage International Core Fund (formerly International Equity): Seeks Wells Fargo Funds Equity long-term capital appreciation. The Portfolio will principally invest in Management, LLC non-U.S. securities. The Portfolio will focus on companies with strong growth potential that offer good relative values. - ----------------------------------------------------------------------------------------------------------------------- Small Cap Advantage Small Cap Growth Fund (formerly Small Cap Growth): Seeks Wells Fargo Funds Growth long-term capital appreciation. The Portfolio focuses on companies that Management, LLC the Sub-advisor believes have above-average growth potential, or that may be involved in new or innovative products, services and processes. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Core Fund (formerly Growth): Seeks total Wells Fargo Funds Blend return comprised of long-term capital appreciation and current income. Management, LLC The Portfolio will invest at least 80% of the Fund's assets in securities of large-capitalization companies, which are defined as those with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Growth Fund (formerly Large Company Wells Fargo Funds Growth Growth): Seeks long-term capital appreciation. The Portfolio invests in the Management, LLC common stocks of large U.S. companies that the Sub-advisor believes have superior growth potential. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Asset Advantage Asset Allocation Fund (formerly Asset Allocation): Seeks Wells Fargo Funds Allocation/ long-term total return, consistent with reasonable risk. The Portfolio Management, LLC Balanced invests in equity and fixed-income securities in varying proportions, with an emphasis on equity securities. The Portfolio does not select individual securities for investment, rather, it buys substantially all of the securities of various indexes to replicate such indexes. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income Advantage Total Return Bond Fund (formerly Total Return Bond): Seeks Wells Fargo Funds total return consisting of income and capital appreciation. The Portfolio Management, LLC invests principally in investment-grade debt securities, which include U.S. Government obligations, corporate bonds, mortgage- and other asset- backed securities and money market instruments. Under normal circumstances, the Portfolio is expected to maintain an overall effective duration between 4 and 5.5 years. - -----------------------------------------------------------------------------------------------------------------------
19 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Mid Cap AIM Variable Insurance Funds -- AIM V.I. Dynamics Fund -- Series I A I M Advisors, Growth shares (formerly an INVESCO fund): seeks long-term capital growth. The Inc. Portfolio pursues its objective by normally investing at least 65% of its assets in common stocks of mid-sized companies that are included in the Russell Midcap Growth[RegTM] Index at the time of purchase. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Technology Fund -- Series I A I M Advisors, shares (formerly an INVESCO fund): seeks capital growth. The Portfolio Inc. normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Health Sciences Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund) (Effective July 1, 2005, AIM Inc. V.I. Health Sciences Fund will be renamed AIM V.I. Global Health Care Fund): seeks capital growth. The Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies related to health care. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Financial Services Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund): seeks capital growth. The Inc. Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks, insurance companies, investment and miscellaneous industries, and suppliers to financial services companies. - ----------------------------------------------------------------------------------------------------------------------- International Evergreen VA International Equity (formerly Evergreen VA International Evergreen Equity Growth): seeks long-term capital growth and secondarily, modest income. Investment The Portfolio normally invests 80% of its assets in equity securities Management issued by established, quality, non-U.S. companies located in countries with Company, LLC developed markets and may purchase across all market capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.). - ----------------------------------------------------------------------------------------------------------------------- Small Cap Evergreen VA Growth (formerly Evergreen VA Special Equity): seeks Evergreen Growth long-term capital growth. The Portfolio invests at least 75% of its assets Investment in common stocks of small- and medium-sized companies (i.e., companies Management whose market capitalizations fall within the range of the Russell 2000[RegTM] Company, LLC Growth Index, at the time of purchase). - ----------------------------------------------------------------------------------------------------------------------- Specialty Evergreen VA Omega: seeks long-term capital growth. The Portfolio Evergreen invests primarily, and under normal conditions, substantially all of its Investment assets in common stocks and securities convertible into common stocks Management of U.S. companies across all market capitalizations. Company, LLC - -----------------------------------------------------------------------------------------------------------------------
20 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- International ProFund VP Europe 30: seeks daily investment results, before fees and ProFund Advisors Equity expenses, that correspond to the daily performance of the ProFunds LLC Europe 30 Index. The ProFunds Europe 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Asia 30: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the ProFunds Asia LLC 30 Index. The ProFunds Asia 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Japan: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Nikkei 225 Stock Average. LLC Since the Japanese markets are not open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States related to the Nikkei 225 Stock Average. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Banks: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Banks Index. The Dow Jones U.S. Banks Index measures the performance of the banking industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Basic Materials: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Basic Materials Sector Index. The Dow Jones U.S. Basic Materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Biotechnology: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Biotechnology Index. The Dow Jones U.S. Biotechnology Index measures the performance of the biotechnology industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Services (formerly ProFund VP Consumer Cyclical): ProFund Advisors seeks daily investment results, before fees and expenses, that correspond LLC to the daily performance of the Dow Jones U.S. Consumer Services Index. The Dow Jones U.S. Consumer Services Index measures the performance of consumer spending in the services industry of the U.S. equity market. - -----------------------------------------------------------------------------------------------------------------------
21 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Goods (formerly ProFund VP Consumer Non- ProFund Advisors Cyclical): seeks daily investment results, before fees and expenses, that LLC correspond to the daily performance of the Dow Jones U.S. Consumer Goods Index. The Dow Jones U.S. Consumer Goods Index measures the performance of consumer spending in the goods industry of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Oil & Gas (formerly ProFund VP Energy): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Sector Index measures the performance of the energy sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Financials (formerly ProFund VP Financial): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Financials Sector Index. The Dow Jones U.S. Financials Sector Index measures the performance of the financial services economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Health Care (formerly ProFund VP Healthcare): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Health Care Index. The Dow Jones U.S. Health Care Index measures the performance of the healthcare economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Industrials (formerly ProFund VP Industrial): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the daily LLC performance of the Dow Jones U.S. Industrials Index. The Dow Jones U.S. Industrials Index measures the performance of the industrial economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Internet: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC Composite Internet Index. The Dow Jones Composite Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Pharmaceuticals: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Pharmaceuticals Index. The Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Precious Metals: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow Jones LLC Precious Metals Index. The Dow Jones Precious Metals Index measures the performance of the precious metals mining industry. - -----------------------------------------------------------------------------------------------------------------------
22 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Real Estate: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate Index measures the performance of the real estate industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Semiconductor: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Semiconductor Index. The Dow Jones U.S. Semiconductor Index measures the performance of the semiconductor industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Technology: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Technology Sector Index. The Dow Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Telecommunications: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Telecommunications Sector Index. The Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Utilities: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Utilities Sector Index. The Dow Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bull: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the S&P 500[RegTM] Index. LLC - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bear: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily LLC performance of the S&P 500[RegTM] Index. If ProFund VP Bear is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500[RegTM] Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - -----------------------------------------------------------------------------------------------------------------------
23 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraBull: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC S&P 500[RegTM] Index. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times (150%) the daily performance of the S&P 500[RegTM] Index. If ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500[RegTM] Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP OTC: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the NASDAQ-100 Index[RegTM]. "OTC" LLC in the name of ProFund VP OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short OTC: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the NASDAQ-100 Index[RegTM]. If ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index[RegTM] when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraOTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC NASDAQ-100 Index[RegTM]. If ProFund VP UltraOTC is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Mid Cap Value ProFund VP Mid-Cap Value: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the S&P MidCap LLC 400/Barra Value Index[RegTM]. The S&P MidCap400/Barra Value Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - -----------------------------------------------------------------------------------------------------------------------
24 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Mid Cap ProFund VP Mid-Cap Growth: seeks daily investment results, before fees ProFund Advisors Growth and expenses, that correspond to the daily performance of the S&P LLC MidCap 400/Barra Growth Index[RegTM]. The S&P MidCap 400/Barra Growth Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index[RegTM] that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraMid-Cap: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC S&P MidCap 400 Index[RegTM]. If ProFund VP UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ----------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Value: seeks daily investment results, before fees ProFund Advisors Value and expenses, that correspond to the daily performance of the S&P LLC SmallCap 600/Barra Value Index[RegTM]. The S&P SmallCap 600/Barra Value Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index[RegTM] that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Growth: seeks daily investment results, before ProFund Advisors Growth fees and expenses, that correspond to the daily performance of the S&P LLC SmallCap 600/Barra Growth Index[RegTM]. The S&P SmallCap 600/Barra Growth Index[RegTM] is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index[RegTM] that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraSmall-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of LLC the Russell 2000[RegTM] Index. If ProFund VP UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index[RegTM] when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - -----------------------------------------------------------------------------------------------------------------------
25 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP U.S. Government Plus: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to one and one-quarter times (125%) LLC the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Rising Rates Opportunity: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to one and one-quarter times LLC (125%) the inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP Rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - ----------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Growth: seeks daily investment results, before ProFund Advisors Growth fees and expenses, that correspond to the daily performance of the S&P LLC 500/Barra Growth Index[RegTM]. The S&P 500/Barra Growth Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Value: seeks daily investment results, before fees ProFund Advisors Value and expenses, that correspond to the daily performance of the S&P LLC 500/Barra Value Index[RegTM]. The S&P 500/Barra Value Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Small-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the Russell 2000[RegTM] Index. If ProFund VP Short Small-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the Russell 2000 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - -----------------------------------------------------------------------------------------------------------------------
26 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Mid-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the S&P MidCap 400 Index[RegTM]. If ProFund VP Short Mid-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the S&P MidCap 400 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty Access VP High Yield: seeks to provide investment results that ProFund Advisors correspond generally to the total return of the high yield market LLC consistent with maintaining reasonable liquidity. The Access VP High Yield, created by ProFund Advisors, will achieve its high yield exposure primarily through CDSs but may invest in high yield debt instruments ("junk bonds"), Interest rate swap agreements and futures contracts, and other debt and money market instruments without limitation, consistent with applicable regulations. Under normal market conditions, the fund will invest at least 80% of its net assets in credit default swaps and other financial instruments that in combination have economic characteristics similar to the high yield debt market and/or in high yield debt securities. The fund seeks to maintain exposure to the high yield bond markets regardless of market conditions and without taking defensive positions. - ----------------------------------------------------------------------------------------------------------------------- Specialty First Trust[RegTM] 10 Uncommon Values: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing L.P. primarily in the ten common stocks selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - ----------------------------------------------------------------------------------------------------------------------- Specialty Target Managed VIP: seeks to provide above-average total return. The Portfolio First Trust Advisors seeks to achieve its objective by investing in common stocks of the most L.P. attractive companies that are identified by a model based on six uniquely specialized strategies -- The Dow(sm) DART 5, the European Target 20, the Nasdaq[RegTM] Target 15, the S&P Target 24, the Target Small Cap and the Value Line[RegTM] Target 25. - ----------------------------------------------------------------------------------------------------------------------- Specialty The Dow(SM) DART 10: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the ten companies in the DJIA that have the highest combined dividend yields and buyback ratios on or about the applicable stock selection date. - -----------------------------------------------------------------------------------------------------------------------
27 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty Global Dividend Target 15 (formerly Global Target 15): seeks to provide First Trust Advisors above-average total return. The Portfolio seeks to achieve its objective by L.P. investing in common stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the companies which are components of the DJIA, the Financial Times Industrial Ordinary Share Index ("FT Index") and the Hang Seng Index. The Portfolio primarily consists of common stocks of the five companies with the lowest per share stock prices of the ten companies in each of the DJIA, FT Index and Hang Seng Index, respectively, that have the highest dividend yield in the respective index on or about the applicable stock selection date. - ----------------------------------------------------------------------------------------------------------------------- Specialty S&P[RegTM] Target 24: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of twenty-four companies selected from a subset of the stocks included in the Standard & Poor's 500 Composite Stock Price Index[RegTM]. The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index[RegTM] based on the sector's market capitalization. - ----------------------------------------------------------------------------------------------------------------------- Specialty The Dow (SM) Target Dividend seeks to provide above-average total return. First Trust Advisors The Portfolio seeks to achieve its objective by investing in common L.P. stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the 20 common stocks from the Dow Jones Select Dividend Index(SM) with the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio as of the close of business on or about the applicable stock selection date. - ----------------------------------------------------------------------------------------------------------------------- Specialty Value Line[RegTM] Target 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing L.P. in 25 of the 100 common stocks that Value Line[RegTM] gives a #1 ranking for Timeliness[RegTM] which have recently exhibited certain positive financial attributes as of the close of business on the applicable stock selection date through a multi-step process. - ----------------------------------------------------------------------------------------------------------------------- Specialty Nasdaq[RegTM] Target 15: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that are expected to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of fifteen companies selected from a pre-screened subset of the stocks included in the Nasdaq-100 Index[RegTM] on or about the applicable stock selection date through a multi-step process. - -----------------------------------------------------------------------------------------------------------------------
28 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- International The Prudential Series Fund, Inc. -- SP William Blair International Prudential Equity Growth: Seeks long-term capital appreciation. The Portfolio invests Investments LLC/ primarily in stocks of large and medium-sized companies William Blair & located in countries included in the Morgan Stanley Company, LLC Capital International All Country World Ex-U.S. Index. Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. - -----------------------------------------------------------------------------------------------------------------------
"Standard & Poor's[RegTM]," "S&P[RegTM]," "S&P 500[RegTM]," "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. 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. "Dow Jones Industrial Average(sm)", "DJIA(sm)", "Dow Industrials(sm)", "Dow Jones Select Dividend Index(sm)", and "The Dow 10(sm)", are service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The portfolios, including, and in particular the Target Managed VIP portfolio The Dow(SM) DART 10 portfolio, and The Dow(SM) Target Dividend Portfolio are not endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. "The Nasdaq 100[RegTM]", "Nasdaq-100 Index[RegTM]", "Nasdaq Stock Market[RegTM]", and "Nasdaq[RegTM]" are trade or service marks of The Nasdaq Stock Market, Inc. (which with its affiliates are the "Corporations") and have been licensed for use by First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio have not been passed on by the Corporations as to its legality or suitability. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not issued, endorsed, sponsored, managed, sold or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Nasdaq Target 15 Portfolio or the Target Managed VIP Portfolio. "Value Line[RegTM]," "The Value Line Investment Survey," and "Value Line Timeliness[RegTM] Ranking System" are registered trademarks of Value Line Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP[RegTM] Portfolio is not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the Portfolio. The First Trust[RegTM] 10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust[RegTM] 10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED ALLOCATIONS? We offer Fixed Allocations of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-680-8920 to determine availability of Fixed Allocations in your state and for your annuity product. 29 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Fees and Charges - -------------------------------------------------------------------------------- The charges under the contracts are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the contracts. They are also designed, in the aggregate, to compensate us for the risks of loss we assume pursuant to the contracts. If, as we expect, the charges that we collect from the contracts exceed our total costs in connection with the contracts, we will earn a profit. Otherwise we will incur a loss. For example, American Skandia may make a profit on the Insurance Charge if, over time, the actual costs of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity. The rates of certain of our charges have been set with reference to estimates of the amount of specific types of expenses or risks that we will incur. In most cases, this prospectus identifies such expenses or risks in the name of the charge; however, the fact that any charge bears the name of, or is designed primarily to defray a particular expense or risk does not mean that the amount we collect from that charge will never be more than the amount of such expense or risk nor does it mean that we may not also be compensated for such expense or risk out of any other charges we are permitted to deduct by the terms of the contract. A portion of the proceeds that American Skandia receives from charges that apply solely to the variable investment options may include amounts based on market appreciation of the variable investment option values. WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages are shown below. YEARS 1 2 3 4 5+ - -------------------------------------------------------------------------------- CHARGE (%) 8.5% 8.0% 7.0% 6.0% 0.0%
The CDSC period is based on the Issue Date of the Annuity, not on the date each Purchase Payment is applied to the Annuity. Purchase Payments applied to the Annuity after the Issue Date do not have their own CDSC period. During the first four (4) Annuity Years, under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." After four (4) complete Annuity Years, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. For purposes of calculating the CDSC on a surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program when we count the twenty free transfers. All transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charginga Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other 30 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- means that reduce our processing costs. If enrolled in any pro- gram that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. Currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charge: Several states and some municipalities charge premium taxes or similar taxes on annuities that we are required to pay. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2% of your premium and is designed to approximate the taxes that we are required to pay. We generally will deduct the charge at the time the tax is imposed, but may also decide to deduct the charge from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. We will pay company income taxes on the taxable corporate earnings created by this separate account product. While we may consider company income taxes when pricing our products, we do not currently include such income taxes in the tax charges you pay under the contract. We will periodically review the issue of charging for these taxes and may impose a charge in the future. In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets, which are treated as company assets under applicable income tax law. These benefits reduce our overall corporate income tax liability. Under current law, such benefits may include foreign tax credits and corporate dividends received deductions. We do not pass these tax benefits through to holders of the separate account annuity contracts because (i) the contract owners are not the owners of the assets generating these benefits under applicable income tax law and (ii) we do not currently include company income taxes in the tax charges you pay under the contract. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed against the average daily assets allocated to the Sub-accounts and is equal to 1.65% on an annual basis. The Insurance Charge is a combination of the Mortality and Expense Risk Charge (1.50%) and the Administration Charge (0.15%). The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits for which we assess a charge solely against the variable investment options: If you elect to purchase certain optional benefits, we will deduct an additional charge on a daily basis solely from your Account Value allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. We may assess charges for other optional benefits on a different basis as described elsewhere in the prospectus. Please refer to the sections entitled "Living Benefit Programs" and "Death Benefit" for a description of the charge for each Optional Benefit. 31 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Fees and Charges continued - -------------------------------------------------------------------------------- WHAT FEES AND EXPENSES ARE INCURRED BY THE PORTFOLIOS? Each Portfolio incurs total annual operating expenses comprised of an investment management fee, other expenses and any distribution and service (12b-1) fees that may apply. These fees and expenses are reflected daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and expenses can be found in the prospectuses for the Portfolios. WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will be subject to charges that apply under the variable immediate annuity option. Also, a tax charge may apply (see "Tax Charge" above). EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce any fees and charges. 32 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Purchasing Your Annuity - -------------------------------------------------------------------------------- WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $10,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $10,000 in total Purchase Payments. Where allowed by law, we must approve any initial and additional Purchase Payments of $1,000,000 or more. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts or Fixed Allocations that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We call our bank drafting program "Auto Saver". We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 85 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 85 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 85 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. Owner, Annuitant and Beneficiary Designations: We will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. o Owner: The Owner(s) holds all rights under the Annuity. You may name up to two Owners in which case all ownership rights are held jointly. Generally joint owners are required to act jointly; however, if each owner provides us with an instruction that we find acceptable, we will permit each owner to act separately. All information and documents that we are required to send you will be sent to the first named owner. This Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." o Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. o Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. Your beneficiary designation should be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. If you use a designation of "surviving spouse" we will pay the death benefit to the individual that is your spouse at the time of your death (as defined under the federal tax laws and regulations). If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. 33 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Annuity - -------------------------------------------------------------------------------- MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us a request in writing. Upon an ownership change, any automated investment or withdrawal programs will be canceled. The new owner must submit the applicable program enrollment if they wish to participate in such a program. 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: o 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; o a new Annuitant subsequent to the Annuity Date; o for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and o a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse that was named as the co-owner unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse that was named as the Contingent Annuitant will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted, and depending on your state's requirements, any applicable insurance charges deducted. The amount returned to you may be higher or lower than the Purchase Payment(s) applied during the right to cancel period. Where required by law, we will return your Purchase Payment(s), or the greater of your current Account Value and the amount of your Purchase Payment(s) applied during the right to cancel period. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic purchase payment program. Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent purchase payments, we will allocate any additional Purchase Payments you make according to your initial purchase payment allocation instructions. If you so instruct us, we will allocate subsequent purchase payments according to any new allocation instructions. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. Additional Purchase Payments may be paid at any time before the Annuity Date. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "Auto 34 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Saver". Purchase Payments made through bank drafting may only be allocated to the variable investment options when applied. Auto Saver allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $10,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $10,000. 35 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Account Value - -------------------------------------------------------------------------------- HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. Subsequent Purchase Payments: Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent Purchase Payments according to any new allocation instructions. Unless you tell us otherwise, Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. HOW DO I RECEIVE A LOYALTY CREDIT? For annuities issued on or after June 20, 2005 (subject to state availability) we apply a Loyalty Credit to your Annuity's Account Value at the end of your fifth Annuity Year ("fifth Annuity Anniversary"). The Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four Annuity Years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Annuity Anniversary. If the total Purchase Payments made during the first four Annuity Years is less than the cumulative amount of withdrawals made on or before the fifth Annuity Anniversary, no Loyalty Credit will be applied to your Annuity. Also, no Loyalty Credit will be applied to your Annuity if your Account Value is zero on the fifth Annuity Anniversary. This would include any situation where the Annuity is still in force due to the fact that payments are being made under an optional benefit such as Lifetime Five or the Guaranteed Minimum Withdrawal Benefit. In addition, no Loyalty Credit will be applied to your Annuity if before the fifth Annuity Anniversary: (i) you have surrendered your Annuity; (ii) you have annuitized your Annuity; (iii) your beneficiary has elected our Beneficiary Continuation Option; or (iv) we have received due proof of your death (and there has been no spousal continuation election made). If your spouse continues the contract under our spousal continuance option, we will apply the Loyalty Credit to your Annuity only on the fifth Annuity Anniversary measured from the date that we originally issued you the Annuity. Since the Loyalty Credit is applied to the Account Value only, any guarantees that are not based on Account Value will not reflect the Loyalty Credit. Similarly, guarantees that are made against a loss in Account Value will not be triggered in certain very limited circumstances where they otherwise would have been, had no Loyalty Credit been applied to the Account Value. HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE? Any Loyalty Credit that is allocated to your Account Value on the fifth Annuity Anniversary will be allocated to the Fixed Allocations and Variable Investment Options in the same percentages as Purchase Payments are then being allocated to your Annuity. Example of Applying the Loyalty Credit Assume you make an initial Purchase Payment of $10,000. During Annuity Year four (i.e., prior to the fourth Annuity Anniversary) you make an additional $10,000 Purchase Payment. During the early part of Annuity Year five (i.e. prior to the fifth Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year make a withdrawal of $5,000. The Loyalty Credit that we will apply to your Annuity on the fifth Annuity Anniversary is equal to 2.25% of $15,000. (This represents the $20,000 of Purchase Payments made during the first four Annuity Years minus the $5,000 withdrawal made in the fifth Annuity Year. The computation disregards the additional $10,000 Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty Credit amount would be equal to $337.50. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions (including transfer requests) for certain Portfolios based 36 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- on the Portfolio's investment and/or transfer restrictions. We may do so to conform to any present or future restriction that is imposed by any portfolio available under this Annuity. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year. Transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may also increase the Transfer Fee that we charge to $15.00 for each transfer after the number of free transfers has been used up. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Once you have made 20 transfers among the Sub-accounts during an Annuity Year, we will accept any additional transfer request during that year only if the request is submitted to us in writing with an original signature and otherwise is in good order. For purposes of this 20 transfer limit, we (i) do not view a facsimile transmission as a "writing", (ii) will treat multiple transfer requests submitted on the same business day as a single transfer, and (iii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio, or any transfer that involves one of our systematic programs, such as asset allocation and automated withdrawals. Frequent transfers among Sub-accounts in response to short-term fluctuations in markets, sometimes called "market timing," can make it very difficult for a Portfolio manager to manage a Portfolio's investments. Frequent transfers may cause the Portfolio to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect performance. The Annuity offers Sub-accounts designed for Owners who wish to engage in frequent transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund Portfolios and the AST Money Market Portfolio), and we encourage Owners seeking frequent transfers to utilize those Sub-accounts. In light of the risks posed to Owners and other investors by frequent transfers, we reserve the right to limit the number of transfers in any Annuity Year for all existing or new Owners and to take the other actions discussed below. 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: (a) we believe that excessive transfer activity (as we define it) or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager) that the purchase or redemption of shares in the Portfolio must be restricted because the Portfolio believes the transfer activity to which such purchase and redemption relates would have a detrimental effect on the share prices of the affected Portfolio. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. In furtherance of our general authority to restrict transfers as described above, and without limiting other actions we may take in the future, we have adopted the following specific restrictions: o With respect to each Sub-account (other than the AST Money Market Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we track amounts exceeding a certain dollar threshold that were transferred into the Sub-account. If you transfer such amount into a particular Sub-account, and within 30 calendar days thereafter transfer (the "Transfer Out") all or a portion of that amount into another Sub-account, then upon the Transfer Out, the former Sub-account becomes restricted (the "Restricted Sub-account"). Specifically, we will not permit subsequent transfers into the Restricted Sub-account for 90 calendar days after the Transfer Out if the Restricted Sub-account invests in a non-international Portfolio, or 180 calendar days after the Transfer Out if the Restricted Sub-account invests in an international Portfolio. For purposes of this rule, we (i) do not count transfers made in connection with one of 37 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- our systematic programs, such as asset allocation and auto- mated withdrawals; (ii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio; and (iii) do not categorize as a transfer the first transfer that you make after the Issue Date, if you make that transfer within 30 calendar days after the Issue Date. Even if an amount becomes restricted under the foregoing rules, you are still free to redeem the amount from your Annuity at any time. o We reserve the right to effect exchanges on a delayed basis for all contracts. That is, we may price an exchange involving the Sub-accounts on the Valuation Day subsequent to the Valuation Day on which the exchange request was received. Before implementing such a practice, we would issue a separate written notice to Owners that explains the practice in detail. o If we deny one or more transfer requests under the foregoing rules, we will inform you or your investment professional promptly of the circumstances concerning the denial. o Contract owners in New York who purchased their contracts prior to March 15, 2004 are not subject to the specific restrictions outlined in bulleted paragraphs immediately above. In addition, there are contract owners of different variable annuity contracts that are funded through the same Separate Account that are not subject to the above-referenced transfer restrictions and, therefore, might make more numerous and frequent transfers than contract owners who are subject to such limitations. Finally there are contract owners of other variable annuity contracts or variable life contracts that are issued by American Skandia as well as other insurance companies that have the same underlying mutual fund portfolios available to them. Since some contract owners are not subject to the same transfer restrictions, unfavorable consequences associated with such frequent trading within the underlying mutual fund (e.g., greater portfolio turnover, higher transaction costs, or performance or tax issues) may affect all contract owners. Similarly, while contracts managed by an investment professional or third party investment advisor are subject to the restrictions on transfers between investment options that are discussed above, if the advisor manages a number of contracts in the same fashion unfavorable consequences may be associated with management activity since it may involve the movement of a substantial portion of an underlying mutual fund asset's which may affect all contract owners invested in the affected options. Apart from jurisdiction-specific and contract difference in transfer restrictions, we will apply these rules uniformly (including contracts managed by an investment professional or third party investment advisor), and will not waive a transfer restriction for any contract owner. Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount periodically from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. You may elect a Dollar Cost Averaging program that transfers amounts monthly, quarterly, semi-annually, or annually from variable investment options, or a program that transfers amounts monthly from Fixed Allocations. By investing amounts on a regular basis instead of investing the total amount at one time, Dollar Cost Averaging may decrease the effect of market fluctuation on the investment of your purchase payment. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. There is no minimum Account Value required to enroll in a Dollar Cost Averaging program and we do not deduct a charge for participating in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: o You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. o You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. o Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. 38 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- NOTE: When a Dollar Cost Averaging program is estab- lished from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. The Dollar Cost Averaging program is not available if you elect the Guaranteed Return Option Plus(SM), the Guaranteed Return Option or the automatic rebalancing programs when it involves transfers out of the Fixed Allocations and is also not available when you have elected an asset allocation program. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced monthly, quarterly, semi-annually, or annually. On the appropriate date, the variable investment options you chose are rebalanced to the allocation percentages you requested. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. Any transfer to or from any variable investment option that is not part of your automatic rebalancing program, will be made, however that variable investment option will not become part of your rebalancing program unless we receive instructions from you indicating that you would like such option to become part of the program. There is no minimum Account Value required to enroll in automatic rebalancing. All rebalancing transfers as part of an automatic rebalancing program are not included when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. Participation in the Automatic Rebalancing program may be restricted if you are enrolled in certain other optional programs. ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? Yes. Certain "static asset allocation programs" are available for use with the Annuity. These programs are considered static because once you have selected a model portfolio, the Sub-accounts and the percentage of contract value allocated to each Sub-account cannot be changed without your consent. The programs are available at no additional charge. Under these programs, the Sub-account for each asset class in each model portfolio is designated for you. Under the programs, the values in the Sub-accounts will be rebalanced periodically back to the indicated percentages for the applicable asset class within the model portfolio that you have selected. For more information on the asset allocation programs, see the Appendix entitled "Additional Information on the Asset Allocation Programs." Asset allocation is a sophisticated method of diversification, which allocates assets among asset classes in order to manage investment risk and enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. No personalized investment advice is provided in connection with the asset allocation programs and you should not rely on these programs as providing individualized investment recommendations to you. The asset allocation programs do not guarantee better investment results. We reserve the right to terminate or change the asset allocation programs at any time. You should consult with your Investment Professional before electing any asset allocation program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, as of a specific date in the future. They are the Balanced Investment Program and the Guaranteed Return Option Plus(SM). (The Guaranteed Return Option Plus (GRO Plus(SM)) is not available in all states. In some states where GRO Plus is not available we offer the Guaranteed Return Option (GRO).) Both the Balanced Investment Program and GRO Plus allow you to allocate a portion of your Account Value to the available variable investment options while ensuring that your Account Value will at least equal your contributions adjusted for withdrawals and transfers on a specified date. Under GRO Plus, Account Value is allocated to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under 39 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts or the interest rate environment after the amount is allocated to a Fixed Allocation. Generally, more of your Account Value will be allocated to the variable investment options under the GRO Plus program than under the Balanced Investment Program (although in periods of poor market performance, low interest rates and/or as the option progresses to its maturity date, this may not be the case). You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. In addition, as with most return of premium programs, amounts that are available to allocate to the variable investment options may be substantially less than they would be if you did not elect a return of premium program. This means that, if investment experience in the variable investment options were positive, your Account Value would grow at a slower rate than if you did not elect a return of premium program and allocated all of your Account Value to the variable investment options. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.781198 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $78,120 will be allocated to the Fixed Allocation and the remaining Account Value ($21,880) will be allocated to the variable investment options. Assuming that you do not make any withdrawals or transfers from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. The Guaranteed Return Option Plus (GRO Plus) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control of your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value is the amount not allocated to the Fixed Allocations to support the guarantees provided. There is a fee associated with this program. See "Living Benefit Programs," later in this Prospectus, for more information about this program. MAY I GIVE MY INVESTMENT PROFESSIONAL PERMISSION TO MANAGE MY ACCOUNT VALUE? Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. If your Investment Professional has this authority, we deem that all transactions that are directed by your Investment Professional with respect to your Annuity have been authorized by you. You must contact us * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 40 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Investment Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT? Yes. You may engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Annuity. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make transfers for you, is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your Account Value under any circumstance. As such, we are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow or any specific transfers they make on your behalf. Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Annuity. If you authorize your investment advisor to withdraw amounts from your Annuity (to the extent permitted) to pay for the investment advisor's fee, as with any other withdrawal from your Annuity, you may incur adverse tax consequences, a CDSC and/or a Market Value Adjustment. Withdrawals to pay your investment advisor generally will also reduce the level of various living and death benefit guarantees provided (e.g. the withdrawals will reduce proportionately the Annuity's guaranteed minimum death benefit.) We are not a party to the agreement you have with your investment advisor and do not verify that amounts withdrawn from your annuity, including amounts withdrawn to pay for the investment advisor's fee, are within the terms of your agreement with your investment advisor. You will, however, receive confirmations of transactions that affect your Annuity. If your investment advisor has also acted as your Investment Professional with respect to the sale of your Annuity, he or she may be receiving compensation for services provided both as an Investment Professional and investment advisor. Alternatively, the investment advisor may compensate the Investment Professional from whom you purchased your annuity for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your Investment Professional receive in connection with your Annuity, you should ask them for more details. We or an affiliate of ours may provide administrative support to licensed, registered Investment Professionals or investment advisors who you authorize to make financial transactions on your behalf. We may require Investment Professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the Investment Professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an Investment Professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) of American Skandia. Contracts managed by your Investment Professional also are subject to the restrictions on transfers between investment options that are discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?". Since transfer activity under contracts managed by an Investment Professional or third party investment adviser may result in unfavorable consequences to all contract owners invested in the affected options we reserve the right to limit the investment options available to a particular Owner whose contract is managed by the advisor or impose other transfer restrictions we deem necessary. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your Investment Professional. Your Investment Professional will be informed of all such restrictions on an ongoing basis. We may also require that your Investment Professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.prudential.com). Limitations that we may impose on your Investment Professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED ALLOCATIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods 41 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-680-8920. A Guarantee Period for a Fixed Allocation begins: o when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; o upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or o when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. - -------------------------------------------------------------------------------- American Skandia may offer Fixed Allocations with Guarantee Periods of 3 months or 6 months exclusively for use as a short-term Fixed Allocation ("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a Short-term Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. - -------------------------------------------------------------------------------- On the Maturity Date of the Short-term Fixed Allocation, the Account Value will be transferred to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transferred to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the Annuity or transfer any Account Value from the Short-term Fixed Allocation to any other investment option before the end of the Guarantee Period, a Market Value Adjustment will apply. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional 42 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. o "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. o "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. o "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: o You allocate $50,000 into a Fixed Allocation (we refer to this as the "Allocation Date" in these examples) with a Guarantee Period of 5 years (we refer to this as the "Maturity Date" in these examples). o The Strip Yields for coupon Strips beginning on the Allocation Date and maturing on the Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%). o You make no withdrawals or transfers until you decide to withdraw the entire Fixed Allocation after exactly three (3) years, at which point 730 days remain before the Maturity Date (N = 730). 43 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. 44 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Access To Account Value - -------------------------------------------------------------------------------- WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through partial withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. The CDSC will be assessed on the amount of Purchase Payments, not on the Account Value at the time of the withdrawal or surrender. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations".) During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. o To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-4 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. o You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount that you may withdraw will depend on the Annuity's Surrender Value as of the date we process the withdrawal request. After any partial withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the partial withdrawal request as a request to fully surrender your Annuity. The minimum partial withdrawal you may request is $100. When we determine if a CDSC applies to partial withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. 45 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Year 1-4 The maximum Free Withdrawal amount during each of Annuity Year 1 through Annuity Year 4 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payments) is 10% of all Purchase Payments. We may apply a Market Value Adjustment to any Fixed Allocations. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. If, during Annuity Years 1 through 4, all Purchase Payments withdrawn are subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Year 5+ After Annuity Year 4, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first four (4) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first four Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $5,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 and 4 would be 10% of $15,000, or $1,500. From Annuity Year 5 and thereafter, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. 3. Assume you make an initial Purchase Payment of $10,000 and take a Free Withdrawal of $500 in Annuity Year 2 and $1,000 in Annuity Year 3. If you surrender your Annuity in Annuity Year 4, the CDSC will be assessed against the initial Purchase Payment amount ($10,000), not the amount of Purchase Payments reduced by the amounts that were withdrawn under the Free Withdrawal provision. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a partial withdrawal during the first four (4) Annuity Years. Whether a CDSC applies and the amount to be charged depends on whether the Partial Withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Issue Date of the Annuity. 1. If you request a partial withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount, we determine if a CDSC will apply to the partial withdrawal based on the number of years that have elapsed since the Annuity was issued. The maximum Free Withdrawal amount during each of Annuity Years 1 through 4 is 10% of all Purchase Payments. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. If, during Annuity Years 1 through 4, all Purchase Payments are withdrawn subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals during the first four (4) Annuity Years may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100 (which may occur under a program that provides payment of an amount equal to the earnings in the annuity for the 46 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- period requested), we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2 that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum amount that applies to Systematic Withdrawals applies to monthly Minimum Distributions but does not apply to Minimum Distributions taken out on a quarterly, semi-annual or annual basis. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: o the Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 47 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- "Contingency Event" described below in order to qualify for a medically-related surrender. o the Annuitant must be alive as of the date we pay the proceeds of such surrender request; o if the Owner is one or more natural persons, all such Owners must also be alive at such time; o we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and o this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. A "Contingency Event" occurs if the Annuitant is: o first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or o first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future other than those fixed annuitization options guaranteed in your Annuity. Please refer to the "Guaranteed Minimum Income Benefit" and the "Lifetime Five Income Benefit" under "Living Benefits" below for a description of annuity options that are available when you elect these benefits. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. 48 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the Annuity and receive its then current cash value (if any) subject to our rules. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the Annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, choosing an Annuity Date within four (4) years of the Issue Date of the Annuity may limit the available annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. You have a right to choose your annuity start date. If you have not provided us with your Annuity Date or annuity payment option in writing, then: o a default date for the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and o the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. If you choose to defer the Annuity Date beyond the default date, the IRS may not consider your contract to be an annuity under the tax law. If that should occur, all gain in your Annuity at that time will become immediately taxable to you. Further, each subsequent year's increase in Account Value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your Annuity will not be considered an annuity for federal income tax purposes. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. 49 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- Variable Annuity Payments Generally, we offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. o Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. o Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. o Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. 50 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. 51 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs - -------------------------------------------------------------------------------- DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY ARE ALIVE? American Skandia offers different optional benefits, for an additional charge, that can provide investment protection for Owners while they are alive. Notwithstanding the additional protection provided under the optional Living Benefit Programs, the additional cost has the impact of reducing net performance of the investment options. Each optional benefit offers a distinct type of guarantee, regardless of the performance of variable investment options, that may be appropriate for you depending on the manner in which you intend to make use of your annuity while you are alive. Depending on which optional benefit you choose, you can have substantial flexibility to invest in variable investment options while: o protecting a principal amount from decreases in value as of specified future dates due to investment performance; o taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; or o guaranteeing a minimum amount of growth will be applied to your principal, if it is to be used as the basis for lifetime income payments beginning after a waiting period. Below is a brief summary of the "living benefits" that American Skandia offers. Please refer to the benefit description for a complete description of the terms, conditions and limitations of each optional benefit. You should consult with your investment professional to determine if any of these optional benefits may be appropriate for you based on your financial needs. There are many factors to consider, but we note that among them you may want to evaluate the tax implications of these different approaches to meeting your needs, both between these benefits and in comparison to other potential solutions to your needs (e.g. comparing the tax implications of the withdrawal benefit and annuity payments). I. The Guaranteed Return Option Plus(SM) (GRO Plus(SM)) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus(SM) program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control by allocating and transferring your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus(SM) program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value that may be allocated among your variable investment options are those amounts not allocated to the Fixed Allocations to support the guarantees provided. II. The Guaranteed Minimum Withdrawal Benefit (GMWB) guarantees your ability to make cumulative withdrawals over time equal to an initial principal value (called the "Protected Value"), regardless of decreases in your Account Value due to market losses. The GMWB program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive guaranteed minimum withdrawals. Taking income as withdrawals, rather than annuity payments, may be less tax efficient for non-qualified uses of the Annuity, but provides greater control over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. III. The Guaranteed Minimum Income Benefit (GMIB) guarantees your ability, after a minimum seven-year waiting period, to begin receiving income from the Annuity in the form of annuity payments based on your total purchase payments under the Annuity and an annual increase of 5% on such Purchase Payments, adjusted for withdrawals, regardless of the impact of market performance on your Account Value. The GMIB program may be appropriate if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. IV. The Lifetime Five Income Benefit guarantees your ability to withdraw amounts equal to a percentage of a "Protected Withdrawal Value" regardless of decreases in your Account Value due to market losses. The Lifetime Five Benefit may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that the market performance will not affect your ability to receive guaranteed minimum withdrawals. Taking income as withdrawals, rather than annuity payments, may be less tax efficient for 52 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- non-qualified uses of the Annuity, but provides greater con- trol over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM)) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program (and it is currently active), the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period and any applicable subsequent period as the "maturity date") and on each anniversary of the maturity date thereafter while the program remains in effect, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate period following election of the enhanced guarantee and on each anniversary thereafter while this enhanced guarantee amount remains in effect, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. o Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter that the program remains in effect, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date that the program remains in effect, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. o Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of a specified period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter that the enhanced guaranteed amount remains in effect, your Account Value will be no less than the Enhanced Protected 53 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically create an enhanced guarantee (or increase your enhanced guarantee, if previously elected) on each anniversary of the program (and create a new maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the protected principal value or enhanced protected principal value by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter that the enhanced guarantee amount remains in effect, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to any Fixed Allocations first and then to the sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals other than Systematic Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations up to growth attributable to the Fixed Allocations and thereafter pro-rata solely from the variable investment options. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge and Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for any third party investment advisory service will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO Plus(SM) program are October 13, 2004; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). 54 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o The base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x (1 - $7,500 / $177,500), or $227,464.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation(s) to support the applicable guaranteed amount. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). 55 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s), causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value or Enhanced Protected Principal Value are transferred to the variable investment options differently than each other because of the different guarantees they support. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated. Termination of the Guaranteed Return Option for the purpose of electing the Guaranteed Return Option Plus, will be treated as any other termination of the Guaranteed Return Option (see below), including the termination of any guaranteed amount, and application of any applicable Market Value Adjustment when amounts are transferred to the variable investment options as a result of the termination. The Guaranteed Return Option Plus program will then be added to your Annuity based on the current Account Value. Termination of the Program You can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. You also can terminate the Guaranteed Return Option Plus program entirely. If you terminate the program entirely, you can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, you could, for example, terminate the program on a given Valuation Day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections (including any election made effective on the Annuity issue date and any election made by a surviving spouse) and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. Upon termination, any Account Value in the Fixed Allocations will be transferred to the variable investment options pro-rata based on the Account 56 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option Plus will no longer provide any guarantees. The surviving spouse may elect the benefit at any time, subject to the limitations described above, after the death of the Annuity Owner. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. o You cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments may be allocated by us to Fixed Allocations to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a variable investment option. o Transfers from Fixed Allocations made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to Fixed Allocations even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to Fixed Allocations. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the sub-accounts for participation in the Guaranteed Return Option Plus program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. 57 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- GUARANTEED RETURN OPTION (GRO) - -------------------------------------------------------------------------------- The Guaranteed Return Option described below is offered only in those jurisdictions where we have not yet received regulatory approval for the Guaranteed Return Option Plus as of the date the election of the option is made. Certain terms and conditions may differ between jurisdictions. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option is not available if you elect the GRO Plus Rider, the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period as the "maturity date") guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and the Fixed Allocation used to support the Protected Principal Value. The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option program. The guarantees provided by the program exist only on the applicable maturity date. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocation to support our future guarantee, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value o Under the GRO option, American Skandia guarantees that on the maturity date, your Account Value will be no less than the Protected Principal Value. On the maturity date if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to the Fixed Allocation first and then to the Sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is generally referred to as the "Guaranteed Amount" in the rider we issue for this benefit. KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in a Fixed Allocation to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on the Fixed Allocation, the remaining duration until the applicable maturity date and the amount of Account Value allocated to the Fixed Allocation relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from the Fixed Allocation. While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from the Fixed Allocation. o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to the Fixed Allocation to support the guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from the Fixed Allocation to 58 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation to support the guaranteed amount. The new Fixed Allocation will have a Guarantee Period equal to the time remaining until the applicable maturity date. The Account Value allocated to the new Fixed Allocation will be credited with the fixed interest rate then being credited to a new Fixed Allocation maturing on the applicable maturity date (rounded to the next highest yearly duration). The Account Value will remain invested in the Fixed Allocation until the maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to the Fixed Allocation to support the Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the guarantee a significant portion of your Account Value may be allocated to the Fixed Allocation to support any applicable guaranteed amount. If your Account Value is less than the reallocation trigger and a new Fixed Allocation must be established during periods where the interest rate being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to the Fixed Allocation to support the guaranteed amount, causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocation and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. Termination of the Program The Annuity Owner also can terminate the Guaranteed Return Option program. Upon termination, any Account Value in the Fixed Allocations will be transferred to the variable investment options pro rata based on the Account Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option will no longer provide any guarantees. If the surviving spouse assumes the Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date of the Annuity or, if the deceased Owner had not previously elected the benefit, may elect the benefit at any time. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option program will no longer be deducted from your Account Value upon termination of the program. 59 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. The Fixed Allocations may not be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to the Fixed Allocation as of the effective date of the program under some circumstances. o Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from the Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments may be allocated by us to the Fixed Allocation to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from the Fixed Allocation to a variable investment option. o Transfers from the Fixed Allocation made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed Allocation to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to the Fixed Allocation even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to the Fixed Allocation. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the Sub-accounts for participation in the Guaranteed Return Option program. The annual charge is deducted daily. In those states where the daily deduction of the charge has not yet been approved, the annual charge is deducted annually, in arrears. Account Value allocated to the Fixed Allocation under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Withdrawal Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Withdrawal Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit rider or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to an initial principal value (called the "Protected Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to protect your principal. You are not required to make withdrawals as part of the program -- the 60 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- guarantee is not lost if you withdraw less than the maximum allowable amount of principal each year under the rules of the program. There is an additional charge if you elect the GMWB program; however, the charge may be waived under certain circumstances described below. KEY FEATURE -- Protected Value The Protected Value is the total amount that we guarantee will be available to you through withdrawals from your Annuity and/or benefit payments, regardless of the impact of market performance on your Account Value. The Protected Value is reduced with each withdrawal you make until the Protected Value is reduced to zero. When the Protected Value is reduced to zero due to your withdrawals, the GMWB program terminates. Additionally, the Protected Value is used to determine the maximum annual amount that you can withdraw from your Annuity, called the Protected Annual Withdrawal Amount, without triggering an adjustment in the Protected Value on a proportional basis. The Protected Value is referred to as the "Benefit Base" in the rider we issue for this benefit. The Protected Value is determined as of the date you make your first withdrawal under the Annuity following your election of the GMWB program. The initial Protected Value is equal to the greater of (A) the Account Value on the date you elect the GMWB program, plus any additional Purchase Payments before the date of your first withdrawal; or (B) the Account Value as of the date of the first withdrawal from your Annuity. The Protected Value may be enhanced by increases in your Account Value due to market performance during the period between your election of the GMWB program and the date of your first withdrawal. o If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. o If we offer the GMWB program to existing Annuity Owners, the Account Value on the anniversary of the Issue Date of your Annuity following your election of the GMWB program will be used to determine the initial Protected Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Value will be increased by the amount of the additional Purchase Payment. You may elect to step-up your Protected Value if, due to positive market performance, your Account Value is greater than the Protected Value. You are eligible to step-up the Protected Value on or after the 5th Annuity anniversary following the first withdrawal under the GMWB program. The Protected Value can be stepped up again on or after the 5th Annuity anniversary following the preceding step-up. If you elect to step-up the Protected Value, you must do so during the 30-day period prior to your eligibility date. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the GMWB program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we reset the Protected Value to be equal to the then current Account Value. For example, assume your initial Protected Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Value to $60,000. On the date you are eligible to step-up the Protected Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Value to $75,000 on the date you are eligible. Upon election of the step-up, we also reset the Protected Annual Withdrawal Amount (discussed immediately below) to be equal to the greater of (A) the Protected Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the Protected Value immediately after the reset. KEY FEATURE -- Protected Annual Withdrawal Amount The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected Value. Under the GMWB program, if your cumulative withdrawals each Annuity Year are less than or equal to the Protected Annual Withdrawal Amount, your Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected Value is reduced by the actual amount of the withdrawal, including any CDSC or MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the Protected Annual Withdrawal Amount trigger a proportional adjustment to both the Protected Value and the Protected Annual Withdrawal Amount, as described in the rider for this benefit (see the examples of this calculation below). The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual Benefit" in the rider we issue for this benefit. The GMWB program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Protected 61 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Protected Annual Withdrawal Amount each Annuity Year. o If, cumulatively, you withdraw an amount less than the Protected Annual Withdrawal Amount in any Annuity Year, you cannot carry-over the unused portion of the Protected Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Protected Annual Withdrawal Amount may extend the period of time until the remaining Protected Value is reduced to zero. o Additional Purchase Payments will increase the Protected Annual Withdrawal Amount by 7% of the applicable Purchase Payment. o If the Protected Annual Withdrawal Amount after an adjustment exceeds the Protected Value, the Protected Annual Withdrawal Amount will be set equal to the Protected Value. The following examples of dollar-for-dollar and proportional reductions and the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the effective date of the GMWB program are October 13, 2004; 2.) an initial Purchase Payment of $250,000; 3.) a Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of $17,500 (7% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Protected Annual Withdrawal Amount: o The Protected Value is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining Protected Annual Withdrawal Amount for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $17,500 to $7,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount withdrawn exceeds the remaining Protected Annual Withdrawal Amount of $7,500 from Example 1: o the Protected Value is first reduced by the remaining Protected Annual Withdrawal Amount (from $240,000 to $232,500); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the remaining Protected Annual Withdrawal Amount ($10,000 - $7,500, or $2,500). o B is the Account Value less the remaining Protected Annual Withdrawal Amount ($220,000 - $7,500, or $212,500). The resulting Protected Value is: $232,500 x (1 - $2,500 / $212,500), or $229,764.71. o the Protected Annual Withdrawal Amount is also reduced by the ratio of A to B: The resulting Protected Annual Withdrawal Amount is: $17,500 x (1 - $2,500 / $212,500), or $17,294.12. o The remaining Protected Annual Withdrawal Amount is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Maximum Annual Benefit A $10,000 withdrawal is made on October 13, 2005 (second Annuity Year). The remaining Protected Annual Withdrawal Amount has been reset to the Protected Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn is less than the remaining Protected Annual Withdrawal Amount: o the Protected Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $229,764.71 to $219,764.71). o The remaining Protected Annual Withdrawal Amount for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $17,294.12 to $7,294.12). BENEFITS UNDER THE GMWB PROGRAM o In addition to any withdrawals you make under the GMWB program, market performance may reduce your Account Value. If your Account Value is equal to zero, and you have not received all of your Protected Value in the form of withdrawals from your Annuity, we will continue to make payments equal to the remaining Protected Value in the form of fixed, periodic payments until the remainder of the Protected Value is paid, at which time the rider terminates. The fixed, periodic payments will each be equal to the Protected Annual Withdrawal Amount, except for the last 62 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS ----------------------------------------------------------------------------- payment which may be equal to the remaining Protected Value. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. You will not have the right to make additional Purchase Payments or receive the remaining Protected Value in a lump sum. You can elect the frequency of payments, subject to our rules then in effect. o If the death benefit under the Annuity becomes payable before you have received all of your Protected Value in the form of withdrawals from your Annuity, your Beneficiary has the option to elect to receive the remaining Protected Value as an alternate death benefit payout in lieu of the amount payable under any other death benefit provided under the Annuity. The remaining Protected Value will be payable in the form of fixed, periodic payments. Your beneficiary can elect the frequency of payments, subject to our rules then in effect. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. The Protected Value is not equal to the Account Value for purposes of the Annuity's other death benefit options. The GMWB program does not increase or decrease the amount otherwise payable under the Annuity's other death benefit options. Generally, the GMWB program would be of value to your Beneficiary only when the Protected Value at death exceeds any other amount available as a death benefit. o If you elect to begin receiving annuity payments before you have received all of your Protected Value in the form of withdrawals from your Annuity, an additional annuity payment option will be available that makes fixed annuity payments for a certain period, determined by dividing the Protected Value by the Protected Annual Withdrawal Amount. If you elect to receive annuity payments calculated in this manner, the assumed interest rate used to calculate such payments will be 0%, which is less than the assumed interest rate on other annuity payment options we offer. This 0% assumed interest rate results in lower annuity payments than what would have been paid if the assumed interest rate was higher than 0%. You can also elect to terminate the GMWB program and begin receiving annuity payments based on your then current Account Value (not the remaining Protected Value) under any of the available annuity payment options. Other Important Considerations o Withdrawals under the GMWB program are subject to all of the terms and conditions of the Annuity, including any CDSC and MVA that may apply. o Withdrawals made while the GMWB program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. o The GMWB program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the GMWB program. The GMWB program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Value in the form of periodic benefit payments. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Election of the Program Currently, the GMWB program can only be elected at the time that you purchase your Annuity. In the future, we may offer existing Annuity Owners the option to elect the GMWB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMWB program after the Issue Date of your Annuity, the program will be effective as of the next anniversary date. Your Account Value as of such anniversary date will be used to calculate the initial Protected Value and the initial Protected Annual Withdrawal Amount. We reserve the right to restrict the maximum amount of Protected Value that may be covered under the GMWB program under this Annuity or any other annuities that you own that are issued by American Skandia or its affiliated companies. 63 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Termination of the Program The program terminates automatically when your Protected Value reaches zero based on your withdrawals. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon due proof of death (unless your surviving spouse elects to continue the Annuity and the GMWB program or your Beneficiary elects to receive the amounts payable under the GMWB program in lieu of the death benefit) or upon your election to begin receiving annuity payments. The charge for the GMWB program will no longer be deducted from your Account Value upon termination of the program. Charges under the Program Currently, we deduct a charge equal to 0.35% of the average daily net assets of the Sub-accounts per year to purchase the GMWB program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. o If, during the seven years following the effective date of the program, you do not make any withdrawals, and do not make any additional Purchase Payments after a five-year period following the effective date of the program, the program will remain in effect; however, we will waive the annual charge going forward. If you make an additional Purchase Payment following the waiver of the annual charge, we will begin charging for the program. After year seven (7) following the effective date of the program, withdrawals will not cause a charge to be re-imposed. o If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the program have changed for new purchasers, your program may be subject to the new charge level for the benefit. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. The amount required under the Code may exceed the Protected Annual Withdrawal Amount, which will cause us to recalculate the Protected Value and the Protected Annual Withdrawal Amount, resulting in a lower amount payable in future Annuity Years. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Income Benefit program is not available if you elect the Guaranteed Return Option program, Guaranteed Return Option Plus program, the Guaranteed Minimum Withdrawal Benefit rider or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on a guaranteed minimum value (called the "Protected Income Value") that increases after the waiting period begins, regardless of the impact of market performance on your Account Value. The program may be appropriate for you if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. There is an additional charge if you elect the GMIB program. KEY FEATURE -- Protected Income Value The Protected Income Value is the minimum amount that we guarantee will be available (net of any applicable tax charge), after a waiting period of at least seven years, as a basis to begin receiving fixed annuity payments. The Protected Income 64 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Value is initially established on the effective date of the GMIB program and is equal to your Account Value on such date. Currently, since the GMIB program may only be elected at issue, the effective date is the Issue Date of the Annuity. The Protected Income Value is increased daily based on an annual growth rate of 5%, subject to the limitations described below. The Protected Income Value is referred to as the "Protected Value" in the rider we issue for this benefit. The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the rider we issue for this benefit. The Protected Income Value is subject to a limit of 200% (2X) of the sum of the Protected Income Value established on the effective date of the GMIB program, or the effective date of any step-up value, plus any additional Purchase Payments made after the waiting period begins ("Maximum Protected Income Value"), minus the sum of any reductions in the Protected Income Value due to withdrawals you make from the Annuity after the waiting period begins. o Subject to the maximum age/durational limits described immediately below, we will no longer increase the Protected Income Value by the 5% annual growth rate once you reach the Maximum Protected Income Value. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments after you reach the Maximum Protected Income Value. Further, if you make withdrawals after you reach the Maximum Protected Income Value, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, we will no longer increase the Protected Income Value by the 5% annual growth rate after the later of the anniversary date on or immediately following the Annuitant's 80th birthday or the 7th anniversary of the later of the effective date of the GMIB program or the effective date of the most recent step-up. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments. Further, if you make withdrawals after the Annuitant reaches the maximum age/duration limits, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, if you make an additional Purchase Payment, we will increase the Protected Income Value by the amount of the Purchase Payment and will apply the 5% annual growth rate on the new amount from the date the Purchase Payment is applied. o As described below, after the waiting period begins, cumulative withdrawals each Annuity Year that are up to 5% of the Protected Income Value on the prior anniversary of the Annuity will reduce the Protected Income Value by the amount of the withdrawal. Cumulative withdrawals each Annuity Year in excess of 5% of the Protected Income Value on the prior anniversary of the Annuity, will reduce the Protected Income Value proportionately. All withdrawals after the Maximum Protected Income Value is reached will reduce the Protected Income Value proportionately. The 5% annual growth rate will be applied to the reduced Protected Income Value from the date of the withdrawal. Stepping-Up the Protected Income Value -- You may elect to "step-up" or "reset" your Protected Income Value if your Account Value is greater than the current Protected Income Value. Upon exercise of the step-up provision, your initial Protected Income Value will be reset equal to your current Account Value. From the date that you elect to step-up the Protected Income Value, we will apply the 5% annual growth rate to the stepped-up Protected Income Value, as described above. You can exercise the step-up provision twice while the GMIB program is in effect, and only while the Annuitant is less than age 76. o A new seven-year waiting period will be established upon the effective date of your election to step-up the Protected Income Value. You cannot exercise your right to begin receiving annuity payments under the GMIB program until the end of the new waiting period. o The Maximum Protected Income Value will be reset as of the effective date of any step-up. The new Maximum Protected Income Value will be equal to 200% of the sum of the Protected Income Value as of the effective date of the step-up plus any subsequent Purchase Payments, minus the impact of any withdrawals after the date of the step-up. o When determining the guaranteed annuity purchase rates for annuity payments under the GMIB program, we will apply such rates based on the number of years since the most recent step-up. o If you elect to step-up the Protected Income Value under the program, and on the date you elect to step-up, the 65 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- charges under the GMIB program have changed for new purchasers, your program may be subject to the new charge going forward. o A step-up will increase the dollar for dollar limit on the anniversary of the Issue Date of the Annuity following such step-up. Impact of Withdrawals on the Protected Income Value -- Cumulative withdrawals each Annuity Year up to 5% of the Protected Income Value will reduce the Protected Income Value on a "dollar-for-dollar" basis (the Protected Income Value is reduced by the actual amount of the withdrawal). Cumulative withdrawals in any Annuity Year in excess of 5% of the Protected Income Value will reduce the Protected Income Value proportionately (see the examples of this calculation below). The 5% annual withdrawal amount is determined on each anniversary of the Issue Date (or on the Issue Date for the first Annuity Year) and applies to any withdrawals during the Annuity Year. This means that the amount available for withdrawals each Annuity Year on a "dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect changes in the Protected Income Value during the prior Annuity Year. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GMIB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000; 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. Immediately prior to the withdrawal, the Protected Income Value is $251,038.10 (the initial value accumulated for 31 days at an annual effective rate of 5%). As the amount withdrawn is less than the dollar-for-dollar limit: o the Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). Immediately before the withdrawal, the Account Value is $220,000 and the Protected Income Value is $242,006.64. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o the Protected Income Value is first reduced by the Remaining Limit (from $242,006.64 to $239,506.64); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($220,000 - $2,500, or $217,500). The resulting Protected Income Value is: $239,506.64 x (1 - $7,500 / $217,500), or $231,247.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on the first anniversary of the Issue Date, October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected Income Value is $240,838.37. The Remaining Limit is reset to 5% of this amount, or $12,041.92. As the amount withdrawn is less than the dollar-for-dollar limit: o the Protected Income Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $240,838.37 to $230,838.37). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,041.92 to $2,041.92). KEY FEATURE -- GMIB Annuity Payments You can elect to apply the Protected Income Value to one of the available GMIB Annuity Payment Options on any anniversary date following the initial waiting period, or any subsequent waiting period established upon your election to step-up the Protected Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the Annuity anniversary, during which you may elect to begin receiving annuity payments under one of the available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 95th birthday, except for Annuities used as a funding vehicle for an IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 92nd birthday. 66 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- The amount of each GMIB Annuity Payment will be deter- mined based on the age and, where permitted by law, sex of the Annuitant by applying the Protected Income Value (net of any applicable tax charge that may be due) to the GMIB Annuity Payment Option you choose. We use special annuity purchase rates to calculate the amount of each payment due under the GMIB Annuity Payment Options. These special rates for the GMIB Annuity Payment Options are calculated using an assumed interest rate factor that provides for lower growth in the value applied to produce annuity payments than if you elected an annuity payment option that is not part of the GMIB program. These special rates also are calculated using other factors such as "age setbacks" (use of an age lower than the Annuitant's actual age) that result in lower payments than would result if you elected an annuity payment option that is not part of the GMIB program. Use of an age setback entails a longer assumed life for the Annuitant which in turn results in lower annuity payments. On the date that you elect to begin receiving GMIB Annuity Payments, we guarantee that your payments will be calculated based on your Account Value and our then current annuity purchase rates if the payment amount calculated on this basis would be higher than it would be based on the Protected Income Value and the special GMIB annuity purchase rates. GMIB Annuity Payment Option 1 -- Payments for Life with a Certain Period Under this option, monthly annuity payments will be made until the death of the Annuitant. If the Annuitant dies before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. GMIB Annuity Payment Option 2 -- Payments for Joint Lives with a Certain Period Under this option, monthly annuity payments will be made until the death of both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint Annuitant die before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. o If the Annuitant dies first, we will continue to make payments until the later of the death of the Joint Annuitant and the end of the period certain. However, if the Joint Annuitant is still receiving annuity payments following the end of the certain period, we will reduce the amount of each subsequent payment to 50% of the original payment amount. o If the Joint Annuitant dies first, we will continue to make payments until the later of the death of the Annuitant and the end of the period certain. You cannot withdraw your Account Value or the Protected Income Value under either GMIB Annuity Payment Option once annuity payments have begun. We may make other payout frequencies available, such as quarterly, semi-annually or annually. Other Important Considerations o You should note that GMIB is designed to provide a type of insurance that serves as a safety net only in the event your Account Value declines significantly due to negative investment performance. If your contract value is not significantly affected by negative investment performance, it is unlikely that the purchase of the GMIB will result in your receiving larger annuity payments than if you had not purchased GMIB. This is because the assumptions that we use in computing the GMIB, such as the annuity purchase rates, (which include assumptions as to age-setbacks and assumed interest rates), are more conservative than the assumptions that we use in computing annuity payout options outside of GMIB. Therefore, you may generate higher income payments if you were to annuitize a lower Account Value at the current annuity purchase rates, than if you were to annuitize under the GMIB with a higher Protected Value than your Account Value but, at the annuity purchase rates guaranteed under the GMIB. The GMIB program does not directly affect the Annuity's Account Value, Surrender Value or the amount payable under either the basic death benefit provision of the Annuity or any optional death benefit provision. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Income Value. The Protected Income Value is only applicable if you elect to begin receiving annuity payments under one of the GMIB annuity options after the waiting period. o The Annuity offers other annuity payment options that you can elect which do not impose an additional charge, but which do not offer to guarantee a minimum value on which to make annuity payments. o Where allowed by law, we reserve the right to limit subsequent purchase payments if we determine, at our sole discretion, that based on the timing of your Purchase Payments and withdrawals, your Protected Income Value is increasing in ways we did not intend. In determining 67 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- whether to limit Purchase Payments, we will look at Purchase Payments which are disproportionately larger than your initial Purchase Payment and other actions that may artificially increase the Protected Income Value. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. o If you change the Annuitant after the effective date of the GMIB program, the period of time during which we will apply the 5% annual growth rate may be changed based on the age of the new Annuitant. If the new Annuitant would not be eligible to elect the GMIB program based on his or her age at the time of the change, then the GMIB program will terminate. o Annuity payments made under the GMIB program are subject to the same tax treatment as any other annuity payment. o At the time you elect to begin receiving annuity payments under the GMIB program or under any other annuity payment option we make available, the protection provided by the Annuity's basic death benefit or any optional death benefit provision you elected will no longer apply. Election of the Program Currently, the GMIB program can only be elected at the time that you purchase your Annuity. The Annuitant must be age 75 or less as of the effective date of the GMIB program. In the future, we may offer existing Annuity Owners the option to elect the GMIB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMIB program after the Issue Date of your Annuity, the program will be effective as of the date of election. Your Account Value as of that date will be used to calculate the Protected Income Value as of the effective date of the program. Termination of the Program The GMIB program cannot be terminated by the Owner once elected. The GMIB program automatically terminates as of the date the Annuity is fully surrendered, on the date the death benefit is payable to your Beneficiary (unless your surviving spouse elects to continue the Annuity), or on the date that your Account Value is transferred to begin making annuity payments. The GMIB program may also be terminated if you designate a new Annuitant who would not be eligible to elect the GMIB program based on his or her age at the time of the change. Upon termination of the GMIB program we will deduct the charge from your Account Value for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). Charges under the Program Currently, we deduct a charge equal to 0.50% per year of the average Protected Income Value for the period the charge applies. Because the charge is calculated based on the average Protected Income Value, it does not increase or decrease based on changes to the Annuity's Account Value due to market performance. The dollar amount you pay each year will increase in any year the Protected Income Value increases, and it will decrease in any year the Protected Income Value decreases due to withdrawal, irrespective of whether your Account Value increases or decreases. The charge is deducted annually in arrears each Annuity Year on the anniversary of the Issue Date of the Annuity. We deduct the amount of the charge pro-rata from the Account Value allocated to the variable investment options and the Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed Allocation. If you surrender your Annuity, begin receiving annuity payments under the GMIB program or any other annuity payment option we make available during an Annuity Year, or the GMIB program terminates, we will deduct the charge for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No charge applies after the Annuity Date. 68 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE) - -------------------------------------------------------------------------------- The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, Lifetime Five can be elected only once each Annuity Year, and only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. We reserve the right to limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, Guaranteed Minimum Withdrawal Benefit or the Guaranteed Minimum Income Benefit rider. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with an eligible model under our asset allocation programs, which are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to a percentage of an initial principal value (called the "Protected Withdrawal Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. There are two options -- one is designed to provide an annual withdrawal amount for life (the "Life Income Benefit") and the other is designed to provide a greater annual withdrawal amount as long as there is Protected Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no Protected Withdrawal Value, the withdrawal benefit will be zero. You do not choose between these two options; each option will continue to be available as long as the Annuity has an Account Value and the Lifetime Five is in effect. Certain benefits under Lifetime Five may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive annual payments. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Protected Withdrawal Value The Protected Withdrawal Value is initially used to determine the amount of each initial annual payment under the Life Income Benefit and the Withdrawal Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Lifetime Five, plus any additional Purchase Payments each growing at 5% per year from the date of your election of the program, or application of the Purchase Payment to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. Each value is increased by the amount of any subsequent Purchase Payments. o If you elect the Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. o For existing Owners who are electing the Lifetime Five benefit, the Account Value on the date of your election of the Lifetime Five program will be used to determine the initial Protected Withdrawal Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Withdrawal Value will be increased by the amount of each additional Purchase Payment. You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. You are eligible 69 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. The Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. The Protected Withdrawal Value is reduced each time a withdrawal is made on a dollar-for-dollar basis up to 7% per Annuity Year of the Protected Withdrawal Value and on the greater of a dollar-for-dollar basis or a pro-rata basis for withdrawals in an Annuity Year in excess of that amount until the Protected Withdrawal Value is reduced to zero. At that point the Annual Withdrawal Amount will be zero until such time (if any) as the Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or additional Purchase Payments being made into the Annuity). KEY FEATURE -- Annual Income Amount under the Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. A withdrawal can be considered Excess Income under the Life Income Benefit even though it does not exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up if such amount is greater than your Annual Income Amount. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. KEY FEATURE -- Annual Withdrawal Amount under the Withdrawal Benefit The initial Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals each Annuity Year are less than or equal to the Annual Withdrawal Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If your cumulative withdrawals are in excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Withdrawal to the Account Value immediately prior to such withdrawal (see the examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. When you elect a step-up, your Annual Withdrawal Amount increases to equal 7% of your Account Value after the step-up if such amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 7% of any additional Purchase Payments. A determination of whether you have exceeded your Annual Withdrawal Amount is made at the time of each withdrawal; therefore, a subsequent increase 70 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- in the Annual Withdrawal Amount will not offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount at the time the withdrawal was made. The Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount and the Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Annual Withdrawal Amount or Annual Income Amount in each Annuity Year. o If, cumulatively, you withdraw an amount less than the Annual Withdrawal Amount under the Withdrawal Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Withdrawal Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. o If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Income Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2011 is equal to $240,000. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 x 1.05(393/365) = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of $265,000). The Annual Income Amount is equal to $13,250 under the Life Income Benefit (5% of $265,000). Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $10,000 = $8,550 Annual Withdrawal Amount for future Annuity Years remains at $18, 550 o Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 o Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount but less than the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $15,000 = $3,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $1,750 / ($263,000 - $13,250) x $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 o Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000 71 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- (b) If $25,000 was withdrawn (more than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 = $6,450) reduces Annual Withdrawal Amount for future Annuity Years. o Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value before Excess Withdrawal x Annual Withdrawal Amount = $6,450 / ($263,000 - $18,550) x $18,550 = $489 Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 = $11,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $11,750 / ($263,000 - $13,250) x $13,250 = $623 Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627 o Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount ($18,550) from $265,000 to $246,450. It is further reduced by the greater of a dollar-for-dollar reduction or a proportional reduction. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450 o Proportional reduction = Excess Withdrawal / Account Value before Excess Withdrawal x Protected Withdrawal Value = $6,450 / ($263,000 - $18,550) x $246,450 = $6,503 Protected Withdrawal Value = $246,450 - max {$6,450, 6,503} = $239,947 Example 3. Step-up of the Protected Withdrawal Value If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 5 years, the Protected Withdrawal Value on March 1, 2011 would be reduced to $198,750 {$265,000 - ($13,250 x 5)}. If a step-up is elected on March 1, 2011, then the following values would result: o Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 o Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped-up Protected Withdrawal Value is 5% of $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. o Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped-up Protected Withdrawal Value is 7% of $240,000, which is $16,800. Therefore the Annual Withdrawal Amount remains $18,550. BENEFITS UNDER THE LIFETIME FIVE PROGRAM o If your Account Value is equal to zero, and the cumulative withdrawals in the current Annuity Year are greater than the Annual Withdrawal Amount, the Lifetime Five program will terminate. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under both the Life Income Benefit and the Withdrawal Benefit, you will be given the choice of receiving the payments under the Life Income Benefit or under the Withdrawal Benefit. Once you make this election we will make an additional payment for that Annuity Year equal to either the remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity Year, if any, depending on the option you choose. In subsequent Annuity Years we make payments that equal either the Annual Income Amount or the Annual Withdrawal Amount as described in this Prospectus. You will not be able to change the option after your election and no further Purchase Payments will be accepted under your Annuity. If you do not make an election, we will pay you annually under the Life Income Benefit. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount but less than or equal to the Annual Withdrawal Amount and amounts are still payable under the Withdrawal Benefit, you will receive the payments under the Withdrawal Benefit. In the year of a withdrawal that reduced your Account Value to zero, we will make an additional payment to equal any remaining Annual Withdrawal Amount and make payments equal to the Annual Withdrawal Amount in each subsequent year (until the Protected Withdrawal Value is depleted). Once your Account Value equals zero no further Purchase Payments will be accepted under your Annuity. 72 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- o If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years or any remaining Protected Withdrawal Value, you can elect one of the following three options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We make such annuity payments until the Annuitant's death; or (3) request that, as of the date annuity payments are to begin, we pay out any remaining Protected Withdrawal Value as annuity payments. Each year such annuity payments will equal the Annual Withdrawal Amount or the remaining Protected Withdrawal Value if less. We make such annuity payments until the earlier of the Annuitant's death or the date the Protected Withdrawal Value is depleted. We must receive your request in a form acceptable to us at our office. o In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a single life fixed annuity with five payments certain using the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the greater of the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. o If no withdrawal was ever taken, we will determine a Protected Withdrawal Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations o Withdrawals under the Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. o Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Withdrawal Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Lifetime Five program. The Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Withdrawal Value or Annual Income Amount in the form of periodic benefit payments. o You must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit in order to elect and maintain the Lifetime Five program. Asset allocation programs are described generally in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. Election of the Program The Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value, the initial Protected Annual Withdrawal Amount, and the Annual Income Amount. Termination of the Program The program terminates automatically when your Protected Withdrawal Value and Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon the death of the Annuitant (but your surviving spouse may elect a new Lifetime Five if your spouse elects the spousal continuance option and your spouse would then be eligible to elect the benefit if he or she was a new purchaser), upon a change in ownership of the Annuity that changes the tax identification number of the Owner, upon change in the Annuitant or upon your election to begin receiving annuity payments. The charge for the Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. 73 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. The amount required under the Code may exceed the Annual Withdrawal Amount and the Annual Income Amount, which will cause us to increase the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. Any such payments will reduce your Protected Withdrawal Value. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 74 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Death Benefit - -------------------------------------------------------------------------------- WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers three different optional Death Benefits that can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. The basic Death Benefit is the greater of: o The sum of all Purchase Payments less the sum of all proportional withdrawals. o The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Three optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - -------------------------------------------------------------------------------- Currently, these benefits are only offered in those jurisdictions where we have received regulatory approval and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase an optional Death Benefit subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ between jurisdictions once approved and if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit may only be elected individually, and cannot be elected in combination with any other optional death benefit. - -------------------------------------------------------------------------------- Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. 75 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. The Enhanced Beneficiary Protection Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit ("HAV") If the Annuity has one Owner, the Owner must be age 79 or less at the time Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of Highest Anniversary Value Death Benefit The HAV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Anniversary Value Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" or the "Highest Daily Value" Death Benefit. - -------------------------------------------------------------------------------- Please refer to the definition of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer contract anniversaries before the death benefit target date is reached. The death benefit target date under this death benefit is earlier than the death benefit target date under the Combination 5% Roll-up and Highest Anniversary Value Death Benefit for Owners who are age 76 or older when the Annuity is issued, which may result in a lower value 76 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- on the death benefit, since there will be fewer contract anni- versaries before the death benefit target date is reached. See Appendix B for examples of how the Highest Anniversary Value Death Benefit is calculated. Combination 5% Roll-up and Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time the Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Combination 5% Roll-up and HAV Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death Benefit The Combination 5% Roll-up and HAV Death Benefit equals the greatest of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value death benefit described above, and 3. 5% Roll-up described below. The calculation of the 5% Roll-up depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date the 5% Roll up is equal to: o all Purchase Payments increasing at an annual effective interest rate of 5% starting on the date that each Purchase Payment is made and ending on the Owner's date of death; MINUS o the sum of all withdrawals, dollar for dollar up to 5% of the death benefit's value as of the prior contract anniversary (or issue date if the withdrawal is in the first contract year). Any withdrawals in excess of the 5% dollar for dollar limit are proportional. If the Owner dies on or after the Death Benefit Target Date the 5% Roll-up is equal to: o the 5% Roll-up value as of the Death Benefit Target Date increased by total Purchase Payments made after the Death Benefit Target Date; MINUS o the sum of all withdrawals which reduce the 5% Roll-up proportionally. Please refer to the definitions of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer Annuity anniversaries before the Death Benefit Target Date is reached. - -------------------------------------------------------------------------------- The Combination 5% Roll-up and Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit is not available if you elect any other optional death benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Combination 5% Roll-up and Highest Anniversary Value Death Benefit is calculated. Key Terms Used with the Highest Anniversary Value Death Benefit and the Combination 5% Roll-up and Highest Anniversary Value Death Benefit: o The Death Benefit Target Date for the Highest Anniversary Value Death Benefit is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. o The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death Benefit is the later of the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Anniversary Value equals the highest of all previous "Anniversary Values" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. o The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. 77 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Anniversary Value or 5% Roll-up value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value or 5% Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Highest Daily Value Death Benefit ("HDV") - -------------------------------------------------------------------------------- If the Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Daily Value Death Benefit is elected. If the Annuity has joint Owners, the older Owner must be age 79 or less. If there are Joint Owners, death of the Owner refers to the first to die of the Joint Owners. If the Annuity is owned by an entity, the Annuitant must be age 79 or less and death of the Owner refers to the death of the Annuitant. If you elect this benefit, you must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit. Because this benefit, once elected, may not be terminated, you must keep your Account Value allocated to an eligible model throughout the life of the Annuity. You may, however, switch from one eligible model to another eligible model. Our asset allocation programs are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- The HDV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the HDV on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Daily Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Daily Value Death Benefit is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit, or the Highest Anniversary Value Death Benefit. - -------------------------------------------------------------------------------- Key Terms Used with the Highest Daily Value Death Benefit: o The Death Benefit Target Date for the Highest Daily Value Death Benefit is the later of the Annuity anniversary on or after the 80th birthday of the current Owner, or the older of either the joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Daily Value equals the highest of all previous "Daily Values" less proportional withdrawals since such date and plus any Purchase Payments since such date. o The Daily Value is the Account Value as of the end of each Valuation Day. The Daily Value on the Issue Date is equal to your Purchase Payment. o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Daily Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Daily Value ($125,000) by 10% or $12,500. 78 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- Please see Appendix B to this prospectus for a hypothetical example of how the HDV Death Benefit is calculated. Annuities with Joint Owners For Annuities with Joint Owners, the Death Benefits are calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the Annuity instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefits are calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Death Benefit and Highest Anniversary Value Death Benefit at any time. The "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated once elected. The optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year of the average daily net assets of the Sub-accounts for each of the Highest Anniversary Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the average daily net assets of the Sub-accounts for the "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge for each of these benefits to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS What is the Annuity Rewards Benefit? The Annuity Rewards Benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than the Annuity's value as of the effective date of the benefit. Under the Annuity Rewards benefit, American Skandia guarantees that the Death Benefit will not be less than: o your Account Value in the variable investment options plus the Interim Value in any Fixed Allocations as of the effective date of the benefit o MINUS any proportional withdrawals* following the effective date of the benefit o PLUS any additional Purchase Payments applied to the Annuity following the effective date of the benefit. The Annuity Rewards Death Benefit enhancement does not affect the basic Death Benefit calculation and any Optional Death Benefits available under the Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. Who is eligible for the Annuity Rewards Benefit? Owners can elect the Annuity Rewards Death Benefit enhancement following the fourth (4th) anniversary of the Annuity's Issue Date. However, the Account Value on the date that the Annuity Rewards Benefit is effective must be greater than the amount that would be payable to the Beneficiary under the Death Benefit (including any amounts payable under any optional death benefit then in effect). The effective date must occur before annuity payments begin. There can only be one effective date for the Annuity Rewards Death Benefit enhancement. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal assumption as described below, in the event of your death, the death benefit must be distributed: * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. 79 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- o as a lump sum amount at any time within five (5) years of the date of death; or o as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary -- Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity -- Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. Qualified Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. o If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. o If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. Upon election of this Qualified Beneficiary Continuation option: o the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. o the Beneficiary will be charged at an amount equal to 1.40% daily against the average daily assets allocated to the Sub-accounts. o the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. o the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied 80 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- to the Owner, except that the Sub-accounts offered will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. o the Fixed Allocations will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. o no additional Purchase Payments can be applied to the Annuity. o other optional Benefits will be those offered under the Qualified Beneficiary Continuation option at the time of election. o the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. o the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. o upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. o all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Your Beneficiary will be provided with a prospectus and settlement option that will describe this option at the time he or she elects this option. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the Qualified Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including any optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. 81 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Valuing Your Investment - -------------------------------------------------------------------------------- HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. The Account Value includes any loyalty credit we apply. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is defined under "Glossary of Terms" above. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day more than 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next Valuation Day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. 82 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- There may be circumstances where the NYSE is open, how- ever, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: o trading on the NYSE is restricted; o an emergency exists making redemption or valuation of securities held in the separate account impractical; or o the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) business days after we receive all of our requirements at our office to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) business days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) business days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment at our office with satisfactory allocation instructions. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions if none are provided. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on the next Valuation Day, unless the next Valuation Day falls in the subsequent calendar year, in which case the transaction will be processed and valued on the prior Valuation Day. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). You cannot request a transaction involving the purchase, redemption or transfer of units in one of the ProFunds VP Sub-account between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefits: Except for the Guaranteed Minimum Income Benefit, the Combination 5% Roll-up and Highest Anniversary Value Death Benefit and the Highest Daily Value Death Benefit, which cannot be terminated by the owner once elected, if any optional benefit terminates, we will no longer deduct the charge we apply to purchase the optional 83 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Valuing Your Investment continued - -------------------------------------------------------------------------------- benefit. Certain optional benefits may be added after you have purchased your Annuity. On the date a charge no longer applies or a charge for an optional benefit begins to be deducted, your Annuity will become subject to a different daily asset-based charge. This change may result in the number of Units attributed to your Annuity and the value of those Units being different than it was before the change; however, the adjustment in the number of Units and Unit Price will not affect your Account Value (although the change in charges that are deducted will affect your Account Value). 84 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Tax Considerations - -------------------------------------------------------------------------------- The tax considerations associated with the Annuity vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan (including contracts held by a non-natural person, such as a trust acting as an agent for a natural person), or (ii) held under a tax-favored retirement plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. The discussion includes a description of certain spousal rights under the contract and under tax-qualified plans. Our administration of such spousal rights and related tax reporting accords with our understanding of the Defense of Marriage Act (which defines a "marriage" as a legal union between a man and a woman and a "spouse" as a person of the opposite sex). The information provided is not intended as tax advice. You should consult with a qualified tax advisor for complete information and advice. References to purchase payments below relates to your cost basis in your contract. Generally, your cost basis in a contract not associated with a tax-favored retirement plan is the amount you pay into your contract, or into annuities exchanged for your contract, on an after-tax basis less any withdrawals of such payments. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS) Taxes Payable by You We believe the contract is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract. Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below. It is possible that the Internal Revenue Service (IRS) would assert that some or all of the charges for the optional benefits under the contract should be treated for federal income tax purposes as a partial withdrawal from the contract. If this were the case, the charge for this benefit could be deemed a withdrawal and treated as taxable to the extent there are earnings in the contract. Additionally, for owners under age 59 1/2, the taxable income attributable to the charge for the benefit could be subject to a tax penalty. If the IRS determines that the charges for one or more benefits under the contract are taxable withdrawals, then the sole or surviving owner will be provided with a notice from us describing available alternatives regarding these benefits. If you choose to defer the Annuity Date beyond the default date for your Annuity, the IRS may not consider your contract to be an annuity under the tax law. For more information, see "How and When Do I Choose the Annuity Payment Option?". Taxes on Withdrawals and Surrender If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of purchase payments, until all gain has been withdrawn. You will generally be taxed on any withdrawals from the contract while you are alive even if the withdrawal is paid to someone else. If you assign or pledge all or part of your contract as collateral for a loan, the part assigned generally will be treated as a withdrawal. If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on any gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce. Taxes on Annuity Payments A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your purchase payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract. After the full amount of your purchase payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 85 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- Tax Penalty on Withdrawals and Annuity Payments Any taxable amount you receive under your contract may be subject to a 10% tax penalty. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59 1/2 or die; o the amount received is attributable to your becoming disabled; o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.); or o the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase). Special Rules in Relation to Tax-Free Exchanges Under Section 1035 Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits certain tax-free exchanges of a life insurance, annuity or endowment contract for an annuity. If the annuity is purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any purchase payments made to the original contract prior to August 14, 1982 will be treated as made to the new contract prior to that date. (See Federal Tax Status section in the Statement of Additional Information.) Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract into an immediate annuity. As of the date of this prospectus, we will accept a partial 1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% tax penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. Taxes Payable by Beneficiaries The death benefit options are subject to income tax to the extent the distribution exceeds the cost basis in the contract. The value of the death benefit, as determined under federal law, is also included in the owner's estate. Generally, the same tax rules described above would also apply to amounts received by your beneficiary. Choosing any option other than a lump sum death benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below. Tax consequences to the beneficiary vary among the death benefit payment options. o Choice 1: the beneficiary is taxed on earnings in the contract. o Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case earnings are treated as being distributed first). o Choice 3: the beneficiary is taxed on each payment (part will be treated as earnings and part as return of premiums). Considerations for Contingent Annuitants: There may be adverse tax consequences if a Contingent Annuitant succeeds an Annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. Reporting and Withholding on Distributions Taxable amounts distributed from your annuity contracts are subject to federal and state income tax reporting and withholding. In general, we will withhold federal income tax from the taxable portion of such distribution based on the type of distribution. In the case of an annuity or similar periodic payment, we will withhold as if you are a married individual with 3 exemptions unless you designate a different withholding status. In the case of all other distributions, we will withhold at a 86 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- 10% rate. You may generally elect not to have tax withheld from your payments. An election out of withholding must be made on forms that we provide. State income tax withholding rules vary and we will withhold based on the rules of your State of residence. Special tax rules apply to withholding for nonresident aliens, and we generally withhold income tax for nonresident aliens at a 30% rate. A different withholding rate may be applicable to a nonresident alien based on the terms of an existing income tax treaty between the United States and the nonresident alien's country. Please refer to the discussion below regarding withholding rules for tax favored plans (for example, an IRA). Regardless of the amount withheld by us, you are liable for payment of federal and state income tax on the taxable portion of annuity distributions. You should consult with your tax advisor regarding the payment of the correct amount of these income taxes and potential liability if you fail to pay such taxes. Annuity Qualification Diversification And Investor Control. In order to qualify for the tax rules applicable to annuity contracts described above, the assets underlying the variable investment options of the annuity contract must be diversified, according to certain rules. We believe these diversification rules will be met. An additional requirement for qualification for the tax treatment described above is that we, and not you as the contract owner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. While we also believe these investor control rules will be met, 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. It is unclear whether such guidelines, if in fact promulgated, would have retroactive effect. It is also unclear what effect, if any, such guidelines may have on transfers between the investment options offered pursuant to this Prospectus. We will take any action, including modifications to your Annuity or the investment options, required to comply with such guidelines if promulgated. Please refer to the Statement of Additional information for further information on these Diversification and Investor Control issues. Required Distributions Upon Your Death. Upon your death, certain distributions must be made under the contract. The required distributions depend on whether you die before you start taking annuity payments under the contract or after you start taking annuity payments under the contract. If you die on or after the annuity date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before the annuity date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if a periodic payment option is selected by your designated beneficiary and if such payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom benefit rights under the contract pass by reason of death, and must be a natural person in order to elect a periodic payment option based on life expectancy or a period exceeding five years. If the contract is payable to (or for the benefit of) your surviving spouse, that portion of the contract may be continued with your spouse as the owner. Changes In The Contract. We reserve the right to make any changes we deem necessary to assure that the contract qualifies as an annuity contract for tax purposes. Any such changes will apply to all contract owners and you will be given notice to the extent feasible under the circumstances. Additional Information You should refer to the Statement of Additional Information if: o The contract is held by a corporation or other entity instead of by an individual or as agent for an individual. o Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982. o You transfer your contract to, or designate, a beneficiary who is either 37 1/2 years younger than you or a grandchild. o You purchased more than one annuity contract from the same insurer within the same calendar year (other than contracts held by tax favored plans). CONTRACTS HELD BY TAX FAVORED PLANS The following discussion covers annuity contracts held under tax-favored retirement plans. Currently, the contract may be purchased for use in connection with individual retirement accounts and annuities (IRAs) which are subject to Sections 408(a), 408(b) and 408A of the Code. In addition, this contract may be purchased for use in 87 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- connection with a corporate Pension and Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities or TDAs), and Section 457 plans (subject to 457 of the Code). This description assumes that you have satisfied the requirements for eligibility for these products. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. You should be aware that tax favored plans such as IRAs generally provide income tax deferral regardless of whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax benefits (such as income tax deferral and income tax free transfers). Types of Tax Favored Plans IRAs. If you buy a contract for use as an IRA, we will provide you a copy of the prospectus and contract. The "IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars, and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free look" after making an initial contribution to the contract. During this time, you can cancel the contract by notifying us in writing, and we will refund all of the purchase payments under the contract (or, if provided by applicable state law, the amount credited under the contract, if greater), less any applicable federal and state income tax withholding. Contributions Limits/Rollovers. Because of the way the contract is designed, you may purchase a contract for an IRA in connection with a "rollover" of amounts from a qualified retirement plan or transfer from another IRA. In 2005 the limit is $4,000; increasing to $5,000 in 2008. After 2008 the contribution amount will be indexed for inflation. The tax law also provides for a catch-up provision for individuals who are age 50 and above. These taxpayers will be permitted to contribute an additional $500, increasing to $1,000 in 2006 and years thereafter. The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy the contract, you can make regular IRA contributions under the contract (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not retain possible favorable tax treatment if you subsequently "roll over" the contract funds originally derived from a qualified retirement plan or TDA into another Section 401(a) plan or TDA. Required Provisions. Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions: o You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce); o Your rights as owner are non-forfeitable; o You cannot sell, assign or pledge the contract; o The annual contribution you pay cannot be greater than the maximum amount allowed by law, including catch-up contributions if applicable (which does not include any rollover amounts); o The date on which annuity payments must begin cannot be later than April 1st of the calendar year after the calendar year you turn age 70 1/2; and o Death and annuity payments must meet "minimum distribution requirements" described below. Usually, the full amount of any distribution from an IRA (including a distribution from this contract) which is not a rollover is taxable. As taxable income, these distributions are subject to the general tax withholding rules described earlier. In addition to this normal tax liability, you may also be liable for the following, depending on your actions: o A 10% "early distribution penalty" described below; o Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or o Failure to take a minimum distribution also described below. SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences: o If you participate in a SEP, you generally do not include in income any employer contributions made to the SEP on your behalf up to the lesser of (a) $42,000 in 2005 or (b) 88 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- 25% of the employee's earned income (not including contribution as "earned income" for these purposes). However, for these purposes, compensation in excess of certain limits established by the IRS will not be considered. In 2005, this limit is $210,000; o SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and o SEPs for small employers permit salary deferrals up to $14,000 in 2005 with the employer making these contributions to the SEP. However, no new "salary reduction" or "SARSEPs" can be established after 1996. Individuals participating in a SARSEP who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. You will also be provided the same information, and have the same "free look" period, as you would have if you purchased the contract for a standard IRA. ROTH IRAs. Like standard IRAs, income within a Roth IRA accumulates tax-free, and contributions are subject to specific limits. Roth IRAs have, however, the following differences: o Contributions to a Roth IRA cannot be deducted from your gross income; o "Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements: (1) the distribution must be made (a) after the owner of the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the owner's disability; or (d) for a qualified first time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and taxed generally in the same manner as distributions from a traditional IRA. o If eligible (including meeting income limitations and earnings requirements), you may make contributions to a Roth IRA after attaining age 70 1/2, and distributions are not required to begin upon attaining such age or at any time thereafter. Because of the way the contract is designed, you may purchase a contract for a Roth IRA in connection with a "rollover" of amounts of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA or Roth IRA. The Code permits persons who meet certain income limitations (generally, adjusted gross income under $100,000), and who receive certain qualifying distributions from such non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of all or any part of the amount of such distribution to a Roth IRA which they establish. This conversion triggers current taxation (but is not subject to a 10% early distribution penalty). Once the contract has been purchased, regular Roth IRA contributions will be accepted to the extent permitted by law. TDAs. You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501 (c)(3)) or a public educational organization, and you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $14,000 in 2005. Individuals participating in a TDA who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. Further, you may roll over TDA amounts to another TDA or an IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP and a 457 government plan. A contract may only qualify as a TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of: o Your attainment of age 59 1/2; o Your severance of employment; o Your death; o Your total and permanent disability; or o Hardship (under limited circumstances, and only related to salary deferrals and any earnings attributable to these amounts). In any event, you must begin receiving distributions from your TDA by April 1st of the calendar year after the calendar year you turn age 70 1/2 or retire, whichever is later. These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a 89 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- mutual fund "custodial account" described under Code Section 403(b)(7). Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans. Minimum Distribution Requirements and Payment Option If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that generally payments must start by April 1 of the year after the year you reach age 70 1/2 and must be made for each year thereafter. The amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount. More information on the mechanics of this calculation is available on request. Please contact us at a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% tax penalty on the amount of any minimum distribution not made in a timely manner. Effective in 2006, in accordance with recent changes in laws and regulations, required minimum distributions will be calculated based on the sum of the contract value and the acturial value of any additional death benefits and benefits from optional riders that you have purchased under the contract. As a result, the required minimum distributions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution under the Contract and an increased amount of taxable income distributed to the contract owner, and a reduction of death benefits and the benefits of any optional riders. You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for this contract without either beginning annuity payments or surrendering the contract. We will distribute to you this minimum distribution amount, less any other partial withdrawals that you made during the year. Although the IRS rules determine the required amount to be distributed from your IRA each year, certain payment alternatives are still available to you. If you own more than one IRA, you can choose to satisfy your minimum distribution requirement for each of your IRAs by withdrawing that amount from any of your IRAs. Penalty for Early Withdrawals You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain age 59 1/2. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59 1/2 or die; o the amount received is attributable to your becoming disabled; or o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59 1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.) Other exceptions to this tax may apply. You should consult your tax advisor for further details. Withholding Unless a distribution is an eligible rollover distribution that is "directly" rolled over into another qualified plan, IRA (including the IRA variations described above), SEP, 457 government plan or TDA, we will withhold federal income tax at the rate of 20%. This 20% withholding does not apply to distributions from IRAs and Roth IRAs. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis: o For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and o For all other distributions, we will withhold at a 10% rate. We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes. There may be additional state income tax withholding requirements. ERISA Disclosure/Requirements ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit 90 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- from any party dealing with the plan, as a result of the sale of the contract. Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract. Information about any applicable fees, charges, discounts, penalties or adjustments may be found in the applicable sections of this Prospectus. Information about sales representatives and commissions may be found in the sections of this Prospectus addressing distribution of the Annuity. Please consult your tax advisor if you have any additional questions. Spousal Consent Rules for Retirement Plans -- Qualified Contracts If you are married at the time your payments commence, you may be required by federal law to choose an income option that provides survivor annuity income to your spouse, unless your spouse waives that right. Similarly, if you are married at the time of your death, federal law may require all or a portion of the death benefit to be paid to your spouse, even if you designated someone else as your beneficiary. A brief explanation of the applicable rules follows. For more information, consult the terms of your retirement arrangement. Defined Benefit Plans and Money Purchase Pension Plans. If you are married at the time your payments commence, federal law requires that benefits be paid to you in the form of a "qualified joint and survivor annuity" (QJSA), unless you and your spouse waive that right, in writing. Generally, this means that you will receive a reduced payment during your life and, upon your death, your spouse will receive at least one-half of what you were receiving for life. You may elect to receive another income option if your spouse consents to the election and waives his or her right to receive the QJSA. If your spouse consents to the alternative form of payment, your spouse may not receive any benefits from the plan upon your death. Federal law also requires that the plan pay a death benefit to your spouse if you are married and die before you begin receiving your benefit. This benefit must be available in the form of an annuity for your spouse's lifetime and is called a "qualified pre-retirement survivor annuity" (QPSA). If the plan pays death benefits to other beneficiaries, you may elect to have a beneficiary other than your spouse receive the death benefit, but only if your spouse consents to the election and waives his or her right to receive the QPSA. If your spouse consents to the alternate beneficiary, your spouse will receive no benefits from the plan upon your death. Any QPSA waiver prior to your attaining age 35 will become null and void on the first day of the calendar year in which you attain age 35, if still employed. Defined Contribution Plans (including 401(k) Plans and ERISA 403(b) Annuities). Spousal consent to a distribution is generally not required. Upon your death, your spouse will receive the entire death benefit, even if you designated someone else as your beneficiary, unless your spouse consents in writing to waive this right. Also, if you are married and elect an annuity as a periodic income option, federal law requires that you receive a QJSA (as described above), unless you and your spouse consent to waive this right. IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a distribution is not required. Upon your death, any death benefit will be paid to your designated beneficiary. Additional Information For additional information about federal tax law requirements applicable to tax favored plans, see the IRA Disclosure Statement. 91 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS General Information - -------------------------------------------------------------------------------- HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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.prudential.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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation, a Prudential Financial Company ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"), whose ultimate parent is Prudential Financial, Inc. American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; and (c) both fixed and variable immediate adjustable annuities. Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, Prudential Financial exercises significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options 92 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002 each Sub-account class of Separate Account B was consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which was subsequently renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B has multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B had no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion of Separate Account D. From time to time additional investment managers may be employed or investment 93 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS General Information continued - -------------------------------------------------------------------------------- managers may cease being employed. We are under no obligation to employ or continue to employ any investment manager(s) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its co-investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC, subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI, Prudential Investments LLC and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. We may add new Sub-accounts that invest in a series of underlying funds other than the Trust that is managed by an affiliate. Such series of funds may have a similar order from the SEC. You also should review the prospectuses for the other underlying funds in which various Sub-accounts invest as to whether they have obtained similar orders from the SEC. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of the underlying Portfolios. Under the terms of these agreements, American Skandia may provide administrative and support services to the Portfolios for which it receives a fee of up to 0.75% (currently) of the average assets allocated to the Portfolios under the Annuity from the investment adviser, distributor and/or the fund. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. 94 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- In addition, the investment adviser, sub-advisor or distributor of the underlying Portfolios may also compensate us by providing reimbursement or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with the Annuity. These services may include, but are not limited to: co-sponsoring various meetings and seminars attended by broker-dealer firms' registered representatives and creating marketing material discussing the Annuity and the available options. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and co-distributor of American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration ("firms"). Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Commissions are paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of his or her firm. Commissions are generally based on a percentage of Purchase Payments made, up to a maximum of 4.0%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation to the distributing firm for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, in an effort to promote the sale of our products (which may include the placement of American Skandia and/or the Annuity on a preferred or recommended company or product list and/or access to the firm's registered representatives), we or ASM may enter into compensation arrangements with certain broker-dealer firms with respect to certain or all registered representatives of such firms under which such firms may receive separate compensation or reimbursement for, among other things, training of sales personnel and/or marketing and/or administrative services and/or other services they provide. These services may include, but are not limited to: educating customers of the firm on the Annuity's features; conducting due diligence and analysis, providing office access, operations and systems support; holding seminars intended to educate the firm's registered representatives and make them more knowledgeable about the Annuity; providing a dedicated marketing coordinator; providing priority sales desk support; and providing expedited marketing compliance approval. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or non-cash compensation. These arrangements may not be offered to all firms and the terms of such arrangements may differ between firms. A list of the firms to whom American Skandia pays an amount of greater than $10,000.00 under these arrangements is provided in the Statement of Additional Information, which is available upon request. You should note that firms and individual registered representatives and branch managers within some firms participating in one of these compensation arrangements might receive greater compensation for selling the Annuity than for selling a different annuity that is not eligible for these compensation arrangements. While compensation is generally taken into account as an expense in considering the charges applicable to an annuity product, any such compensation will be paid by us or ASM and will not result in any additional charge to you. Overall compensation paid to the distributing firm does not exceed, based on actuarial assumptions, 8.5% of the total Purchase Payments made. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. 95 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS General Information continued - -------------------------------------------------------------------------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by an independent registered public accounting firm. American Skandia's annual report for the year ended December 31, 2004, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia -- Variable Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room by calling (202) 942-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. FINANCIAL STATEMENTS The financial statements of the separate account and American Skandia Life Assurance Corporation are included in the Statement of Additional Information. HOW TO CONTACT US You can contact us by: o calling our Customer Service Team at 1-800-680-8920 during our normal business hours, 8:30 a.m. EST to 8:00 p.m. EST, Monday through Friday, or Skandia's telephone automated response system at 1-800-766-4530. o writing to us via regular mail at American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, 2101 Welsh Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. o sending an email to service@prudential.com or visiting our Internet Website at www.americanskandia.prudential.com. o accessing information about your Annuity through our Internet Website at www.americanskandia.prudential.com. You can obtain account information by calling our automated response system and at www.americanskandia. prudential.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. Please note that unless you tell us otherwise, we deem that all transactions that are directed by your investment professional with respect to your Annuity have been authorized by you. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. 96 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS - -------------------------------------------------------------------------------- American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia o American Skandia Life Assurance Corporation o American Skandia Life Assurance Corporation Variable Account B o American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor -- American Skandia Marketing, Incorporated Payments Made to Promote Sale of Our Products How the Unit Price is Determined Additional Information on Fixed Allocations o How We Calculate the Market Value Adjustment General Information o Voting Rights o Modification o Deferral of Transactions o Misstatement of Age or Sex o Ending the Offer Annuitization Experts Legal Experts Financial Statements 97 This page intentionally left blank APPENDIX A AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B - -------------------------------------------------------------------------------- Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. Since November 18, 2002, we have been determining, on a daily basis, multiple Unit Prices for each Sub-account of Separate Account B. We compute multiple Unit Prices because several of our variable annuities invest in the same Sub-accounts, and these annuities deduct varying charges that correspond to each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charges for each optional benefit. Where an asset-based charge corresponding to a particular Sub-account within a new annuity product is identical to that in the same Sub-account within an existing annuity, the Unit Price for the new annuity will be identical to that of the existing annuity. In such cases, we will for reference purposes depict, in the condensed financial information for the new annuity, Unit Prices of the existing annuity. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. When a Unit Price was first calculated for a particular Sub-account, we set the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2005. A-1 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- International Equity(1) (2000) With No Optional Benefits Unit Price $ 13.70 $ 12.71 -- Number of Units 36,282 30,093 -- With any one of GRO Plus, EBP or HAV Unit Price $ 13.63 -- -- Number of Units 3,086 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.55 -- -- Number of Units 1,400 -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Price -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Small-Cap Growth(2) (1999) With No Optional Benefits Unit Price $ 15.25 $ 13.63 $ 9.74 Number of Units 31,804 27,988 2,121 With any one of GRO Plus, EBP or HAV Unit Price $ 15.17 -- -- Number of Units 4,467 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Price -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------------------------------
A-2 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Growth(3) (1994) With No Optional Benefits Unit Price $ 12.42 $ 11.65 $ 9.59 Number of Units 9,541 8,938 1,090 With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value $ 11.01 -- -- Number of Units 714 -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Large Company Growth(4) (1999) With No Optional Benefits Unit Price $ 11.81 $ 11.63 $ 9.36 Number of Units 145,943 94,737 8,608 With any one of GRO Plus, EBP or HAV Unit Price $ 11.74 $ 11.59 -- Number of Units 12,589 1,333 -- With GMWB Unit Value $ 10.50 -- -- Number of Units 6,708 -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------------------------------
A-3 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Equity Value(5) (1998) With No Optional Benefits Unit Price $ 13.47 $ 12.32 $ 9.97 Number of Units 43,291 30,911 900 With any one of GRO Plus, EBP or HAV Unit Price $ 13.40 -- -- Number of Units 6,651 -- -- With GMWB Unit Value $ 13.37 -- -- Number of Units 931 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 9.53 $ 8.77 -- Number of Units 2,185 2,290 -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Price -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Equity Income(6) (1999) With No Optional Benefits Unit Price $ 11.18 $ 10.23 $ 8.25 Number of Units 590,808 314,757 196,720 With any one of GRO Plus, EBP or HAV Unit Price $ 13.36 $ 12.26 $ 9.9 Number of Units 285,526 251,071 10,707 With GMWB Unit Value $ 13.33 $ 12.25 -- Number of Units 39,530 5,900 -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.29 $ 12.23 $ 9.9 Number of Units 63,454 15,983 91 With any one of EBP or HAV and GMWB Unit Value $ 16.60 $ 15.29 -- Number of Units 14,303 15,958 -- With HAV, EBP and GRO Plus Unit Price $ 13.22 -- -- Number of Units 480 -- -- With HAV, EBP and GMWB Unit Price $ 11.61 -- -- Number of Units 13 -- -- - ---------------------------------------------------------------------------------------------------------
A-4 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Asset Allocation(7) (1994) With No Optional Benefits Unit Price $ 12.67 $ 11.79 $ 9.82 Number of Units 88,663 62,075 2,641 With any one of GRO Plus, EBP or HAV Unit Price $ 12.61 $ 11.75 -- Number of Units 903 701 -- With GMWB Unit Value $ 11.07 -- -- Number of Units 5,863 -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.54 -- -- Number of Units 961 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.24 -- -- Number of Units 1,339 -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Price -- -- -- Number of Units -- -- -- - ---------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Total Return Bond(8) (1999) With No Optional Benefits Unit Price $ 11.19 $ 10.89 $ 10.21 Number of Units 38,158 29,473 74 With any one of GRO Plus, EBP or HAV Unit Price $ 11.13 $ 10.86 -- Number of Units 0 89 -- With GMWB Unit Value $ 10.26 -- -- Number of Units 1,190 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.29 -- -- Number of Units 354 -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Price -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------------------------
A-5 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- AST JP Morgan International Equity Portfolio With No Optional Benefits Unit Price $ 12.67 $ 11.00 $ 8.56 Number of Units 3,227,381 2,415,394 2,569,506 With any one of GRO Plus, EBP or HAV Unit Price $ 14.65 $ 12.75 $ 9.95 Number of Units 2,064,681 936,678 90,759 With GMWB Unit Value $ 14.62 $ 12.74 -- Number of Units 217,166 17,098 -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.57 $ 12.72 $ 9.95 Number of Units 284,319 141,470 6,047 With any one of EBP or HAV and GMWB Unit Value $ 7.86 $ 6.87 -- Number of Units 428,765 400,112 -- With HAV, EBP and GRO Plus Unit Price $ 14.49 $ 12.68 -- Number of Units 38,292 13,590 -- With HAV, EBP and GMWB Unit Price $ 12.32 -- -- Number of Units 20,718 -- -- - --------------------------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits Unit Price $ 15.30 $ 13.39 $ 9.72 Number of Units 11,265,469 5,547,558 835,523 With any one of GRO Plus, EBP or HAV Unit Price $ 15.21 $ 13.35 $ 9.72 Number of Units 15,481,627 6,498,151 78,368 With GMWB Unit Value $ 15.18 $ 13.34 -- Number of Units 1,821,923 103,740 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.13 $ 13.32 $ 9.71 Number of Units 2,722,552 1,009,679 5,178 With any one of EBP or HAV and GMWB Unit Value $ 15.74 $ 13.86 -- Number of Units 545,075 29,434 -- With HAV, EBP and GRO Plus Unit Price $ 15.05 $ 13.28 -- Number of Units 325,809 32,626 -- With HAV, EBP and GMWB Unit Price $ 11.94 -- -- Number of Units 135,829 -- -- - ---------------------------------------------------------------------------------------------------------
A-6 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------------------------- AST LSV International Value (1994) With No Optional Benefits Unit Price $ 12.84 $ 10.79 $ 8.19 Number of Units 1,897,469 1,201,268 269,995 With any one of GRO Plus, EBP or HAV Unit Price $ 15.27 $ 12.86 $ 9.79 Number of Units 810,108 368,945 22,770 With GMWB Unit Value $ 15.24 $ 12.85 -- Number of Units 69,494 5,504 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.19 $ 12.82 -- Number of Units 119,845 24,374 -- With any one of EBP or HAV and GMWB Unit Value $ 6.69 $ 5.65 -- Number of Units 122,795 72,406 -- With HAV, EBP and GRO Plus Unit Price $ 15.11 $ 12.79 -- Number of Units 16,366 1,767 -- With HAV, EBP and GMWB Unit Value $ 12.70 -- -- Number of Units 5,736 -- -- - ---------------------------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price $ 13.16 $ 11.30 $ 9.04 Number of Units 2,276,801 1,393,001 969,509 With any one of GRO Plus, EBP or HAV Unit Price $ 14.29 $ 12.31 $ 9.87 Number of Units 1,897,254 916,888 32,306 With GMWB Unit Value $ 14.26 $ 12.29 -- Number of Units 98,046 4,306 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.22 $ 12.27 -- Number of Units 219,580 62,490 -- With any one of EBP or HAV and GMWB Unit Value $ 10.48 $ 9.06 -- Number of Units 273,401 308,725 -- With HAV, EBP and GRO Plus Unit Price $ 14.14 $ 12.24 -- Number of Units 26,943 6,069 -- With HAV, EBP and GMWB Unit Value $ 12.40 -- -- Number of Units 5,188 -- -- - ----------------------------------------------------------------------------------------------------------
A-7 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- AST State Street Research Small-Cap Growth(9) With No Optional Benefits Unit Price $ 9.05 $ 9.89 $ 6.92 Number of Units 2,242,129 3,292,593 1,970,250 With any one of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 13.50 $ 9.48 Number of Units 1,200,247 1,059,046 47,261 With GMWB Unit Value $ 12.30 $ 13.49 -- Number of Units 113,913 9,676 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.26 $ 13.46 $ 9.47 Number of Units 136,313 138,936 6,595 With any one of EBP or HAV and GMWB Unit Value $ 15.30 $ 16.82 -- Number of Units 67,370 64,850 -- With HAV, EBP and GRO Plus Unit Price $ 12.19 $ 13.43 -- Number of Units 23,253 4,691 -- With HAV, EBP and GMWB Unit Value $ 9.32 -- -- Number of Units 1,043 -- -- - --------------------------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits Unit Price $ 11.98 $ 11.13 $ 7.67 Number of Units 1,618,719 1,682,193 639,695 With any one of GRO Plus, EBP or HAV Unit Price $ 15.10 $ 14.06 $ 9.71 Number of Units 779,045 480,221 12,122 With GMWB Unit Value $ 15.07 $ 14.05 -- Number of Units 56,414 1,850 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.02 $ 14.02 $ 9.71 Number of Units 192,105 89,708 1,728 With any one of EBP or HAV and GMWB Unit Value $ 7.07 $ 6.61 -- Number of Units 129,475 131,605 -- With HAV, EBP and GRO Plus Unit Price $ 14.94 $ 13.98 -- Number of Units 18,825 3,753 -- With HAV, EBP and GMWB Unit Value $ 11.03 -- -- Number of Units 3,398 -- -- - ---------------------------------------------------------------------------------------------------------
A-8 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $ 15.42 $ 12.74 $ 7.64 Number of Units 4,808,453 3,085,373 1,255,415 With any one of GRO Plus, EBP or HAV Unit Price $ 19.79 $ 16.40 $ 9.86 Number of Units 5,192,694 2,615,505 63,097 With GMWB Unit Value $ 19.75 $ 16.38 -- Number of Units 562,771 37,078 -- With any two of GRO Plus, EBP or HAV Unit Price $ 19.69 $ 16.35 $ 9.86 Number of Units 808,007 362,906 4,107 With any one of EBP or HAV and GMWB Unit Value $ 9.70 $ 8.06 -- Number of Units 324,340 79,226 -- With HAV, EBP and GRO Plus Unit Price $ 19.58 $ 16.30 -- Number of Units 95,514 20,181 -- With HAV, EBP and GMWB Unit Value $ 12.64 -- -- Number of Units 53,866 -- -- - ---------------------------------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits Unit Price $ 14.22 $ 12.42 $ 9.3 Number of Units 10,785,030 10,183,346 6,141,523 With any one of GRO Plus, EBP or HAV Unit Price $ 15.34 $ 13.43 $ 10.08 Number of Units 10,169,483 5,824,200 209,790 With GMWB Unit Value $ 15.31 $ 13.41 -- Number of Units 1,007,926 100,155 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.26 $ 13.39 $ 10.08 Number of Units 1,690,870 767,455 17,411 With any one of EBP or HAV and GMWB Unit Value $ 15.87 $ 13.95 -- Number of Units 465,784 275,971 -- With HAV, EBP and GRO Plus Unit Price $ 15.17 $ 13.35 -- Number of Units 166,852 34,978 -- With HAV, EBP and GMWB Unit Value $ 12.11 -- -- Number of Units 91,011 -- -- - ----------------------------------------------------------------------------------------------------------
A-9 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits Unit Price $ 12.99 $ 10.81 $ 7.66 Number of Units 2,143,020 1,134,865 423,387 With any one of GRO Plus, EBP or HAV Unit Price $ 17.00 $ 14.19 $ 10.08 Number of Units 1,054,696 434,509 11,686 With GMWB Unit Value $ 16.96 $ 14.17 -- Number of Units 236,402 10,756 -- With any two of GRO Plus, EBP or HAV Unit Price $ 16.90 $ 14.15 $ 10.08 Number of Units 213,632 70,597 5,211 With any one of EBP or HAV and GMWB Unit Value $ 12.78 $ 10.70 -- Number of Units 63,057 22,847 -- With HAV, EBP and GRO Plus Unit Price $ 16.81 $ 14.11 -- Number of Units 14,277 879 -- With HAV, EBP and GMWB Unit Value $ 12.71 -- -- Number of Units 634 -- -- - --------------------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits Unit Price $ 11.80 $ 10.31 $ 7.97 Number of Units 4,375,813 3,027,057 1,273,118 With any one of GRO Plus, EBP or HAV Unit Price $ 14.55 $ 12.75 $ 9.87 Number of Units 5,139,643 2,379,820 66,279 With GMWB Unit Value $ 14.52 $ 12.73 -- Number of Units 516,261 37,400 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.47 $ 12.71 $ 9.87 Number of Units 994,493 365,115 2,488 With any one of EBP or HAV and GMWB Unit Value $ 4.24 $ 3.73 -- Number of Units 457,010 175,708 -- With HAV, EBP and GRO Plus Unit Price $ 14.39 $ 12.68 -- Number of Units 124,672 12,201 -- With HAV, EBP and GMWB Unit Value $ 11.91 -- -- Number of Units 33,665 -- -- - ---------------------------------------------------------------------------------------------------------
A-10 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits Unit Price $ 10.86 $ 9.51 $ 7.41 Number of Units 4,715,301 3,415,318 2,175,250 With any one of GRO Plus, EBP or HAV Unit Price $ 13.87 $ 12.18 $ 9.51 Number of Units 2,211,800 1,089,649 44,760 With GMWB Unit Value $ 13.84 $ 12.17 -- Number of Units 153,923 16,702 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.80 $ 12.15 $ 9.51 Number of Units 377,548 96,879 1,311 With any one of EBP or HAV and GMWB Unit Value $ 6.81 $ 6.01 -- Number of Units 369,234 294,816 -- With HAV, EBP and GRO Plus Unit Price $ 13.72 $ 12.11 -- Number of Units 38,051 5,407 -- With HAV, EBP and GMWB Unit Value $ 11.70 -- -- Number of Units 18,225 -- -- - ------------------------------------------------------------------------------------------------ AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits Unit Price $ 14.51 $ 12.01 $ 8.96 Number of Units 11,461,684 8,530,129 5,118,558 With any one of GRO Plus, EBP or HAV Unit Price $ 16.08 $ 13.34 $ 9.98 Number of Units 9,335,291 4,786,623 163,415 With GMWB Unit Value $ 16.04 $ 13.33 -- Number of Units 937,314 87,253 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.99 $ 13.31 $ 9.97 Number of Units 1,457,788 610,598 10,745 With any one of EBP or HAV and GMWB Unit Value $ 15.99 $ 13.32 -- Number of Units 537,445 370,965 -- With HAV, EBP and GRO Plus Unit Price $ 15.91 $ 13.27 -- Number of Units 154,749 21,843 -- With HAV, EBP and GMWB Unit Value $ 12.97 -- -- Number of Units 95,076 -- -- - ------------------------------------------------------------------------------------------------
A-11 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $ 9.67 $ 9.07 $ 6.8 Number of Units 1,798,457 2,002,166 658,419 With any one of GRO Plus, EBP or HAV Unit Price $ 13.25 $ 12.45 $ 9.36 Number of Units 715,598 636,548 6,409 With GMWB Unit Value $ 13.22 $ 12.43 -- Number of Units 119,566 10,356 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.17 $ 12.41 $ 9.36 Number of Units 141,575 106,376 3,466 With any one of EBP or HAV and GMWB Unit Value $ 6.19 $ 5.84 -- Number of Units 107,188 87,326 -- With HAV, EBP and GRO Plus Unit Price $ 13.10 $ 12.38 -- Number of Units 22,732 4,810 -- With HAV, EBP and GMWB Unit Value $ 10.73 -- -- Number of Units 6,346 -- -- - ------------------------------------------------------------------------------------------------ AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $ 12.38 $ 10.91 $ 8.17 Number of Units 2,587,064 2,513,413 1,200,225 With any one of GRO Plus, EBP or HAV Unit Price $ 15.14 $ 13.38 $ 10.04 Number of Units 1,071,978 727,500 28,449 With GMWB Unit Value $ 15.11 $ 13.37 -- Number of Units 116,474 12,627 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.06 $ 13.35 $ 10.04 Number of Units 256,671 127,279 88 With any one of EBP or HAV and GMWB Unit Value $ 11.15 $ 9.89 -- Number of Units 194,765 166,080 -- With HAV, EBP and GRO Plus Unit Price $ 14.98 $ 13.31 -- Number of Units 8,849 1,455 -- With HAV, EBP and GMWB Unit Value $ 12.11 -- -- Number of Units 7,555 -- -- - ------------------------------------------------------------------------------------------------
A-12 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $ 16.25 $ 12.59 $ 9.59 Number of Units 2,040,188 2,011,627 724,670 With any one of GRO Plus, EBP or HAV Unit Price $ 17.60 $ 13.67 $ 10.44 Number of Units 1,025,462 433,891 7,378 With GMWB Unit Value $ 17.56 $ 13.66 -- Number of Units 172,186 24,634 -- With any two of GRO Plus, EBP or HAV Unit Price $ 17.50 $ 13.63 $ 10.44 Number of Units 158,672 77,245 5,472 With any one of EBP or HAV and GMWB Unit Value $ 14.40 $ 11.23 -- Number of Units 41,428 6,747 -- With HAV, EBP and GRO Plus Unit Price $ 17.41 $ 13.60 -- Number of Units 37,779 1,035 -- With HAV, EBP and GMWB Unit Value $ 14.36 -- -- Number of Units 13,775 -- -- - ------------------------------------------------------------------------------------------------ AST Alliance Growth 10 (1996) With No Optional Benefits Unit Price $ 9.44 $ 9.08 $ 7.46 Number of Units 2,378,881 2,098,873 1,869,353 With any one of GRO Plus, EBP or HAV Unit Price $ 11.76 $ 11.34 $ 9.34 Number of Units 1,189,655 717,430 31,105 With GMWB Unit Value $ 11.73 $ 11.32 -- Number of Units 84,417 2,206 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.70 $ 11.30 $ 9.34 Number of Units 297,369 114,477 3,975 With any one of EBP or HAV and GMWB Unit Value $ 5.91 $ 5.72 -- Number of Units 307,367 267,109 -- With HAV, EBP and GRO Plus Unit Price $ 11.63 $ 11.27 -- Number of Units 15,562 8,067 -- With HAV, EBP and GMWB Unit Value $ 10.57 -- -- Number of Units 4,945 -- -- - ------------------------------------------------------------------------------------------------
A-13 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ AST MFS Growth (1999) With No Optional Benefits Unit Price $ 9.97 $ 9.16 $ 7.58 Number of Units 4,529,834 4,784,269 2,930,432 With any one of GRO Plus, EBP or HAV Unit Price $ 12.39 $ 11.41 $ 9.47 Number of Units 2,897,175 2,222,614 134,574 With GMWB Unit Value $ 12.37 $ 11.40 -- Number of Units 304,760 18,900 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 11.38 $ 9.46 Number of Units 442,758 207,063 2,437 With any one of EBP or HAV and GMWB Unit Value $ 6.72 $ 6.21 -- Number of Units 387,463 262,995 -- With HAV, EBP and GRO Plus Unit Price $ 12.26 $ 11.35 -- Number of Units 52,718 10,550 -- With HAV, EBP and GMWB Unit Value $ 11.00 -- -- Number of Units 33,939 -- -- - ------------------------------------------------------------------------------------------ AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $ 12.26 $ 10.78 $ 8.32 Number of Units 28,117,310 20,138,164 10,144,317 With any one of GRO Plus, EBP or HAV Unit Price $ 13.95 $ 12.30 $ 9.51 Number of Units 30,793,077 14,975,841 457,013 With GMWB Unit Value $ 13.92 $ 12.28 -- Number of Units 3,136,818 215,988 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.88 $ 12.26 $ 9.51 Number of Units 4,692,895 2,031,583 30,465 With any one of EBP or HAV and GMWB Unit Value $ 9.22 $ 8.16 -- Number of Units 2,016,277 925,591 -- With HAV, EBP and GRO Plus Unit Price $ 13.80 $ 12.23 -- Number of Units 578,919 70,776 -- With HAV, EBP and GMWB Unit Value $ 11.61 -- -- Number of Units 263,104 -- -- - ------------------------------------------------------------------------------------------
A-14 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits Unit Price $ 9.64 $ 9.45 $ 7.67 Number of Units 2,785,100 2,053,023 1,349,939 With any one of GRO Plus, EBP or HAV Unit Price $ 11.83 $ 11.63 $ 9.46 Number of Units 1,641,544 715,845 41,632 With GMWB Unit Value $ 11.80 $ 11.61 -- Number of Units 122,739 17,452 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.76 $ 11.59 -- Number of Units 277,607 49,620 -- With any one of EBP or HAV and GMWB Unit Value $ 4.46 $ 4.40 -- Number of Units 541,661 395,905 -- With HAV, EBP and GRO Plus Unit Price $ 11.70 $ 11.56 -- Number of Units 10,426 242 -- With HAV, EBP and GMWB Unit Value $ 10.54 -- -- Number of Units 12,303 -- -- - --------------------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits Unit Price $ 12.53 $ 10.78 $ 8.66 Number of Units 2,351,197 1,072,256 664,649 With any one of GRO Plus, EBP or HAV Unit Price $ 14.36 $ 12.39 $ 9.98 Number of Units 1,347,344 583,969 18,250 With GMWB Unit Value $ 14.33 $ 12.38 -- Number of Units 175,087 9,674 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.29 $ 12.36 $ 9.97 Number of Units 234,446 58,333 4,906 With any one of EBP or HAV and GMWB Unit Value $ 10.72 $ 9.28 -- Number of Units 199,601 137,247 -- With HAV, EBP and GRO Plus Unit Price $ 14.21 $ 12.32 -- Number of Units 16,355 4,412 -- With HAV, EBP and GMWB Unit Value $ 12.25 -- -- Number of Units 6,163 -- -- - ---------------------------------------------------------------------------------------------------
A-15 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------------ AST Alliance/Bernstein Growth + Value(11) (2001) With No Optional Benefits Unit Price $ 10.72 $ 9.91 $ 7.99 Number of Units 1,620,391 1,387,072 965,912 With any one of GRO Plus, EBP or HAV Unit Price $ 13.07 $ 12.11 $ 9.79 Number of Units 1,011,796 667,395 11,345 With GMWB Unit Value $ 13.05 $ 12.09 -- Number of Units 72,365 5,118 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.00 $ 12.07 $ 9.79 Number of Units 256,194 115,455 704 With any one of EBP or HAV and GMWB Unit Value $ 9.31 $ 8.65 -- Number of Units 215,645 154,955 -- With HAV, EBP and GRO Plus Unit Price $ 12.93 $ 12.04 -- Number of Units 7,165 1,041 -- With HAV, EBP and GMWB Unit Value $ 11.15 -- -- Number of Units 1,191 -- -- - ------------------------------------------------------------------------------------------------------ AST Sanford Bernstein Core Value(12) (2001) With No Optional Benefits Unit Price $ 12.39 $ 11.06 $ 8.76 Number of Units 4,643,022 3,621,862 6,005,922 With any one of GRO Plus, EBP or HAV Unit Price $ 14.18 $ 12.69 $ 10.08 Number of Units 3,959,115 2,277,726 386,259 With GMWB Unit Value $ 14.15 $ 12.67 -- Number of Units 220,419 11,518 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.10 $ 12.65 $ 10.08 Number of Units 534,389 328,567 30,510 With any one of EBP or HAV and GMWB Unit Value $ 11.83 $ 10.62 -- Number of Units 303,689 216,416 -- With HAV, EBP and GRO Plus Unit Price $ 14.03 $ 12.62 -- Number of Units 49,912 10,893 -- With HAV, EBP and GMWB Unit Value $ 11.86 -- -- Number of Units 57,669 -- -- - ------------------------------------------------------------------------------------------------------
A-16 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------------------------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $ 18.49 $ 13.63 $ 10.08 Number of Units 4,080,179 3,097,315 1,563,489 With any one of GRO Plus, EBP or HAV Unit Price $ 18.84 $ 13.92 $ 10.33 Number of Units 2,863,749 1,376,696 41,098 With GMWB Unit Value $ 18.80 $ 13.91 -- Number of Units 184,027 13,615 -- With any two of GRO Plus, EBP or HAV Unit Price $ 18.74 $ 13.88 $ 10.32 Number of Units 538,151 270,852 6,429 With any one of EBP or HAV and GMWB Unit Value $ 14.12 $ 10.47 -- Number of Units 68,406 8,884 -- With HAV, EBP and GRO Plus Unit Price $ 18.64 $ 13.84 -- Number of Units 17,014 8,189 -- With HAV, EBP and GMWB Unit Value $ 14.07 -- -- Number of Units 5,246 -- -- - -------------------------------------------------------------------------------------------------------- AST Sanford Bernstein Managed Index 500(13) (1998) With No Optional Benefits Unit Price $ 11.07 $ 10.23 $ 8.17 Number of Units 6,845,369 5,442,511 3,662,406 With any one of GRO Plus, EBP or HAV Unit Price $ 13.22 $ 12.25 $ 9.81 Number of Units 3,486,237 2,209,334 79,915 With GMWB Unit Value $ 13.19 $ 12.24 -- Number of Units 389,368 16,957 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.15 $ 12.22 $ 9.81 Number of Units 352,176 203,573 383 With any one of EBP or HAV and GMWB Unit Value $ 8.58 $ 7.98 -- Number of Units 343,296 293,662 -- With HAV, EBP and GRO Plus Unit Price $ 13.08 $ 12.18 -- Number of Units 9,296 4,899 -- With HAV, EBP and GMWB Unit Value $ 11.31 -- -- Number of Units 43,627 -- -- - --------------------------------------------------------------------------------------------------------
A-17 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST American Century Income & Growth (1997) With No Optional Benefits Unit Price $ 11.57 $ 10.45 $ 8.25 Number of Units 4,670,846 2,115,438 1,751,136 With any one of GRO Plus, EBP or HAV Unit Price $ 13.80 $ 12.50 $ 9.89 Number of Units 2,219,323 846,118 36,829 With GMWB Unit Value $ 13.77 $ 12.48 -- Number of Units 198,789 2,386 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.73 $ 12.46 $ 9.89 Number of Units 368,328 124,008 8,874 With any one of EBP or HAV and GMWB Unit Value $ 9.04 $ 8.22 -- Number of Units 372,540 195,232 -- With HAV, EBP and GRO Plus Unit Price $ 13.65 $ 12.43 -- Number of Units 25,550 4,612 -- With HAV, EBP and GMWB Unit Value $ 11.72 -- -- Number of Units 7,406 -- -- - ------------------------------------------------------------------------------------------------ AST Alliance Growth and Income(14) (1992) With No Optional Benefits Unit Price $ 11.46 $ 10.50 $ 8.06 Number of Units 25,850,506 21,264,670 6,667,373 With any one of GRO Plus, EBP or HAV Unit Price $ 13.91 $ 12.77 $ 9.83 Number of Units 27,268,222 13,386,166 165,588 With GMWB Unit Value $ 13.88 $ 12.76 -- Number of Units 2,899,917 187,011 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.83 $ 12.74 $ 9.83 Number of Units 4,694,207 2,029,598 6,100 With any one of EBP or HAV and GMWB Unit Value $ 10.72 $ 9.88 -- Number of Units 1,731,512 976,756 -- With HAV, EBP and GRO Plus Unit Price $ 13.76 $ 12.70 -- Number of Units 564,502 69,435 -- With HAV, EBP and GMWB Unit Value $ 11.50 -- -- Number of Units 228,955 -- -- - ------------------------------------------------------------------------------------------------
A-18 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Hotchkis & Wiley Large-Cap Value With No Optional Benefits Unit Price $ 11.17 $ 9.83 $ 8.34 Number of Units 3,717,848 2,647,064 2,110,071 With any one of GRO Plus, EBP or HAV Unit Price $ 13.19 $ 11.65 $ 9.9 Number of Units 1,916,775 651,074 30,714 With GMWB Unit Value $ 13.16 $ 11.63 -- Number of Units 173,888 21,961 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.12 $ 11.61 $ 9.9 Number of Units 198,898 90,092 5,934 With any one of EBP or HAV and GMWB Unit Value $ 9.78 $ 8.66 -- Number of Units 419,818 347,275 -- With HAV, EBP and GRO Plus Unit Price $ 13.05 $ 11.58 -- Number of Units 37,159 332 -- With HAV, EBP and GMWB Unit Value $ 11.75 -- -- Number of Units 23,032 -- -- - --------------------------------------------------------------------------------------------- AST DeAM Global Allocation(15) (1993) With No Optional Benefits Unit Price $ 11.19 $ 10.24 $ 8.71 Number of Units 1,061,887 898,161 847,517 With any one of GRO Plus, EBP or HAV Unit Price $ 12.70 $ 11.65 $ 9.94 Number of Units 278,657 155,865 3,088 With GMWB Unit Value $ 12.67 $ 11.64 -- Number of Units 35,622 483 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.63 $ 11.62 $ 9.93 Number of Units 52,110 34,914 94 With any one of EBP or HAV and GMWB Unit Value $ 9.12 $ 8.40 -- Number of Units 290,887 303,295 -- With HAV, EBP and GRO Plus Unit Price $ 12.56 $ 11.58 -- Number of Units 2,849 1,169 -- With HAV, EBP and GMWB Unit Value $ 11.23 -- -- Number of Units 2,193 -- -- - ---------------------------------------------------------------------------------------------
A-19 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ----------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $ 11.46 $ 10.69 $ 9.14 Number of Units 2,335,598 2,045,205 1,126,058 With any one of GRO Plus, EBP or HAV Unit Price $ 12.43 $ 11.62 $ 9.97 Number of Units 1,308,462 930,516 15,835 With GMWB Unit Value $ 12.40 $ 11.61 -- Number of Units 175,763 18,977 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.36 $ 11.59 $ 9.97 Number of Units 186,307 58,741 2,760 With any one of EBP or HAV and GMWB Unit Value $ 10.08 $ 9.46 -- Number of Units 218,686 196,909 -- With HAV, EBP and GRO Plus Unit Price $ 12.29 $ 11.56 -- Number of Units 18,231 11,783 -- With HAV, EBP and GMWB Unit Value $ 10.98 -- -- Number of Units 125 -- -- - ----------------------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $ 12.13 $ 11.09 $ 9.09 Number of Units 3,551,315 2,243,566 921,329 With any one of GRO Plus, EBP or HAV Unit Price $ 13.22 $ 12.12 $ 9.96 Number of Units 2,109,855 955,716 21,928 With GMWB Unit Value $ 13.19 $ 12.11 -- Number of Units 349,177 27,414 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.15 $ 12.09 $ 9.96 Number of Units 464,055 160,339 150 With any one of EBP or HAV and GMWB Unit Value $ 11.38 $ 10.48 -- Number of Units 39,231 2,741 -- With HAV, EBP and GRO Plus Unit Price $ 13.08 $ 12.05 -- Number of Units 46,336 31,706 -- With HAV, EBP and GMWB Unit Value $ 11.35 -- -- Number of Units 9,372 -- -- - -----------------------------------------------------------------------------------------------------
A-20 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST T. Rowe Price Global Bond (1994) With No Optional Benefits Unit Price $ 13.45 $ 12.59 $ 11.34 Number of Units 4,717,822 2,962,471 1,739,313 With any one of GRO Plus, EBP or HAV Unit Price $ 12.17 $ 11.42 $ 10.31 Number of Units 6,387,666 1,827,606 36,822 With GMWB Unit Value $ 12.14 $ 11.40 -- Number of Units 712,411 24,361 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.10 $ 11.38 $ 10.31 Number of Units 1,195,848 279,110 3,700 With any one of EBP or HAV and GMWB Unit Value $ 14.05 $ 13.23 -- Number of Units 191,816 148,319 -- With HAV, EBP and GRO Plus Unit Price $ 12.04 $ 11.35 -- Number of Units 137,089 12,591 -- With HAV, EBP and GMWB Unit Value $ 10.94 -- -- Number of Units 43,652 -- -- - ------------------------------------------------------------------------------------------------ AST Goldman Sachs High Yield Bond Portfolio With No Optional Benefits Unit Price $ 12.69 $ 11.61 $ 9.71 Number of Units 13,717,128 12,201,163 5,592,940 With any one of GRO Plus, EBP or HAV Unit Price $ 13.34 $ 12.24 $ 10.26 Number of Units 4,901,936 3,684,174 74,022 With GMWB Unit Value $ 13.31 $ 12.23 -- Number of Units 426,333 27,535 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.27 $ 12.21 $ 10.26 Number of Units 707,876 379,114 6,524 With any one of EBP or HAV and GMWB Unit Value $ 11.51 $ 10.60 -- Number of Units 545,726 346,126 -- With HAV, EBP and GRO Plus Unit Price $ 13.20 $ 12.17 -- Number of Units 54,058 28,237 -- With HAV, EBP and GMWB Unit Value $ 11.24 -- -- Number of Units 65,084 -- -- - ------------------------------------------------------------------------------------------------
A-21 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $ 12.26 $ 11.61 $ 9.94 Number of Units 8,369,008 7,751,236 4,146,530 With any one of GRO Plus, EBP or HAV Unit Price $ 12.56 $ 11.92 $ 10.23 Number of Units 7,337,467 4,628,945 162,571 With GMWB Unit Value $ 12.53 $ 11.90 -- Number of Units 904,128 42,593 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.49 $ 11.88 $ 10.23 Number of Units 1,314,641 624,019 7,474 With any one of EBP or HAV and GMWB Unit Value $ 12.18 $ 11.60 -- Number of Units 732,155 423,485 -- With HAV, EBP and GRO Plus Unit Price $ 12.42 $ 11.85 -- Number of Units 155,764 28,346 -- With HAV, EBP and GMWB Unit Value $ 10.88 -- -- Number of Units 85,669 -- -- - ------------------------------------------------------------------------------------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $ 11.31 $ 10.95 $ 10.57 Number of Units 33,208,757 26,287,388 20,544,075 With any one of GRO Plus, EBP or HAV Unit Price $ 10.82 $ 10.51 $ 10.17 Number of Units 30,067,867 16,012,778 604,147 With GMWB Unit Value $ 10.79 $ 10.49 -- Number of Units 3,495,678 378,676 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.76 $ 10.48 $ 10.17 Number of Units 4,319,279 2,192,336 36,236 With any one of EBP or HAV and GMWB Unit Value $ 13.09 $ 12.76 -- Number of Units 2,344,332 1,558,557 -- With HAV, EBP and GRO Plus Unit Price $ 10.70 $ 10.45 -- Number of Units 476,033 119,982 -- With HAV, EBP and GMWB Unit Value $ 10.32 -- -- Number of Units 323,335 -- -- - ------------------------------------------------------------------------------------------
A-22 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $ 10.55 $ 10.51 $ 10.34 Number of Units 21,299,789 15,242,856 11,274,642 With any one of GRO Plus, EBP or HAV Unit Price $ 10.23 $ 10.22 $ 10.08 Number of Units 19,103,280 5,152,783 215,314 With GMWB Unit Value $ 10.21 $ 10.21 -- Number of Units 2,764,809 36,640 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.17 $ 10.19 $ 10.08 Number of Units 2,785,690 636,860 80,547 With any one of EBP or HAV and GMWB Unit Value $ 11.62 $ 11.65 -- Number of Units 1,143,298 329,629 -- With HAV, EBP and GRO Plus Unit Price $ 10.12 $ 10.16 -- Number of Units 301,108 35,430 -- With HAV, EBP and GMWB Unit Value $9.96 -- -- Number of Units 240,337 -- -- - --------------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits Unit Price $ 9.78 $ 9.86 $ 9.96 Number of Units 29,870,585 32,730,501 36,255,772 With any one of GRO Plus, EBP or HAV Unit Price $ 9.75 $ 9.86 $ 9.99 Number of Units 8,152,893 7,176,983 999,737 With GMWB Unit Value $ 9.73 $ 9.85 -- Number of Units 1,312,018 81,304 -- With any two of GRO Plus, EBP or HAV Unit Price $ 9.70 $ 9.83 $ 9.99 Number of Units 1,742,703 1,118,618 70,899 With any one of EBP or HAV and GMWB Unit Value $ 9.98 $ 10.13 -- Number of Units 234,402 35,505 -- With HAV, EBP and GRO Plus Unit Price $ 9.65 $ 9.80 -- Number of Units 432,144 149,705 -- With HAV, EBP and GMWB Unit Value $ 9.79 -- -- Number of Units 61,321 -- -- - ---------------------------------------------------------------------------------------------
A-23 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, ------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------------------------------ Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits Unit Price $ 16.02 $ 13.60 $ 8.66 Number of Units 2,103,950 1,763,660 283,466 With any one of GRO Plus, EBP or HAV Unit Price $ 18.29 $ 15.56 $ 9.93 Number of Units 934,258 415,864 21,816 With GMWB Unit Value $ 18.25 $ 15.54 -- Number of Units 161,653 12,503 -- With any two of GRO Plus, EBP or HAV Unit Price $ 18.19 $ 15.52 $ 9.93 Number of Units 141,365 44,993 442 With any one of EBP or HAV and GMWB Unit Value $ 12.74 $ 10.88 -- Number of Units 25,630 843 -- With HAV, EBP and GRO Plus Unit Price $ 18.09 $ 15.47 -- Number of Units 17,121 1,871 -- With HAV, EBP and GMWB Unit Value $ 12.70 -- -- Number of Units 11,161 -- -- - ------------------------------------------------------------------------------------------------------------------------ AIM V.I. -- Dynamics (1999) With No Optional Benefits Unit Price $ 10.72 $ 9.61 $ 7.09 Number of Units 668,032 889,464 543,762 With any one of GRO Plus, EBP or HAV Unit Price $ 14.59 $ 13.12 $ 9.7 Number of Units 590,157 634,308 32,635 With GMWB Unit Value $ 14.56 $ 13.11 -- Number of Units 61,543 4,848 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.51 $ 13.08 $ 9.7 Number of Units 55,199 38,518 576 With any one of EBP or HAV and GMWB Unit Value $ 11.67 -- -- Number of Units 1,825 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.43 $ 13.05 -- Number of Units 4,253 3,083 -- With HAV, EBP and GMWB Unit Value $ 11.63 -- -- Number of Units 13 -- -- - ------------------------------------------------------------------------------------------------------------------------
A-24 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits Unit Price $ 8.09 $ 7.87 $ 5.5 Number of Units 512,424 578,651 293,307 With any one of GRO Plus, EBP or HAV Unit Price $ 13.71 $ 13.35 -- Number of Units 5,184 3,695 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------- AIM V.I. -- Health Sciences (1999) With No Optional Benefits Unit Price $ 10.64 $ 10.05 $ 8 Number of Units 937,586 698,364 475,873 With any one of GRO Plus, EBP or HAV Unit Price $ 12.58 $ 11.93 $ 9.51 Number of Units 578,826 381,478 5,444 With GMWB Unit Value $ 12.56 $ 11.91 -- Number of Units 87,037 2,077 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.52 $ 11.89 $ 9.51 Number of Units 181,513 55,867 140 With any one of EBP or HAV and GMWB Unit Value $ 11.41 $ 10.85 -- Number of Units 5,057 1,330 -- With HAV, EBP and GRO Plus Unit Price $ 12.45 -- -- Number of Units 5,438 -- -- With HAV, EBP and GMWB Unit Value $ 11.38 -- -- Number of Units 2,157 -- -- - -------------------------------------------------------------------------------------
A-25 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, -------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits Unit Price $ 11.94 $ 11.17 $ 8.76 Number of Units 585,185 607,265 366,258 With any one of GRO Plus, EBP or HAV Unit Price $ 13.44 $ 12.61 $ 9.92 Number of Units 387,921 200,360 1,897 With GMWB Unit Value $ 13.42 $ 12.60 -- Number of Units 67,581 20,268 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.37 $ 12.58 $ 9.92 Number of Units 84,188 50,250 141 With any one of EBP or HAV and GMWB Unit Value $ 11.11 $ 10.46 -- Number of Units 15,566 1,378 -- With HAV, EBP and GRO Plus Unit Price $ 13.30 $ 12.54 -- Number of Units 8,806 751 -- With HAV, EBP and GMWB Unit Value $ 11.08 -- -- Number of Units 468 -- -- - ------------------------------------------------------------------------------------------- Evergreen VA -- International Equity (1999) With No Optional Benefits Unit Price $ 13.66 $ 11.65 $ 8.15 Number of Units 414,631 189,143 113,389 With any one of GRO Plus, EBP or HAV Unit Price $ 14.94 $ 12.78 $ 9.67 Number of Units 195,986 76,749 3,669 With GMWB Unit Value $ 12.21 $ 10.45 -- Number of Units 32,858 827 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.86 $ 12.74 -- Number of Units 67,201 6,492 -- With any one of EBP or HAV and GMWB Unit Value $ 12.40 $ 10.64 -- Number of Units 83,727 81,555 -- With HAV, EBP and GRO Plus Unit Price $ 14.78 $ 12.71 -- Number of Units 7,362 1,395 -- With HAV, EBP and GMWB Unit Value $ 12.36 -- -- Number of Units 2,878 -- -- - -------------------------------------------------------------------------------------------
A-26 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------- Evergreen VA -- Special Equity(16) (1999) With No Optional Benefits Unit Price $ 11.58 $ 11.12 $ 7.44 Number of Units 702,642 815,621 127,728 With any one of GRO Plus, EBP or HAV Unit Price $ 15.25 $ 14.69 $ 9.85 Number of Units 509,734 293,794 12,520 With GMWB Unit Value $ 15.22 $ 14.67 -- Number of Units 46,748 3,620 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.17 $ 14.65 $ 9.85 Number of Units 177,731 58,548 533 With any one of EBP or HAV and GMWB Unit Value $ 9.13 $ 8.83 -- Number of Units 114,259 23,503 -- With HAV, EBP and GRO Plus Unit Price $ 15.09 -- -- Number of Units 3,411 -- -- With HAV, EBP and GMWB Unit Value $ 10.53 -- -- Number of Units 26,034 -- -- - ---------------------------------------------------------------------------------------- Evergreen VA -- Omega (2000) With No Optional Benefits Unit Price $ 11.29 $ 10.71 $ 7.78 Number of Units 570,123 404,789 39,943 With any one of GRO Plus, EBP or HAV Unit Price $ 13.89 $ 13.21 -- Number of Units 387,492 56,002 -- With GMWB Unit Value $ 13.86 $ 13.19 -- Number of Units 31,153 283 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.81 $ 13.17 -- Number of Units 108,796 25,003 -- With any one of EBP or HAV and GMWB Unit Value $ 9.40 $ 8.97 -- Number of Units 84,876 19,658 -- With HAV, EBP and GRO Plus Unit Price $ 13.74 $ 13.13 -- Number of Units 3,028 1,855 -- With HAV, EBP and GMWB Unit Value $ 10.92 -- -- Number of Units 30,383 -- -- - ----------------------------------------------------------------------------------------
A-27 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- Europe 30 (1999) With No Optional Benefits Unit Price $ 12.17 $ 10.83 $ 7.93 Number of Units 1,812,435 2,116,400 292,396 With any one of GRO Plus, EBP or HAV Unit Price $ 14.80 $ 13.20 $ 9.7 Number of Units 313,111 158,208 2,625 With GMWB Unit Value $ 14.77 $ 13.18 -- Number of Units 99,557 13,365 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.72 $ 13.16 -- Number of Units 162,300 40,636 -- With any one of EBP or HAV and GMWB Unit Value $ 12.39 $ 11.09 -- Number of Units 17,205 3,060 -- With HAV, EBP and GRO Plus Unit Price $ 14.64 -- -- Number of Units 7,739 -- -- With HAV, EBP and GMWB Unit Value $ 12.35 -- -- Number of Units 7,758 -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Asia 30 (2002) With No Optional Benefits Unit Price $ 12.30 $ 12.57 $ 7.75 Number of Units 896,010 942,605 281,993 With any one of GRO Plus, EBP or HAV Unit Price $ 15.57 $ 15.96 $ 9.86 Number of Units 253,337 131,276 6,995 With GMWB Unit Value $ 15.54 $ 15.94 -- Number of Units 74,988 10,432 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.49 $ 15.91 -- Number of Units 67,805 33,050 -- With any one of EBP or HAV and GMWB Unit Value $ 10.14 $ 10.43 -- Number of Units 28,325 1,873 -- With HAV, EBP and GRO Plus Unit Price $ 15.40 -- -- Number of Units 5,612 -- -- With HAV, EBP and GMWB Unit Value $ 10.10 -- -- Number of Units 6,082 -- -- - ------------------------------------------------------------------------------------------
A-28 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------ ProFund VP -- Japan (2002) With No Optional Benefits Unit Price $ 9.55 $ 9.03 $ 7.24 Number of Units 710,879 426,718 65,845 With any one of GRO Plus, EBP or HAV Unit Price $ 13.40 $ 12.70 $ 10.21 Number of Units 137,584 76,553 351 With GMWB Unit Value $ 13.38 $ 12.69 -- Number of Units 35,968 1,883 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.33 $ 12.67 -- Number of Units 62,668 10,769 -- With any one of EBP or HAV and GMWB Unit Value $ 10.35 -- -- Number of Units 8,278 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.26 -- -- Number of Units 7,559 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------ ProFund VP -- Banks (2002) With No Optional Benefits Unit Price $ 11.98 $ 10.90 $ 8.56 Number of Units 229,711 93,067 101,136 With any one of GRO Plus, EBP or HAV Unit Price $ 14.10 $ 12.86 $ 10.13 Number of Units 171,696 34,962 3,422 With GMWB Unit Value $ 14.07 -- -- Number of Units 8,847 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.03 $ 12.83 -- Number of Units 29,071 6,833 -- With any one of EBP or HAV and GMWB Unit Value $ 11.58 -- -- Number of Units 20,936 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.95 $ 12.79 -- Number of Units 788 1,039 -- With HAV, EBP and GMWB Unit Value $ 11.54 -- -- Number of Units 582 -- -- - ------------------------------------------------------------------------------------
A-29 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ---------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits Unit Price $ 11.87 $ 10.95 $ 8.46 Number of Units 529,237 1,512,864 76,331 With any one of GRO Plus, EBP or HAV Unit Price $ 14.43 $ 13.35 $ 10.34 Number of Units 170,212 100,189 12 With GMWB Unit Value $ 14.40 $ 13.33 -- Number of Units 23,555 8,054 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.35 $ 13.31 -- Number of Units 35,537 15,986 -- With any one of EBP or HAV and GMWB Unit Value $ 12.43 -- -- Number of Units 15,658 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.28 -- -- Number of Units 3,155 -- -- With HAV, EBP and GMWB Unit Value $ 12.40 -- -- Number of Units 1,246 -- -- - ---------------------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits Unit Price $ 10.52 $ 9.75 $ 7.09 Number of Units 757,678 208,971 130,082 With any one of GRO Plus, EBP or HAV Unit Price $ 14.56 $ 13.53 -- Number of Units 5,878 847 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------
A-30 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------ ProFund VP -- Consumer Services (2002) With No Optional Benefits Unit Price $ 9.56 $ 9.04 $ 7.25 Number of Units 430,620 136,269 128,022 With any one of GRO Plus, EBP or HAV Unit Price $ 12.31 $ 11.66 $ 9.37 Number of Units 87,433 30,700 2,426 With GMWB Unit Value $ 12.28 -- -- Number of Units 17,197 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.24 $ 11.62 -- Number of Units 8,198 5,655 -- With any one of EBP or HAV and GMWB Unit Value $ 10.69 -- -- Number of Units 2,087 -- -- With HAV, EBP and GRO Plus Unit Price $ 12.17 $ 11.59 -- Number of Units 1,211 3,817 -- With HAV, EBP and GMWB Unit Value $ 10.66 -- -- Number of Units 14 -- -- - ------------------------------------------------------------------------------------ ProFund VP -- Consumer Goods (2002) With No Optional Benefits Unit Price $ 10.36 $ 9.64 $ 8.28 Number of Units 369,007 58,425 148,446 With any one of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 11.51 $ 9.9 Number of Units 102,706 12,720 2,303 With GMWB Unit Value $ 12.31 $ 11.49 -- Number of Units 8,437 954 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.27 -- -- Number of Units 54,297 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.40 $ 10.67 -- Number of Units 9,175 4,737 -- With HAV, EBP and GRO Plus Unit Price $ 12.20 -- -- Number of Units 1,731 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------
A-31 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- Oil & Gas (2001) With No Optional Benefits Unit Price $ 13.33 $ 10.48 $ 8.71 Number of Units 1,856,882 1,225,844 299,833 With any one of GRO Plus, EBP or HAV Unit Price $ 15.40 $ 12.14 $ 10.12 Number of Units 888,111 114,553 1,660 With GMWB Unit Value $ 15.37 $ 12.12 -- Number of Units 58,804 4,007 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.32 $ 12.10 -- Number of Units 174,913 25,623 -- With any one of EBP or HAV and GMWB Unit Value $ 13.80 -- -- Number of Units 29,672 -- -- With HAV, EBP and GRO Plus Unit Price $ 15.23 $ 12.07 -- Number of Units 14,353 2,434 -- With HAV, EBP and GMWB Unit Value $ 13.76 -- -- Number of Units 6,676 -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Financials (2001) With No Optional Benefits Unit Price $ 12.19 $ 11.23 $ 8.85 Number of Units 553,342 398,159 221,377 With any one of GRO Plus, EBP or HAV Unit Price $ 13.48 $ 12.45 $ 9.84 Number of Units 323,190 134,420 2,066 With GMWB Unit Value $ 13.45 $ 12.44 -- Number of Units 17,749 1,060 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.41 $ 12.42 -- Number of Units 35,528 27,402 -- With any one of EBP or HAV and GMWB Unit Value $ 11.26 -- -- Number of Units 15,974 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.33 -- -- Number of Units 1,103 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------
A-32 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- Health Care (2001) With No Optional Benefits Unit Price $ 9.23 $ 9.17 $ 7.94 Number of Units 1,318,525 707,449 388,508 With any one of GRO Plus, EBP or HAV Unit Price $ 11.10 $ 11.05 $ 9.59 Number of Units 518,389 244,228 6,831 With GMWB Unit Value $ 11.07 $ 11.04 -- Number of Units 8,570 1,969 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.04 $ 11.02 -- Number of Units 139,890 56,392 -- With any one of EBP or HAV and GMWB Unit Value $ 10.65 -- -- Number of Units 5,322 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.98 $ 10.99 -- Number of Units 4,035 2,123 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Industrials (2002) With No Optional Benefits Unit Price $ 11.15 $ 10.01 $ 7.93 Number of Units 253,411 318,339 12,642 With any one of GRO Plus, EBP or HAV Unit Price $ 14.27 $ 12.85 -- Number of Units 88,729 20,601 -- With GMWB Unit Value $ 14.24 -- -- Number of Units 4,426 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.20 $ 12.81 -- Number of Units 14,026 4,507 -- With any one of EBP or HAV and GMWB Unit Value $ 12.08 -- -- Number of Units 4,381 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.12 -- -- Number of Units 945 -- -- With HAV, EBP and GMWB Unit Value $ 12.04 -- -- Number of Units 807 -- -- - ------------------------------------------------------------------------------------------
A-33 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - -------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits Unit Price $ 17.89 $ 15.00 $ 8.57 Number of Units 992,879 206,876 306,572 With any one of GRO Plus, EBP or HAV Unit Price $ 19.83 $ 16.67 -- Number of Units 3,806 1,210 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits Unit Price $ 7.93 $ 8.89 $ 8.56 Number of Units 527,336 266,978 136,559 With any one of GRO Plus, EBP or HAV Unit Price $ 8.88 $ 9.97 $ 9.63 Number of Units 246,789 77,105 2,545 With GMWB Unit Value $ 8.86 $ 9.96 -- Number of Units 23,137 2,871 -- With any two of GRO Plus, EBP or HAV Unit Price $ 8.83 $ 9.94 -- Number of Units 70,946 6,346 -- With any one of EBP or HAV and GMWB Unit Value $ 9.44 -- -- Number of Units 5,382 -- -- With HAV, EBP and GRO Plus Unit Price $ 8.78 $ 9.91 -- Number of Units 3,939 1,646 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------
A-34 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits Unit Price $ 11.77 $ 13.29 $ 9.7 Number of Units 1,479,384 1,329,806 1,175,651 With any one of GRO Plus, EBP or HAV Unit Price $ 13.64 $ 15.44 $ 11.3 Number of Units 457,761 390,896 19,964 With GMWB Unit Value $ 13.61 -- -- Number of Units 42,627 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.57 $ 15.39 -- Number of Units 111,588 44,664 -- With any one of EBP or HAV and GMWB Unit Value $ 10.17 -- -- Number of Units 93,541 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.49 $ 15.35 -- Number of Units 7,072 1,458 -- With HAV, EBP and GMWB Unit Value $ 10.14 $ 11.55 -- Number of Units 11,671 23,284 -- - --------------------------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits Unit Price $ 16.15 $ 12.91 $ 9.86 Number of Units 1,816,706 462,906 441,318 With any one of GRO Plus, EBP or HAV Unit Price $ 16.63 $ 13.33 $ 10.2 Number of Units 509,763 136,941 12,789 With GMWB Unit Value $ 16.60 $ 13.31 -- Number of Units 58,062 3,835 -- With any two of GRO Plus, EBP or HAV Unit Price $ 16.54 $ 13.29 -- Number of Units 128,625 32,970 -- With any one of EBP or HAV and GMWB Unit Value $ 13.06 -- -- Number of Units 22,857 -- -- With HAV, EBP and GRO Plus Unit Price $ 16.45 -- -- Number of Units 629 -- -- With HAV, EBP and GMWB Unit Value $ 13.02 -- -- Number of Units 1,198 -- -- - ---------------------------------------------------------------------------------------------
A-35 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------ ProFund VP -- Semiconductor (2002) With No Optional Benefits Unit Price $ 7.15 $ 9.51 $ 5.14 Number of Units 694,352 423,958 93,241 With any one of GRO Plus, EBP or HAV Unit Price $ 11.95 $ 15.93 -- Number of Units 3,639 3,475 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------ ProFund VP -- Technology (2001) With No Optional Benefits Unit Price $ 8.48 $ 8.66 $ 6.03 Number of Units 727,580 497,972 254,131 With any one of GRO Plus, EBP or HAV Unit Price $ 12.99 $ 13.30 -- Number of Units 9,239 6,845 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------
A-36 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ---------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits Unit Price $ 8.19 $ 7.21 $ 7.15 Number of Units 460,848 398,350 272,408 With any one of GRO Plus, EBP or HAV Unit Price $ 11.43 $ 10.08 $ 10.03 Number of Units 212,127 47,283 3,642 With GMWB Unit Value $ 11.40 -- -- Number of Units 6,379 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.37 $ 10.05 -- Number of Units 34,691 13,783 -- With any one of EBP or HAV and GMWB Unit Value $ 12.54 -- -- Number of Units 4,099 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.31 -- -- Number of Units 11,741 -- -- With HAV, EBP and GMWB Unit Value $ 12.50 -- -- Number of Units 2,691 -- -- - ---------------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits Unit Price $ 11.13 $ 9.34 $ 7.83 Number of Units 1,060,939 618,427 521,419 With any one of GRO Plus, EBP or HAV Unit Price $ 15.00 $ 12.63 $ 10.61 Number of Units 332,768 93,690 8,871 With GMWB Unit Value $ 14.97 $ 12.62 -- Number of Units 57,208 8,137 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.92 $ 12.60 -- Number of Units 87,691 10,588 -- With any one of EBP or HAV and GMWB Unit Value $ 12.51 -- -- Number of Units 21,365 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.84 -- -- Number of Units 7,490 -- -- With HAV, EBP and GMWB Unit Value $ 12.47 -- -- Number of Units 573 -- -- - ----------------------------------------------------------------------------------------
A-37 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits Unit Price $ 10.53 $ 9.84 $ 7.97 Number of Units 8,215,357 3,563,562 954,792 With any one of GRO Plus, EBP or HAV Unit Price $ 12.82 $ 12.01 $ 9.75 Number of Units 2,052,501 708,248 10,297 With GMWB Unit Value $ 12.79 $ 12.00 -- Number of Units 171,187 1,179 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.75 $ 11.98 $ 9.75 Number of Units 570,114 58,349 400 With any one of EBP or HAV and GMWB Unit Value $ 11.25 $ 10.58 -- Number of Units 31,600 427 -- With HAV, EBP and GRO Plus Unit Price $ 12.68 $ 11.94 -- Number of Units 88,697 10,714 -- With HAV, EBP and GMWB Unit Value $ 11.21 -- -- Number of Units 12,971 -- -- - --------------------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits Unit Price $ 7.45 $ 8.44 $ 11.38 Number of Units 1,202,243 1,886,515 1,532,543 With any one of GRO Plus, EBP or HAV Unit Price $ 6.60 $ 7.49 $ 10.13 Number of Units 289,105 716,467 28,618 With GMWB Unit Value $ 6.58 -- -- Number of Units 41,480 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 6.56 $ 7.47 $ 10.13 Number of Units 60,475 36,686 1,514 With any one of EBP or HAV and GMWB Unit Value $ 8.15 $ 9.29 -- Number of Units 10,709 7,927 -- With HAV, EBP and GRO Plus Unit Price $ 6.52 $ 7.45 -- Number of Units 14,578 13,622 -- With HAV, EBP and GMWB Unit Value $ 8.12 $ 9.29 -- Number of Units 1,620 7,293 -- - ---------------------------------------------------------------------------------------------
A-38 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- ProFund VP -- UltraBull (2001) With No Optional Benefits Unit Price $ 11.76 $ 10.20 $ 6.78 Number of Units 2,817,803 1,431,345 297,435 With any one of GRO Plus, EBP or HAV Unit Price $ 16.58 $ 14.42 $ 9.61 Number of Units 9,518 1,432 245 With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits Unit Price $ 9.94 $ 9.32 $ 6.45 Number of Units 4,885,351 4,445,234 1,346,852 With any one of GRO Plus, EBP or HAV Unit Price $ 14.34 $ 13.47 $ 9.36 Number of Units 1,807,904 810,005 13,113 With GMWB Unit Value $ 14.31 $ 13.46 -- Number of Units 128,923 5,378 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.27 $ 13.44 -- Number of Units 225,055 34,480 -- With any one of EBP or HAV and GMWB Unit Value $ 10.92 -- -- Number of Units 28,507 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.19 -- -- Number of Units 32,376 -- -- With HAV, EBP and GMWB Unit Value $ 10.88 -- -- Number of Units 14,308 -- -- - ---------------------------------------------------------------------------------------------
A-39 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- ProFund VP -- Short OTC (2002) With No Optional Benefits Unit Price $ 5.93 $ 6.78 $ 11 Number of Units 908,064 1,535,439 433,181 With any one of GRO Plus, EBP or HAV Unit Price $ 5.60 $ 6.42 $ 10.43 Number of Units 181,352 196,526 15,308 With GMWB Unit Value $ 5.58 -- -- Number of Units 7,191 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 5.57 $ 6.40 -- Number of Units 65,148 20,167 -- With any one of EBP or HAV and GMWB Unit Value -- $ 9.49 -- Number of Units -- 7,708 -- With HAV, EBP and GRO Plus Unit Price $ 5.54 $ 6.38 -- Number of Units 16,306 16,907 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits Unit Price $ 7.89 $ 7.03 $ 3.53 Number of Units 6,592,447 3,410,589 1,003,123 With any one of GRO Plus, EBP or HAV Unit Price $ 19.36 $ 17.30 $ 8.7 Number of Units 22,282 5,905 233 With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ---------------------------------------------------------------------------------------------
A-40 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits Unit Price $ 11.67 $ 10.23 $ 7.66 Number of Units 2,632,869 1,455,513 438,387 With any one of GRO Plus, EBP or HAV Unit Price $ 15.24 $ 13.40 $ 10.06 Number of Units 626,618 462,172 4,777 With GMWB Unit Value $ 15.21 $ 13.39 -- Number of Units 110,312 4,164 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.16 $ 13.36 $ 10.06 Number of Units 304,648 99,189 4,799 With any one of EBP or HAV and GMWB Unit Value $ 12.20 $ 10.77 -- Number of Units 39,454 3,516 -- With HAV, EBP and GRO Plus Unit Price $ 15.08 $ 13.33 -- Number of Units 12,473 916 -- With HAV, EBP and GMWB Unit Value $ 12.17 -- -- Number of Units 3,507 -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits Unit Price $ 10.58 $ 9.69 $ 7.7 Number of Units 2,220,901 1,009,867 439,054 With any one of GRO Plus, EBP or HAV Unit Price $ 13.42 $ 12.32 $ 9.82 Number of Units 579,666 295,528 1,587 With GMWB Unit Value $ 13.39 $ 12.31 -- Number of Units 53,472 2,028 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.35 $ 12.28 $ 9.81 Number of Units 163,302 47,141 1,583 With any one of EBP or HAV and GMWB Unit Value $ 11.12 $ 10.24 -- Number of Units 21,341 3,933 -- With HAV, EBP and GRO Plus Unit Price $ 13.28 $ 12.25 -- Number of Units 6,489 1,274 -- With HAV, EBP and GMWB Unit Value $ 11.09 -- -- Number of Units 9,859 -- -- - ------------------------------------------------------------------------------------------
A-41 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits Unit Price $ 11.99 $ 9.55 $ 5.71 Number of Units 3,106,849 1,112,311 477,953 With any one of GRO Plus, EBP or HAV Unit Price $ 20.62 $ 16.46 $ 9.86 Number of Units 338,303 136,523 1,673 With GMWB Unit Value $ 20.57 $ 16.44 -- Number of Units 101,493 3,746 -- With any two of GRO Plus, EBP or HAV Unit Price $ 20.51 $ 16.41 -- Number of Units 150,540 88,028 -- With any one of EBP or HAV and GMWB Unit Value $ 13.86 -- -- Number of Units 27,449 -- -- With HAV, EBP and GRO Plus Unit Price $ 20.40 $ 16.37 -- Number of Units 2,161 557 -- With HAV, EBP and GMWB Unit Value $ 13.81 -- -- Number of Units 14,660 -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- Small-Cap Value (2002) With No Optional Benefits Unit Price $ 11.10 $ 9.39 $ 7.09 Number of Units 4,088,760 5,144,632 994,778 With any one of GRO Plus, EBP or HAV Unit Price $ 15.80 $ 13.41 $ 10.15 Number of Units 2,597,154 1,218,990 19,019 With GMWB Unit Value $ 15.76 $ 13.39 -- Number of Units 163,443 24,769 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.71 $ 13.37 -- Number of Units 596,413 207,523 -- With any one of EBP or HAV and GMWB Unit Value $ 12.53 $ 10.67 -- Number of Units 31,732 4,223 -- With HAV, EBP and GRO Plus Unit Price $ 15.63 $ 13.33 -- Number of Units 29,856 28,687 -- With HAV, EBP and GMWB Unit Value $ 12.49 -- -- Number of Units 6,158 -- -- - ------------------------------------------------------------------------------------------
A-42 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits Unit Price $ 11.98 $ 10.16 $ 7.69 Number of Units 4,677,820 3,868,951 772,260 With any one of GRO Plus, EBP or HAV Unit Price $ 15.34 $ 13.05 $ 9.91 Number of Units 1,611,060 1,289,398 10,572 With GMWB Unit Value $ 15.31 $ 13.04 -- Number of Units 170,800 21,997 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.26 $ 13.01 -- Number of Units 285,725 210,595 -- With any one of EBP or HAV and GMWB Unit Value $ 12.23 $ 10.44 -- Number of Units 42,134 2,529 -- With HAV, EBP and GRO Plus Unit Price $ 15.17 $ 12.98 -- Number of Units 9,388 30,164 -- With HAV, EBP and GMWB Unit Value $ 12.19 -- -- Number of Units 13,290 -- -- - ------------------------------------------------------------------------------------------ ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits Unit Price $ 15.52 $ 12.04 $ 6.14 Number of Units 5,098,565 1,702,558 212,085 With any one of GRO Plus, EBP or HAV Unit Price $ 24.98 $ 19.43 -- Number of Units 32,780 13,082 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------
A-43 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------------ ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits Unit Price $ 11.79 $ 11.08 $ 11.56 Number of Units 1,051,158 731,470 2,486,854 With any one of GRO Plus, EBP or HAV Unit Price $ 10.34 $ 9.75 $ 10.19 Number of Units 372,142 291,892 22,148 With GMWB Unit Value $ 10.32 $ 9.73 -- Number of Units 120,311 14,956 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.29 $ 9.72 $ 10.19 Number of Units 111,072 32,854 609 With any one of EBP or HAV and GMWB Unit Value $ 10.80 -- -- Number of Units 4,588 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.23 -- -- Number of Units 13,114 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------------------ ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits Unit Price $ 6.63 $ 7.56 $ 8.02 Number of Units 5,314,528 1,817,924 165,792 With any one of GRO Plus, EBP or HAV Unit Price $ 7.97 $ 9.12 $ 9.69 Number of Units 2,060,525 445,486 9,028 With GMWB Unit Value $ 7.95 $ 9.11 -- Number of Units 333,355 4,991 -- With any two of GRO Plus, EBP or HAV Unit Price $ 7.93 $ 9.09 -- Number of Units 588,490 82,598 -- With any one of EBP or HAV and GMWB Unit Value $ 8.31 -- -- Number of Units 219,942 -- -- With HAV, EBP and GRO Plus Unit Price $ 7.89 $ 9.07 -- Number of Units 52,002 10,876 -- With HAV, EBP and GMWB Unit Value $ 8.28 -- -- Number of Units 14,108 -- -- - ------------------------------------------------------------------------------------------------------
A-44 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------- ProFund VP -- Large-Cap Growth With No Optional Benefits Unit Price $ 10.37 -- -- Number of Units 72,725 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.37 -- -- Number of Units 18,860 -- -- With GMWB Unit Value $ 10.37 -- -- Number of Units 2,860 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.37 -- -- Number of Units 6,286 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.37 -- -- Number of Units 554 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.37 -- -- Number of Units 84 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------- ProFund VP -- Large-Cap Value With No Optional Benefits Unit Price $ 10.37 -- -- Number of Units 159,605 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.36 -- -- Number of Units 36,170 -- -- With GMWB Unit Value $ 10.36 -- -- Number of Units 3,802 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.36 -- -- Number of Units 1,123 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.36 -- -- Number of Units 554 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.36 -- -- Number of Units 84 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------
A-45 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - --------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------- ProFund VP -- Short Mid-Cap With No Optional Benefits Unit Price $ 9.70 -- -- Number of Units 39,360 -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------- ProFund VP -- Short Small-Cap With No Optional Benefits Unit Price $ 9.54 -- -- Number of Units 136,809 -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ---------------------------------------------------------------------------------
A-46 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ First Trust[RegTM] 10 Uncommon Values (2000) With No Optional Benefits Unit Price $ 10.03 $ 9.16 $ 6.8 Number of Units 91,924 66,435 19,826 With any one of GRO Plus, EBP or HAV Unit Price $ 14.39 $ 13.17 -- Number of Units 28 467 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------ First Trust Global Target 15(17) With No Optional Benefits Unit Price $ 11.85 -- -- Number of Units 311,233 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.83 -- -- Number of Units 303,452 -- -- With GMWB Unit Value $ 11.82 -- -- Number of Units 108,014 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.81 -- -- Number of Units 65,909 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.80 -- -- Number of Units 6,777 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.79 -- -- Number of Units 4,718 -- -- With HAV, EBP and GMWB Unit Value $ 11.78 -- -- Number of Units 3,816 -- -- - ------------------------------------------------------------------------------------------
A-47 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ----------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------- First Trust Target Managed VIP With No Optional Benefits Unit Price $ 11.32 -- -- Number of Units 1,777,316 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.30 -- -- Number of Units 1,562,079 -- -- With GMWB Unit Value $ 11.30 -- -- Number of Units 1,057,901 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.28 -- -- Number of Units 429,320 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.28 -- -- Number of Units 40,194 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.27 -- -- Number of Units 217,324 -- -- With HAV, EBP and GMWB Unit Value $ 11.26 -- -- Number of Units 23,730 -- -- - ----------------------------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits Unit Price $ 10.66 -- -- Number of Units 82,809 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.64 -- -- Number of Units 1,635 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------
A-48 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
Year Ended December 31, - -------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------- First Trust S&P Target 24 With No Optional Benefits Unit Price $ 10.75 -- -- Number of Units 173,851 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.73 -- -- Number of Units 152,355 -- -- With GMWB Unit Value $ 10.72 -- -- Number of Units 38,677 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.71 -- -- Number of Units 72,575 -- -- With any one of EBP or HAV and GM WB Unit Value $ 10.70 -- -- Number of Units 11,933 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.69 -- -- Number of Units 3,409 -- -- With HAV, EBP and GMWB Unit Value $ 10.68 -- -- Number of Units 2,359 -- -- - -------------------------------------------------------------------------------------- First Trust The Dow(SM) Dart 10 With No Optional Benefits Unit Price $ 10.48 -- -- Number of Units 155,695 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.46 -- -- Number of Units 160,820 -- -- With GMWB Unit Value $ 10.46 -- -- Number of Units 78,082 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.45 -- -- Number of Units 82,728 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.44 -- -- Number of Units 3,913 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.43 -- -- Number of Units 10,531 -- -- With HAV, EBP and GMWB Unit Value $ 10.42 -- -- Number of Units 105 -- -- - --------------------------------------------------------------------------------------
A-49 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, - ------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------ First Trust Value Line[RegTM] Target 25 With No Optional Benefits Unit Price $ 12.59 -- -- Number of Units 389,792 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.57 -- -- Number of Units 4,909 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMW B Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------ SP William Blair International Growth With No Optional Benefits Unit Price $ 10.53 -- -- Number of Units 269,671 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.53 -- -- Number of Units 172,859 -- -- With GMWB Unit Value $ 10.53 -- -- Number of Units 73,031 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.52 -- -- Number of Units 23,863 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.52 -- -- Number of Units 6,604 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.52 -- -- Number of Units 4,127 -- -- With HAV, EBP and GMWB Unit Value $ 10.52 -- -- Number of Units 806 -- -- - ------------------------------------------------------------------------------------
A-50 APPENDIX A - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS 1: Effective May 2, 2005 the name of the Wells Fargo Variable Trust International Equity Portfolio has changed to Wells Fargo Variable Trust Advantage International Core Portfolio. 2: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Small-Cap Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Small-Cap Growth Portfolio. 3: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Core Portfolio. 4: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Large Company Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Growth Portfolio. 5: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Value Portfolio has changed to Wells Fargo Variable Trust Advantage C&B Large-Cap Value Portfolio. 6: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Income Portfolio has changed to Wells Fargo Variable Trust Advantage Equity Income Portfolio. 7: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Asset Allocation Portfolio has changed to Wells Fargo Variable Trust Advantage Asset Allocation Portfolio. 8: Effective May 2, 2005 the name of the Wells Fargo Variable Trust Total Return Bond Portfolio has changed to Wells Fargo Variable Trust Advantage Total Return Bond Portfolio. 9: Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 10: Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 11: Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 12: Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 13: Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 14: Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 15: Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 16: Effective April 15, 2005 the name of the Evergreen VA -- Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 17: Effective May 2, 2005 the name of the First Trust Global Target 15 Portfolio has changed to First Trust Global Dividend Target 15 Portfolio. A-51 This page intentionally left blank APPENDIX B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix B -- Calculation of Optional Death Benefits Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Account Value of variable investment options plus Interim Purchase Payments - Growth = Value of Fixed Allocations minus proportional withdrawals (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 x 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $85,000
Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $ 50,000
B-1 APPENDIX B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 x $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 x 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000
Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value = $90,000 - [$90,000 x $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 x $15,000/$75,000)] = max [$80,000, $40,000] = $80,000
The Death Benefit therefore is $80,000. B-2 APPENDIX B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [($80,000 + $15,000) x $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000
The Death Benefit therefore is $88,214. Examples of Combination 5% Roll-Up and Highest Anniversary Value Death Benefit Calculation The following are examples of how the Combination 5% Roll-Up and Highest Anniversary Value Death Benefit are calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the 7th anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Roll-Up Value is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than both the Roll-Up Value ($67,005) and the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Owner made a withdrawal of $5,000 on the 6th anniversary of the Issue Date when the Account Value was $45,000. The Roll-Up Value on the 6th anniversary of the Issue Date is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal Limit for the 7th annuity year is equal to 5% of the Roll-Up Value as of the 6th anniversary of the Issue Date, or $3,350. Therefore, the remaining $1,650 of the withdrawal results in a proportional reduction to the Roll-Up Value. On the 7th anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $43,000; however, the Anniversary Value on the 2nd anniversary of the Issue Date was $70,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. B-3 APPENDIX B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued Roll-Up Value = {($67,005 - $3,350) - [($67,005 - $3,350) x $1,650/($45,000 -$3,350)]} x 1.05 = ($63,655 - $2,522) x 1.05 = $64,190 Highest Anniversary Value = $70,000 - [$70,000 x $5,000/$45,000] = $70,000 - $7,778 = $62,222 Basic Death Benefit = max [$43,000, $50,000 - ($50,000 x $5,000/$45,000)] = max [$43,000, $44,444] = $44,444
The Death Benefit therefore is $64,190. Example with death after Death Benefit Target Date Assume that the Owner has not made any withdrawals prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Roll-Up Value on the Death Benefit Target Date (the contract anniversary on or following the Owner's 80th birthday) is equal to initial Purchase Payment accumulated at 5% for 10 years, or $81,445. The Highest Anniversary Value on the Death Benefit Target Date was $85,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as of the Death Benefit Target Date; each increased by subsequent purchase payments and reduced proportionally for subsequent withdrawals. Roll-Up Value = $81,445 + $15,000 - [($81,445 + 15,000) x $5,000/$70,000] = $81,445 + $15,000 - $6,889 = $89,556 Highest Anniversary Value = $85,000 + $15,000 - [($85,000 + 15,000) x $5,000/$70,000] = $85,000 + $15,000 - $7,143 = $92,857 Basic Death Benefit = max [$75,000, $50,000 + $15,000 - {(50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000
The Death Benefit therefore is $92,857. Examples of Highest Daily Value Death Benefit Calculation The following are examples of how the HDV Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Highest Daily Value was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value or the basic Death Benefit. The Death Benefit would be the HDV ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). B-4 APPENDIX B - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Highest Daily Value ($90,000) was attained during the fifth Annuity Year. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value (proportionally reduced by the subsequent withdrawal) or the basic Death Benefit. Highest Daily Value = $90,000 - [$90,000 x $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 x $15,000/$75,000)] = max [$80,000, $40,000] = $80,000
The Death Benefit therefore is $80,000. Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Daily Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Daily Value on the Death Benefit Target Date plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) x $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000
The Death Benefit therefore is $88,214. B-5 This page intentionally left blank APPENDIX C - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix C -- Additional Information on Asset Allocation Programs Program Rules - ------------- o You can elect an asset allocator program where the Sub-accounts for each asset class in each model portfolio are designated based on an evaluation of available Sub-accounts. If you elect the Lifetime Five Benefit ("LT5") or the Highest Daily Value Death Benefit ("HDV"), you must enroll in one of the eligible model portfolios. Asset allocation is a sophisticated method of diversification that allocates assets among asset classes in order to manage investment risk and potentially enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. How the Asset Allocation Program Works o Amounts will automatically be allocated in accordance with the percentages and to Sub-accounts indicated for the model portfolio that you choose. If you allocate your Account Value or transfer your Account Value among any Sub-accounts that are outside of your model portfolio, we will allocate these amounts according to the allocation percentages of the applicable model portfolio upon the next rebalancing. You may only choose one model portfolio at a time. When you enroll in the asset allocation program and upon each rebalance thereafter, 100% of your Account Value allocated to the variable Sub-accounts will be allocated to the asset allocation program. Any Account Value not invested in the Sub-accounts will not be part of the program. o Additional Purchase Payments: Unless otherwise requested, any additional Purchase Payments applied to the variable Sub-accounts in the Annuity will be allocated to the Sub-accounts according to the allocation percentages for the model portfolio you choose. Allocation of additional Purchase Payments outside of your model portfolio but into a Sub-account, will be reallocated according to the allocation percentages of the applicable model portfolio upon the next rebalancing. o Rebalancing Your Model Portfolio: Changes in the value of the Sub-account will cause your Account Value allocated to the Sub-accounts to vary from the percentage allocations of the model portfolio you select. By selecting the asset allocation program, you have directed us to periodically (e.g., quarterly) rebalance your Account Value allocated to the Sub-accounts in accordance with the percentage allocations assigned to each Sub-account within your model portfolio at the time you elected the program or as later modified with your consent. Some asset allocation programs will only require that a rebalancing occur when the percent of your Account Value allocated to the Sub-accounts are outside of the acceptable range permitted under such asset allocation program. Note -- Any Account Value not invested in the Sub-accounts will not be affected by any rebalance. o Sub-account Changes Within the Model Portfolios: From time to time you may be notified of a suggested change in a Sub-account or percentage allocated to a Sub-account within your model portfolio. If you consent (in the manner that is then permitted or required) to the suggested change, then it will be implemented upon the next rebalance. If you do not consent then rebalancing will continue in accordance with your unchanged model portfolio, unless the Sub-account is no longer available under your Annuity, in which case your lack of consent will be deemed a request to terminate the asset allocation program and the provisions under "Termination or Modification of the Asset Allocation Program" will apply. o Owner Changes in Choice of Model Portfolio: You may change from the model portfolio that you have elected to any other currently available model portfolio at any time. The change will be implemented on the date we receive all required information in the manner that is then permitted or required. Termination or Modification of the Asset Allocation Program: o You may request to terminate your asset allocation program at any time. Any termination will be effective on the date that American Skandia receives your termination request in good order. If you are enrolled in HDV or LT5, termination of your asset allocation program must coincide with enrollment in a then currently available and approved asset allocation program or other approved option. However, if you are enrolled in LT5 you may terminate the LT5 benefit in order to then terminate your asset allocation program. American Skandia reserves the right to terminate or modify the asset allocation program at any time with respect to any programs. Restrictions on Electing the Asset Allocation: o You cannot participate in auto-rebalancing or a DCA program while enrolled in an asset allocation program. Upon election of an asset allocation program, American Skandia will automatically terminate your enrollment in any auto-rebalancing or DCA program. Finally, Systematic Withdrawals can only be made as flat dollar amounts. C-1 This page intentionally left blank APPENDIX D - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You American Skandia Life Assurance Corporation offers several deferred variable annuity products. Each annuity has different features and benefits that may be appropriate for you based on your individual financial situation and how you intend to use the annuity. The different features and benefits may include variations on your ability to access funds in your annuity without the imposition of a withdrawal charge as well as different ongoing fees and charges you pay to stay in the contract. Additionally, differences may exist on various optional benefits such as guaranteed living benefits or death benefit protection. Among the factors you should consider when choosing which annuity product may be most appropriate for your individual needs are the following: o Your age; o The amount of your investment and any planned future deposits into the annuity; o How long you intend to hold the annuity (also referred to as investment time horizon); o Your desire to make withdrawals from the annuity; o Your investment return objectives; o The effect of optional benefits that may be elected, and o Your desire to minimize costs and/or maximize return associated with the annuity. The following chart outlines some of the different features for each American Skandia Annuity. The availability of optional features, such as those noted in the chart, may increase the cost of the contract. Therefore you should carefully consider which features you plan to use when selecting your annuity. You should also consider the investment objectives, risks, charges and expenses of an investment carefully before investing. In addition, the hypothetical illustrations below reflect the account value and surrender value of each variable annuity over a variety of holding periods. These charts are meant to reflect how your annuities can grow or decrease depending on market conditions and the comparable value of each of the annuities (which reflects the charges associated with the annuities) under the assumptions noted. Your registered representative can provide you with prospectuses of one or more of these variable annuities noted in this document and can guide you to Selecting the Variable Annuity That's Right for You. American Skandia Annuity Product Comparison - ------------------------------------------- Below is a summary of American Skandia's annuity products. ASL II refers to American Skandia Lifevest[RegTM] II, APEX II refers to American Skandia APEX(SM) II, Stagecoach APEX II refers to American Skandia Stagecoach[RegTM] APEX(SM) II, ASAP III refers to American Skandia Advisor Plan(SM) III, Stagecoach ASAP III refers to American Skandia Stagecoach[RegTM] ASAP(SM) III, Xtra Credit SIX refers to American Skandia Xtra Credit(SM) SIX and Stagecoach[RegTM] Xtra Credit(SM) SIX refers to American Skandia Stagecoach[RegTM] Xtra Credit(SM) SIX. You should consider the investment objectives, risks, charges and expenses of an investment in any Annuity carefully before investing. Each product prospectus as well as the underlying portfolio prospectuses contains this and other information about the variable annuities and underlying investment options. Your Investment Professional can provide you with prospectuses for one or more of these variable annuities and the underlying portfolios and can help you decide upon the product that would be most advantageous for you given your individual needs. Please read the prospectuses carefully before investing. D-1 APPENDIX D - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued
- ------------------------------------------------------------------------------------------------------------------------------------ XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------------ Minimum Investment $15,000 $10,000 $10,000 $10,000 Maximum Issue Age No Maximum Age 85 80 75 Withdrawal Charge None 4 Years 8 Years 10 Years Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, (9%, 9%, 8.5% ,8%, 5%, 4%, 3%, 2%) 7%, 6%, 5%, 4%, 3%, 2%) - ------------------------------------------------------------------------------------------------------------------------------------ Insurance and 1.65% 1.65% 1.25% years 1-8; 1.65% years 1-10; Distribution Charge 0.65% years 9+ 0.65% years 11+ - ------------------------------------------------------------------------------------------------------------------------------------ Contract Charges Lesser of $35 or Lesser of $35 or Lesser of $35 or Lesser of $35 or 2% of Account 2% of Account 2% of Account 2% of Account Value* Value* Value* Value* - ------------------------------------------------------------------------------------------------------------------------------------ Contract Credit No Yes. Effective for No Yes based on year Contracts issued on purchase payment or after June 20, received for first 6 2005. Generally, we years of contract apply a Loyalty Credit (6%, 5%, 4%, 3%, to your Annuity's 2%, 1%) Account Value at the end of your fifth contract year (i.e., on your fifth Contract Anniversary). The Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four contract years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Contract Anniversary - ------------------------------------------------------------------------------------------------------------------------------------ Fixed Rate Account Fixed Rates Available Fixed Rates Available Fixed Rates Available Fixed Rates (early withdrawals are (As of May 1, 2005 (As of May 1, 2005 (As of May 1, 2005 Available (As of subject to a Market currently offering currently offering currently offering May 1, 2005 Value Adjustment) durations of: durations of: durations of: currently offering 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) durations of: 1,2,3,5,7,10 years) - ------------------------------------------------------------------------------------------------------------------------------------ Variable Investment All options available All options available All options available All options available Options(1) - ------------------------------------------------------------------------------------------------------------------------------------
D-2 APPENDIX D - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS
- ------------------------------------------------------------------------------------------------------------------------------------ XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------------ Standard Death Prior to age 85: The The greater of: The greater of: The greater of: Benefit greater of: purchase purchase payments purchase payments purchase payments payments less less proportional less proportional less proportional proportional withdrawals or withdrawals or withdrawals or withdrawals or account value (no account value (no account value (no account value (no MVA Applied). MVA Applied). MVA Applied) less MVA Applied). an amount equal to On or after age 85: the credits applied account value within the 12 months prior to date of death. - ------------------------------------------------------------------------------------------------------------------------------------ Optional Death Enhanced Beneficiary EBP II, EBP II, EBP II, Benefits (for an Protection (EBPII) HDV, HDV, HDV, additional cost)(2) Highest Daily Value HAV, HAV, HAV, (HDV) Combo 5% Roll-up/ Combo 5% Roll-up/ Combo 5% Roll-up/ Highest Account HAV HAV HAV Value (HAV) Combo 5% Roll-up/ HAV - ------------------------------------------------------------------------------------------------------------------------------------ Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, additional cost)(3) Guaranteed GMWB, GMWB, GMWB, Minimum Withdrawal GMIB, GMIB, GMIB, Benefit (GMWB), Lifetime Five Lifetime Five Lifetime Five Guaranteed Minimum Income Benefit (GMIB), Lifetime Five - ------------------------------------------------------------------------------------------------------------------------------------ Annuity Rewards(4) Not Available Available after initial Available after initial Available after initial withdrawal period withdrawal period withdrawal period - ------------------------------------------------------------------------------------------------------------------------------------
Hypothetical Illustration - ------------------------- The following examples outline the value of each annuity as well as the amount that would be available to an investor as a result of full surrender at the end of each of the contract years specified. The values shown below are based on the following assumptions: An initial investment of $100,000 is made into each contract earning a gross rate of return of 0% and 6% respectively. o No subsequent deposits or withdrawals are made from the contract. o The hypothetical gross rates of return are reduced by the arithmetic average of the fees and expenses of the underlying portfolios and the charges that are deducted from the Annuity at the Separate Account level as follows5: o 1.55% based on the fees and expenses of the underlying portfolios as of December 31, 2004.1 The arithmetic average of all fund expenses are computed by adding portfolio management fees, 12b-1 fees and other expenses of all of the underlying portfolios and then dividing by the number of portfolios. For purposes of the illustrations, we do not reflect any expense reimbursements or expense waivers that might apply and are described in the prospectus fee table. o The Separate Account level charges include the Insurance Charge and Distribution Charge (as applicable). o The Annuity Value and Surrender Value are further reduced by the annual maintenance fee. For XTra Credit SIX, Stagecoach XTra Credit SIX, APEX II, and Stagecoach APEX II, the Annuity Value and Surrender Value also reflect the addition of any applicable bonus credits. D-3 APPENDIX D - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued The Annuity Value displays the current account value assuming no surrender while the Surrender Value assumes a 100% surrender on the day after the contract anniversary, therefore, reflecting the decrease in surrender charge where applicable. The values that you actually experience under an Annuity will be different what is depicted here if any of the assumptions we make here differ from your circumstances, however the relative values for each product reflected below will remain the same. (We will provide you with a personalized illustration upon request). Shaded cells represent the product with the highest customer Surrender Value for the contract year. Multiple shaded cells represent a tie between two or more annuities. 0% Gross Rate of Return
- --------------------------------------------------------------------------------------------------------------- XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - --------------------------------------------------------------------------------------------------------------- Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - --------------------------------------------------------------------------------------------------------------- 1 $96,791 $96,791 $96,791 $88,791 $97,184 $90,184 $102,600 $93,600 - --------------------------------------------------------------------------------------------------------------- 2 $93,683 $93,683 $93,683 $86,683 $94,447 $87,947 $ 99,308 $90,808 - --------------------------------------------------------------------------------------------------------------- 3 $90,674 $90,674 $90,674 $84,674 $91,786 $85,786 $ 96,121 $88,121 - --------------------------------------------------------------------------------------------------------------- 4 $87,761 $87,761 $87,761 $87,761 $89,199 $84,199 $ 93,034 $86,034 - --------------------------------------------------------------------------------------------------------------- 5 $84,940 $84,940 $84,940 $84,940 $86,683 $82,683 $ 90,046 $84,046 - --------------------------------------------------------------------------------------------------------------- 6 $82,208 $82,208 $84,387 $84,387 $84,238 $81,238 $ 87,153 $82,153 - --------------------------------------------------------------------------------------------------------------- 7 $79,564 $79,564 $81,673 $81,673 $81,861 $79,861 $ 84,351 $80,351 - --------------------------------------------------------------------------------------------------------------- 8 $77,003 $77,003 $79,046 $79,046 $79,549 $79,549 $ 81,638 $78,638 - --------------------------------------------------------------------------------------------------------------- 9 $74,524 $74,524 $76,501 $76,501 $77,772 $77,772 $ 79,012 $77,012 - --------------------------------------------------------------------------------------------------------------- 10 $72,123 $72,123 $74,038 $74,038 $76,034 $76,034 $ 76,469 $76,469 - --------------------------------------------------------------------------------------------------------------- 11 $69,799 $69,799 $71,653 $71,653 $74,334 $74,334 $ 74,759 $74,759 - --------------------------------------------------------------------------------------------------------------- 12 $67,548 $67,548 $69,343 $69,343 $72,671 $72,671 $ 73,087 $73,087 - --------------------------------------------------------------------------------------------------------------- 13 $65,369 $65,369 $67,107 $67,107 $71,045 $71,045 $ 71,451 $71,451 - --------------------------------------------------------------------------------------------------------------- 14 $63,259 $63,259 $64,942 $64,942 $69,454 $69,454 $ 69,852 $69,852 - --------------------------------------------------------------------------------------------------------------- 15 $61,215 $61,215 $62,845 $62,845 $67,898 $67,898 $ 68,287 $68,287 - --------------------------------------------------------------------------------------------------------------- 16 $59,237 $59,237 $60,815 $60,815 $66,376 $66,376 $ 66,756 $66,756 - --------------------------------------------------------------------------------------------------------------- 17 $57,322 $57,322 $58,850 $58,850 $64,887 $64,887 $ 65,260 $65,260 - --------------------------------------------------------------------------------------------------------------- 18 $55,467 $55,467 $56,946 $56,946 $63,431 $63,431 $ 63,795 $63,795 - --------------------------------------------------------------------------------------------------------------- 19 $53,671 $53,671 $55,104 $55,104 $62,007 $62,007 $ 62,363 $62,363 - --------------------------------------------------------------------------------------------------------------- 20 $51,933 $51,933 $53,319 $53,319 $60,614 $60,614 $ 60,963 $60,963 - --------------------------------------------------------------------------------------------------------------- 21 $50,249 $50,249 $51,592 $51,592 $59,252 $59,252 $ 59,593 $59,593 - --------------------------------------------------------------------------------------------------------------- 22 $48,619 $48,619 $49,919 $49,919 $57,919 $57,919 $ 58,253 $58,253 - --------------------------------------------------------------------------------------------------------------- 23 $47,041 $47,041 $48,299 $48,299 $56,616 $56,616 $ 56,942 $56,942 - --------------------------------------------------------------------------------------------------------------- 24 $45,512 $45,512 $46,731 $46,731 $55,341 $55,341 $ 55,660 $55,660 - --------------------------------------------------------------------------------------------------------------- 25 $44,033 $44,033 $45,213 $45,213 $54,094 $54,094 $ 54,406 $54,406 - ---------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected D-4 APPENDIX D - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS 6% Gross Rate of Return
- ------------------------------------------------------------------------------------------------------------------------ XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - ------------------------------------------------------------------------------------------------------------------------ Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - ------------------------------------------------------------------------------------------------------------------------ 1 $102,635 $102,635 $102,635 $ 94,635 $103,053 $ 96,053 $108,758 $ 99,758 - ------------------------------------------------------------------------------------------------------------------------ 2 $105,340 $105,340 $105,340 $ 98,340 $106,198 $ 99,698 $111,589 $103,089 - ------------------------------------------------------------------------------------------------------------------------ 3 $108,115 $108,115 $108,115 $102,115 $109,440 $103,440 $114,495 $106,495 - ------------------------------------------------------------------------------------------------------------------------ 4 $110,964 $110,964 $110,964 $110,964 $112,781 $107,781 $117,477 $110,477 - ------------------------------------------------------------------------------------------------------------------------ 5 $113,888 $113,888 $113,888 $113,888 $116,223 $112,223 $120,537 $114,537 - ------------------------------------------------------------------------------------------------------------------------ 6 $116,890 $116,890 $119,199 $119,199 $119,771 $116,771 $123,679 $118,679 - ------------------------------------------------------------------------------------------------------------------------ 7 $119,970 $119,970 $122,340 $122,340 $123,427 $121,427 $126,903 $122,903 - ------------------------------------------------------------------------------------------------------------------------ 8 $123,131 $123,131 $125,564 $125,564 $127,195 $127,195 $130,212 $127,212 - ------------------------------------------------------------------------------------------------------------------------ 9 $126,376 $126,376 $128,872 $128,872 $131,874 $131,874 $133,608 $131,608 - ------------------------------------------------------------------------------------------------------------------------ 10 $129,706 $129,706 $132,268 $132,268 $136,725 $136,725 $137,094 $137,094 - ------------------------------------------------------------------------------------------------------------------------ 11 $133,124 $133,124 $135,754 $135,754 $141,755 $141,755 $142,102 $142,102 - ------------------------------------------------------------------------------------------------------------------------ 12 $136,632 $136,632 $139,331 $139,331 $146,970 $146,970 $147,294 $147,294 - ------------------------------------------------------------------------------------------------------------------------ 13 $140,232 $140,232 $143,003 $143,003 $152,376 $152,376 $152,678 $152,678 - ------------------------------------------------------------------------------------------------------------------------ 14 $143,927 $143,927 $146,771 $146,771 $157,982 $157,982 $158,259 $158,259 - ------------------------------------------------------------------------------------------------------------------------ 15 $147,720 $147,720 $150,638 $150,638 $163,793 $163,793 $164,046 $164,046 - ------------------------------------------------------------------------------------------------------------------------ 16 $151,613 $151,613 $154,608 $154,608 $169,819 $169,819 $170,046 $170,046 - ------------------------------------------------------------------------------------------------------------------------ 17 $155,608 $155,608 $158,682 $158,682 $176,066 $176,066 $176,266 $176,266 - ------------------------------------------------------------------------------------------------------------------------ 18 $159,708 $159,708 $162,863 $162,863 $182,543 $182,543 $182,716 $182,716 - ------------------------------------------------------------------------------------------------------------------------ 19 $163,917 $163,917 $167,155 $167,155 $189,258 $189,258 $189,402 $189,402 - ------------------------------------------------------------------------------------------------------------------------ 20 $168,236 $168,236 $171,560 $171,560 $196,220 $196,220 $196,335 $196,335 - ------------------------------------------------------------------------------------------------------------------------ 21 $172,669 $172,669 $176,081 $176,081 $203,438 $203,438 $203,522 $203,522 - ------------------------------------------------------------------------------------------------------------------------ 22 $177,219 $177,219 $180,720 $180,720 $210,922 $210,922 $210,974 $210,974 - ------------------------------------------------------------------------------------------------------------------------ 23 $181,889 $181,889 $185,483 $185,483 $218,681 $218,681 $218,700 $218,700 - ------------------------------------------------------------------------------------------------------------------------ 24 $186,682 $186,682 $190,370 $190,370 $226,726 $226,726 $226,710 $226,710 - ------------------------------------------------------------------------------------------------------------------------ 25 $191,601 $191,601 $195,387 $195,387 $235,066 $235,066 $235,015 $235,015 - ------------------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected * Contract charges are waived for account values greater than $100,000. 1) If you are purchasing your Annuity through an Investment Professional that is associated with Wells Fargo, your variable investment option choices are different than those that are offered through other broker-dealers. In addition, due to the differences in the variable investment option choices, the expenses for the underlying portfolios that are available under the "Stagecoach" products are slightly lower and if those expenses were reflected, the values illustrated would be slightly higher. 2) For more information on these benefits, refer to the "Death Benefit" section in the Prospectus. 3) For more information on these benefits, refer to the "Living Benefit Programs" section in the Prospectus. 4) The Annuity Rewards benefit offers Owners an ability to increase the guaranteed death benefit so that the death benefit will at least equal the Annuity's account value on the effective date of the Annuity Rewards benefits, if the terms of the Annuity Rewards benefit are met. 5) These reductions result in hypothetical net rates of return corresponding to the 0% and 6% gross rates of return, respectively as follows: ASLII -1.55% and 4.36%; APEX II and Stagecoach APEX II -3.17% and 2.64%; ASAP III and Stagecoach ASAP III -2.78% and 3.05% in years 1-8 and -2.19% and 3.68% in years 9+, XTra Credit SIX and Stagecoach XTra Credit SIX -3.17% and 2.64% in years 1-10 and -2.19% and 3.68% in years 11+. D-5 This page intentionally left blank - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVAPEXII-PROS (06/2005). -------------------------------------- (print your name) -------------------------------------- (address) -------------------------------------- (city/state/zip code) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED A Prudential Financial Company A Prudential Financial Company One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-680-8920 Telephone: 203-926-1888 http://www.americanskandia.prudential.com http://www.americanskandia.prudential.com
MAILING ADDRESSES: AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity P.O. Box 7960 Philadelphia, PA 19176 EXPRESS MAIL: AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity 2101 Welsh Road Dresher, PA 19025 Supplement dated December 5, 2005 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia Advisor Plan III, Stagecoach Advisor Plan III, American Skandia XTra Credit SIX, Stagecoach XTra Credit SIX, American Skandia LifeVest(R) II, American Skandia APEX II, Stagecoach APEX II, Advisors Choice (R)/2000/, American Skandia Variable Adjustable Immediate Annuity, and American Skandia Variable Immediate Annuity, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable or immediate annuity you own, and is not intended to be a prospectus or offer for any other variable or immediate annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST") and to announce five additional AST portfolios (the "AST Asset Allocation Portfolios") that are being offered as new variable investment options under each of the above-referenced products. We are announcing the closure of the asset allocation programs offered in each of the above-referenced products. All of these changes apply to each Prospectus and will be effective on or about December 5, 2005, unless specifically stated otherwise. 1. PORTFOLIO MERGERS The Trustees of AST and shareholders have approved these mergers to be effective as of December 5, 2005: The AST Alger All-Cap Growth Portfolio has merged into the AST Neuberger Berman Mid-Cap Growth Portfolio. As a result of the merger, the AST Alger All-Cap Growth Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST Neuberger Berman Mid-Cap Growth Portfolio remain unchanged. The AST AllianceBernstein Growth + Value Portfolio merged into the AST AllianceBernstein Managed Index 500 Portfolio. As a result of the merger, the AST AllianceBernstein Growth + Value Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST AllianceBernstein Managed Index 500 Portfolio remain unchanged. The following information for the successor portfolios replaces the information previously indicated for these portfolios under the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust" to reflect estimates of what the expenses of the portfolio will be as a result of the mergers:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------------------- Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Neuberger Berman Mid-Cap Growth/1/ 0.90% 0.18% None 1.08% AST AllianceBernstein Managed Index 500/2/ 0.60% 0.16% None 0.76%
- -------- 1 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST Neuberger Berman Mid-Cap Growth Portfolio prior to the Merger were as follows: Management Fee: 0.90%; 12b-1 Fee: None; Other Expenses: 0.22%; Total Annual Portfolio Operating Expenses: 1.12%. 2 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST AllianceBernstein Managed Index 500 Portfolio prior to the Merger were as follows: Management Fee: 0.60%; 12b-1 Fee: None; Other Expenses: 0.17%; Total Annual Portfolio Operating Expenses: 0.77%. 2. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST and, where necessary, shareholders have approved the following sub-advisor and portfolio name changes to be effective as of December 5, 2005: AST Gabelli All-Cap Value Portfolio EARNEST Partners LLC and Wedge Capital Management, LLP replaced GAMCO Investors, Inc. as Sub-advisors to the AST Gabelli All-Cap Value Portfolio. As a result, the Portfolio's name has changed to the AST Mid-Cap Value Portfolio. Under normal circumstances, the Portfolio will now invest at least 80% of the value its net assets in mid-capitalization companies. AST AllianceBernstein Large-Cap Growth Portfolio T. Rowe Price Associates, Inc. replaced Alliance Capital Management as Sub-advisor to the AST AllianceBernstein Large-Cap Growth Portfolio. As a result, the Portfolio's name has changed to the AST T. Rowe Price Large-Cap Growth Portfolio. AST Hotchkis & Wiley Large-Cap Value Portfolio J.P. Morgan Investment Management, Inc. has been added as a Sub-advisor to the AST Hotchkis & Wiley Large-Cap Value Portfolio and will manage a portion of the Portfolio. Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST Large-Cap Value Portfolio. AST Small-Cap Value Portfolio Salomon Brothers Asset Management Inc. has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. Each of Integrity Asset Management, J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Money Market Portfolio Prudential Investment Management, Inc. replaced Wells Capital Management, Inc. as Sub-advisor to the AST Money Market Portfolio. The name of the Portfolio remains unchanged. As a result of the above sub-advisor, investment objective/policies and name changes, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------ -------------------------------------------- ------------------- Mid Cap AST Mid-Cap Value (formerly AST Gabelli EARNEST Partners Value All-Cap Value): seeks to provide capital LLC/Wedge Capital growth by investing primarily in Management, LLP mid-capitalization stocks that appear to be undervalued. The Portfolio has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its net assets in mid-capitalization companies. Large Cap AST T. Rowe Price Large-Cap Growth (formerly T. Rowe Price Growth AST AllianceBernstein Large-Cap Growth): Associates, Inc. seeks long-term growth of capital by investing predominantly in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. The Portfolio takes a growth approach to investment selection and normally invests at least 80% of its net assets in the common stocks of large cap companies. Large Cap AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Value Wiley Large-Cap Value): seeks current income Capital Management, and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc. its net assets in common stocks of large-cap U.S. companies. The Portfolio focuses on common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small Cap AST Small-Cap Value: seeks to provide Integrity Asset Value long-term capital growth by investing Management; Lee primarily in small-capitalization stocks Munder Investments, that appear to be undervalued. The Portfolio Ltd; J.P. Morgan has a non-fundamental policy to invest, Investment under normal circumstances, at least 80% of Management, Inc.; the value of its net assets in Salomon Brothers small-capitalization stocks. The Portfolio Asset Management will focus on common stocks that appear to Inc. be undervalued. Fixed Income AST Money Market: seeks high current income Prudential while maintaining high levels of liquidity. Investment The Portfolio attempts to accomplish its Management, Inc. objective by maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. 2 Effective January 1, 2006, The Prudential Series Fund, Inc. will be reorganized as a Delaware statutory trust which will be named The Prudential Series Fund. Effective January 1, 2006, all references to The Prudential Series Fund, Inc. within each Prospectus shall be deemed to refer to The Prudential Series Fund. 3. AST ASSET ALLOCATION PORTFOLIOS Effective December 5, 2005, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", the following information is added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) ------------------------------------------------ Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Aggressive Asset Allocation /1/,/2/ 1.04% 0.26% None 1.30% AST Capital Growth Asset Allocation /1/,/2/ 0.99% 0.25% None 1.24% AST Balanced Asset Allocation /1/,/2/ 0.95% 0.24% None 1.19% AST Conservative Asset Allocation /1/,/2/ 0.93% 0.23% None 1.16% AST Preservation Asset Allocation /1/,/2/ 0.88% 0.22% None 1.10%
- -------- 1. Management Fees are based in part on estimated amounts for the current fiscal year. Each Asset Allocation Portfolio invests primarily in shares of one or more Underlying Portfolios. The only management fee directly paid by an Asset Allocation Portfolio is a 0.15% fee paid to the Investment Managers. The management fee shown in the chart for each Asset Allocation Portfolio is (i) the 0.15% management fee to be paid by the Asset Allocation Portfolios to the Investment Managers plus (ii) a weighted average estimate of the management fees to be paid by the Underlying Portfolios to the Investment Managers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the management fees to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocations for the applicable Asset Allocation Portfolio and the management fee rates for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolios. The management fees paid by an Asset Allocation Portfolio may be greater or less than those indicated above. 2. Other Expenses are based in part on estimated amounts for the current fiscal year. The other expenses shown in the chart for each Asset Allocation Portfolio include: (i) the other expenses expected to be paid by the Asset Allocation Portfolio to the Investment Managers and other service providers plus (ii) a weighted average estimate of the other expenses to be paid by the Underlying Portfolios to the Investment Managers and other service providers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the other expenses to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocation for the applicable Asset Allocation Portfolio and the annual operating expense ratios for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolio. The other expenses paid by an Asset Allocation Portfolio may be greater or less than those indicated above. A description of the types of costs that are included as other expenses for the Underlying Portfolios is set forth under the caption "Management of the Trust - Other Expenses" in the Underlying Portfolio Prospectus. B. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Aggressive Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 92.5% to 100% of its net assets to underlying portfolios investing primarily in equity securities, and 0% to 7.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Capital Growth Asset Allocation American Skandia Allocation/ Portfolio: seeks the highest potential total Investment Balanced return consistent with its specified level Services, Inc./ of risk tolerance. The Portfolio will invest Prudential its assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 72.5% to 87.5% of its net assets to underlying portfolios investing primarily in equity securities, and 12.5% to 27.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 3 PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Balanced Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in equity securities, and 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Conservative Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 47.5% to 62.5% of its net assets to underlying portfolios investing primarily in equity securities, and 37.5% to 52.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Preservation Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in equity securities, and 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 4. CLOSURE OF ASSET ALLOCATION PROGRAMS Effective December 5, 2005, the asset allocation programs that had been made available for use with your Annuity are being closed for new enrollments. As a result, in order to reflect the closure of the programs, the following changes are made to each Prospectus: A. The first paragraph in the section of the Prospectus entitled "Managing Your Account Value", under the sub-section "Are Any Asset Allocation Programs Available?" is replaced with the following: ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? We currently do not offer any asset allocation programs for use with your Annuity. Prior to December 5, 2005, we made certain asset allocation programs available. If you enrolled in one of the asset allocation programs prior to December 5, 2005, see the Appendix entitled "Additional Information on the Asset Allocation Programs" for more information on how the programs are administered. B. The Appendix entitled "Additional Information on Asset Allocation Programs" is revised to reflect the following changes to the Program Rules for those contract owners that choose to remain in their asset allocation program after December 5, 2005: . The asset allocation program will only perform the function of periodic rebalancing of your Account Value allocated to the variable Sub-accounts in accordance with the percentage allocations for the model portfolio you previously chose. . You will not be permitted to change from one model portfolio to another. Depending on what asset allocation program you had enrolled in, you may be permitted to transfer Account Value among the currently available sub-accounts that are part of the model (e.g., from one large-cap growth sub-account to another large-cap growth sub-account). . If you terminate your asset allocation program, you will not be permitted to re-enroll in the program. If you are enrolled in the Highest Daily Value Death Benefit ("HDV") or the Lifetime Five Income Benefit ("LT5"), or with respect to the American Skandia Variable Adjustable Immediate Annuity you have elected the Guarantee feature, termination of your asset allocation program must coincide with (i) the enrollment in a then currently available and approved asset allocation program or other approved option; or (ii) the allocation of your entire Account Value (or Income Base with respect to the American Skandia Variable Adjustable Immediate Annuity) to the then required investment option(s) available with these benefits or feature. 4 C. In each Prospectus, with the exception of the American Skandia Variable Immediate Annuity and the American Skandia Variable Adjustable Immediate Annuity, the following revisions are made: (i) In the section entitled "Living Benefit Programs", under the sub-section "Lifetime Five Income Benefit (Lifetime Five)": . the last two sentences in the box are replaced with the following: As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. . under the heading "Other Important Considerations", the fourth bullet is replaced with the following: You must allocate your Account Value in accordance with the then permitted and available option(s) with this program in order to elect and maintain the Lifetime Five program. (ii) In the section entitled "Death Benefit", under the sub-section "Highest Daily Value Death Benefit ("HDV")", the second paragraph within the first box is replaced with the following: If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. Because this benefit, once elected, may not be terminated you must keep your Account Value allocated to a permitted option throughout the life of the Annuity. D. In the Prospectus for the American Skandia Variable Adjustable Immediate Annuity, the sub-section entitled "Am I Required to Participate in an Asset Allocation Program?" under the section entitled "Managing Your Annuity", is replaced with the following: Am I Required to Participate in an Asset Allocation Program? If you purchased your Annuity prior to December 5, 2005 and chose the Optional Guarantee Feature, your Net Premium (plus any applicable Credit) was required to be allocated in accordance with an asset allocation model, and your Income Base also had to be allocated in accordance with such model. If you purchase your Annuity on or after December 5, 2005 and you choose the Optional Guarantee Feature, you must allocate your Net Premium/Income Base in accordance with the then permitted and available investment option(s) with this feature. 5. OTHER MATTERS A. In the Prospectus for the American Skandia LifeVest(R) II Annuity, in the section entitled "Summary of Contract Fees and Charges" in the table under the sub-section "Your Optional Benefit Fees and Charges", under the heading "Highest Daily Value Death Benefit ("HDV")", the Total Annual Charge in the third column is replaced and corrected as follows: HIGHEST DAILY VALUE DEATH BENEFIT ("HDV") ** 0.50% of average 2.15% We offer an Optional Death Benefit that provides an daily net assets of enhanced level of protection for your the Sub-accounts beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Daily Value, less proportional withdrawals. B. In the Prospectus for the American Skandia Xtra Credit SIX Annuity, in the section entitled "Managing Your Account Value", sub-section "May I Give My Investment Professional Permission To Manage My Account Value?", the first two sentences are replaced and corrected as follows: Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. 5 Supplement to Prospectus Dated May 2, 2005 Supplement dated March 20, 2006 Supplement dated March 20, 2006 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia APEX II and Stagecoach APEX II, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable annuity you own, and is not intended to be a prospectus or offer for any other variable annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST"), the addition of three AST portfolios that are being offered as new variable investment options and a new living benefit. All of these changes apply to each Prospectus and will be effective on or about March 20, 2006, unless specifically stated otherwise. 1. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST have approved the following sub-advisor and portfolio name changes to be effective as of March 20, 2006: AST Goldman Sachs High Yield Portfolio Pacific Investment Management Company LLC has been added as a Sub-advisor to the AST Goldman Sachs High Yield Portfolio and will manage a portion of the Portfolio. Goldman Sachs Asset Management, L.P. will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST High Yield Portfolio. AST Large-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Large-Cap Value Portfolio and will manage a portion of the Portfolio. Both J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Small-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. In addition, Integrity Asset Management will no longer be a Sub-advisor to the Portfolio. Each of Salomon Brothers Asset Management Inc., J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. As a result, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Fixed AST High Yield (formerly AST Goldman Sachs Goldman Sachs Asset Income High Yield): seeks a high level of current Management, L.P.; income and may also consider the potential Pacific Investment for capital appreciation. The Portfolio Management Company invests, under normal circumstances, at LLC (PIMCO) least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in high yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. Large AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Cap Wiley Large-Cap Value): seeks current income Capital Management, Value and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc.; its net assets in common stocks of large-cap Dreman Value U.S. companies. The Portfolio focuses on Management LLC common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small AST Small-Cap Value: seeks to provide Lee Munder Cap long-term capital growth by investing Investments, Ltd; Value primarily in small-capitalization stocks J.P. Morgan that appear to be undervalued. The Portfolio Investment has a non-fundamental policy to invest, Management, Inc.; under normal circumstances, at least 80% of Salomon Brothers the value of its net assets in Asset Management small-capitalization stocks. The Portfolio Inc.; Dreman Value will focus on common stocks that appear to Management LLC be undervalued. 2. NEW SUB-ACCOUNTS Effective March 20, 2006, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- ------------------- Asset AST First Trust Balanced Target: seeks First Trust Allocation/ long-term capital growth balanced by current Advisors L.P. Balanced income. The portfolio normally invests approximately 65% of its total assets in equity securities and 35% in fixed income securities. Depending on market conditions, the equity portion may range between 60-70% and the fixed income portion between 30-40%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST First Trust Capital Appreciation Target: First Trust Allocation/ seeks long-term growth of capital. The Advisors L.P. Balanced portfolio normally invests approximately 80% of its total assets in equity securities and 20% in fixed income securities. Depending on market conditions, the equity portion may range between 75-85% and the fixed income portion between 15-25%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST Advanced Strategies: seeks a high level Marsico Capital Allocation/ of absolute return. The Portfolio invests Management, LLC; T. Balanced primarily in a diversified portfolio of Rowe Price equity and fixed income securities across Associates, Inc.; different investment categories and LSV Asset investment managers. The Portfolio pursues a Management; William combination of traditional and Blair & Company, non-traditional investment strategies. L.L.C.; Pacific Investment Management Company LLC (PIMCO); B. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", following portfolios have been added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - ----------------------------------------------------------------------------------------------- Total Annual UNDERLYING PORTFOLIO Management Other Portfolio Operating American Skandia Trust: Fees Expenses 12b-1 Fees Expenses - ----------------------- ---------- -------- ---------- ------------------- AST First Trust Balanced Target 0.85% 0.19% None 1.04% AST First Trust Capital Appreciation Target 0.85% 0.19% None 1.04% AST Advanced Strategies 0.85% 0.18% None 1.03%
2 3. NEW INSURANCE FEATURE We are adding the Spousal Lifetime Five(SM) Income Benefit ("Spousal Lifetime Five"), that guarantees until the later death of two designated lives the ability to withdraw an annual amount of an initial principal value regardless of market-based declines in account value. As a result, the following revisions are made to the Prospectus: A. The following information has been added to "YOUR OPTIONAL BENEFIT FEES AND CHARGES" table in the "Summary of Contract Fees and Charges" section of the Prospectus: OPTIONAL BENEFIT TOTAL ANNUAL FEE/CHARGE CHARGE ------------------- ------------ SPOUSAL LIFETIME FIVE INCOME BENEFIT* We offer a program that guarantees until 0.75% of average 2.40% the later death of two Designated Lives (as daily net assets of defined in this Prospectus) the ability to the Sub-accounts withdraw an annual amount equal to 5% of an initial principal value regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. - -------- * This optional benefit is not available under the Qualified BCO. B. The Spousal Lifetime Five program is not available if you elect any other optional living or optional death benefit, therefore all references in the Prospectus that reflect the availability of the optional living benefits are revised accordingly. C. The following description of the new optional living benefit is added as the last section under "Living Benefit Programs" in the Prospectus: SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE) The Spousal Lifetime Five program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, if you elect Spousal Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Spousal Lifetime Five and Lifetime Five. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must be elected based on two Designated Lives, as described below. Each Designated Life must be at least 55 years old when the benefit is elected. The Spousal Lifetime Five program is not available if you elect any other optional living benefit or Death Benefit. As long as your Spousal Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees until the later death of two natural persons that are each other's spouses at the time of election of Spousal Lifetime Five and at the first death of one of them (the "Designated Lives", each a "Designated Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit") equal to a percentage of an initial principal value (the "Protected Withdrawal Value") regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. The Spousal Life Income Benefit may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity, wish to ensure that market performance will not affect your ability to receive annual payments and wish either spouse to be able to continue the Spousal Life Income Benefit after the death of the first. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Initial Protected Withdrawal Value The initial Protected Withdrawal Value is used to determine the amount of initial annual payment under the Spousal Life Income Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Spousal Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Spousal Lifetime Five, plus any additional Purchase Payments growing at 5% per year from the date of your election of the program, (or application of the Purchase Payment if later) to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (B) and (C) above, each value is increased by the amount of any subsequent Purchase Payments. . If you elect the Spousal Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. 3 . For existing Owners who are electing the Spousal Lifetime Five benefit, the Account Value on the date of your election of the Spousal Lifetime Five program will be used to determine the initial Protected Withdrawal Value. KEY FEATURE -- Annual Income Amount under the Spousal Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in the Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 3rd anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Spousal Lifetime Five or after you have elected Spousal Lifetime Five. If, on the date that we implement an auto step-up to your Annual Income Amount, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such auto step-up. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary on or next following the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program, and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is affected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. The Spousal Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount. Under Spousal Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Spousal Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2009 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for the Spousal Lifetime Five. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05 (393/365) = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit (5% of $265,000). Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006, then the following values would result: 4 . Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006, then the following values would result: . Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. . Reduction to Annual Income Amount = Excess Income/Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 Example 3. Step-up of the Annual Income Amount If a step-up of the Annual Income Amount is requested on March 1, 2009, the request will be accepted because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM . To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under the Spousal Life Income Benefit, we will make an additional payment for that Annuity Year equal to the remaining Annual Income Amount for the Annuity Year, if any. Thus, in that scenario, the remaining Annual Income Amount would be payable even though your Account Value was reduced to zero. In subsequent Annuity Years we make payments that equal the Annual Income Amount as described in this Prospectus. No further Purchase Payments will be accepted under your Annuity. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount, the Spousal Life Income Benefit terminates and no additional payments will be made. . If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years, you can elect one of the following two options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. We must receive your request in a form acceptable to us at our office. . In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a joint and survivor or single (as applicable) life fixed annuity with five payments certain using the same basis that is used to calculate the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the same basis that is used to calculate the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. . If no withdrawal was ever taken, we will determine an initial Protected Withdrawal Value and calculate an Annual Income Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations . Withdrawals under the Spousal Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. . Withdrawals made while the Spousal Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Spousal Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value. 5 . You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Spousal Lifetime Five program. The Spousal Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Annual Income Amount in the form of periodic benefit payments. . You must allocate your Account Value in accordance with the then available option(s) that we may permit in order to elect and maintain the Spousal Lifetime Five program. . There may be circumstances where you will continue to be charged the full amount for the Spousal Lifetime Five program even when the benefit is only providing a guarantee of income based on one life with no survivorship. . In order for the Surviving Designated Life to continue the Spousal Lifetime Five program upon the death of an owner, the Designated Life must elect to assume ownership of the Annuity under the spousal continuation option. See "Spousal Owners/Spousal Beneficiaries", "Spousal Beneficiary -- Assumption of Annuity" and "Qualified Beneficiary Continuation Option" in this Prospectus. Election of and Designations under the Program Spousal Lifetime Five can only be elected based on two Designated Lives. Designated Lives must be natural persons who are each other's spouses at the time of election of the program and at the death of the first of the Designated Lives to die. Currently, the program may only be elected where the Owner, Annuitant and Beneficiary designations are as follows: . One Annuity Owner, where the Annuitant and the Owner are the same person and the beneficiary is the Owner's spouse. The Owner/Annuitant and the beneficiary each must be at least 55 years old at the time of election; or . Co-Annuity Owners, where the Owners are each other's spouses. The Beneficiary designation must be the surviving spouse. The first named Owner must be the Annuitant. Both Owners must each be 55 years old at the time of election. No Ownership changes or Annuitant changes will be permitted once this program is elected. However, if the Annuity is co-owned, the Owner that is not the Annuitant may be removed without affecting the benefit. The Spousal Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Spousal Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Termination of the Program The program terminates automatically when your Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. We reserve the right to further limit the frequency election in the future. The program terminates upon your surrender of the Annuity, upon the first Designated Life to die if the Annuity is not continued, upon the second Designated Life to die or upon your election to begin receiving annuity payments. The charge for the Spousal Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity, this required beginning date can generally be deferred to after retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Income Amount, which will cause us to increase the Annual Income Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 6 5. LIFETIME FIVE INCOME BENEFIT In order to reflect certain administrative changes to the Lifetime Five Income Benefit, the box in the section of the prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), is replaced with: The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Lifetime Five can be elected only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. Currently, if you elect Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Lifetime Five and Spousal Lifetime Five. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect any other optional living benefit. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), under the heading "Key Feature - Protected Withdrawal Value" the following information is added after the 3rd paragraph: You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect, then you are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected prior to March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elected the Lifetime Five program on or after March 20, 2006, then you are eligible to step-up the Protected Withdrawal Value on or after the 3rd anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected on or after March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 3rd anniversary following the preceding step-up. In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Under the same heading "Key Feature - Protected Withdrawal Value", before the last paragraph, the following information is added: We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Lifetime Five or after you have elected Lifetime Five. If, on the date that we implement an auto step-up to your Protected Withdrawal Value, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the first withdrawal under the Lifetime Five program (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is effected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. Under the heading "Election of the Program", the following information is added: Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Spousal Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. If you elected Lifetime Five prior to March 20, 2006, and you terminate the program, there will be no waiting period before you can re-elect the program or elect Spousal Lifetime Five provided that you had not previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five. If you had previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five, you will be able to re-elect the program or elect Spousal Lifetime Five on any date on or after the next anniversary of the Annuity Date. However, once you choose to re-elect/elect, the waiting period described above will apply to subsequent re-elections. We reserve the right to limit the re-election/election frequency in the future. Before making any such change to the re-election/election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. 7 Under the heading "Termination of the Program", the following sentence was added to the end of the first paragraph: While you may terminate Lifetime Five at any time, we may not terminate the benefit other than in the circumstances listed above. However, we may stop offering the program for new elections or re-elections at any time in the future. 6. WACHOVIA SECURITIES In the section entitled "General Information", the following paragraph was added to the end of the heading entitled "Who Distributes Annuities Offered by American Skandia?": On July 1, 2003, Prudential Financial combined its retail securities brokerage and clearing operations with those of Wachovia Corporation ("Wachovia") and formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a joint venture headquartered in Richmond, Virginia. Prudential Financial has a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia and Wachovia Securities are key distribution partners for certain products of Prudential Financial affiliates, including mutual funds and individual annuities that are distributed through their financial advisors, bank channel and independent channel. In addition, Prudential Financial is a service provider to the managed account platform and certain wrap-fee programs offered by Wachovia Securities. 8 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 ----------------------------------------------- AMERICAN SKANDIA STAGECOACH(TM) XTRA CREDIT(SM) SIX Flexible Premium Deferred Annuity - ------------------------------------------------------------------------------- PROSPECTUS: MAY 2, 2005 AS REVISED ON JUNE 20, 2005 This Prospectus describes Stagecoach(TM) XTra Credit(SM) SIX, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Wells Fargo Bank, N.A. The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. For more information about variations applicable to your state, please refer to your Annuity contract or consult your Investment Professional. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. - -------------------------------------------------------------------------------- American Skandia offers several different annuities which your Investment Professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection and the ability to access your annuity's account value. The fees and charges you pay and compensation paid to your Investment Professional may also be different between each annuity. For more information, please refer to the Appendix entitled "Selecting the Variable Annuity That's Right for You." - -------------------------------------------------------------------------------- The Variable Investment Options - -------------------------------------------------------------------------------- The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: Wells Fargo Variable Trust, American Skandia Trust, Gartmore Variable Investment Trust, A I M Advisors, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. Please Read This Prospectus - -------------------------------------------------------------------------------- Please read this prospectus and the current prospectus for the underlying mutual funds. Keep them for future reference. If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. Available Information - -------------------------------------------------------------------------------- We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 101. This Prospectus is part of the registration statement we filed with the SEC regarding this offering. Additional information on us and this offering is available in the registration statement and the exhibits thereto. You may review and 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. 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. For Further Information call: - -------------------------------------------------------------------------------- > 1-800-680-8920 These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, or bank subsidiary of Wells Fargo Bank, N.A., are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value, even with respect to amounts allocated to the AST Money Market sub-account. 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. American Skandia XTra Credit(SM) is a service mark of The Prudential Insurance Company of America. American Skandia Stagecoach(TM) XTra Credit(SM) Six are registered trademarks/service marks of a Wells Fargo Bank, N.A. and The Prudential Insurance Company of America, respectively. Prospectus Dated: May 2, 2005 as revised on June 20, 2005 Statement of Additional Information Dated: May 2, 2005 WFXT6PR605 WFVXT-SIXPROS PLEASE SEE OUR PRIVACY POLICY AND IRA DISCLOSURE STATEMENT ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. Contents - -------------------------------------------------------------------------------- Introduction ............................................................................. 1 Why Would I Choose to Purchase This Annuity? ........................................... 1 What Are Some of the Key Features of This Annuity? ..................................... 2 How Do I Purchase This Annuity? ........................................................ 2 Glossary of Terms ........................................................................ 3 Summary of Contract Fees and Charges ..................................................... 4 Expense Examples ......................................................................... 13 Investment Options ....................................................................... 14 What Are the Investment Objectives and Policies of the Portfolios? ..................... 14 What Are the Fixed Allocations? ........................................................ 30 Fees and Charges ......................................................................... 31 What Are the Contract Fees and Charges? ................................................ 31 What Charges Apply Solely to the Variable Investment Options? .......................... 32 What Fees and Expenses Are Assessed by the Portfolios? ................................. 33 What Charges Apply to the Fixed Allocations? ........................................... 33 What Charges Apply if I Choose an Annuity Payment Option? .............................. 33 Exceptions/Reductions to Fees and Charges .............................................. 33 Purchasing Your Annuity .................................................................. 34 What Are Our Requirements for Purchasing the Annuity? .................................. 34 Managing Your Annuity .................................................................... 36 May I Change the Owner, Annuitant and Beneficiary Designations? ........................ 36 May I Return the Annuity if I Change My Mind? .......................................... 36 May I Make Additional Purchase Payments? ............................................... 36 May I Make Scheduled Payments Directly from My Bank Account? ........................... 37 May I Make Purchase Payments Through a Salary Reduction Program? ....................... 37 Managing Your Account Value .............................................................. 38 How and When Are Purchase Payments Invested? ........................................... 38 How Do I Receive Credits? .............................................................. 38 How Are Credits Applied to My Account Value? ........................................... 38 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 40 Do You Offer Dollar Cost Averaging? .................................................... 41 Do You Offer Any Automatic Rebalancing Programs? ....................................... 42 Are Any Asset Allocation Programs Available? ........................................... 42 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 43 May I Give My Investment Professional Permission to Manage My Account Value? ........... 44 May I Authorize My Third Party Investment Advisor to Manage My Account? ................ 44 How Do the Fixed Allocations Work? ..................................................... 45 How Do You Determine Rates for Fixed Allocations? ...................................... 46 How Does the Market Value Adjustment Work? ............................................. 46 What Happens When My Guarantee Period Matures? ......................................... 47 Access To Account Value .................................................................. 48 What Types of Distributions are Available to Me? ....................................... 48 Are There Tax Implications for Distributions? .......................................... 48 Can I Withdraw a Portion of My Annuity? ................................................ 48 How Much Can I Withdraw as a Free Withdrawal? .......................................... 49 Is There a Charge for a Partial Withdrawal? ............................................ 49 Can I Make Periodic Withdrawals From the Annuity During the Accumulation Period? ....... 49 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue Code? ................................................................. 50 What Are Minimum Distributions and When Would I Need to Make Them? ..................... 50 Can I Surrender My Annuity for its Value? .............................................. 50 What is a Medically-Related Surrender and How Do I Qualify? ............................ 50
(i) Contents - -------------------------------------------------------------------------------- What Types of Annuity Options Are Available? ........................................... 51 How and When Do I Choose the Annuity Payment Option? ................................... 52 How Are Annuity Payments Calculated? ................................................... 52 Living Benefit Programs .................................................................. 55 Do You Offer Programs Designed to Provide Investment Protection for Owners While They Are Alive? ........................................................................... 55 Guaranteed Return Option Plussm (GRO Plussm) ........................................... 56 Guaranteed Return Option (GRO) ......................................................... 61 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 63 Guaranteed Minimum Income Benefit (GMIB) ............................................... 67 Lifetime Five Income Benefit (Lifetime Five) ........................................... 72 Death Benefit ............................................................................ 78 What Triggers the Payment of a Death Benefit? .......................................... 78 Basic Death Benefit .................................................................... 78 Optional Death Benefits ................................................................ 78 American Skandia's Annuity Rewards ..................................................... 83 Payment of Death Benefits .............................................................. 83 Valuing Your Investment .................................................................. 86 How is My Account Value Determined? .................................................... 86 What is the Surrender Value of My Annuity? ............................................. 86 How and When Do You Value the Sub-Accounts? ............................................ 86 How Do You Value Fixed Allocations? .................................................... 86 When Do You Process and Value Transactions? ............................................ 86 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 88 Tax Considerations ....................................................................... 89 General Information ...................................................................... 96 How Will I Receive Statements and Reports? ............................................. 96 Who is American Skandia? ............................................................... 96 What are Separate Accounts? ............................................................ 96 What is the Legal Structure of the Underlying Funds? ................................... 98 Who Distributes Annuities Offered by American Skandia? ................................. 99 Incorporation of Certain Documents by Reference ........................................ 100 Financial Statements ................................................................... 100 How to Contact Us ...................................................................... 100 Indemnification ........................................................................ 101 Legal Proceedings ...................................................................... 101 Contents of the Statement of Additional Information .................................... 101 Appendix A -- Condensed Financial Information About Separate Account B ................... A-1 Appendix B -- Calculation of Optional Death Benefits ..................................... B-1 Appendix C -- Additional Information on Asset Allocation Programs ........................ C-1 Appendix D -- Selecting the Variable Annuity That's Right for You ........................ D-1
(ii) AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Introduction - -------------------------------------------------------------------------------- Why Would I Choose to Purchase This Annuity? - -------------------------------------------------------------------------------- This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers a choice of different optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive and one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed allocations. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59-1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 70-1/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your Investment Professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. - -------------------------------------------------------------------------------- If you purchase this Annuity, we apply an additional amount (an XTra Credit(SM)) to your account value with each purchase payment you make, including your initial purchase payment and any additional purchase payments during the first six annuity years. o This Annuity features an annual Insurance Charge of 0.65% and an annual Distribution Charge of 1.00%. We only deduct the Distribution Charge during the first 10 years following the effective date of your Annuity. During the first 10 years, the total asset-based charges on this Annuity are higher than many of our other annuities. o Unlike many other annuities, the contingent deferred sales charge (CDSC) that may apply to a withdrawal or surrender of your Annuity is based on the number of years since the effective date of your Annuity. We do not assess a separate CDSC based on the date that each purchase payment is applied. The CDSC on this Annuity is higher and is deducted for a longer period of time as compared to our other annuities. As with any investment product that features a CDSC, you should consider your need to access your account value during the CDSC period and whether the liquidity provision under the Annuity will satisfy that need. The CDSC is only deducted if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity. If you make a withdrawal or surrender your Annuity which is subject to a CDSC, we do not recover the XTra Credit(SM) amount. o The XTra Credit(SM) amount is included in your account value. However, American Skandia may take back the original XTra Credit(SM) amount applied to your purchase payment if you "free-look" your Annuity or within twelve (12) months of having received an XTra Credit amount, you die or elect to withdraw your account value under the medically-related surrender provision. In these situations, your Account Value could be substantially reduced. However, any investment gain on the XTra Credit(SM) amount will not be recovered. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we recover the XTra Credit(SM) amount. - -------------------------------------------------------------------------------- 1 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Introduction continued - -------------------------------------------------------------------------------- What Are Some of the Key Features of This Annuity? - -------------------------------------------------------------------------------- o This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. o This Annuity offers both variable investment options and Fixed Allocations. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed Allocations of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. o The Annuity features two distinct phases -- the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. o During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. o This Annuity offers a Credit which we add to your Annuity with each Purchase Payment we receive in Annuity Years one (1) through six (6). o This Annuity offers optional benefits, for an additional charge, that can provide principal protection or guaranteed minimum income protection for Owners while they are alive. o This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. o You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges, although any optional guaranteed benefit you elect may be reduced. Other product features allow you to access your Account Value as necessary, although a charge may apply. o Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. How Do I Purchase This Annuity? - -------------------------------------------------------------------------------- We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $10,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $10,000. If the Annuity is owned by an individual or individuals, the oldest of those Owners must be age 75 or under, as of the Issue Date of the Annuity. If the Annuity is owned by an entity, the annuitant must be age 75 or under, as of the Issue Date of the Annuity. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the Owner's date of death. 2 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Glossary of Terms - -------------------------------------------------------------------------------- Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. ACCOUNT VALUE - ------------- The value of each allocation to a Sub-account (also referred to as "variable investment option") or a Fixed Allocation prior to the Annuity Date, plus any earnings, and/or less any losses, distributions and charges. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC" or "surrender charge") and/or other than on a contract anniversary, any fee that is deducted from the contract annually in arrears. The Account Value includes any Credits we applied to your Purchase Payments that we are entitled to recover under certain circumstances. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. ANNUITIZATION - ------------- The application of Account Value (or Protected Income Value for the Guaranteed Minimum Income Benefit, if applicable) to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. ANNUITY DATE - ------------ The date you choose for annuity payments to commence. A maximum Annuity Date may apply. ANNUITY YEAR - ------------ A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. CODE - ---- The Internal Revenue Code of 1986, as amended from time to time. FIXED ALLOCATION - ---------------- An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. GUARANTEE PERIOD - ---------------- A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. INTERIM VALUE - ------------- The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. ISSUE DATE - ---------- The effective date of your Annuity. MVA - --- A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day more than 30 days prior to the Maturity Date of such Fixed Allocation. OWNER - ----- With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. SURRENDER VALUE - --------------- The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge, the charge for any optional benefits, and any additional amounts we applied to your Purchase Payments that we may be entitled to recover under certain circumstances. The surrender value may be calculated using a Market Value Adjustment with respect to amounts in any Fixed Allocation. UNIT - ---- A measure used to calculate your Account Value in a Sub-account during the accumulation period. VALUATION DAY - -------------- Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. 3 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Summary of Contract Fees and Charges - -------------------------------------------------------------------------------- Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the mortality and expense risk charge, the charge for administration of the Annuity, the Distribution Charge and the charge for certain optional benefits you elect, other than the Guaranteed Minimum Income Benefit, which is assessed against the Protected Income Value. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. The following table provides a summary of the fees and charges you will pay if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
YOUR TRANSACTION FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------- (ASSESSED AGAINST THE ANNUITY) FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------------- Contingent Deferred Sales Charge* 9.0% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period during which a particular percentage applies is measured from the Issue Date of the Annuity. - ------------------------------------------------------------------------------------------------------------------- Transfer Fee $10 (currently, $15 maximum) (Currently, we deduct the fee after the 20th transfer each Annuity Year. We guarantee that the number of charge free transfers per Annuity Year will never be less than 8.) - ------------------------------------------------------------------------------------------------------------------- Tax Charge Up to 3.5% of the value that is annuitized, depending on the requirements of the applicable jurisdiction. This charge is deducted generally at the time you annuitize your contract. - -------------------------------------------------------------------------------------------------------------------
* The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. For purposes of calculating this charge we consider the year following the Issue Date of your Annuity as Year 1.
- ---------------------------------------------------------------------------------------------------------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9 Yr. 10 Yr. 11+ - ---------------------------------------------------------------------------------------------------------- 9.0% 9.0% 8.5% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0% - ----------------------------------------------------------------------------------------------------------
4 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- The following table provides a summary of the periodic fees and charges you will pay while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus.
YOUR PERIODIC FEES AND CHARGES - ---------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINST THE ANNUITY FEE/CHARGE AMOUNT DEDUCTED - ---------------------------------------------------------------------------------------------------------------------- Smaller of $35 or 2% of Account Value (Assessed annually on the Annuity's anniversary date or Annual Maintenance Fee upon surrender) - ---------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNT(1) - ---------------------------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE AMOUNT DEDUCTED - ---------------------------------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge(2) 0.50% - ---------------------------------------------------------------------------------------------------------------------- Administration Charge(2) 0.15% - ---------------------------------------------------------------------------------------------------------------------- Distribution Charge(3) 1.00% in Annuity Years 1-10 - ---------------------------------------------------------------------------------------------------------------------- 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Settlement Service Charge(4) Option 5 ("Qualified BCO") - ---------------------------------------------------------------------------------------------------------------------- 1.65% per year of the value of each Sub-account in Annuity Years 1-10; 0.65% in Annuity Years 11 and later (1.40% per year if you Total Annual Charges of the Sub-accounts are a beneficiary electing the Qualified BCO) ----------------------------------------------------------------------------------------------------------------------
1: These charges are deducted daily and apply to Variable Investment Options only. 2: The combination of the Mortality and Expense Risk Charge and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. 3: The Distribution Charge in Annuity Years 11+ is 0.00%. 4: The Mortality & Expense Risk Charge, the Administration Charge and the Distribution Charge do not apply if you are a beneficiary under the Qualified Beneficiary Continuation Option. The Settlement Service Charge applies only if your beneficiary elects the Qualified Beneficiary Continuation Option. 5: When an Annuity is used as an IRA, 403(b) or other "qualified investment", upon the Owner's death a beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. If a beneficiary elects this option, the beneficiary will incur the Settlement Service Charge. Please refer to the section of this Prospectus that describes the Qualified Beneficiary Continuation Option for more detailed information about this option, including certain restrictions and limitations that may apply. 5 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- The following table provides a summary of the fees and charges you will pay if you elect any of the following optional benefits. Not all optional benefits may be purchased in combination with one another. You may only elect one optional living benefit. The optional living benefits are the Guaranteed Return Option Plus program (and where not available, Guaranteed Return Option), the Guaranteed Minimum Withdrawal Benefit, the Guaranteed Minimum Income Benefit and the Lifetime Five(SM) Income Benefit. For the optional death benefits, you may elect the Highest Anniversary Value Death Benefit or the Highest Daily Value Death Benefit together with the Enhanced Beneficiary Protection Death Benefit or any of these three benefits, individually, but the Combination 5% Roll-up and the HAV Death Benefit may only be purchased individually. The fees and charges and each of the optional benefits are described in more detail within this Prospectus.
YOUR OPTIONAL BENEFIT FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ OPTIONAL BENEFIT FEE/ TOTAL ANNUAL OPTIONAL BENEFIT CHARGE CHARGE* - ------------------------------------------------------------------------------------------------------------------------------------ GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM))/GUARANTEED RETURN OPTION - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees a "return of premium" at a future date, 0.25% of average daily 1.90% in Annuity Years while allowing you to allocate all or a portion of your Account Value to net assets of the 1-10; 0.90% in Annuity certain Sub-accounts. Sub-accounts Years 11 and later; 1.65% for Qualified BCO GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts equal 0.35% of average daily 2.00% in Annuity Years to an initial principal value, regardless of the impact of market performance net assets of the 1-10; 1.00% in Annuity on your Account Value. Sub-accounts Years 11 and later; 1.75% for Qualified BCO GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that, after a seven-year waiting period, guarantees your 0.50% per year of the 1.65% in Annuity Years ability to begin receiving income from your Annuity in the form of annuity average Protected 1-10; 0.65% in Annuity payments based on your total Purchase Payments (and any Credits applied to Income Value during Years 11 and later such Purchase Payments) and an annual increase of 5% on such Purchase each year; deducted PLUS Payments adjusted for withdrawals (called the "Protected Income Value"), annually in arrears each 0.50% per year of average regardless of the impact of market performance on your Account Value. Annuity Year Protected Income Value LIFETIME FIVE INCOME BENEFIT** - ------------------------------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts equal 0.60% of average daily 2.25% in Annuity Years to a percentage of an initial principal value, regardless of the impact of net assets of the 1-10; 1.25% in Annuity market performance on your Account Value, subject to our program rules Sub-accounts Years 11 and later regarding the timing and amount of withdrawals. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily 1.90% in Annuity Years protection for your beneficiary(ies) by providing amounts in addition to the net assets of the 1-10; 0.90% in Annuity basic Death Benefit that can be used to offset federal and state taxes Sub-accounts Years 11 and later payable on any taxable gains in your Annuity at the time of your death.
6 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
OPTIONAL BENEFIT FEE/ TOTAL ANNUAL OPTIONAL BENEFIT CHARGE CHARGE* - ------------------------------------------------------------------------------------------------------------------------------------ HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.25% of average daily 1.90% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the 1-10; 0.90% in Annuity greater of the basic Death Benefit and the Highest Anniversary Value, less Sub-accounts Years 11 and later proportional withdrawals. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT ** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily 2.15% in Annuity Years protection for your beneficiary(ies) by providing the greater of the Highest net assets of the 1-10; 1.15% in Annuity Anniversary Value Death Benefit and a 5% annual increase on Purchase Sub-accounts Years 11 and later Payments (and any Credits applied to such Purchase Payments) adjusted for withdrawals. HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** - ------------------------------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 0.50% of average daily 2.15% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to net assets of the 1-10; 1.15% in Annuity the greater of the basic Death Benefit and the Highest Daily Value, less Sub-accounts Years 11 and later proportional withdrawals. - ------------------------------------------------------------------------------------------------------------------------------------ Please refer to the section of this Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - ------------------------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge and Distribution Charge assessed against the average daily net assets allocated to the Sub-accounts. If you elect more than one optional benefit, the Total Annual Charge would be increased to include the charge for each optional benefit. ** These optional benefits are not available under the Qualified BCO. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2004. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES - --------------------------------------------------------------------------------
MINIMUM MAXIMUM - -------------------------------------------------------------------------------- Total Portfolio Operating Expense 0.63% 3.06%
The following are the investment management fees, other expenses, 12b-1 fees (if applicable) and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2004, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee has been waived and/or other expenses have been partially reimbursed. Any such fee waivers and/or reimbursements have been reflected in the footnotes. The "Total Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. 7 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Summary of Contract Fees and Charges continued - --------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES - -------------------------------------------------------------------------------------------------------- (AS A PERCENTAGE OF THE AVERAGE NET ASSETS OF THE UNDERLYING PORTFOLIOS) TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES American Skandia Trust: (2, 3) - -------------------------------------------------------------------------------------------------------- AST JPMorgan International Equity 1.00% 0.13% None 1.13% AST William Blair International Growth 1.00% 0.22% None 1.22% AST LSV International Value(4) 1.00% 0.37% None 1.37% AST MFS Global Equity 1.00% 0.35% None 1.35% AST Small-Cap Growth(5) 0.90% 0.24% None 1.14% AST DeAM Small-Cap Growth 0.95% 0.22% None 1.17% AST Federated Aggressive Growth 0.95% 0.24% None 1.19% AST Goldman Sachs Small-Cap Value 0.95% 0.24% None 1.19% AST Small-Cap Value(6) 0.90% 0.18% None 1.08% AST DeAM Small-Cap Value 0.95% 0.33% None 1.28% AST Goldman Sachs Mid-Cap Growth 1.00% 0.25% None 1.25% AST Neuberger Berman Mid-Cap Growth 0.90% 0.22% None 1.12% AST Neuberger Berman Mid-Cap Value 0.90% 0.15% None 1.05% AST Alger All-Cap Growth 0.95% 0.22% None 1.17% AST Gabelli All-Cap Value 0.95% 0.26% None 1.21% AST T. Rowe Price Natural Resources 0.90% 0.26% None 1.16% AST AllianceBernstein Large-Cap Growth(7) 0.90% 0.23% None 1.13% AST MFS Growth 0.90% 0.20% None 1.10% AST Marsico Capital Growth 0.90% 0.14% None 1.04% AST Goldman Sachs Concentrated Growth 0.90% 0.17% None 1.07% AST DeAM Large-Cap Value 0.85% 0.26% None 1.11% AST AllianceBernstein Growth + Value 0.90% 0.32% None 1.22% AST AllianceBernstein Core Value8 0.75% 0.24% None 0.99% AST Cohen & Steers Realty 1.00% 0.22% None 1.22% AST AllianceBernstein Managed Index 500(9) 0.60% 0.17% None 0.77% AST American Century Income & Growth 0.75% 0.24% None 0.99% AST AllianceBernstein Growth & Income(10) 0.75% 0.15% None 0.90% AST Hotchkis & Wiley Large-Cap Value 0.75% 0.19% None 0.94% AST Global Allocation(11) 0.89% 0.26% None 1.15% AST American Century Strategic Balanced 0.85% 0.27% None 1.12% AST T. Rowe Price Asset Allocation 0.85% 0.27% None 1.12% AST T. Rowe Price Global Bond 0.80% 0.27% None 1.07% AST Goldman Sachs High Yield 0.75% 0.18% None 0.93% AST Lord Abbett Bond-Debenture 0.80% 0.22% None 1.02% AST PIMCO Total Return Bond 0.65% 0.16% None 0.81% AST PIMCO Limited Maturity Bond 0.65% 0.17% None 0.82% AST Money Market 0.50% 0.13% None 0.63% Gartmore Variable Investment Trust: - -------------------------------------------------------------------------------------------------------- GVIT Developing Markets 1.15% 0.38% 0.25% 1.78%
8 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES Wells Fargo Variable Trust Advantage:(12) - ------------------------------------------------------------------------------------------------------------------- Advantage C&B Large Cap Value 0.55% 0.39% 0.25% 1.19% Advantage Equity Income 0.55% 0.23% 0.25% 1.03% Advantage International Core 0.75% 0.42% 0.25% 1.42% Advantage Small Cap Growth 0.75% 0.24% 0.25% 1.24% Advantage Large Company Core 0.55% 0.33% 0.25% 1.13% Advantage Large Company Growth 0.55% 0.25% 0.25% 1.05% Advantage Asset Allocation 0.55% 0.22% 0.25% 1.02% Advantage Total Return Bond 0.45% 0.26% 0.25% 0.96% AIM Variable Insurance Funds:(13) - ------------------------------------------------------------------------------------------------------------------- AIM V.I. Dynamics Fund -- Series I shares 0.75% 0.39% None 1.14% AIM V.I. Technology Fund -- Series I shares 0.75% 0.40% None 1.15% AIM V.I. Health Sciences Fund -- Series I shares(14) 0.75% 0.36% None 1.11% AIM V.I. Financial Services Fund -- Series I shares 0.75% 0.37% None 1.12% Evergreen Variable Annuity Trust: - ------------------------------------------------------------------------------------------------------------------- International Equity(15) 0.42% 0.30% None 0.72% Growth(16) 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% ProFund VP:(17) - ------------------------------------------------------------------------------------------------------------------- Access VP High Yield 0.75% 1.02% 0.25% 2.02% Bull 0.75% 0.78% 0.25% 1.78% OTC 0.75% 0.87% 0.25% 1.87% Large-Cap Value 0.75% 1.04% 0.25% 2.04% Large-Cap Growth 0.75% 2.06% 0.25% 3.06% Mid-Cap Value 0.75% 0.92% 0.25% 1.92% Mid-Cap Growth 0.75% 0.94% 0.25% 1.94% Small-Cap Value 0.75% 0.95% 0.25% 1.95% Small-Cap Growth 0.75% 0.90% 0.25% 1.90% Asia 30 0.75% 0.86% 0.25% 1.86% Europe 30 0.75% 0.78% 0.25% 1.78% Japan 0.75% 0.85% 0.25% 1.85% UltraBull 0.75% 0.89% 0.25% 1.89% UltraMid-Cap 0.75% 0.94% 0.25% 1.94% UltraSmall-Cap 0.75% 0.94% 0.25% 1.94% UltraOTC 0.75% 0.88% 0.25% 1.88% Bear 0.75% 0.90% 0.25% 1.90% Short Mid-Cap 0.75% 0.80% 0.25% 1.80% Short Small-Cap 0.75% 1.28% 0.25% 2.28% Short OTC 0.75% 0.86% 0.25% 1.86% Banks 0.75% 0.98% 0.25% 1.98% Basic Materials 0.75% 0.96% 0.25% 1.96% Biotechnology 0.75% 0.98% 0.25% 1.98%
9 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Summary of Contract Fees and Charges continued - --------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES ProFund VP:(17) continued - ---------------------------------------------------------------------------------------------------------- Consumer Goods 0.75% 0.99% 0.25% 1.99% Consumer Services 0.75% 1.20% 0.25% 2.20% Financials 0.75% 0.92% 0.25% 1.92% Health Care 0.75% 0.91% 0.25% 1.91% Industrials 0.75% 0.99% 0.25% 1.99% Internet 0.75% 0.94% 0.25% 1.94% Oil & Gas 0.75% 0.92% 0.25% 1.92% Pharmaceuticals 0.75% 0.97% 0.25% 1.97% Precious Metals 0.75% 0.87% 0.25% 1.87% Real Estate 0.75% 0.93% 0.25% 1.93% Semiconductor 0.75% 0.99% 0.25% 1.99% Technology 0.75% 0.87% 0.25% 1.87% Telecommunications 0.75% 0.95% 0.25% 1.95% Utilities 0.75% 0.95% 0.25% 1.95% U.S. Government Plus 0.50% 0.86% 0.25% 1.61% Rising Rates Opportunity 0.75% 0.75% 0.25% 1.75% First Defined Portfolio Fund, LLC: (18, 19) - ---------------------------------------------------------------------------------------------------------- First Trust(TM) 10 Uncommon Values 0.60% 0.76% 0.25% 1.61% Target Managed VIP 0.60% 1.25% 0.25% 2.10% The Dowsm DART 10 0.60% 1.53% 0.25% 2.38% Global Dividend Target 15 0.60% 1.85% 0.25% 2.70% S&P(TM) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(TM) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(TM) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(20) 0.60% 0.62% 0.25% 1.47% The Prudential Series Fund, Inc.: - ---------------------------------------------------------------------------------------------------------- SP William Blair International Growth 0.85% 0.45% 0.25% 1.55%
10 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- (1) As noted above, shares of the Portfolios generally are purchased through variable insurance products. Many of the Portfolios and/or their investment advisers and/or distributors have entered into arrangements with us as the issuer of the Annuity under which they compensate us for providing ongoing services in lieu of the Trust providing such services. Amounts paid by a Portfolio under those arrangements are included under "Other Expenses." For more information see the prospectus for each underlying portfolio and, "Service Fees payable to American Skandia," later in this prospectus. (2) The Portfolios' total actual annual operating expenses for the year ended December 31, 2004 were less than the amount shown in the table due to fee waivers, reimbursement of expenses and expense offset arrangements. These waivers, reimbursements, and offset arrangements are voluntary and may be terminated by American Skandia Investment Services, Inc. and Prudential Investments LLC at any time. After accounting for the waivers, reimbursements and offset arrangements, the Portfolios' actual annual operating expenses were:
TOTAL ACTUAL ANNUAL PORTFO- LIO OPERATING EXPENSES AFTER PORTFOLIO NAME EXPENSE REIMBURSEMENT AST William Blair International Growth 1.11% AST LSV International Value 1.22% AST DeAM Small-Cap Growth 1.02% AST DeAM Small-Cap Value 1.13% AST Goldman Sachs Mid-Cap Growth 1.13% AST Neuberger Berman Mid-Cap Growth 1.11% AST Neuberger Berman Mid-Cap Value 1.04% AST AllianceBernstein Large-Cap Growth 1.10% AST MFS Growth 1.07% AST Marsico Capital Growth 1.02% AST Goldman Sachs Concentrated Growth 1.00% AST DeAM Large-Cap Value 0.99% AST Cohen & Steers Realty 1.11% AST AllianceBernstein Growth & Income 0.87% AST Hotchkis & Wiley Large-Cap Value 0.90% AST American Century Strategic Balanced 1.09% AST T. Rowe Price Asset Allocation 1.07% AST Lord Abbett Bond-Debenture Portfolio 0.97% AST PIMCO Total Return Bond 0.78% AST PIMCO Limited Maturity Bond 0.79% AST Money Market 0.58%
(3) Until November 18, 2004, the Trust had a Distribution Plan under Rule 12b-1 to permit an affiliate of the Trust's Investment Managers to receive brokerage commissions in connection with purchases and sales of securities held by the Portfolios, and to use these commissions to promote the sale of shares of the Portfolio. The Distribution Plan was terminated effective November 18, 2004. The total annual portfolio operating expenses do not reflect any brokerage commissions paid pursuant to the Distribution Plan prior to the Plan's termination. (4) Effective November 18, 2004, LSV Asset Management became the Sub-advisor of the Portfolio. Prior to November 18, 2004, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM International Equity Portfolio." (5) Effective May 1, 2005, Eagle Asset Management and Neuberger Berman Management, Inc. became Co-Sub-advisors of the Portfolio. Prior to May 1, 2005, State Street Research and Management Company served as Sub-advisor of the Portfolio, then named "AST State Street Research Small-Cap Growth Portfolio." (6) Effective November 18, 2004, Integrity Asset Management, Lee Munder Capital Group, J.P. Morgan Fleming Asset Management became Co-Sub-advisors of the Portfolio. Prior to November 18, 2004, GAMCO Advisors Inc. served as Sub-advisor of the Portfolio, then named "AST Gabelli Small-Cap Value Portfolio." (7) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth Portfolio" to "AST AllianceBernstein Large-Cap Growth Portfolio." (8) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Core Value Portfolio" to "AST AllianceBernstein Core Value Portfolio." (9) Effective May 1, 2005, the name of the Portfolio was changed from "AST Sanford Bernstein Managed Index 500 Portfolio" to "AST AllianceBernstein Managed Index 500 Portfolio." (10) Effective May 1, 2005, the name of the Portfolio was changed from "AST Alliance Growth and Income Portfolio" to "AST AllianceBernstein Growth & Income Portfolio." (11) The AST Global Allocation Portfolio invests primarily in shares of other AST Portfolios (the "Underlying Portfolios"). (a) The only management fee directly paid by the Portfolio is a 0.10% fee paid to American Skandia Investment Services, Inc. and Prudential Investments LLC. The management fee shown in the chart for the Portfolio is (i) that 0.10% management fee paid by the Portfolio plus (ii) an estimate of the management fees paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the management fee rates shown in the chart above. (b) The expense information shown in the chart for the Portfolio reflects (i) the expenses of the Portfolio itself plus (ii) an estimate of the expenses paid by the Underlying Portfolios, which are borne indirectly by investors in the Portfolio. The estimate was calculated based on the percentage of the Portfolio invested in each Underlying Portfolio as of December 31, 2004 using the expense rates for the Underlying Portfolios shown in the above chart. (c) Effective May 1, 2005, Prudential Investment LLC provides day to day management of the Portfolio. Prior to May 1, 2005, Deutsche Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST DeAM Global Allocation Portfolio." 11 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Summary of Contract Fees and Charges continued - -------------------------------------------------------------------------------- (12) (a) The Adviser of Wells Fargo Variable Trust has committed through April 30, 2006 to waive fees and/or reimburse expenses to the extent necessary to maintain the Fund's net operating expenses as shown.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT Advantage C&B Large Cap Value 1.00% Advantage Equity Income 1.00% Advantage International Core 1.00% Advantage Small Cap Growth 1.20% Advantage Large Company Core 1.00% Advantage Large Company Growth 1.00% Advantage Asset Allocation 1.00% Advantage Total Return Bond 0.90%
(b) In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Value Advantage C&B Large Cap Value Equity Income Advantage Equity Income International Equity Advantage International Core Small Cap Growth Advantage Small Cap Growth Growth Advantage Large Company Core Large Company Growth Advantage Large Company Growth Asset Allocation Advantage Asset Allocation Total Return Bond Advantage Total Return Bond
(13) The Fund's adviser is entitled to receive reimbursement from the Fund for fees and expenses paid for by the Fund's adviser pursuant to expense limitation commitments between the Fund's adviser and the Fund if such reimbursement does not cause the Fund to exceed its then-current expense limitations and the reimbursement is made within three years after the Fund's adviser incurred the expense. (14) Effective July 1, 2005, the "AIM V.I. Health Sciences Fund" will be renamed "AIM V.I. Global Health Care Fund." (15) Effective April 15, 2005, the name of the Portfolio was changed from "Evergreen VA International Growth" to "Evergreen VA International Equity." (16) Effective April 15, 2005, the name of the Portfolio was changed from "Evergreen VA Special Equity" to "Evergreen VA Growth." (17) ProFund Advisors LLC has contractually agreed to waive Investment Advisory and Management Services Fees and to reimburse other expenses to the extent Total Annual Portfolio Operating Expenses, as a percentage of average daily net assets, exceed 1.98% (1.73% for ProFund VP U.S. Government Plus and 1.78% for ProFund VP Rising Rates Opportunity) through December 31, 2005. After such date, any of the expense limitations may be terminated or revised. Amounts waived or reimbursed in a particular fiscal year may be repaid to ProFund Advisors LLC within three years of the waiver or reimbursement to the extent that recoupment will not cause the Portfolio's expenses to exceed any expense limitation in place at that time. A waiver or reimbursement lowers the expense ratio and increases overall returns to investors. (18) The Funds' Board of Trustees reserves the right to suspend payments under the 12b-1 Plan at any time. On May 1, 2003, 12b-1 payments were suspended for all Funds except the First Trust 10 Uncommon Values Portfolio. Payments under the 12b-1 Plan resumed effective May 1, 2004 for the Target Managed VIP Portfolio, the Dow Dart 10 Portfolio, the Global Dividend Target 15 Portfolio, the S&P Target 24 Portfolio, the Nasdaq Target 15 Portfolio and the Value Line Target 25 Portfolio. (19) For the period September 30, 2004 through December 31, 2007, First Trust has contractually agreed to waive fees and reimburse expenses of the Portfolios to limit the total annual fund operating expenses (excluding brokerage expense and extraordinary expense) to 1.37% for the First Trust 10 Uncommon Values Portfolio and 1.47% for each of the other Portfolios' average daily net assets. First Trust has entered into an agreement with First Defined Portfolio Fund, LLC that will allow First Trust to recover from the Portfolios any fees waived or reimbursed during the three year period of January 1, 2005 through December 31, 2007. However, First Trust's ability to recover such amounts is limited to the extent that it would not exceed the amount reimbursed or waived during such period.
TOTAL ACTUAL ANNUAL PORTFOLIO OPERATING EXPENSES PORTFOLIO NAME AFTER EXPENSE REIMBURSEMENT First Trust(TM) 10 Uncommon Values 1.37% Target Managed VIP 1.47% S&P Target 24 1.47% The Dow(sm) DART 10 1.47% Value Line(TM) Target 25 1.47% Global Dividend Target 15 1.47% Nasdaq Target 15 1.47% Dow Target Dividend 1.47%
(20) The Dow (SM) Target Dividend Portfolio is newly organized. Accordingly, Other Expenses and Total Annual Portfolio Operating Expenses are based on estimated expenses for the current fiscal year. 12 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Expense Examples - -------------------------------------------------------------------------------- These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges, Annual Maintenance Fee, Insurance Charge, Distribution Charge, and the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product, as well as the maximum charges for the optional benefits that are offered under the Annuity that can be elected in combination with one another. Below are examples showing what you would pay in expenses at the end of the stated time periods had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 0.65% per year; (c) the Distribution Charge is assessed as 1.00% per year in Annuity Years 1-10; (d) the Annual Maintenance Fee is reflected as an asset-based charge based on an assumed average contract size; (e) you make no withdrawals of Account Value during the period shown; (f) you make no transfers, or other transactions for which we charge a fee during the period shown; (g) no tax charge applies; (h) the highest total annual portfolio operating expenses for any underlying Portfolio offered under the product applies; (i) the charge for each optional benefit is reflected as an additional charge equal to 0.60% per year of the average daily net assets of the Sub-accounts for the Lifetime Five Income Benefit, 0.50% per year of the average daily net assets of the Sub-accounts for the Highest Daily Value Death Benefit, and 0.25% of the average daily net asset of the Sub-accounts for the Enhanced Beneficiary Protection Death Benefit; and (j) the Credit applicable to your Annuity is 6% of Purchase Payments. Amounts shown in the examples are rounded to the nearest dollar. The Credit we apply to Purchase Payments received after the first Annuity Year are less than 6% (see "How do I Receive Credits?"). 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 will be less than those shown if you elect a different combination of optional benefits than indicated in the examples available or if you allocate account value to any other available sub-accounts. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. A table of Accumulation Values appears in Appendix A to this Prospectus.
IF YOU ANNUITIZE AT THE END OF THE APPLICABLE TIME PERIOD: IF YOU SURRENDER YOUR ANNUITY AT (you may not annuitize in the first IF YOU DO NOT SURRENDER THE END OF THE APPLICABLE TIME PERIOD: three (3) Annuity Years): YOUR ANNUITY: - -------------------------------------------------------------------- ------------------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS $1,678 $3,191 $4,522 $7,384 N/A N/A $3,850 $7,192 $814 $2,375 $3,850 $7,192
13 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options - -------------------------------------------------------------------------------- WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information). Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment managers for AST are American Skandia Investment Services, Incorporated, a Prudential Financial Company, and Prudential Investments LLC, affiliated companies of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day management. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. - -------------------------------------------------------------------------------- Effective May 1, 2004, the SP William Blair International Growth Portfolio (formerly the SP Jennison International Growth Portfolio) is no longer offered as a Sub-account under the Annuity, except as follows: if at any time prior to May 1, 2004 you had any portion of your Account Value allocated to the SP William Blair International Growth Sub-account, you may continue to allocate Account Value and make transfers into and/or out of the SP William Blair International Growth Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. If you never had a portion of your Account Value allocated to the SP William Blair International Growth Sub-account prior to May 1, 2004 or if you purchase your Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP William Blair International Growth Sub-account. This Sub-account may be offered to new Owners at some future date; however, at the present time, there is no intention to do so. We also reserve the right to offer or close this Sub-account to all Owners that owned the Annuity prior to the close date. - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS
- -------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------------- International AST JPMorgan International Equity: seeks long-term capital growth by J.P. Morgan Equity investing in a diversified portfolio of international equity securities. The Fleming Asset Portfolio seeks to meet its objective by investing, under Management normal market conditions, at least 80% of its assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. - -------------------------------------------------------------------------------------------------------------------- International AST William Blair International Growth: Seeks long-term capital William Blair & Equity appreciation. The Portfolio invests primarily in stocks of large and Company, L.L.C. medium-sized companies located in countries included in the Morgan Stanley Capital International All Country World Ex-U.S. Index. - -------------------------------------------------------------------------------------------------------------------- International AST LSV International Value (formerly AST DeAM International Equity): LSV Asset Equity seeks capital growth. The Portfolio pursues its objective by primarily Management investing at least 80% of the value of its assets in the equity securities of companies in developed non-U.S. countries that are represented in the MSCI EAFE Index. - -------------------------------------------------------------------------------------------------------------------- International AST MFS Global Equity: seeks capital growth. Under normal Massachusetts Equity circumstances the Portfolio invests at least 80% of its assets in equity Financial Services securities of U.S. and foreign issuers (including issuers in developing Company countries). The Portfolio generally seeks to purchase securities of companies with relatively large market capitalizations relative to the market in which they are traded. - -------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Growth (formerly AST State Street Research Small- Eagle Asset Growth Cap Growth): seeks long-term capital growth. The Portfolio pursues Management, its objective by primarily investing in the common stocks of small- Neuberger Berman capitalization companies. Management, Inc. - -------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Growth: seeks maximum growth of investors' Deutsche Asset Growth capital from a portfolio of growth stocks of smaller companies. The Management, Inc. Portfolio pursues its objective, under normal circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(TM) Index. - -------------------------------------------------------------------------------------------------------------------- Small Cap AST Federated Aggressive Growth: seeks capital growth. The Portfolio Federated Equity Growth pursues its investment objective by investing primarily in the stocks of Management small companies that are traded on national security exchanges, the Company of NASDAQ stock exchange and the over-the-counter market. Pennsylvania/ Federated Global Investment Management Corp. - -------------------------------------------------------------------------------------------------------------------- Small Cap AST Small-Cap Value (formerly AST Gabelli Small-Cap Value): seeks to Integrity Asset Value provide long-term capital growth by investing primarily in small- Management, Lee capitalization stocks that appear to be undervalued. The Portfolio will Munder Capital have a non-fundamental policy to invest, under normal circumstances, at Group, J.P. Morgan least 80% of the value of its assets in small capitalization companies. Fleming Asset Management - --------------------------------------------------------------------------------------------------------------------
15 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- Small Cap AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. Deutsche Asset Value The Portfolio pursues its objective under normal market conditions, by Management, Inc. primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000(TM) Value Index. - ---------------------------------------------------------------------------------------------------------------------- Mid Cap AST Goldman Sachs Mid-Cap Growth: seeks long-term capital growth. Goldman Sachs Growth The Portfolio pursues its investment objective by investing primarily in Asset Management, equity securities selected for their growth potential, and normally invests L.P. at least 80% of the value of its assets in medium capitalization companies. - ---------------------------------------------------------------------------------------------------------------------- Mid Cap AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under Neuberger Berman Growth normal market conditions, the Portfolio primarily invests at least 80% Management Inc. of its net assets in the common stocks of mid-cap companies. The Sub- advisor looks for fast-growing companies that are in new or rapidly evolving industries. - ---------------------------------------------------------------------------------------------------------------------- Mid AST Neuberger Berman Mid-Cap Value: seeks capital growth. Neuberger Berman Cap Value Under normal market conditions, the Portfolio primarily Management Inc. invests at least 80% of its net assets in the common stocks of mid-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise before other investors realize their worth. - ---------------------------------------------------------------------------------------------------------------------- Specialty AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio Fred Alger invests primarily in equity securities, such as common or preferred stocks Management, Inc. that are listed on U.S. exchanges or in the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ---------------------------------------------------------------------------------------------------------------------- Specialty AST Gabelli All-Cap Value: seeks capital growth. The Portfolio GAMCO Investors, pursues its objective by investing primarily in readily Inc. marketable equity securities including common stocks, preferred stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ---------------------------------------------------------------------------------------------------------------------- Specialty AST T. Rowe Price Natural Resources: seeks long-term capital growth T. Rowe Price primarily through the common stocks of companies that own or develop Associates, Inc. natural resources (such as energy products, precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. - ----------------------------------------------------------------------------------------------------------------------
16 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Large-Cap Growth (formerly AST Alliance Growth): Alliance Capital Growth seeks long-term capital growth. The Portfolio invests at least 80% of its Management, L.P. total assets in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST MFS Growth: seeks long-term capital growth and future income. Massachusetts Growth Under normal market conditions, the Portfolio invests at least 80% of its Financial Services total assets in common stocks and related securities, such as Company preferred stocks, convertible securities and depositary receipts, of companies that the Sub-advisor believes offer better than average prospects for long- term growth. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Marsico Capital Growth: seeks capital growth. Income realization is Marsico Capital Growth not an investment objective and any income realized on the Portfolio's Management, LLC investments, therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Goldman Sachs Concentrated Growth: seeks growth of capital in a Goldman Sachs Growth manner consistent with the preservation of capital. Realization of income Asset Management, is not a significant investment consideration and any income L.P. 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 equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST DeAM Large-Cap Value: seeks maximum growth of capital by Deutsche Asset Value investing primarily in the value stocks of larger companies. The Portfolio Management, Inc. pursues its objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000(TM) Value Index. - ---------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth + Value: seeks capital growth by investing Alliance Capital Blend approximately 50% of its assets in growth stocks of large companies and Management, L.P. approximately 50% of its assets in value stocks of large companies. The Portfolio will invest primarily in common stocks of large U.S. companies included in the Russell 1000(TM) Index. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Core Value (formerly AST Sanford Bernstein Core Alliance Capital Value Value): seeks long-term capital growth by investing primarily in common Management, L.P. stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be invested in the common stocks of large companies that appear to be undervalued. - ----------------------------------------------------------------------------------------------------------------------- Specialty AST Cohen & Steers Realty: seeks to maximize total return through Cohen & Steers investment in real estate securities. The Portfolio pursues its investment Capital objective by investing, under normal circumstances, at least 80% of its Management, Inc. net assets in securities of real estate issuers. - -----------------------------------------------------------------------------------------------------------------------
17 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Managed Index 500 (formerly AST Sanford Alliance Capital Blend Bernstein Managed Index 500): seeks to outperform the S&P 500 through Management, L.P. stock selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest, under normal circumstances, at least 80% of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Index. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST American Century Income & Growth: seeks capital growth with American Century Value current income as a secondary objective. The Portfolio invests primarily Investment in common stocks that offer potential for capital growth, and may, Management, Inc. consistent with its investment objective, invest in stocks that offer potential for current income. - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST AllianceBernstein Growth & Income: seeks long-term growth of Alliance Capital Value capital and income while attempting to avoid excessive fluctuations in Management, L.P. market value. The Portfolio normally will invest in common stocks (and securities convertible into common stocks). - ----------------------------------------------------------------------------------------------------------------------- Large Cap AST Hotchkis & Wiley Large-Cap Value: seeks current income and Hotchkis & Wiley Value long-term growth of income, as well as capital appreciation. The Portfolio Capital invests, under normal circumstances, at least 80% of its net Management, LLC assets plus borrowings for investment purposes in common stocks of large cap U.S. companies that have a high cash dividend or payout yield relative to the market. - ----------------------------------------------------------------------------------------------------------------------- Asset AST Global Allocation (formerly AST DeAM Global Allocation): seeks to Prudential Allocation/ obtain the highest potential total return consistent with a specified level Investments LLC Balanced of risk tolerance. The Portfolio seeks to achieve its investment objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. - ----------------------------------------------------------------------------------------------------------------------- Asset AST American Century Strategic Balanced: seeks capital growth and American Century Allocation/ current income. The Sub-advisor intends to maintain approximately 60% Investment Balanced of the Portfolio's assets in equity securities and the remainder in bonds Management, Inc. and other fixed income securities. - ----------------------------------------------------------------------------------------------------------------------- Asset AST T. Rowe Price Asset Allocation: seeks a high level of total return by T. Rowe Price Allocation/ investing primarily in a diversified portfolio of fixed income and equity Associates, Inc. Balanced securities. The Portfolio normally invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. This mix may vary depending on the Sub-advisor's outlook for the markets. - -----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST T. Rowe Price Global Bond: seeks to provide high current income T. Rowe Price and capital growth by investing in high quality foreign and U.S. dollar- International, Inc. denominated bonds. The Portfolio will invest at least 80% of its total assets in fixed income securities, including high quality bonds issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Goldman Sachs High Yield: seeks a high level of current income and may Goldman Sachs also consider the potential for capital appreciation. The Portfolio Asset Management, invests, under normal circumstances, at least 80% of its net assets plus L.P. any borrowings for investment purposes (measured at time of purchase) ("Net Assets") in high-yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Lord Abbett Bond-Debenture: seeks high current income and Lord, Abbett & Co. the opportunity for capital appreciation to produce a high LLC total return. To pursue its objective, the Portfolio will invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible into common stock and preferred stocks. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Total Return Bond: seeks to maximize total return Pacific Investment consistent with preservation of capital and prudent investment Management management. The Portfolio will invest in a diversified portfolio of Company LLC fixed-income securities of varying maturities. The average (PIMCO) portfolio duration of the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST PIMCO Limited Maturity Bond: seeks to maximize total return Pacific Investment consistent with preservation of capital and prudent investment Management management. The Portfolio will invest in a diversified portfolio Company LLC of fixed-income securities of varying maturities. The average (PIMCO) portfolio duration of the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income AST Money Market: seeks high current income while maintaining high Wells Capital levels of liquidity. The Portfolio attempts to accomplish its objective by Management, Inc. maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ----------------------------------------------------------------------------------------------------------------------- International GVIT Developing Markets: seeks long-term capital appreciation, under Gartmore Global Equity normal conditions by investing at least 80% of its total assets in stocks of Asset Management companies of any size based in the world's developing economies. Trust/Gartmore Under normal market conditions, investments are maintained in at Global Partners least six countries at all times and no more than 35% of total assets in any single one of them. - -----------------------------------------------------------------------------------------------------------------------
19 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage C&B Large Cap Value Fund (formerly Equity Value): Seeks Wells Fargo Funds Value maximum long-term total return, consistent with minimizing risk to Management, LLC principal. The Portfolio will principally invest in large-capitalization securities, which the Sub-advisor defines as securities of companies with market capitalizations of $1 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Equity Income Fund (formerly Equity Income): Seeks long-term Wells Fargo Funds Value capital appreciation and above-average dividend income. The Portfolio Management, LLC invests in the common stocks of large U.S. companies with strong return potential and above-average dividend income. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- International Advantage International Core Fund (formerly International Equity): Seeks Wells Fargo Funds Equity long-term capital appreciation. The Portfolio will principally invest in Management, LLC non-U.S. securities. The Portfolio will focus on companies with strong growth potential that offer good relative values. - ----------------------------------------------------------------------------------------------------------------------- Small Cap Advantage Small Cap Growth Fund (formerly Small Cap Growth): Seeks Wells Fargo Funds Growth long-term capital appreciation. The Portfolio focuses on companies that Management, LLC the Sub-advisor believes have above-average growth potential, or that may be involved in new or innovative products, services and processes. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Core Fund (formerly Growth): Seeks total Wells Fargo Funds Blend return comprised of long-term capital appreciation and current income. Management, LLC The Portfolio will invest at least 80% of the Fund's assets in securities of large-capitalization companies, which are defined as those with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Large Cap Advantage Large Company Growth Fund (formerly Large Company Wells Fargo Funds Growth Growth): Seeks long-term capital appreciation. The Portfolio invests in the Management, LLC common stocks of large U.S. companies that the Sub-advisor believes have superior growth potential. The Portfolio invests principally in securities of companies with market capitalizations of $3 billion or more. - ----------------------------------------------------------------------------------------------------------------------- Asset Advantage Asset Allocation Fund (formerly Asset Allocation): Seeks Wells Fargo Funds Allocation/ long-term total return, consistent with reasonable risk. The Portfolio Management, LLC Balanced invests in equity and fixed-income securities in varying proportions, with an emphasis on equity securities. The Portfolio does not select individual securities for investment, rather, it buys substantially all of the securities of various indexes to replicate such indexes. - ----------------------------------------------------------------------------------------------------------------------- Fixed Income Advantage Total Return Bond Fund (formerly Total Return Bond): Seeks Wells Fargo Funds total return consisting of income and capital appreciation. The Portfolio Management, LLC invests principally in investment-grade debt securities, which include U.S. Government obligations, corporate bonds, mortgage- and other asset- backed securities and money market instruments. Under normal circumstances, the Portfolio is expected to maintain an overall effective duration between 4 and 5.5 years. - -----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Mid Cap AIM Variable Insurance Funds -- AIM V.I. Dynamics Fund -- Series I A I M Advisors, Growth shares (formerly an INVESCO fund): seeks long-term capital growth. The Inc. Portfolio pursues its objective by normally investing at least 65% of its assets in common stocks of mid-sized companies that are included in the Russell Midcap Growth(TM) Index at the time of purchase. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Technology Fund -- Series I A I M Advisors, shares (formerly an INVESCO fund): seeks capital growth. The Portfolio Inc. normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Health Sciences Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund) (Effective July 1, 2005, AIM Inc. V.I. Health Sciences Fund will be renamed AIM V.I. Global Health Care Fund): seeks capital growth. The Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies related to health care. - ----------------------------------------------------------------------------------------------------------------------- Specialty AIM Variable Insurance Funds -- AIM V.I. Financial Services Fund -- A I M Advisors, Series I shares (formerly an INVESCO fund): seeks capital growth. The Inc. Portfolio normally invests at least 80% of its net assets in the equity securities and equity-related instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks, insurance companies, investment and miscellaneous industries, and suppliers to financial services companies. - ----------------------------------------------------------------------------------------------------------------------- International Evergreen VA International Equity (formerly Evergreen VA International Evergreen Equity Growth): seeks long-term capital growth and secondarily, modest income. Investment The Portfolio normally invests 80% of its assets in equity securities Management issued by established, quality, non-U.S. companies located in countries Company, LLC with developed markets and may purchase across all market capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.). - ----------------------------------------------------------------------------------------------------------------------- Small Cap Evergreen VA Growth (formerly Evergreen VA Special Equity): seeks Evergreen Growth long-term capital growth. The Portfolio invests at least 75% of its assets Investment in common stocks of small- and medium-sized companies (i.e., companies Management whose market capitalizations fall within the range of the Russell 2000(TM) Company, LLC Growth Index, at the time of purchase). - ----------------------------------------------------------------------------------------------------------------------- Specialty Evergreen VA Omega: seeks long-term capital growth. The Portfolio Evergreen invests primarily, and under normal conditions, substantially all of its Investment assets in common stocks and securities convertible into common stocks Management of U.S. companies across all market capitalizations. Company, LLC - -----------------------------------------------------------------------------------------------------------------------
21 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- International ProFund VP Europe 30: seeks daily investment results, before fees and ProFund Advisors Equity expenses, that correspond to the daily performance of the ProFunds LLC Europe 30 Index. The ProFunds Europe 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Asia 30: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance LLC of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Japan: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the LLC Nikkei 225 Stock Average. Since the Japanese markets are not open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States related to the Nikkei 225 Stock Average. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Banks: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Banks Index. The Dow Jones U.S. Banks Index measures the performance of the banking industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Basic Materials: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Basic Materials Sector Index. The Dow Jones U.S. Basic Materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Biotechnology: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Biotechnology Index. The Dow Jones U.S. Biotechnology Index measures the performance of the biotechnology industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Services (formerly ProFund VP Consumer Cyclical): ProFund Advisors seeks daily investment results, before fees and expenses, that correspond LLC to the daily performance of the Dow Jones U.S. Consumer Services Index. The Dow Jones U.S. Consumer Services Index measures the performance of consumer spending in the services industry of the U.S. equity market. - -----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Consumer Goods (formerly ProFund VP Consumer Non- ProFund Advisors Cyclical): seeks daily investment results, before fees and expenses, that LLC correspond to the daily performance of the Dow Jones U.S. Consumer Goods Index. The Dow Jones U.S. Consumer Goods Index measures the performance of consumer spending in the goods industry of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Oil & Gas (formerly ProFund VP Energy): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Sector Index measures the performance of the energy sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Financials (formerly ProFund VP Financial): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Financials Sector Index. The Dow Jones U.S. Financials Sector Index measures the performance of the financial services economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Health Care (formerly ProFund VP Healthcare): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the LLC daily performance of the Dow Jones U.S. Health Care Index. The Dow Jones U.S. Health Care Index measures the performance of the healthcare economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Industrials (formerly ProFund VP Industrial): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the daily LLC performance of the Dow Jones U.S. Industrials Index. The Dow Jones U.S. Industrials Index measures the performance of the industrial economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Internet: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC Composite Internet Index. The Dow Jones Composite Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Pharmaceuticals: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Pharmaceuticals Index. The Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Precious Metals: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance of the Dow LLC Jones Precious Metals Index. The Dow Jones Precious Metals Index measures the performance of the precious metals mining industry. - -----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Real Estate: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Real Estate Index. The Dow Jones U.S. Real Estate Index measures the performance of the real estate industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Semiconductor: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Semiconductor Index. The Dow Jones U.S. Semiconductor Index measures the performance of the semiconductor industry portion of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Technology: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Technology Sector Index. The Dow Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Telecommunications: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance of the Dow LLC Jones U.S. Telecommunications Sector Index. The Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Utilities: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC U.S. Utilities Sector Index. The Dow Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bull: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the S&P 500(TM) Index. LLC - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Bear: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily LLC performance of the S&P 500(TM) Index. If ProFund VP Bear is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500(TM) Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - -----------------------------------------------------------------------------------------------------------------------
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- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraBull: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC S&P 500(TM) Index. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times (150%) the daily performance of the S&P 500(TM) Index. If ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(TM) Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP OTC: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the NASDAQ-100 Index(TM). LLC "OTC" in the name of ProFund VP OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short OTC: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the NASDAQ-100 Index(TM). If ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index(TM) when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraOTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC NASDAQ-100 Index(TM). If ProFund VP UltraOTC is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(TM) when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------- Mid Cap Value ProFund VP Mid-Cap Value: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the S&P LLC MidCap 400/Barra Value Index(TM). The S&P MidCap400/Barra Value Index(TM) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index that have comparatively low price- to-book ratios as determined before each semiannual rebalance date. - -----------------------------------------------------------------------------------------------------------------------
25 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Mid Cap ProFund VP Mid-Cap Growth: seeks daily investment results, before fees ProFund Advisors Growth and expenses, that correspond to the daily performance of the S&P LLC MidCap 400/Barra Growth Index(TM). The S&P MidCap 400/Barra Growth Index(TM) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(TM) that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraMid-Cap: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the LLC S&P MidCap 400 Index(TM). If ProFund VP UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index(TM) when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ----------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Value: seeks daily investment results, before fees ProFund Advisors Value and expenses, that correspond to the daily performance of the S&P LLC SmallCap 600/Barra Value Index(TM). The S&P SmallCap 600/Barra Value Index(TM) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(TM) that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Small Cap ProFund VP Small-Cap Growth: seeks daily investment results, before ProFund Advisors Growth fees and expenses, that correspond to the daily performance of the S&P LLC SmallCap 600/Barra Growth Index(TM). The S&P SmallCap 600/Barra Growth Index(TM) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(TM) that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP UltraSmall-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of LLC the Russell 2000(TM) Index. If ProFund VP UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(TM) when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - -----------------------------------------------------------------------------------------------------------------------
26 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP U.S. Government Plus: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to one and one-quarter times (125%) LLC the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the price of the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter as much, on a percentage basis, as any daily decrease in the price of the Long Bond on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Rising Rates Opportunity: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to one and one-quarter times LLC (125%) the inverse (opposite) of the daily price movement of the most recently issued 30-year U.S. Treasury bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP Rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - ----------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Growth: seeks daily investment results, before ProFund Advisors Growth fees and expenses, that correspond to the daily performance of the S&P LLC 500/Barra Growth Index(TM). The S&P 500/Barra Growth Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Large Cap ProFund VP Large-Cap Value: seeks daily investment results, before fees ProFund Advisors Value and expenses, that correspond to the daily performance of the S&P LLC 500/Barra Value Index(TM). The S&P 500/Barra Value Index is a float adjusted market capitalization weighted index comprised of the stocks in the S&P 500 Index that have comparatively low price-to-book ratios as determined before each semiannual rebalance date. - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Small-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the Russell 2000(TM) Index. If ProFund VP Short Small-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the Russell 2000 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - -----------------------------------------------------------------------------------------------------------------------
27 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty ProFund VP Short Mid-Cap: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily LLC performance of the S&P MidCap 400 Index(TM). If ProFund VP Short Mid-Cap is successful in meeting its objective, its net asset value should gain approximately the same amount, on a percentage basis, as any decrease in the S&P MidCap 400 Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same amount, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ----------------------------------------------------------------------------------------------------------------------- Specialty Access VP High Yield: seeks to provide investment results that ProFund Advisors correspond generally to the total return of the high yield market LLC consistent with maintaining reasonable liquidity. The Access VP High Yield, created by ProFund Advisors, will achieve its high yield exposure primarily through CDSs but may invest in high yield debt instruments ("junk bonds"), Interest rate swap agreements and futures contracts, and other debt and money market instruments without limitation, consistent with applicable regulations. Under normal market conditions, the fund will invest at least 80% of its net assets in credit default swaps and other financial instruments that in combination have economic characteristics similar to the high yield debt market and/or in high yield debt securities. The fund seeks to maintain exposure to the high yield bond markets regardless of market conditions and without taking defensive positions. - ----------------------------------------------------------------------------------------------------------------------- Specialty First Trust(TM) 10 Uncommon Values: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing L.P. primarily in the ten common stocks selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - ----------------------------------------------------------------------------------------------------------------------- Specialty Target Managed VIP: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. of the most attractive companies that are identified by a model based on six uniquely specialized strategies -- The Dowsm DART 5, the European Target 20, the Nasdaq(TM) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(TM) Target 25. - ----------------------------------------------------------------------------------------------------------------------- Specialty The Dow(SM) DART 10: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the ten companies in the DJIA that have the highest combined dividend yields and buyback ratios on or about the applicable stock selection date. - -----------------------------------------------------------------------------------------------------------------------
28 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- Specialty Global Dividend Target 15 (formerly Global Target 15): seeks to provide First Trust Advisors above-average total return. The Portfolio seeks to achieve its objective by L.P. investing in common stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of the companies which are components of the DJIA, the Financial Times Industrial Ordinary Share Index ("FT Index") and the Hang Seng Index. The Portfolio primarily consists of common stocks of the five companies with the lowest per share stock prices of the ten companies in each of the DJIA, FT Index and Hang Seng Index, respectively, that have the highest dividend yield in the respective index on or about the applicable stock selection date. - ----------------------------------------------------------------------------------------------------------------------- Specialty S&P(TM) Target 24: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of twenty-four companies selected from a subset of the stocks included in the Standard & Poor's 500 Composite Stock Price Index(TM). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(TM) based on the sector's market capitalization. - ----------------------------------------------------------------------------------------------------------------------- Specialty The Dow (SM) Target Dividend seeks to provide above-average total return. First Trust Advisors The Portfolio seeks to achieve its objective by investing in common L.P. stocks issued by companies that are expected to provide income and to have the potential for capital appreciation. The Portfolio invests primarily in the 20 common stocks from the Dow Jones Select Dividend Index (SM) with the best overall ranking on both the change in return on assets over the last 12 months and price-to-book ratio as of the close of business on or about the applicable stock selection date. - ----------------------------------------------------------------------------------------------------------------------- Specialty Value Line(TM) Target 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing L.P. in 25 of the 100 common stocks that Value Line(TM) gives a #1 ranking for Timeliness[TM] which have recently exhibited certain positive financial attributes as of the close of business on the applicable stock selection date through a multi-step process. - ----------------------------------------------------------------------------------------------------------------------- Specialty Nasdaq(TM) Target 15: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in common stocks L.P. issued by companies that are expected to have the potential for capital appreciation. The Portfolio invests primarily in the common stocks of fifteen companies selected from a pre-screened subset of the stocks included in the Nasdaq-100 Index(TM) on or about the applicable stock selection date through a multi-step process. - -----------------------------------------------------------------------------------------------------------------------
29 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Investment Options continued - --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------- International The Prudential Series Fund, Inc. -- SP William Blair International Prudential Equity Growth: Seeks long-term capital appreciation. The Portfolio invests Investments LLC/ primarily in stocks of large and medium-sized companies William Blair & located in countries included in the Morgan Stanley Capital Company, LLC International All Country World Ex-U.S. Index. Under normal market conditions, the portfolio invests at least 80% of its net assets in equity securities. The Portfolio's assets normally will be allocated among not fewer than six different countries and will not concentrate investments in any particular industry. - -----------------------------------------------------------------------------------------------------------------------
"Standard & Poor's(TM)," "S&P(TM)," "S&P 500(TM)," "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. 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. "Dow Jones Industrial Average(SM)", "DJIA(SM)", "Dow Industrials(SM)", "The Dow(SM)", and "The Dow 10(SM)", are service marks of Dow Jones & Company, Inc. ("Dow Jones") and have been licensed for use for certain purposes by First Trust Advisors L.P. ("First Trust"). The portfolios, including, and in particular the Target Managed VIP portfolio and The Dow(SM) DART 10 portfolio, are not endorsed, sold or promoted by Dow Jones, and Dow Jones makes no representation regarding the advisability of investing in such products. "Standard & Poor's," "S&P," "S&P 500," "Standard & Poor's 500," and "500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by First Trust on behalf of the S&P Target 24 Portfolio and the Target Managed VIP Portfolio. The Portfolios are not sponsored, endorsed, managed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Portfolio. "The Nasdaq 100(TM)", "Nasdaq-100 Index(TM)", "Nasdaq Stock Market(TM)", and "Nasdaq(TM)" are trade or service marks of The Nasdaq Stock Market, Inc. (which with its affiliates are the "Corporations") and have been licensed for use by First Trust. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio have not been passed on by the Corporations as to its legality or suitability. The Nasdaq Target 15 Portfolio and Target Managed VIP Portfolio are not issued, endorsed, sponsored, managed, sold or promoted by the Corporations. The Corporations make no warranties and bear no liability with respect to the Nasdaq Target 15 Portfolio or the Target Managed VIP Portfolio. "Value Line(TM)," "The Value Line Investment Survey," and "Value Line Timeliness(TM) Ranking System" are registered trademarks of Value Line Securities, Inc. or Value Line Publishing, Inc. The Target Managed VIP(TM) Portfolio is not sponsored, recommended, sold or promoted by Value Line Publishing, Inc., Value Line, Inc. or Value Line Securities, Inc. ("Value Line"). Value Line makes no representation regarding the advisability of investing in the Portfolio. The First Trust(TM) 10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(TM) 10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED ALLOCATIONS? We offer fixed Allocations of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the rates that are currently being credited on Fixed Allocations. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-680-8920 to determine availability of Fixed Allocations in your state and for your annuity product. 30 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Fees and Charges - -------------------------------------------------------------------------------- The charges under the contracts are designed to cover, in the aggregate, our direct and indirect costs of selling, administering and providing benefits under the contracts. They are also designed, in the aggregate, to compensate us for the risks of loss we assume pursuant to the contracts. If, as we expect, the charges that we collect from the contracts exceed our total costs in connection with the contracts, we will earn a profit. Otherwise we will incur a loss. For example, American Skandia may make a profit on the Insurance Charge if, over time, the actual costs of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity and to offset a portion of the costs associated with offering Credits which are funded through American Skandia's general account. The Insurance Charge is deducted against your Annuity's Account Value, which includes the amount of any Credits we apply to your Purchase Payments and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts. The rates of certain of our charges have been set with reference to estimates of the amount of specific types of expenses or risks that we will incur. In most cases, this prospectus identifies such expenses or risks in the name of the charge; however, the fact that any charge bears the name of, or is designed primarily to defray a particular expense or risk does not mean that the amount we collect from that charge will never be more than the amount of such expense or risk, nor does it mean that we may not also be compensated for such expense or risk out of any other charges we are permitted to deduct by the terms of the contract. A portion of the proceeds that American Skandia receives from charges that apply solely to the variable investment options may include amounts based on market appreciation of the variable investment option values, including appreciation on amounts that represent Credits. WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages are shown below. YEARS 1 2 3 4 5 6 7 8 9 10 11+ - ------------------------------------------------------------------------------------------------------------ CHARGE (%) 9.0 9.0 8.5 8.0 7.0 6.0 5.0 4.0 3.0 2.0 0.0
The CDSC period is based on the Issue Date of the Annuity, not on the date each Purchase Payment is applied to the Annuity. Purchase Payments applied to the Annuity after the Issue Date do not have their own CDSC period. Under certain circumstances, during the first ten (10) Annuity Years, you can withdraw a limited amount from your Annuity without paying a CDSC. This is referred to as a "Free Withdrawal." Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 10. For purposes of calculating the CDSC on a surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program when we count the twenty free transfers. All transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging 31 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Fees and Charges continued - -------------------------------------------------------------------------------- a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charge: Several states and some municipalities charge premium taxes or similar taxes on annuities that we are required to pay. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3-1/2% of your premium and is designed to approximate the taxes that we are required to pay. We generally will deduct the charge at the time the tax is imposed, but may also decide to deduct the charge from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. We will pay company income taxes on the taxable corporate earnings created by this separate account product. While we may consider company income taxes when pricing our products, we do not currently include such income taxes in the tax charges you pay under the contract. We will periodically review the issue of charging for these taxes and may impose a charge in the future. In calculating our corporate income tax liability, we derive certain corporate income tax benefits associated with the investment of company assets, including separate account assets, which are treated as company assets under applicable income tax law. These benefits reduce our overall corporate income tax liability. Under current law, such benefits may include foreign tax credits and corporate dividends received deductions. We do not pass these tax benefits through to holders of the separate account annuity contracts because (i) the contract owners are not the owners of the assets generating these benefits under applicable income tax law and (ii) we do not currently include company income taxes in the tax charges you pay under the contract. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed against the average daily assets allocated to the Sub-accounts and is equal to 0.65% on an annual basis. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (0.50%) and the Administration Charge (0.15%). The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Distribution Charge: We deduct a Distribution Charge daily. The charge is assessed against the average assets allocated to the Sub-accounts and is equal to 1.00% on an annual basis in Annuity Years 1 through 10. After the end of the first ten Annuity Years, the 1.00% charge for distribution will no longer be assessed. The Distribution Charge is intended to compensate us for a portion of our acquisition expenses under the Annuity, including promotion and distribution of the Annuity and costs associated with offering Credits which are funded through American Skandia's general account. The Distribution Charge is deducted against your Annuity's Account Value, which includes the amount of any Credits we apply to your Purchase Payments and any increases or decreases in your 32 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Account Value based on market fluctuations of the Sub-- accounts will affect the charge. Optional Benefits for which we assess a charge solely against the variable investment options: If you elect to purchase certain optional benefits, we will deduct an additional charge on a daily basis solely from your Account Value allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. We may assess charges for other optional benefits on a different basis as described elsewhere in the prospectus. Please refer to the sections entitled "Living Benefit Programs" and "Death Benefit" for a description of the charge for each Optional Benefit. WHAT FEES AND EXPENSES ARE INCURRED BY THE PORTFOLIOS? Each Portfolio incurs total annual operating expenses comprised of an investment management fee, other expenses and any distribution and service (12b-1) fees that may apply. These fees and expenses are reflected daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and expenses can be found in the prospectuses for the Portfolios. WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will be subject to charges that apply under the variable immediate annuity option. Also, a tax charge may apply (see "Tax Charge" above). EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce any fees and charges. 33 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Purchasing Your Annuity - -------------------------------------------------------------------------------- WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $10,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $10,000 in total Purchase Payments. Where allowed by law, we must approve any initial and additional Purchase Payments of $1,000,000 or more. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts or Fixed Allocations that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your Investment Professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We call our bank drafting program "Auto Saver". We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 75 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 75 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 75 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59-1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability and level of protection of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity or the date of the Owner's death. Special Considerations for Purchasers of Bonus or Credit Products o This Annuity features an annual Insurance Charge of 0.65% and an annual Distribution Charge of 1.00%. We only deduct the Distribution Charge during the first 10 years following the effective date of your Annuity. During the first 10 years, the total asset-based charges on this Annuity are higher than many of our other annuities. o The CDSC on this Annuity is higher and is deducted for a longer period of time as compared to our other annuities. As with any investment product that features a CDSC, you should consider your need to access your account value during the CDSC period and whether the liquidity provision under the Annuity will satisfy that need. The CDSC is only deducted if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity. If you make a withdrawal or surrender your Annuity and are subject to a CDSC, we do not recover the XTra Credit(SM) amount. o The XTra Credit(SM) amount is included in your Account Value. However, American Skandia may take back any credits applied to your Purchase Payment if you "free-look" your Annuity or within twelve (12) months of having received an XTra Credit amount, you die or elect to withdraw your Account Value under the medically-related surrender provision. In these situations, your Account Value could be substantially reduced. However, any investment gain on the XTra Credit(SM) amount will not be recovered. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we recover the XTra Credit(SM) amount. Owner, Annuitant and Beneficiary Designations: We will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. o Owner: The Owner(s) holds all rights under the Annuity. You may name up to two Owners in which case all ownership rights are held jointly. Generally, joint owners are required to act jointly; however, if each owner provides us with an instruction that we find acceptable, we will permit each owner to act separately. All information and documents that we are required to send you will be sent to the first named owner. This Annuity does not provide a right of 34 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." o Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. o Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. Your beneficiary designation should be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. If you use a designation of "surviving spouse," we will pay the death benefit to the individual that is your spouse (as defined under the federal tax laws and regulations). If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. 35 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Annuity - -------------------------------------------------------------------------------- MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us a request in writing. Upon an ownership change, any automated investment or withdrawal programs will be canceled. The new owner must submit the applicable program enrollment if they wish to participate in such a program. 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: o 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; o a new Annuitant subsequent to the Annuity Date; o for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and o a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse that was named as the co-owner unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse that was named as the Contingent Annuitant will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity, and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted, and depending on your state's requirements, any applicable insurance charges deducted. The amount returned to you may be higher or lower than the Purchase Payment(s) applied during the right to cancel period. Where required by law, we will return your Purchase Payment(s), or the greater of your current Account Value and the amount of your Purchase Payment(s) applied during the right to cancel period. If you return your Annuity, we will not return any Credits we applied to your Annuity based on your Purchase Payments. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in "Auto Saver" or a periodic purchase payment program. Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial purchase payment allocation instructions. If you so instruct us, we will allocate subsequent purchase payments according to any new allocation instructions. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. Additional Purchase Payments may be paid at any time before the Annuity Date. 36 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "Auto Saver". Purchase Payments made through Auto Saver may only be allocated to the variable investment options when applied. Bank drafting allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $10,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $10,000. 37 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Account Value - -------------------------------------------------------------------------------- HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. Subsequent Purchase Payments: Unless you participate in an asset allocation program, or unless you have provided us with other specific allocation instructions for one, more than one, or all subsequent Purchase Payments, we will allocate any additional Purchase Payments you make according to your initial Purchase Payment allocation instructions. If you so instruct us, we will allocate subsequent Purchase Payments according to any new allocation instructions. Purchase Payments made while you participate in an asset allocation program will be allocated in accordance with such program. HOW DO I RECEIVE CREDITS? We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment during the first six (6) Annuity Years. The amount of the Credit is payable from our general account. The amount of the Credit depends on the Annuity Year in which the Purchase Payment(s) is made, according to the table below:
ANNUITY YEAR CREDIT - ------------------------------------------ 1 6.00% 2 5.00% 3 4.00% 4 3.00% 5 2.00% 6 1.00% 7+ 0.00% - ------------------------------------------
Credits Applied to Purchase Payments for Designated Class of Annuity Owner Prior to May 1, 2004, where allowed by state law, Annuities could be purchased by a member of the class defined below, with a different table of Credits. The Credit applied to all Purchase Payments on such Annuities is as follows based on the Annuity Year in which the Purchase Payment was made: Year 1 - 9.0%; Year 2 - 9.0%; Year 3 - 8.5%; Year 4 - 8.0%; Year 5 - 7.0%; Year 6 - 6.0%; Year 7 - 5.0%; Year 8 - 4.0%; Year 9 - 3.0%; Year 10 - 2.0%; Year 11+ - 0.0%. The designated class of Annuity Owners included: (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, a Prudential Financial Company; (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) the child(ren) or other legal dependent under the age of 21 of any such person noted in (b) through (h); and (j) the siblings of any such persons noted in (b) through (h) above. All other terms and conditions of the Annuity apply to Owners in the designated class. HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE? Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied. Examples of Applying Credits Initial Purchase Payment Assume you make an initial Purchase Payment of $10,000. We would apply a 6.0% Credit to your Purchase Payment and allocate the amount of the Credit ($600 = $10,000 x .06) to your Account Value in the proportion that your Account Value is allocated. Additional Purchase Payment in Annuity Year 2 Assume that you make an additional Purchase Payment of $5,000. We would apply a 5.0% Credit to your Purchase Payment and allocate the amount of the Credit ($250 = $5,000 x .05) to your Account Value. 38 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Additional Purchase Payment in Annuity Year 6 Assume that you make an additional Purchase Payment of $15,000. We would apply a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit ($150 = $15,000 x .01) to your Account Value. - -------------------------------------------------------------------------------- The amount of any Credits applied to your Account Value can be recovered by American Skandia under certain circumstances: o any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be recovered. o the amount available under the medically-related surrender portion of the Annuity will not include the amount of any Credits payable on Purchase Payments made within 12 months of the date the Annuitant first became eligible for the medically-related surrender. o if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits. The Account Value may be substantially reduced if American Skandia recovers the XTra Credit(SM) amount under these circumstances. However, any investment gain on the XTra Credit(SM) amount will not be taken back. We do not deduct a CDSC in any situation where we recover the XTra Credit(SM) amount. During the first 10 Annuity Years, the total asset-based charges on this Annuity (including the Insurance Charge and the Distribution Charge) are higher than many of our other annuities, including other annuities we offer that apply credits to purchase payments. - -------------------------------------------------------------------------------- Examples of Recovering Credits The following are hypothetical examples of how Credits could be recovered by American Skandia. These examples do not cover every potential situation. Recovery from payment of Death Benefits 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 6.0% Credit, for a total of $3,600. If the Death Benefit becomes payable in the 9th month after the Issue Date, the amount of the Death Benefit would be reduced by the entire amount of the prior Credits ($3,600). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 6.0% Credit, for a total of $3,600. If death occurs in the 16th month after the Issue Date, the amount of the Death Benefit would be reduced but only in the amount of those Credits applied within the previous 12-months. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the date of death, the Death Benefit would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of death. Therefore, the amount of the Death Benefit would be reduced by the amount of the Credits payable on the additional Purchase Payment ($600). 3. NOTE: If the Death Benefit would otherwise have been equal to the Purchase Payments minus any proportional withdrawals due to poor investment performance, we will not reduce the amount of the Death Benefit by the amount of the Credits as shown in Example 2 above. Recovery from Medically-Related Surrenders 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You receive a Credit of $3,000 ($50,000 x .06). The Annuitant is diagnosed as terminally ill in the 6th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Assuming the Credits were applied within 12-months of the date of diagnosis of the terminal illness, the amount that would be payable under the medically-related surrender provision would be reduced by the entire amount of the Credits ($3,000). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 6.0% Credit, for a total of $3,600. The Annuitant is diagnosed as terminally ill in the 16th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the diagnosis, the amount that would be payable upon the medically-related surrender provision would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of diagnosis. Therefore, the amount that would be 39 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- payable under the medically-related surrender provision would be reduced by the amount of the Credits payable on the additional Purchase Payment ($600). General Information about Credits o We do not consider Credits to be "investment in the contract" for income tax purposes. o You may not withdraw the amount of any Credits under the Free Withdrawal provision. The Free Withdrawal provision only applies to withdrawals of Purchase Payments. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro-rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions (including transfer requests) for certain Portfolios based on the Portfolio's investment and/or transfer restrictions. We may do so to conform to any present or future restriction that is imposed by any portfolio available under this Annuity. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year. Transfers made as part of a dollar cost averaging, automatic rebalancing or asset allocation program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may also increase the Transfer Fee that we charge to $15.00 for each transfer after the number of free transfers has been used up. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. If enrolled in any program that does not permit transfer requests to be transmitted electronically, the Transfer Fee will not be waived. Once you have made 20 transfers among the Sub-accounts during an Annuity Year, we will accept any additional transfer request during that year only if the request is submitted to us in writing with an original signature and otherwise is in good order. For purposes of this 20 transfer limit, we (i) do not view a facsimile transmission as a "writing", (ii) will treat multiple transfer requests submitted on the same business day as a single transfer, and (iii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio, or any transfer that involves one of our systematic programs, such as asset allocation and automated withdrawals. Frequent transfers among Sub-accounts in response to short-term fluctuations in markets, sometimes called "market timing," can make it very difficult for a Portfolio manager to manage a Portfolio's investments. Frequent transfers may cause the Portfolio to hold more cash than otherwise necessary, disrupt management strategies, increase transaction costs, or affect performance. The Annuity offers Sub-accounts designed for Owners who wish to engage in frequent transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund Portfolios and the AST Money Market Portfolio), and we encourage Owners seeking frequent transfers to utilize those Sub-accounts. In light of the risks posed to Owners and other investors by frequent transfers, we reserve the right to limit the number of transfers in any Annuity Year for all existing or new Owners and to take the other actions discussed below. 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: (a) we believe that excessive transfer activity (as we define it) or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio manager) that the purchase or redemption of shares in the Portfolio must be restricted because the Portfolio believes the transfer activity to 40 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- which such purchase and redemption relates would have a detrimental effect on the share prices of the affected Portfolio. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. In furtherance of our general authority to restrict transfers as described above, and without limiting other actions we may take in the future, we have adopted the following specific restrictions: o With respect to each Sub-account (other than the AST Money Market Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we track amounts exceeding a certain dollar threshold that were transferred into the Sub-account. If you transfer such amount into a particular Sub-account, and within 30 calendar days thereafter transfer (the "Transfer Out") all or a portion of that amount into another Sub-account, then upon the Transfer Out, the former Sub-account becomes restricted (the "Restricted Sub-account"). Specifically, we will not permit subsequent transfers into the Restricted Sub-account for 90 calendar days after the Transfer Out if the Restricted Sub-account invests in a non-international Portfolio, or 180 calendar days after the Transfer Out if the Restricted Sub-account invests in an international Portfolio. For purposes of this rule, we (i) do not count transfers made in connection with one of our systematic programs, such as asset allocation and automated withdrawals; (ii) do not count any transfer that solely involves Sub-accounts corresponding to any ProFund Portfolio and/or the AST Money Market Portfolio; and (iii) do not categorize as a transfer the first transfer that you make after the Issue Date, if you make that transfer within 30 calendar days after the Issue Date. Even if an amount becomes restricted under the foregoing rules, you are still free to redeem the amount from your Annuity at any time. o We reserve the right to effect exchanges on a delayed basis for all contracts. That is, we may price an exchange involving the Sub-accounts on the Valuation Day subsequent to the Valuation Day on which the exchange request was received. Before implementing such a practice, we would issue a separate written notice to Owners that explains the practice in detail. o If we deny one or more transfer requests under the foregoing rules, we will inform you or your Investment Professional promptly of the circumstances concerning the denial. o Contract owners in New York who purchased their contracts prior to March 15, 2004 are not subject to the specific restrictions outlined in bulleted paragraphs immediately above. In addition, there are contract owners of different variable annuity contracts that are funded through the same Separate Account that are not subject to the above-referenced transfer restrictions and, therefore, might make more numerous and frequent transfers than contract owners who are subject to such limitations. Finally, there are contract owners of other variable annuity contracts or variable life contracts that are issued by American Skandia as well as other insurance companies that have the same underlying mutual fund portfolios available to them. Since some contract owners are not subject to the same transfer restrictions, unfavorable consequences associated with such frequent trading within the underlying mutual fund (e.g., greater portfolio turnover, higher transaction costs, or performance or tax issues) may affect all contract owners. Similarly, while contracts managed by an Investment Professional or third party investment advisor are subject to the restrictions on transfers between investment options that are discussed above, if the advisor manages a number of contracts in the same fashion unfavorable consequences may be associated with management activity since it may involve the movement of a substantial portion of an underlying mutual fund's assets which may affect all contract owners invested in the affected options. Apart from jurisdiction-specific and contract differences in transfer restrictions, we will apply these rules uniformly (including contracts managed by an Investment Professional or third party investment advisor), and will not waive a transfer restriction for any contract owner. Although our transfer restrictions are designed to prevent excessive transfers, they are not capable of preventing every potential occurrence of excessive transfer activity. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount periodically from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. You may elect a Dollar Cost Averaging program that transfers amounts monthly, quarterly, semi-annually, or annually from variable investment options, or a program that transfers 41 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- amounts monthly from Fixed Allocations. By investing amounts on a regular basis instead of investing the total amount at one time, Dollar Cost Averaging may decrease the effect of market fluctuation on the investment of your Purchase Payment. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. There is no minimum Account Value required to enroll in a Dollar Cost Averaging program and we do not deduct a charge for participating in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: o You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. o You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. o Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. The Dollar Cost Averaging program is not available if you elect the Guaranteed Return Option Plus(SM), the Guaranteed Return Option or the automatic rebalancing programs when it involves transfers out of the Fixed Allocations and is also not available when you have elected an asset allocation program. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced monthly, quarterly, semi-annually, or annually. On the appropriate date, the variable investment options you chose are rebalanced to the allocation percentages you requested. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. Any transfer to or from any variable investment option that is not part of your automatic rebalancing program, will be made, however that variable investment option will not become part of your rebalancing program unless we receive instructions from you indicating that you would like such option to become part of the program. There is no minimum Account Value required to enroll in automatic rebalancing. All rebalancing transfers as part of an automatic rebalancing program are not included when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. Participation in the Automatic Rebalancing program may be restricted if you are enrolled in certain other optional programs. ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? Yes. Certain "static asset allocation programs" are available for use with the Annuity. These programs are considered static because once you have selected a model portfolio, the Sub-accounts and the percentage of contract value allocated to each Sub-account cannot be changed without your consent. The programs are available at no additional charge. Under these programs, the Sub-account for each asset class in each model portfolio is designated for you. Under the programs, the values in the Sub-accounts will be rebalanced periodically back to the indicated percentages for the applicable asset class within the model portfolio that you have selected. For more information on the asset allocation programs, see Appendix entitled "Additional Information on the Asset Allocation Programs." Asset allocation is a sophisticated method of diversification, which allocates assets among asset classes in order to manage investment risk and enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. No personalized investment advice is provided in connection with the asset allocation programs and you should not rely on these programs as providing individualized investment recommendations to you. The asset allocation programs do not guarantee better investment results. We reserve the right to terminate or change the asset allocation programs at any time. You should consult with your Investment Professional before electing any asset allocation program. 42 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, as of a specific date in the future. They are the Balanced Investment Program and the Guaranteed Return Option Plus(SM). (The Guaranteed Return Option Plus (GRO Plus(SM)) is not available in all states. In some states where GRO Plus is not available we offer the Guaranteed Return Option (GRO).) Both the Balanced Investment Program and GRO Plus allow you to allocate a portion of your Account Value to the available variable investment options while ensuring that your Account Value will at least equal your contributions adjusted for withdrawals and transfers on a specified date. Under GRO Plus, Account Value is allocated to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts or the interest rate environment after the amount is allocated to a Fixed Allocation. Generally, more of your Account Value will be allocated to the variable investment options under the GRO Plus program than under the Balanced Investment Program (although in periods of poor market performance, low interest rates and/or as the option progresses to its maturity date, this may not be the case). You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. In addition, as with most return of premium programs, amounts that are available to allocate to the variable investment options may be substantially less than they would be if you did not elect a return of premium program. This means that, if investment experience in the variable investment options were positive, your Account Value would grow at a slower rate than if you did not elect a return of premium program and allocated all of your Account Value to the variable investment options. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.781198 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $78,120 will be allocated to the Fixed Allocation and the remaining Account Value ($21,880) will be allocated to the variable investment options. Assuming that you do not make any withdrawals or transfers from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. The Guaranteed Return Option Plus (GRO Plus) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus program may be appropriate if you wish to protect a principal * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 43 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control of your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value is the amount not allocated to the Fixed Allocations to support the guarantees provided. There is a fee associated with this program. See "Living Benefit Programs," later in this Prospectus, for more information about this program. MAY I GIVE MY INVESTMENT PROFESSIONAL PERMISSION TO MANAGE MY ACCOUNT VALUE? Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules, and unless you tell us otherwise. If your Investment Professional has this authority, we deem that all transactions that are directed by your Investment Professional with respect to your Annuity have been authorized by you. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your Investment Professional until we receive notification of the revocation of such person's authority. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT? Yes. You may engage your own investment advisor to manage your account. These investment advisors may be firms or persons who also are appointed by us, or whose affiliated broker-dealers are appointed by us, as authorized sellers of the Annuity. Even if this is the case, however, please note that the investment advisor you engage to provide advice and/or make transfers for you, is not acting on our behalf, but rather is acting on your behalf. We do not offer advice about how to allocate your Account Value under any circumstance. As such, we are not responsible for any recommendations such investment advisors make, any investment models or asset allocation programs they choose to follow or any specific transfers they make on your behalf. Any fee that is charged by your investment advisor is in addition to the fees and expenses that apply under your Annuity. If you authorize your investment advisor to withdraw amounts from your Annuity (to the extent permitted) to pay for the investment advisor's fee, as with any other withdrawal from your Annuity, you may incur adverse tax consequences, a CDSC and/or a Market Value Adjustment. Withdrawals to pay your investment advisor generally will also reduce the level of various living and death benefit guarantees provided (e.g. the withdrawals will reduce proportionately the Annuity's guaranteed minimum death benefit.) We are not a party to the agreement you have with your investment advisor and do not verify that amounts withdrawn from your Annuity, including amounts withdrawn to pay for the investment advisor's fee, are within the terms of your agreement with your investment advisor. You will, however, receive confirmations of transactions that affect your Annuity. If your investment advisor has also acted as your Investment Professional with respect to the sale of your Annuity, he or she may be receiving compensation for services provided both as an Investment Professional and investment advisor. Alternatively, the investment advisor may compensate the Investment Professional from whom you purchased your Annuity for the referral that led you to enter into your investment advisory relationship with the investment advisor. If you are interested in the details about the compensation that your investment advisor and/or your Investment Professional receive in connection with your Annuity, you should ask them for more details. We or an affiliate of ours may provide administrative support to licensed, registered Investment Professionals or investment advisors who you authorize to make financial transactions on your behalf. We may require Investment Professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the Investment Professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an Investment Professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or 44 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- to comply with specific restrictions or limitations imposed by a Portfolio(s) of American Skandia. Contracts managed by your Investment Professional also are subject to the restrictions on transfers between investment options that are discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?". Since transfer activity under contracts managed by an Investment Professional or third party investment advisor may result in unfavorable consequences to all contract owners invested in the affected options we reserve the right to limit the investment options available to a particular Owner whose contract is managed by the advisor or impose other transfer restrictions we deem necessary. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your Investment Professional. Your Investment Professional will be informed of all such restrictions on an ongoing basis. We may also require that your Investment Professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.prudential.com). Limitations that we may impose on your Investment Professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED ALLOCATIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-680-8920. A Guarantee Period for a Fixed Allocation begins: o when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; o upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or o when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. - -------------------------------------------------------------------------------- American Skandia may offer Fixed Allocations with Guarantee Periods of 3 months or 6 months exclusively for use as a short-term Fixed Allocation ("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be established with your initial Purchase Payment or additional Purchase Payments. You may not transfer existing Account Value to a Short-term Fixed Allocation. We reserve the right to terminate offering these special purpose Fixed Allocations at any time. - -------------------------------------------------------------------------------- On the Maturity Date of the Short-term Fixed Allocation, the Account Value will be transferred to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transferred to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the Annuity or transfer any Account Value from the Short-term Fixed Allocation to any other investment option before the end of the Guarantee Period, a Market Value Adjustment will apply. 45 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. o "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. o "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. o "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: N/365 [(1+I) / (1+J+0.0010)] where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is N/365. [(1 + I)/(1 + J)] 46 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: o You allocate $50,000 into a Fixed Allocation (we refer to this as the "Allocation Date" in these examples) with a Guarantee Period of 5 years (we refer to this as the "Maturity Date" in these examples). o The Strip Yields for coupon Strips beginning on the Allocation Date and maturing on the Maturity Date plus the Option-adjusted Spread is 5.50% (I = 5.50%). o You make no withdrawals or transfers until you decide to withdraw the entire Fixed Allocation after exactly three (3) years, at which point 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: N/365 MVA Factor = [(1+I)/(1+J+0.0010)] = 2 [1.055/1.041] = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on the Maturity Date plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: N/365 MVA Factor = [(1+I)/(1+J+0.0010)] = 2 [1.055/1.071] = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value x MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. 47 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Access To Account Value - -------------------------------------------------------------------------------- WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through partial withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. The CDSC will be assessed on the amount of Purchase Payments, not on the Account Value at the time of the withdrawal or surrender. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations".) During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59-1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. o To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-10 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. o You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount that you may withdraw will depend on the Annuity's Surrender Value as of the date we process the withdrawal request. After any partial withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the partial withdrawal request as a request to fully surrender your Annuity. The minimum partial withdrawal you may request is $100. When we determine if a CDSC applies to partial withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. 48 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Years 1-10 The maximum Free Withdrawal amount during each of Annuity Years 1 through 10 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payment) is 10% of all Purchase Payments. We may apply a Market Value Adjustment to any Fixed Allocations. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 10. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first ten (10) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. If, during Annuity Years 1 through 10, all Purchase Payments withdrawn are subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity, which may include Credits. Annuity Years 11+ After Annuity Year 10, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first ten Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $5,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 through 10 would be 10% of $15,000, or $1,500. From Annuity Year 11 and thereafter, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. 3. Assume you make an initial Purchase Payment of $10,000 and take a Free Withdrawal of $500 in Annuity Year 2 and $1,000 in Annuity Year 3. If you surrender your Annuity in Annuity Year 5, the CDSC will be assessed against the initial Purchase Payment amount ($10,000), not the amount of Purchase Payments reduced by the amounts that were withdrawn under the Free Withdrawal provision. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a partial withdrawal during the first ten (10) Annuity Years. Whether a CDSC applies and the amount to be charged depends on whether the partial withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Issue Date of the Annuity. 1. If you request a partial withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount, we determine if a CDSC will apply to the partial withdrawal based on the number of years that have elapsed since the Annuity was issued. Any CDSC will only apply to the amount withdrawn that exceeds the Free Withdrawal amount. The maximum Free Withdrawal amount during each of Annuity Years 1 through 10 is 10% of all Purchase Payments. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. If, during Annuity Years 1 through 10, all Purchase Payments are withdrawn subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity, which may include Credits. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a partial withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than 49 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- $100 (which may occur under a program that provides payment of an amount equal to the earnings in the annuity for the period requested), we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59-1/2 that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum amount that applies to Systematic Withdrawals applies to monthly minimum distributions but does not apply to minimum distributions taken out on a quarterly, semi-annual or annual basis. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.prudential.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value minus: (a) the amount of any Credits applied within 12 months 50 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- of the applicable "Contingency Event" as defined below; and (b) the amount of any Credits added in conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (i.e. Purchase Payments received at such time pursuant to a salary reduction program). This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: o the Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the "Contingency Event" described below in order to qualify for a medically-related surrender; o the Annuitant must be alive as of the date we pay the proceeds of such surrender request; o if the Owner is one or more natural persons, all such Owners must also be alive at such time; o we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and o this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. A "Contingency Event" occurs if the Annuitant is: o first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or o first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future other than those fixed annuitization options guaranteed in your Annuity. Please refer to the "Guaranteed Minimum Income Benefit" and the "Lifetime Five Income Benefit" under "Living Benefits" below for a description of annuity options that are available when you elect these benefits. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may not choose an Annuity Date that occurs in the first three Annuity Years. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. You may not annuitize and receive annuity payments within the first three Annuity Years. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. 51 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the Annuity and receive its then current cash value (if any) subject to our rules. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, choosing an Annuity Date within ten (10) years of the Issue Date of the Annuity may limit the available annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. You have a right to choose your annuity start date. If you have not provided us with your Annuity Date or annuity payment option in writing, then: o a default date for the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and o the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. If you choose to defer the Annuity Date beyond the default date, the IRS may not consider your contract to be an annuity under the tax law. If that should occur, all gain in your contract at that time will become immediately taxable to you. Further, each subsequent year's increase in Account Value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your Annuity will not be considered an annuity for federal income tax purposes. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that 52 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments Generally, we offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. o Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. o Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. 53 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Access To Account Value continued - -------------------------------------------------------------------------------- o Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. 54 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs - -------------------------------------------------------------------------------- DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY ARE ALIVE? American Skandia offers different optional benefits, for an additional charge, that can provide investment protection for Owners while they are alive. Notwithstanding the additional protection provided under the optional Living Benefit Programs, the additional cost has the impact of reducing net performance of the investment options. Each optional benefit offers a distinct type of guarantee, regardless of the performance of variable investment options, that may be appropriate for you depending on the manner in which you intend to make use of your annuity while you are alive. Depending on which optional benefit you choose, you can have substantial flexibility to invest in variable investment options while: o protecting a principal amount from decreases in value as of specified future dates due to investment performance; o taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; or o guaranteeing a minimum amount of growth will be applied to your principal, if it is to be used as the basis for lifetime income payments beginning after a waiting period. Below is a brief summary of the "living benefits" that American Skandia offers. Please refer to the benefit description for a complete description of the terms, conditions and limitations of each optional benefit. You should consult with your Investment Professional to determine if any of these optional benefits may be appropriate for you based on your financial needs. There are many factors to consider, but we note that among them you may want to evaluate the tax implications of these different approaches to meeting your needs, both between these benefits and in comparison to other potential solutions to your needs (e.g. comparing the tax implications of the withdrawal benefit and annuity payments). I. The Guaranteed Return Option Plus(SM) (GRO Plus(SM)) guarantees that, after a seven-year period following commencement of the program ("maturity date") and on each anniversary of the maturity date thereafter, your Account Value will not be less than the Account Value on the effective date of the program. The program also offers you the option to elect a second, enhanced guarantee amount at a higher Account Value subject to a separate maturity period (and its anniversaries). The GRO Plus(SM) program may be appropriate if you wish to protect a principal amount (called the "Protected Principal Value") against market downturns as of a specific date in the future, but also wish to exercise control by allocating and transferring your available Account Value among the variable investment options to participate in market experience. Under the GRO Plus(SM) program, you give us the right to allocate amounts to Fixed Allocations as needed to support the guarantees provided. The available Account Value that may be allocated among your variable investment options are those amounts not allocated to the Fixed Allocations to support the guarantees provided. II. The Guaranteed Minimum Withdrawal Benefit (GMWB) guarantees your ability to make cumulative withdrawals over time equal to an initial principal value (called the "Protected Value"), regardless of decreases in your Account Value due to market losses. The GMWB program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive guaranteed minimum withdrawals. Taking income as withdrawals, rather than annuity payments, may be less tax efficient for non-qualified uses of the Annuity, but provides greater control over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. III. The Guaranteed Minimum Income Benefit (GMIB) guarantees your ability, after a minimum seven-year waiting period, to begin receiving income from the Annuity in the form of annuity payments based on your total Purchase Payments (and any Credits applied to such Purchase Payments) under the contract and an annual increase of 5% on such Purchase Payments, adjusted for withdrawals, regardless of the impact of market performance on your Account Value. The GMIB program may be appropriate if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. IV. The Lifetime Five Income Benefit guarantees your ability to withdraw amounts equal to a percentage of a "Protected Withdrawal Value" regardless of decreases in your Account Value due to market losses. The Lifetime Five Benefit may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will 55 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- not affect your ability to receive guaranteed minimum with- drawals. Taking income as withdrawals, rather than annuity payments, may be less tax efficient for non-qualified uses of the Annuity, but provides greater control over the timing and amount of withdrawals during the accumulation period, as well as continuing the Annuity's other benefits, such as the death benefit. GUARANTEED RETURN OPTION Plus(SM) (GRO Plus(SM)) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program (and it is currently active), the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit, or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period and any applicable subsequent period as the "maturity date") and on each anniversary of the maturity date thereafter while the program remains in effect, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate period following election of the enhanced guarantee and on each anniversary thereafter while this enhanced guarantee amount remains in effect, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. o Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter that the program remains in effect, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date that the program remains in effect, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. o Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced 56 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of a specified period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter that the enhanced guaranteed amount remains in effect, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically create an enhanced guarantee (or increase your enhanced guarantee, if previously elected) on each anniversary of the program (and create a new maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the protected principal value or enhanced protected principal value by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter that the enhanced guarantee amount remains in effect, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to any Fixed Allocations first and then to the sub-accounts pro rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals other than Systematic Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations up to growth attributable to the Fixed Allocations and thereafter pro-rata solely from the variable investment options. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge and Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for any third party investment advisory service will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO Plus(SM) program are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes any Credits); 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). 57 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o The base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x (1 - $7,500 / $177,500), or $227,464.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: o The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation(s) to support the applicable guaranteed amount. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). 58 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s), causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value or Enhanced Protected Principal Value are transferred to the variable investment options differently than each other because of the different guarantees they support. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated. Termination of the Guaranteed Return Option for the purpose of electing the Guaranteed Return Option Plus, will be treated as any other termination of the Guaranteed Return Option (see below), including the termination of any guaranteed amount, and application of any applicable Market Value Adjustment when amounts are transferred to the variable investment options as a result of the termination. The Guaranteed Return Option Plus program will then be added to your Annuity based on the current Account Value. Termination of the Program You can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. You also can terminate the Guaranteed Return Option Plus program entirely. If you terminate the program entirely, you can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, you could, for example, terminate the program on a given Valuation Day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections (including any election made effective on the Annuity issue date and any election made by a surviving spouse) and (B) a program reinstatement cannot be effected on the same Valuation Day on which a program termination was effected. Upon termination, 59 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- any Account Value in the Fixed Allocations will be transferred to the variable investment options pro-rata based on the Account Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option Plus will no longer provide any guarantees. The surviving spouse may elect the benefit at any time, subject to the limitations described above, after the death of the Annuity Owner. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. o You cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments) or transfer Account Value to or from a Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments) may be allocated by us to Fixed Allocations to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to a variable investment option. o Transfers from Fixed Allocations made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to Fixed Allocations even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to Fixed Allocations. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the sub-accounts for participation in the Guaranteed Return Option Plus program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. 60 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- GUARANTEED RETURN OPTION (GRO) - -------------------------------------------------------------------------------- The Guaranteed Return Option described below is offered only in those jurisdictions where we have not yet received regulatory approval for the Guaranteed Return Option Plus as of the date the election of the option is made. Certain terms and conditions may differ between jurisdictions. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option is not available if you elect the GRO Plus Rider, the Guaranteed Minimum Withdrawal Benefit rider, the Guaranteed Minimum Income Benefit rider, the Lifetime Five Income Benefit rider, the Highest Daily Value Death Benefit or the Dollar Cost Averaging program if it involves transfers out of the Fixed Allocations. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that period as the "maturity date") guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and the Fixed Allocation used to support the Protected Principal Value. The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market performance. There is an additional charge if you elect the Guaranteed Return Option program. The guarantees provided by the program exist only on the applicable maturity date. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between the variable investment options and the Fixed Allocation to support our future guarantee, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. For this same reason, the program may limit your ability to benefit from market increases while it is in effect. KEY FEATURE -- Protected Principal Value o Under the GRO option, American Skandia guarantees that on the maturity date, your Account Value will be no less than the Protected Principal Value. On the maturity date if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. Any amounts added to your Annuity to support our guarantees under the program will be applied to the Fixed Allocation first and then to the Sub-accounts pro-rata, based on your most recent allocation instructions in accordance with the allocation mechanism we use under the program. We will notify you of any amounts added to your Annuity under the program. If our assumptions are correct and the operations relating to the administration of the program work properly, we do not expect that we will need to add additional amounts to the Annuity. The Protected Principal Value is generally referred to as the "Guaranteed Amount" in the rider we issue for this benefit. KEY FEATURE -- Allocation of Account Value Account Value is transferred to and maintained in a Fixed Allocation to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. We monitor fluctuations in your Account Value each Valuation Day, as well as the prevailing interest rates on the Fixed Allocation, the remaining duration until the applicable maturity date and the amount of Account Value allocated to the Fixed Allocation relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from the Fixed Allocation. While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from the Fixed Allocation. o If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to the Fixed Allocation to support the guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your most recent allocation instructions (including the model 61 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from the Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. o If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred from your variable investment options pro rata according to your allocations to a new Fixed Allocation to support the guaranteed amount. The new Fixed Allocation will have a Guarantee Period equal to the time remaining until the applicable maturity date. The Account Value allocated to the new Fixed Allocation will be credited with the fixed interest rate then being credited to a new Fixed Allocation maturing on the applicable maturity date (rounded to the next highest yearly duration). The Account Value will remain invested in the Fixed Allocation until the maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). - -------------------------------------------------------------------------------- If a significant amount of your Account Value is systematically transferred to the Fixed Allocation to support the Protected Principal Value during periods of market declines, low interest rates, and/or as the program nears its maturity date, less of your Account Value may be available to participate in the investment experience of the variable investment options if there is a subsequent market recovery. During periods closer to the maturity date of the guarantee a significant portion of your Account Value may be allocated to the Fixed Allocation to support any applicable guaranteed amount. If your Account Value is less than the reallocation trigger and a new Fixed Allocation must be established during periods where the interest rate being credited to such Fixed Allocations is low, a larger portion of your Account Value may need to be transferred to the Fixed Allocation to support the guaranteed amount, causing less of your Account Value to be available to participate in the investment experience of the variable investment options. - -------------------------------------------------------------------------------- American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility, interest rates and time left to the maturity of the program to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocation and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option can be elected at the time that you purchase your Annuity, or on any Valuation Day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the Valuation Day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. Termination of the Program The Annuity Owner also can terminate the Guaranteed Return Option program. Upon termination, any Account Value in the Fixed Allocations will be transferred to the variable investment options pro-rata based on the Account Values in such variable investment options, or in accordance with any effective asset allocation program. A Market Value Adjustment will apply. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned con tract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program, the Guaranteed Return Option will no longer provide any guarantees. If the surviving spouse assumes the Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date of the Annuity or, if the deceased Owner had not previously elected the benefit, may elect the benefit at any time. The surviving spouse's election will be effective on the Valuation Day that we receive the required documentation in good order at our home office, and the Account Value on that Valuation Day will be the Protected Principal Value. The charge for the Guaranteed Return Option program will no longer be deducted from your Account Value upon termination of the program. 62 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: o Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. The Fixed Allocations may not be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to the Fixed Allocation as of the effective date of the program under some circumstances. o Annuity Owners cannot allocate any portion of Purchase Payments (including any Credits applied to such Purchase Payments) or transfer Account Value to or from the Fixed Allocation while participating in the program; however, all or a portion of any Purchase Payments (including any Credits applied to such Purchase Payments) may be allocated by us to the Fixed Allocation to support the amount guaranteed. You cannot participate in any dollar cost averaging program that transfers Account Value from the Fixed Allocation to a variable investment option. o Transfers from the Fixed Allocation made as a result of the allocation mechanism under the program will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% liquidity factor in the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently established Fixed Allocation. o Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed Allocation to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. o Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. o Low interest rates may require allocation to the Fixed Allocation even when the current Account Value exceeds the guarantee. o As the time remaining until the applicable maturity date gradually decreases the program will become increasingly sensitive to moves to the Fixed Allocation. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Charges under the Program We deduct a charge equal to 0.25% of the average daily net assets of the sub-accounts for participation in the Guaranteed Return Option program. The annual charge is deducted daily. In those states where the daily deduction of the charge has not yet been approved, the annual charge is deducted annually, in arrears. Account Value allocated to the Fixed Allocation under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Withdrawal Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Withdrawal Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit rider, or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to an initial principal value (called the "Protected Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance 63 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- will not affect your ability to protect your principal. You are not required to make withdrawals as part of the program -- the guarantee is not lost if you withdraw less than the maximum allowable amount of principal each year under the rules of the program. There is an additional charge if you elect the GMWB program; however, the charge may be waived under certain circumstances described below. KEY FEATURE -- Protected Value The Protected Value is the total amount that we guarantee will be available to you through withdrawals from your Annuity and/or benefit payments, regardless of the impact of market performance on your Account Value. The Protected Value is reduced with each withdrawal you make until the Protected Value is reduced to zero. When the Protected Value is reduced to zero due to your withdrawals, the GMWB program terminates. Additionally, the Protected Value is used to determine the maximum annual amount that you can withdraw from your Annuity, called the Protected Annual Withdrawal Amount, without triggering an adjustment in the Protected Value on a proportional basis. The Protected Value is referred to as the "Benefit Base" in the rider we issue for this benefit. The Protected Value is determined as of the date you make your first withdrawal under the Annuity following your election of the GMWB program. The initial Protected Value is equal to the greater of (A) the Account Value on the date you elect the GMWB program, plus any additional Purchase Payments and any Credits that may be applied to such Purchase Payments before the date of your first withdrawal; or (B) the Account Value as of the date of the first withdrawal from your Annuity. The Protected Value may be enhanced by increases in your Account Value due to market performance during the period between your election of the GMWB program and the date of your first withdrawal. o If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment plus any Credit applied to such Purchase Payment. o If we offer the GMWB program to existing Annuity Owners, the Account Value on the anniversary of the Issue Date of your Annuity following your election of the GMWB program will be used to determine the initial Protected Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Value will be increased by the amount of the additional Purchase Payment and any Credits that we apply to the Purchase Payment. You may elect to step-up your Protected Value if, due to positive market performance, your Account Value is greater than the Protected Value. You are eligible to step-up the Protected Value on or after the 5th contract anniversary following the first withdrawal under the GMWB program. The Protected Value can be stepped up again on or after the 5th contract anniversary following the preceding step-up. If you elect to step-up the Protected Value, you must do so during the 30-day period prior to your eligibility date. If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the GMWB program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we reset the Protected Value to be equal to the then current Account Value. For example, assume your initial Protected Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Value to $60,000. On the date you are eligible to step-up the Protected Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Value to $75,000 on the date you are eligible. Upon election of the step-up, we also reset the Protected Annual Withdrawal Amount (discussed immediately below) to be equal to the greater of (A) the Protected Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the Protected Value immediately after the reset. KEY FEATURE -- Protected Annual Withdrawal Amount The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected Value. Under the GMWB program, if your cumulative withdrawals each Annuity Year are less than or equal to the Protected Annual Withdrawal Amount, your Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected Value is reduced by the actual amount of the withdrawal, including any CDSC or MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed the Protected Annual Withdrawal Amount trigger a proportional adjustment to both the Protected Value and the Protected Annual Withdrawal Amount, as described in the rider for this benefit (see the examples of this calculation below). The Protected Annual Withdrawal Amount is referred to as the "Maximum Annual Benefit" in the rider we issue for this benefit. 64 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- The GMWB program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Protected Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Protected Annual Withdrawal Amount each Annuity Year. o If, cumulatively, you withdraw an amount less than the Protected Annual Withdrawal Amount in any Annuity Year, you cannot carry-over the unused portion of the Protected Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Protected Annual Withdrawal Amount may extend the period of time until the remaining Protected Value is reduced to zero. o Additional Purchase Payments will increase the Protected Annual Withdrawal Amount by 7% of the applicable Purchase Payment (and any Credits we apply to such Purchase Payment). o If the Protected Annual Withdrawal Amount after an adjustment exceeds the Protected Value, the Protected Annual Withdrawal Amount will be set equal to the Protected Value. The following examples of dollar-for-dollar and proportional reductions and the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and the effective date of the GMWB program are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes any Credits); 3.) a Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of $17,500 (7% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2004 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Protected Annual Withdrawal Amount: o The Protected Value is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). o The remaining Protected Annual Withdrawal Amount for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $17,500 to $7,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount withdrawn exceeds the remaining Protected Annual Withdrawal Amount of $7,500 from Example 1: o the Protected Value is first reduced by the remaining Protected Annual Withdrawal Amount (from $240,000 to $232,500); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the remaining Protected Annual Withdrawal Amount ($10,000 - $7,500, or $2,500). o B is the Account Value less the remaining Protected Annual Withdrawal Amount ($220,000 - $7,500, or $212,500). The resulting Protected Value is: $232,500 x (1 - $2,500 / $212,500), or $229,764.71. o the Protected Annual Withdrawal Amount is also reduced by the ratio of A to B: The resulting Protected Annual Withdrawal Amount is: $17,500 x (1 - $2,500 / $212,500), or $17,294.12. o The remaining Protected Annual Withdrawal Amount is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Maximum Annual Benefit A $10,000 withdrawal is made on October 13, 2005 (second Annuity Year). The remaining Protected Annual Withdrawal Amount has been reset to the Protected Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn is less than the remaining Protected Annual Withdrawal Amount: o the Protected Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $229,764.71 to $219,764.71). o The remaining Protected Annual Withdrawal Amount for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $17,294.12 to $7,294.12). BENEFITS UNDER THE GMWB PROGRAM o In addition to any withdrawals you make under the GMWB program, market performance may reduce your Account Value. If your Account Value is equal to zero, and you have not received all of your Protected Value in the form of withdrawals from your Annuity, we will continue to make payments equal to the remaining Protected Value in the form of fixed, periodic payments until the remainder of the Protected Value is paid, at which time the rider terminates. The fixed, periodic payments will each be equal to the Protected Annual Withdrawal Amount, except for the last pay- 65 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- ment which may be equal to the remaining Protected Value. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. You will not have the right to make additional Purchase Payments or receive the remaining Protected Value in a lump sum. You can elect the frequency of payments, subject to our rules then in effect. o If the death benefit under the Annuity becomes payable before you have received all of your Protected Value in the form of withdrawals from your Annuity, your Beneficiary has the option to elect to receive the remaining Protected Value as an alternate death benefit payout in lieu of the amount payable under any other death benefit provided under the Annuity. The remaining Protected Value will be payable in the form of fixed, periodic payments. Your beneficiary can elect the frequency of payments, subject to our rules then in effect. We will determine the duration for which periodic payments will continue by dividing the Protected Value by the Protected Annual Withdrawal Amount. The Protected Value is not equal to the Account Value for purposes of the Annuity's other death benefit options. The GMWB program does not increase or decrease the amount otherwise payable under the Annuity's other death benefit options. Generally, the GMWB program would be of value to your Beneficiary only when the Protected Value at death exceeds any other amount available as a death benefit. o If you elect to begin receiving annuity payments before you have received all of your Protected Value in the form of withdrawals from your Annuity, an additional annuity payment option will be available that makes fixed annuity payments for a certain period, determined by dividing the Protected Value by the Protected Annual Withdrawal Amount. If you elect to receive annuity payments calculated in this manner, the assumed interest rate used to calculate such payments will be 0%, which is less than the assumed interest rate on other annuity payment options we offer. This 0% assumed interest rate results in lower annuity payments than what would have been paid if the assumed interest rate was higher than 0%. You can also elect to terminate the GMWB program and begin receiving annuity payments based on your then current Account Value (not the remaining Protected Value) under any of the available annuity payment options. Other Important Considerations o Withdrawals under the GMWB program are subject to all of the terms and conditions of the Annuity, including any CDSC and MVA that may apply. o Withdrawals made while the GMWB program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. o The GMWB program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the GMWB program. The GMWB program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Value in the form of periodic benefit payments. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. Election of the Program Currently, the GMWB program can only be elected at the time that you purchase your Annuity. In the future, we may offer existing Annuity Owners the option to elect the GMWB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMWB program after the Issue Date of your Annuity, the program will be effective as of the next anniversary date. Your Account Value as of such anniversary date will be used to calculate the initial Protected Value and the initial Protected Annual Withdrawal Amount. We reserve the right to restrict the maximum amount of Protected Value that may be covered under the GMWB program under this Annuity or any other annuities that you own that are issued by American Skandia or its affiliated companies. 66 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Termination of the Program The program terminates automatically when your Protected Value reaches zero based on your withdrawals. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon due proof of death (unless your surviving spouse elects to continue the Annuity and the GMWB program or your Beneficiary elects to receive the amounts payable under the GMWB program in lieu of the death benefit) or upon your election to begin receiving annuity payments. The charge for the GMWB program will no longer be deducted from your Account Value upon termination of the program. Charges under the Program Currently, we deduct a charge equal to 0.35% of the average daily net assets of the Sub-accounts per year to purchase the GMWB program. The annual charge is deducted daily. Account Value allocated to Fixed Allocations under the program is not subject to the charge. o If, during the seven years following the effective date of the program, you do not make any withdrawals, and do not make any additional Purchase Payments after a five-year period following the effective date of the program, the program will remain in effect; however, we will waive the annual charge going forward. If you make an additional Purchase Payment following the waiver of the annual charge, we will begin charging for the program. After year seven (7) following the effective date of the program, withdrawals will not cause a charge to be re-imposed. o If you elect to step-up the Protected Value under the program, and on the date you elect to step-up, the charges under the program have changed for new purchasers, your program may be subject to the new charge level for the benefit. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70-1/2. The amount required under the Code may exceed the Protected Annual Withdrawal Amount, which will cause us to recalculate the Protected Value and the Protected Annual Withdrawal Amount, resulting in a lower amount payable in future Annuity Years. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. GUARANTEED MINIMUM INCOME BENEFIT (GMIB) - -------------------------------------------------------------------------------- The Guaranteed Minimum Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, the program can only be elected by new purchasers on the Issue Date of their Annuity. We may offer the program to existing Annuity Owners in the future, subject to our eligibility rules and restrictions. The Guaranteed Minimum Income Benefit program is not available if you elect the Guaranteed Return Option program, Guaranteed Return Option Plus program, the Guaranteed Minimum Withdrawal Benefit rider, or the Lifetime Five Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year waiting period, guarantees your ability to begin receiving income from your Annuity in the form of annuity payments based on a guaranteed minimum value (called the "Protected Income Value") that increases after the waiting period begins, regardless of the impact of market performance on your Account Value. The program may be appropriate for you if you anticipate using your Annuity as a future source of periodic fixed income payments for the remainder of your life and wish to ensure that the basis upon which your income payments will be calculated will achieve at least a minimum amount despite fluctuations in market performance. There is an additional charge if you elect the GMIB program. KEY FEATURE -- Protected Income Value The Protected Income Value is the minimum amount that we guarantee will be available (net of any applicable taxes), after a waiting period of at least seven years, as a basis to begin receiving fixed annuity payments. The Protected Income Value 67 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- is initially established on the effective date of the GMIB program and is equal to your Account Value on such date. Currently, since the GMIB program may only be elected at issue, the effective date is the Issue Date of the Annuity. The Protected Income Value is increased daily based on an annual growth rate of 5%, subject to the limitations described below. The Protected Income Value is referred to as the "Protected Value" in the rider we issue for this benefit. The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the rider we issue for this benefit. The Protected Income Value is subject to a limit of 200% (2x) of the sum of the Protected Income Value established on the effective date of the GMIB program, or the effective date of any step-up value, plus any additional Purchase Payments and any Credits that are applied to such Purchase Payments made after the waiting period begins ("Maximum Protected Income Value"), minus the sum of any reductions in the Protected Income Value due to withdrawals you make from the Annuity after the waiting period begins. o Subject to the maximum age/durational limits described immediately below, we will no longer increase the Protected Income Value by the 5% annual growth rate once you reach the Maximum Protected Income Value. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments and any Credits applied to such Purchase Payments after you reach the Maximum Protected Income Value. Further, if you make withdrawals after you reach the Maximum Protected Income Value, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, we will no longer increase the Protected Income Value by the 5% annual growth rate after the later of the anniversary date on or immediately following the Annuitant's 80th birthday or the 7th anniversary of the later of the effective date of the GMIB program or the effective date of the most recent step-up. However, we will increase the Protected Income Value by the amount of any additional Purchase Payments and any Credits applied to such Purchase Payments. Further, if you make withdrawals after the Annuitant reaches the maximum age/duration limits, we will reduce the Protected Income Value and the Maximum Protected Income Value by the proportional impact of the withdrawal on your Account Value. o Subject to the Maximum Protected Income Value, if you make an additional Purchase Payment, we will increase the Protected Income Value by the amount of the Purchase Payment (including any Credits that may be applied to your Account Value based on such Purchase Payment) and will apply the 5% annual growth rate on the new amount from the date the Purchase Payment is applied. o As described below, after the waiting period begins, cumulative withdrawals each Annuity Year that are up to 5% of the Protected Income Value on the prior anniversary of the Annuity will reduce the Protected Income Value by the amount of the withdrawal. Cumulative withdrawals each Annuity Year in excess of 5% of the Protected Income Value on the prior anniversary of the Annuity, will reduce the Protected Income Value proportionately. All withdrawals after the Maximum Protected Income Value is reached will reduce the Protected Income Value proportionately. The 5% annual growth rate will be applied to the reduced Protected Income Value from the date of the withdrawal. Stepping-Up the Protected Income Value -- You may elect to "step-up" or "reset" your Protected Income Value if your Account Value is greater than the current Protected Income Value. Upon exercise of the step-up provision, your initial Protected Income Value will be reset equal to your current Account Value. From the date that you elect to step-up the Protected Income Value, we will apply the 5% annual growth rate to the stepped-up Protected Income Value, as described above. You can exercise the step-up provision twice while the GMIB program is in effect, and only while the Annuitant is less than age 76. o A new seven-year waiting period will be established upon the effective date of your election to step-up the Protected Income Value. You cannot exercise your right to begin receiving annuity payments under the GMIB program until the end of the new waiting period. o The Maximum Protected Income Value will be reset as of the effective date of any step-up. The new Maximum Protected Income Value will be equal to 200% of the sum of the Protected Income Value as of the effective date of the step-up plus any subsequent Purchase Payments and any Credits applied to such Purchase Payments, minus the impact of any withdrawals after the date of the step-up. o When determining the guaranteed annuity purchase rates for annuity payments under the GMIB program, we will apply such rates based on the number of years since the most recent step-up. 68 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- o If you elect to step-up the Protected Income Value under the program, and on the date you elect to step-up, the charges under the GMIB program have changed for new purchasers, your program may be subject to the new charge going forward. o A step-up will increase the dollar for dollar limit on the anniversary of the Issue Date of the Annuity following such step-up. Impact of Withdrawals on the Protected Income Value -- Cumulative withdrawals each Annuity Year up to 5% of the Protected Income Value will reduce the Protected Income Value on a "dollar-for-dollar" basis (the Protected Income Value is reduced by the actual amount of the withdrawal). Cumulative withdrawals in any Annuity Year in excess of 5% of the Protected Income Value will reduce the Protected Income Value proportionately (see the examples of this calculation below). The 5% annual withdrawal amount is determined on each anniversary of the Issue Date (or on the Issue Date for the first Annuity Year) and applies to any withdrawals during the Annuity Year. This means that the amount available for withdrawals each Annuity Year on a "dollar-for-dollar" basis is adjusted on each contract anniversary to reflect changes in the Protected Income Value during the prior Annuity Year. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GMIB program are October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits); 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity Year). No prior withdrawals have been taken. Immediately prior to the withdrawal, the Protected Income Value is $251,038.10 (the initial value accumulated for 31 days at an annual effective rate of 5%). As the amount withdrawn is less than the dollar-for-dollar limit: o The Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). o The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 13, 2005 (still within the first Annuity Year). Immediately before the withdrawal, the Account Value is $220,000 and the Protected Income Value is $242,006.64. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: o The Protected Income Value is first reduced by the Remaining Limit (from $242,006.64 to $239,506.64); o The result is then further reduced by the ratio of A to B, where: o A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). o B is the Account Value less the Remaining Limit ($220,000 - $2,500, or $217,500). The resulting Protected Income Value is: $239,506.64 x (1 - $7,500 / $217,500), or $231,247.79. o The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on the first anniversary of the Issue Date, October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected Income Value is $240,838.37. The Remaining Limit is reset to 5% of this amount, or $12,041.92. As the amount withdrawn is less than the dollar-for-dollar limit: o The Protected Income Value is reduced by the amount withdrawn (i.e., reduced by $10,000, from $240,838.37 to $230,838.37). o The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,041.92 to $2,041.92). KEY FEATURE -- GMIB Annuity Payments You can elect to apply the Protected Income Value to one of the available GMIB Annuity Payment Options on any anniversary date following the initial waiting period, or any subsequent waiting period established upon your election to step-up the Protected Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the Annuity anniversary, during which you may elect to begin receiving annuity payments under one of the available GMIB Annuity Payment Options. You must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 95th birthday, except for Annuities used as a funding vehicle for 69 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- an IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue Date on or immediately following the Annuitant's 92nd birthday. The amount of each GMIB Annuity Payment will be determined based on the age and, where permitted by law, sex of the Annuitant by applying the Protected Income Value (net of any applicable tax charge that may be due) to the GMIB Annuity Payment Option you choose. We use special annuity purchase rates to calculate the amount of each payment due under the GMIB Annuity Payment Options. These special rates for the GMIB Annuity Payment Options are calculated using an assumed interest rate factor that provides for lower growth in the value applied to produce annuity payments than if you elected an annuity payment option that is not part of the GMIB program. These special rates also are calculated using other factors such as "age setbacks" (use of an age lower than the Annuitant's actual age) that result in lower payments than would result if you elected an annuity payment option that is not part of the GMIB program. Use of an age setback entails a longer assumed life for the Annuitant which in turn results in lower annuity payments. On the date that you elect to begin receiving GMIB Annuity Payments, we guarantee that your payments will be calculated based on your Account Value and our then current annuity purchase rates if the payment amount calculated on this basis would be higher than it would be based on the Protected Income Value and the special GMIB annuity purchase rates. GMIB Annuity Payment Option 1 -- Payments for Life with a Certain Period Under this option, monthly annuity payments will be made until the death of the Annuitant. If the Annuitant dies before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. GMIB Annuity Payment Option 2 -- Payments for Joint Lives with a Certain Period Under this option, monthly annuity payments will be made until the death of both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint Annuitant die before having received 120 monthly annuity payments, the remainder of the 120 monthly annuity payments will be made to the Beneficiary. o If the Annuitant dies first, we will continue to make payments until the later of the death of the Joint Annuitant and the end of the period certain. However, if the Joint Annuitant is still receiving annuity payments following the end of the certain period, we will reduce the amount of each subsequent payment to 50% of the original payment amount. o If the Joint Annuitant dies first, we will continue to make payments until the later of the death of the Annuitant and the end of the period certain. You cannot withdraw your Account Value or the Protected Income Value under either GMIB Annuity Payment Option once annuity payments have begun. We may make other payout frequencies available, such as quarterly, semi-annually or annually. Other Important Considerations o You should note that GMIB is designed to provide a type of insurance that serves as a safety net only in the event your Account Value declines significantly due to negative investment performance. If your contract value is not significantly affected by negative investment performance, it is unlikely that the purchase of the GMIB will result in your receiving larger annuity payments than if you had not purchased GMIB. This is because the assumptions that we use in computing the GMIB, such as the annuity purchase rates, (which include assumptions as to age-setbacks and assumed interest rates), are more conservative than the assumptions that we use in computing annuity payout options outside of GMIB. Therefore, you may generate higher income payments if you were to annuitize a lower Account Value at the current annuity purchase rates, than if you were to annuitize under the GMIB with a higher Protected Value than your Account Value but, at the annuity purchase rates guaranteed under the GMIB. The GMIB program does not directly affect the Annuity's Account Value, Surrender Value or the amount payable under either the basic death benefit provision of the Annuity or any optional death benefit provision. If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Income Value. The Protected Income Value is only applicable if you elect to begin receiving annuity payments under one of the GMIB annuity options after the waiting period. o The Annuity offers other annuity payment options that you can elect which do not impose an additional charge, but which do not offer to guarantee a minimum value on which to make annuity payments. 70 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- o Where allowed by law, we reserve the right to limit subse- quent purchase payments if we determine, at our sole discretion, that based on the timing of your Purchase Payments and withdrawals, your Protected Income Value is increasing in ways we did not intend. In determining whether to limit Purchase Payments, we will look at Purchase Payments which are disproportionately larger than your initial Purchase Payment and other actions that may artificially increase the Protected Income Value. o We currently limit the variable investment options in which you may allocate Account Value if you participate in this program. We reserve the right to transfer any Account Value in a prohibited investment option to an eligible investment option. Should we prohibit access to any investment option, any transfers required to move Account Value to eligible investment options will not be counted in determining the number of free transfers during an Annuity Year. We may also require that you allocate your Account Value according to an asset allocation model. o If you change the Annuitant after the effective date of the GMIB program, the period of time during which we will apply the 5% annual growth rate may be changed based on the age of the new Annuitant. If the new Annuitant would not be eligible to elect the GMIB program based on his or her age at the time of the change, then the GMIB program will terminate. o Annuity payments made under the GMIB program are subject to the same tax treatment as any other annuity payment. o At the time you elect to begin receiving annuity payments under the GMIB program or under any other annuity payment option we make available, the protection provided by the Annuity's basic death benefit or any optional death benefit provision you elected will no longer apply. Election of the Program Currently, the GMIB program can only be elected at the time that you purchase your Annuity. The Annuitant must be age 75 or less as of the effective date of the GMIB program. In the future, we may offer existing Annuity Owners the option to elect the GMIB program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. If you elect the GMIB program after the Issue Date of your Annuity, the program will be effective as of the date of election. Your Account Value as of the that date will be used to calculate the Protected Income Value as of the effective date of the program. Termination of the Program The GMIB program cannot be terminated by the Owner once elected. The GMIB program automatically terminates as of the date the Annuity is fully surrendered, on the date the death benefit is payable to your Beneficiary (unless your surviving spouse elects to continue the Annuity), or on the date that your Account Value is transferred to begin making annuity payments. The GMIB program may also be terminated if you designate a new Annuitant who would not be eligible to elect the GMIB program based on his or her age at the time of the change. Upon termination of the GMIB program we will deduct the charge from your Account Value for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). Charges under the Program Currently, we deduct a charge equal to 0.50% per year of the average Protected Income Value for the period the charge applies. Because the charge is calculated based on the average Protected Income Value, it does not increase or decrease based on changes to the Annuity's Account Value due to market performance. The dollar amount you pay each year will increase in any year the Protected Income Value increases, and it will decrease in any year the Protected Income Value decreases due to withdrawal, irrespective of whether your Account Value increases or decreases. The charge is deducted annually in arrears each Annuity Year on the anniversary of the Issue Date of the Annuity. We deduct the amount of the charge pro-rata from the Account Value allocated to the variable investment options and the Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed Allocation. If you surrender your Annuity, begin receiving annuity payments under the GMIB program or any other annuity payment option we make available during an Annuity Year, or the GMIB program terminates, we will deduct the charge for the portion of the Annuity Year since the prior anniversary of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No charge applies after the Annuity Date. 71 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE) - -------------------------------------------------------------------------------- The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, Lifetime Five can be elected only once each Annuity Year, and only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. We reserve the right to limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, Guaranteed Minimum Withdrawal Benefit or the Guaranteed Minimum Income Benefit rider. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with an eligible model under our asset allocation programs, which are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- We offer a program that guarantees your ability to withdraw amounts equal to a percentage of an initial principal value (called the "Protected Withdrawal Value"), regardless of the impact of market performance on your Account Value, subject to our program rules regarding the timing and amount of withdrawals. There are two options -- one is designed to provide an annual withdrawal amount for life (the "Life Income Benefit") and the other is designed to provide a greater annual withdrawal amount as long as there is Protected Withdrawal Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no Protected Withdrawal Value, the withdrawal benefit will be zero. You do not choose between these two options; each option will continue to be available as long as the Annuity has an Account Value and the Lifetime Five is in effect. Certain benefits under Lifetime Five may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity and wish to ensure that market performance will not affect your ability to receive annual payments. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Protected Withdrawal Value The Protected Withdrawal Value is initially used to determine the amount of each initial annual payment under the Life Income Benefit and the Withdrawal Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Lifetime Five, plus any additional Purchase Payments and associated Credits each growing at 5% per year from the date of your election of the program, or application of the Purchase Payment and associated Credit to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier, (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. Each value is increased by the amount of any subsequent Purchase Payments and associated Credits. o If you elect the Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment plus the amount of any associated Credits. o For existing Owners who are electing the Lifetime Five benefit, the Account Value on the date of your election of the Lifetime Five program will be used to determine the initial Protected Withdrawal Value. o If you make additional Purchase Payments after your first withdrawal, the Protected Withdrawal Value will be increased by the amount of each additional Purchase Payment plus associated Credits. You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is 72 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- greater than the Protected Withdrawal Value. You are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. The Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Upon election of the step-up, we increase the Protected Withdrawal Value to be equal to the then current Account Value. For example, assume your initial Protected Withdrawal Value was $100,000 and you have made cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to $60,000. On the date you are eligible to step-up the Protected Withdrawal Value, your Account Value is equal to $75,000. You could elect to step-up the Protected Withdrawal Value to $75,000 on the date you are eligible. If your current Annual Income Amount and Annual Withdrawal Amount are less than they would be if we did not reflect the step-up in Protected Withdrawal Value, then we will increase these amounts to reflect the step-up as described below. The Protected Withdrawal Value is reduced each time a withdrawal is made on a dollar-for-dollar basis up to 7% per Annuity Year of the Protected Withdrawal Value and on the greater of a dollar-for-dollar basis or a pro-rata basis for withdrawals in an Annuity Year in excess of that amount until the Protected Withdrawal Value is reduced to zero. At that point the Annual Withdrawal Amount will be zero until such time (if any) as the Annuity reflects a Protected Withdrawal Value (for example, due to a step-up or additional Purchase Payments being made into the Annuity). KEY FEATURE -- Annual Income Amount under the Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. A withdrawal can be considered Excess Income under the Life Income Benefit even though it does not exceed the Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up if such amount is greater than your Annual Income Amount. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments plus any associated Credits. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore, a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. KEY FEATURE -- Annual Withdrawal Amount under the Withdrawal Benefit The initial Annual Withdrawal Amount is equal to 7% of the initial Protected Withdrawal Value. Under the Lifetime Five program, if your cumulative withdrawals each Annuity Year are less than or equal to the Annual Withdrawal Amount, your Protected Withdrawal Value will be reduced on a dollar-for-dollar basis. If your cumulative withdrawals are in excess of the Annual Withdrawal Amount ("Excess Withdrawal"), your Annual Withdrawal Amount will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Withdrawal to the Account Value immediately prior to such withdrawal (see the examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. When you elect a step-up, your Annual Withdrawal Amount increases to equal 7% of your Account Value after the step-up if such amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 7% of any additional Purchase Payments. A determination of whether you have exceeded your Annual Withdrawal Amount is made at the time of each withdrawal; therefore, a subsequent increase in the Annual Withdrawal Amount will not offset the effect of a withdrawal that exceeded the Annual Withdrawal Amount at the time the withdrawal was made. 73 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- The Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount and the Annual Withdrawal Amount. You are not required to withdraw all or any portion of the Annual Withdrawal Amount or Annual Income Amount in each Annuity Year. o If, cumulatively, you withdraw an amount less than the Annual Withdrawal Amount under the Withdrawal Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Withdrawal Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Withdrawal Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. o If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. However, because the Protected Withdrawal Value is only reduced by the actual amount of withdrawals you make under these circumstances, any unused Annual Income Amount may extend the period of time until the remaining Protected Withdrawal Value is reduced to zero. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Protected Withdrawal Value, Annual Withdrawal Amount and Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000 (includes any Credits); 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2011 is equal to $240,000. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase Payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 x 1.05(393/365) = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7% of $265,000). The Annual Income Amount is equal to $13,250 under the Life Income Benefit (5% of $265,000). Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $10,000 = $8,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 o Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 o Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount but less than the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: o Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 - $15,000 = $3,550 Annual Withdrawal Amount for future Annuity Years remains at $18,550 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $1,750 / ($263,000 - $13,250) x $13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 o Protected Withdrawal Value is reduced by $15,000 from $265,000 to $250,000 (b) If $25,000 was withdrawn (more than both the Annual Income Amount and the Annual Withdrawal Amount) on March 1, 2006, then the following values would result: 74 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- o Remaining Annual Withdrawal Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Withdrawal Amount ($25,000 - $18,550 = $6,450) reduces Annual Withdrawal Amount for future Annuity Years. o Reduction to Annual Withdrawal Amount = Excess Withdrawal/Account Value before Excess Withdrawal x Annual Withdrawal Amount = $6,450 / ($263,000 - $18,550) x $18,550 = $489 Annual Withdrawal Amount for future Annuity Years = $18,550 - $489 = $18,061 o Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($25,000 - $13,250 = $11,750) reduces Annual Income Amount for future Annuity Years. o Reduction to Annual Income Amount = Excess Income/ Account Value before Excess Income x Annual Income Amount = $11,750 / ($263,000 - $13,250) x $13,250 = $623 Annual Income Amount for future Annuity Years = $13,250 - $623 = $12,627 o Protected Withdrawal Value is first reduced by the Annual Withdrawal Amount ($18,550) from $265,000 to $246,450. It is further reduced by the greater of a dollar-for-dollar reduction or a proportional reduction. Dollar-for-dollar reduction = $25,000 - $18,550 = $6,450 o Proportional reduction = Excess Withdrawal / Account Value before Excess Withdrawal x Protected Withdrawal Value = $6,450 / ($263,000 - $18,550) x $246,450 = $6,503 Protected Withdrawal Value = $246,450 - max x {$6,450, $6,503} = $239,947 Example 3. Step-up of the Protected Withdrawal Value If the Annual Income Amount ($13,250) is withdrawn each year starting on March 1, 2006 for a period of 5 years, the Protected Withdrawal Value on March 1, 2011 would be reduced to $198,750 {$265,000 - ($13,250 x 5)}. If a step-up is elected on March 1, 2011, then the following values would result: o Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 o Annual Income Amount is equal to the greater of the current Annual Income Amount or 5% of the stepped up Protected Withdrawal Value. Current Annual Income Amount is $13,250. 5% of the stepped up Protected Withdrawal Value is 5% of $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. o Annual Withdrawal Amount is equal to the greater of the current Annual Withdrawal Amount or 7% of the stepped up Protected Withdrawal Value. Current Annual Withdrawal Amount is $18,550. 7% of the stepped up Protected Withdrawal Value is 7% of $240,000, which is $16,800. Therefore, the Annual Withdrawal Amount remains $18,550. BENEFITS UNDER THE LIFETIME FIVE PROGRAM o If your Account Value is equal to zero, and the cumulative withdrawals in the current Annuity Year are greater than the Annual Withdrawal Amount, the Lifetime Five program will terminate. To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under both the Life Income Benefit and the Withdrawal Benefit, you will be given the choice of receiving the payments under the Life Income Benefit or under the Withdrawal Benefit. Once you make this election we will make an additional payment for that Annuity Year equal to either the remaining Annual Income Amount or Annual Withdrawal Amount for the Annuity Year, if any, depending on the option you choose. In subsequent Annuity Years we make payments that equal either the Annual Income Amount or the Annual Withdrawal Amount as described in this Prospectus. You will not be able to change the option after your election and no further Purchase Payments will be accepted under your Annuity. If you do not make an election, we will pay you annually under the Life Income Benefit. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount but less than or equal to the Annual Withdrawal Amount and amounts are still payable under the Withdrawal Benefit, you will receive the payments under the Withdrawal Benefit. In the year of a withdrawal that reduced your Account Value to zero, we will make an additional payment to equal any remaining Annual Withdrawal Amount and make payments equal to the Annual With- 75 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- drawal Amount in each subsequent year (until the Protected Withdrawal Value is depleted). Once your Account Value equals zero, no further Purchase Payments will be accepted under your Annuity. o If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years or any remaining Protected Withdrawal Value, you can elect one of the following three options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We make such annuity payments until the Annuitant's death; or (3) request that, as of the date annuity payments are to begin, we pay out any remaining Protected Withdrawal Value as annuity payments. Each year such annuity payments will equal the Annual Withdrawal Amount or the remaining Protected Withdrawal Value if less. We make such annuity payments until the earlier of the Annuitant's death or the date the Protected Withdrawal Value is depleted. We must receive your request in a form acceptable to us at our office. o In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a single life fixed annuity with five payments certain using the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the greater of the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. o If no withdrawal was ever taken, we will determine a Protected Withdrawal Value and calculate an Annual Income Amount and an Annual Withdrawal Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations o Withdrawals under the Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. o Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value, not the Protected Withdrawal Value. o You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Lifetime Five program. The Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Protected Withdrawal Value or Annual Income Amount in the form of periodic benefit payments. o You must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit in order to elect and maintain the Lifetime Five program. Asset allocation programs are described generally in the "Are Any Asset Allocation Programs Available" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. Election of the Program The Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value, the initial Protected Annual Withdrawal Amount, and the Annual Income Amount. Termination of the Program The program terminates automatically when your Protected Withdrawal Value and Annual Income Amount equals zero. You 76 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective. The program terminates upon your surrender of the Annuity, upon the death of the Annuitant (but your surviving spouse may elect a new Lifetime Five if your spouse elects the spousal continuance option and your spouse would then be eligible to elect the benefit if he or she was a new purchaser), upon a change in ownership of the Annuity that changes the tax identification number of the Owner, upon change in the Annuitant or upon your election to begin receiving annuity payments. The charge for the Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70-1/2. The amount required under the Code may exceed the Annual Withdrawal Amount and the Annual Income Amount, which will cause us to increase the Annual Income Amount and the Annual Withdrawal Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. Any such payments will reduce your Protected Withdrawal Value. In addition, the amount and duration of payments under the annuity payment and death benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 77 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Death Benefit - -------------------------------------------------------------------------------- WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers three different optional Death Benefits that can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. Under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. (See "How are Credits Applied to My Account Value".) The basic Death Benefit is the greater of: o The sum of all Purchase Payments less the sum of all proportional withdrawals. o The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, less the amount of any Credits applied within 12-months prior to the date of death. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Three optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - -------------------------------------------------------------------------------- Currently, these benefits are only offered in those jurisdictions where we have received regulatory approval and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase an optional Death Benefit subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ between jurisdictions once approved and if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit may only be elected individually, and cannot be elected in combination with any other optional death benefit. Under certain circumstances, each Optional Death Benefit that you elect may be reduced by the amount of Credits applied to your Purchase Payments. - -------------------------------------------------------------------------------- Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. 78 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments, less the amount of any Credits applied within 12 months prior to the date of death, reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. The Enhanced Beneficiary Protection Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit ("HAV") If the Annuity has one Owner, the Owner must be age 79 or less at the time Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of Highest Anniversary Value Death Benefit The HAV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The amount calculated in Items 1 & 2 above (before, on or after the Death Benefit Target Date) may be reduced by any Credits under certain circumstances. - -------------------------------------------------------------------------------- The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Anniversary Value Death Benefit is not available if you elect the "Combination 5% Roll-up and Highest Anniversary Value" or the "Highest Daily Value" Death Benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Highest Anniversary Value Death Benefit is calculated. Please refer to the definition of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death 79 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer contract anniversaries before the death benefit target date is reached. The death benefit target date under this death benefit is earlier than the death benefit target date under the Combination 5% Roll-up and Highest Anniversary Value Death Benefit for Owners who are age 76 or older when the Annuity is issued, which may result in a lower value on the death benefit, since there will be fewer contract anniversaries before the death benefit target date is reached. Combination 5% Roll-up and Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time the Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Combination 5% Roll-up and HAV Death Benefit. In addition, we reserve the right to require you to use certain asset allocation model(s) if you elect this death benefit. Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death Benefit The Combination 5% Roll-up and HAV Death Benefit equals the greatest of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value death benefit described above, and 3. 5% Roll-up described below. The calculation of the 5% Roll-up depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date the 5% Roll up is equal to: o all Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death) increasing at an annual effective interest rate of 5% starting on the date that each Purchase Payment is made and ending on the Owner's date of death; MINUS o the sum of all withdrawals, dollar for dollar up to 5% of the death benefit's value as of the prior contract anniversary (or issue date if the withdrawal is in the first contract year). Any withdrawals in excess of the 5% dollar for dollar limit are proportional. If the Owner dies on or after the Death Benefit Target Date the 5% Roll-up is equal to: o the 5% Roll-up value as of the Death Benefit Target Date increased by total Purchase Payments (including any Credits applied to such Purchase Payments more than twelve (12) months prior to date of death) made after the Death Benefit Target Date; MINUS o the sum of all withdrawals which reduce the 5% Roll-up proportionally. The amounts calculated above (before, on or after the Death Benefit Target Date) may be reduced by any Credits under certain circumstances. Please refer to the definitions of Death Benefit Target Date below. This death benefit may not be an appropriate feature where the Owner's age is near the age specified in the Death Benefit Target Date. This is because the benefit may not have the same potential for growth as it otherwise would, since there will be fewer Annuity anniversaries before the Death Benefit Target Date is reached. - -------------------------------------------------------------------------------- The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit is not available if you elect any other optional death benefit. - -------------------------------------------------------------------------------- See Appendix B for examples of how the Combination 5% Roll-up and Highest Anniversary Value Death Benefit is calculated. Key Terms Used with the Highest Anniversary Value Death Benefit and the Combination 5% Roll-up and Highest Anniversary Value Death Benefit: o The Death Benefit Target Date for the Highest Anniversary Value Death Benefit is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. o The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death Benefit is the later of the contract anniversary on or after the 80th birthday of the current Owner, the oldest 80 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- of either joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Anniversary Value equals the highest of all previous "Anniversary Values" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. o The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Anniversary Value or 5% Roll-up value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value or 5% Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Highest Daily Value Death Benefit ("HDV") - -------------------------------------------------------------------------------- If the Annuity has one Owner, the Owner must be age 79 or less at the time the Highest Daily Value Death Benefit is elected. If the Annuity has joint Owners, the older Owner must be age 79 or less. If there are Joint Owners, death of the Owner refers to the first to die of the Joint Owners. If the Annuity is owned by an entity, the Annuitant must be age 79 or less and death of the Owner refers to the death of the Annuitant. If you elect this benefit, you must allocate your Account Value in accordance with an eligible model under an available asset allocation program or in accordance with other options that we may permit. Because this benefit, once elected, may not be terminated, you must keep your Account Value allocated to an eligible model throughout the life of the Annuity. You may, however, switch from one eligible model to another eligible model. Our asset allocation programs are generally described in the "Are Any Asset Allocation Programs Available?" section above. For further information on asset allocation programs, please consult with your Investment Professional or call 1-800-680-8920. - -------------------------------------------------------------------------------- The HDV Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above (including any credits applied to such Purchase Payments more than twelve (12) months prior to the date of death); and 2. the HDV as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above (including any credits applied to such Purchase Payments more than twelve (12) months prior to the date of death); and 2. the HDV on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The amount may also be increased by any Credits under certain circumstances. - -------------------------------------------------------------------------------- The Highest Daily Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. The Highest Daily Value Death Benefit is not available if you elect the Guaranteed Return Option, Guaranteed Return Option Plus, the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit, or the Highest Anniversary Value Death Benefit. - -------------------------------------------------------------------------------- 81 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- Key Terms Used with the Highest Daily Value Death Benefit: o The Death Benefit Target Date for the Highest Daily Value Death Benefit is the later of the Annuity anniversary on or after the 80th birthday of the current Owner, or the older of either the joint Owner or the Annuitant, if entity owned, or five years after the Issue Date of the Annuity. o The Highest Daily Value equals the highest of all previous "Daily Values" less proportional withdrawals since such date and plus any Purchase Payments (and associated Credits) since such date. o The Daily Value is the Account Value as of the end of each Valuation Day. The Daily Value on the Issue Date is equal to your Purchase Payment (plus any associated Credit). o Proportional withdrawals are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. Proportional withdrawals result in a reduction to the Highest Daily Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Daily Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Daily Value ($125,000) by 10% or $12,500. Please see Appendix B to this Prospectus for a hypothetical example of how the HDV Death Benefit is calculated. Annuities with Joint Owners For Annuities with Joint Owners, the Death Benefits are calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the Annuity instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefits are calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Death Benefit and Highest Anniversary Value Death Benefit at any time. The "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated once elected. The optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year of the average daily net assets of the Sub-accounts for each of the Highest Anniversary Value Death Benefit and the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the average daily net assets of the Sub-accounts for the "Combination 5% Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge for each of these benefits to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. 82 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- AMERICAN SKANDIA'S ANNUITY REWARDS What is the Annuity Rewards Benefit? The Annuity Rewards benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than the Annuity's value as of the effective date of the benefit. Under the Annuity Rewards benefit, American Skandia guarantees that the Death Benefit will not be less than: o your Account Value in the variable investment options plus the Interim Value in any Fixed Allocations as of the effective date of the benefit o MINUS any proportional withdrawals* following the effective date of the benefit o PLUS any additional Purchase Payments applied to the Annuity following the effective date of the benefit. The Annuity Rewards Death Benefit enhancement does not affect the basic Death Benefit calculation or any Optional Death Benefits available under the Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. Who is eligible for the Annuity Rewards Benefit? Owners can elect the Annuity Rewards Death Benefit enhancement following the tenth (10th) anniversary of the Annuity's Issue Date. However, the Account Value on the date that the Annuity Rewards Benefit is effective must be greater than the amount that would be payable to the Beneficiary under the Death Benefit (including any amounts payable under any Optional Death Benefit then in effect). The effective date must occur before annuity payments begin. There can only be one effective date for the Annuity Rewards Death Benefit enhancement. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal assumption as described below, in the event of your death, the death benefit must be distributed: * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. o as a lump sum amount at any time within five (5) years of the date of death; or o as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary -- Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity -- Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. Qualified Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity 83 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. o If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70-1/2, which ever is later. o If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. Upon election of this Qualified Beneficiary Continuation option: o the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. o the Beneficiary will be charged at an amount equal to 1.40% daily against the average daily assets allocated to the Sub-accounts. o the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. o the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner, except that the Sub-accounts offered will be those under the Qualified Beneficiary Continuation option at the time the option is elected. o the Fixed Allocations will be those offered under the Qualified Beneficiary Continuation option at the time the option is elected. o no additional Purchase Payments can be applied to the Annuity. o other optional Benefits will be those offered under the Qualified Beneficiary Continuation option at the time of election. o the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. o the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. o upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. o all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Your Beneficiary will be provided with a prospectus and settlement option that will describe this option at the time he or she elects this option. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the Qualified Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including any optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy 84 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. 85 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Valuing Your Investment - -------------------------------------------------------------------------------- HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. The Account Value includes any Credit we apply to your Purchase Payments that we are entitled to recover under certain circumstances. When determining the Account Value on any day other than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is defined under "Glossary of Terms" above. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge, the Distribution Charge (if applicable), and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge, Distribution Charge (if applicable) and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day more than 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next Valuation Day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circum- 86 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- stances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Washington's Birthday, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: o trading on the NYSE is restricted; o an emergency exists making redemption or valuation of securities held in the separate account impractical; or o the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) business days after we receive all of our requirements at our office to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) business days, we are required to return the Purchase Payment at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) business days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment at our office with satisfactory allocation instructions. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions if none are provided. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on the next Valuation Day, unless the next Valuation Day falls in the subsequent calendar year, in which case the transaction will be processed and valued on the prior Valuation Day. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to 1/2 hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.prudential.com). You cannot request a transaction involving the purchase, redemption or transfer of Units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. 87 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Valuing Your Investment continued - -------------------------------------------------------------------------------- WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefits: Except for Guaranteed Minimum Income Benefit, the Combination 5% Roll-up and Highest Anniversary Value Death Benefit and the Highest Daily Value Death Benefit which cannot be terminated by the owner once elected, if any optional benefit terminates, we will no longer deduct the charge we apply to purchase the optional benefit. Certain optional benefits may be added after you have purchased your Annuity. On the date a charge no longer applies or a charge for an optional benefit begins to be deducted, your Annuity will become subject to a different daily asset-based charge. This change may result in the number of Units attributed to your Annuity and the value of those Units being different than it was before the change; however, the adjustment in the number of Units and Unit Price will not affect your Account Value (although the change in charges that are deducted will affect your Account Value). 88 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Tax Considerations - -------------------------------------------------------------------------------- The tax considerations associated with the Annuity vary depending on whether the contract is (i) owned by an individual and not associated with a tax-favored retirement plan (including contracts held by a non-natural person, such as a trust acting as an agent for a natural person), or (ii) held under a tax-favored retirement plan. We discuss the tax considerations for these categories of contracts below. The discussion is general in nature and describes only federal income tax law (not state or other tax laws). It is based on current law and interpretations, which may change. The discussion includes a description of certain spousal rights under the contract and under tax-qualified plans. Our administration of such spousal rights and related tax reporting accords with our understanding of the Defense of Marriage Act (which defines a "marriage" as a legal union between a man and a woman and a "spouse" as a person of the opposite sex). The information provided is not intended as tax advice. You should consult with a qualified tax advisor for complete information and advice. References to purchase payments below relates to your cost basis in your contract. Generally, your cost basis in a contract not associated with a tax-favored retirement plan is the amount you pay into your contract, or into annuities exchanged for your contract, on an after-tax basis less any withdrawals of such payments. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. CONTRACTS OWNED BY INDIVIDUALS (NOT ASSOCIATED WITH TAX-FAVORED RETIREMENT PLANS) Taxes Payable by You We believe the contract is an annuity contract for tax purposes. Accordingly, as a general rule, you should not pay any tax until you receive money under the contract. Generally, annuity contracts issued by the same company (and affiliates) to you during the same calendar year must be treated as one annuity contract for purposes of determining the amount subject to tax under the rules described below. It is possible that the Internal Revenue Service (IRS) would assert that some or all of the charges for the optional benefits under the contract should be treated for federal income tax purposes as a partial withdrawal from the contract. If this were the case, the charge for this benefit could be deemed a withdrawal and treated as taxable to the extent there are earnings in the contract. Additionally, for owners under age 59-1/2, the taxable income attributable to the charge for the benefit could be subject to a tax penalty. If the IRS determines that the charges for one or more benefits under the contract are taxable withdrawals, then the sole or surviving owner will be provided with a notice from us describing available alternatives regarding these benefits. If you choose to defer the Annuity Date beyond the default date for your Annuity, the IRS may not consider your contract to be an annuity under the tax law. For more information, see "How and When Do I Choose the Annuity Payment Option?". Taxes on Withdrawals and Surrender If you make a withdrawal from your contract or surrender it before annuity payments begin, the amount you receive will be taxed as ordinary income, rather than as return of purchase payments, until all gain has been withdrawn. You will generally be taxed on any withdrawals from the contract while you are alive even if the withdrawal is paid to someone else. If you assign or pledge all or part of your contract as collateral for a loan, the part assigned generally will be treated as a withdrawal. If you transfer your contract for less than full consideration, such as by gift, you will trigger tax on any gain in the contract. This rule does not apply if you transfer the contract to your spouse or under most circumstances if you transfer the contract incident to divorce. Taxes on Annuity Payments A portion of each annuity payment you receive will be treated as a partial return of your purchase payments and will not be taxed. The remaining portion will be taxed as ordinary income. Generally, the nontaxable portion is determined by multiplying the annuity payment you receive by a fraction, the numerator of which is your purchase payments (less any amounts previously received tax-free) and the denominator of which is the total expected payments under the contract. After the full amount of your purchase payments have been recovered tax-free, the full amount of the annuity payments will be taxable. If annuity payments stop due to the death of the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 89 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- Tax Penalty on Withdrawals and Annuity Payments Any taxable amount you receive under your contract may be subject to a 10% tax penalty. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59-1/2 or die; o the amount received is attributable to your becoming disabled; o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59-1/2 or 5 years.) Modification of payments during that time period will result in retroactive application of the 10% tax penalty.); or o the amount received is paid under an immediate annuity contract (in which annuity payments begin within one year of purchase). Special Rules in Relation to Tax-Free Exchanges Under Section 1035 Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits certain tax-free exchanges of a life insurance, annuity or endowment contract for an annuity. If the annuity is purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any purchase payments made to the original contract prior to August 14, 1982 will be treated as made to the new contract prior to that date. (See Federal Tax Status section in the Statement of Additional Information.) Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% tax penalty on pre-age 59-1/2 withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. In addition, it is unclear how the IRS will treat a partial exchange from a life insurance, endowment, or annuity contract into an immediate annuity. As of the date of this prospectus, we will accept a partial 1035 exchange from a non-qualified annuity into an immediate annuity as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% tax penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. Taxes Payable by Beneficiaries The death benefit options are subject to income tax to the extent the distribution exceeds the cost basis in the contract. The value of the death benefit, as determined under federal law, is also included in the owner's estate. Generally, the same tax rules described above would also apply to amounts received by your beneficiary. Choosing any option other than a lump sum death benefit may defer taxes. Certain minimum distribution requirements apply upon your death, as discussed further below. Tax consequences to the beneficiary vary among the death benefit payment options. o Choice 1: the beneficiary is taxed on earnings in the contract. o Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case earnings are treated as being distributed first). o Choice 3: the beneficiary is taxed on each payment (part will be treated as earnings and part as return of premiums). Considerations for Contingent Annuitants: There may be adverse tax consequences if a Contingent Annuitant succeeds an Annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. Reporting and Withholding on Distributions Taxable amounts distributed from your annuity contracts are subject to federal and state income tax reporting and withholding. In general, we will withhold federal income tax from the taxable portion of such distribution based on the type of distribution. In the case of an annuity or similar periodic payment, we will withhold as if you are a married individual with 3 90 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- exemptions unless you designate a different withholding status. In the case of all other distributions, we will withhold at a 10% rate. You may generally elect not to have tax withheld from your payments. An election out of withholding must be made on forms that we provide. State income tax withholding rules vary and we will withhold based on the rules of your State of residence. Special tax rules apply to withholding for nonresident aliens, and we generally withhold income tax for nonresident aliens at a 30% rate. A different withholding rate may be applicable to a nonresident alien based on the terms of an existing income tax treaty between the United States and the nonresident alien's country. Please refer to the discussion below regarding withholding rules for tax favored plans (for example, an IRA). Regardless of the amount withheld by us, you are liable for payment of federal and state income tax on the taxable portion of annuity distributions. You should consult with your tax advisor regarding the payment of the correct amount of these income taxes and potential liability if you fail to pay such taxes. Annuity Qualification Diversification And Investor Control. In order to qualify for the tax rules applicable to annuity contracts described above, the assets underlying the variable investment options of the annuity contract must be diversified, according to certain rules. We believe these diversification rules will be met. An additional requirement for qualification for the tax treatment described above is that we, and not you as the contract owner, must have sufficient control over the underlying assets to be treated as the owner of the underlying assets for tax purposes. While we also believe these investor control rules will be met, 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. It is unclear whether such guidelines, if in fact promulgated, would have retroactive effect. It is also unclear what effect, if any, such guidelines may have on transfers between the investment options offered pursuant to this Prospectus. We will take any action, including modifications to your Annuity or the investment options, required to comply with such guidelines if promulgated. Please refer to the Statement of Additional information for further information on these Diversification and Investor Control issues. Required Distributions Upon Your Death. Upon your death, certain distributions must be made under the contract. The required distributions depend on whether you die before you start taking annuity payments under the contract or after you start taking annuity payments under the contract. If you die on or after the annuity date, the remaining portion of the interest in the contract must be distributed at least as rapidly as under the method of distribution being used as of the date of death. If you die before the annuity date, the entire interest in the contract must be distributed within 5 years after the date of death. However, if a periodic payment option is selected by your designated beneficiary and if such payments begin within 1 year of your death, the value of the contract may be distributed over the beneficiary's life or a period not exceeding the beneficiary's life expectancy. Your designated beneficiary is the person to whom benefit rights under the contract pass by reason of death, and must be a natural person in order to elect a periodic payment option based on life expectancy or a period exceeding five years. If the contract is payable to (or for the benefit of) your surviving spouse, that portion of the contract may be continued with your spouse as the owner. Changes In The Contract. We reserve the right to make any changes we deem necessary to assure that the contract qualifies as an annuity contract for tax purposes. Any such changes will apply to all contract owners and you will be given notice to the extent feasible under the circumstances. Additional Information You should refer to the Statement of Additional Information if: o The contract is held by a corporation or other entity instead of by an individual or as agent for an individual. o Your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982. o You transfer your contract to, or designate, a beneficiary who is either 37-1/2 years younger than you or a grandchild. o You purchased more than one annuity contract from the same insurer within the same calendar year (other than contracts held by tax favored plans). CONTRACTS HELD BY TAX FAVORED PLANS The following discussion covers annuity contracts held under tax-favored retirement plans. Currently, the contract may be purchased for use in connection with individual retirement accounts and annuities (IRAs) 91 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- which are subject to Sections 408(a), 408(b) and 408A of the Code. In addition, this contract may be purchased for use in connection with a corporate Pension and Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans (also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities or TDAs), and Section 457 plans (subject to 457 of the Code). This description assumes that you have satisfied the requirements for eligibility for these products. This contract may also be purchased as a non-qualified annuity (i.e., a contract not held under a tax-favored retirement plan) by a trust or custodial IRA or 403(b) account, which can hold other permissible assets other than the annuity. The terms and administration of the trust or custodial account in accordance with the laws and regulations for IRAs or 403(b)s, as applicable, are the responsibility of the applicable trustee or custodian. You should be aware that tax favored plans such as IRAs generally provide income tax deferral regardless of whether they invest in annuity contracts. This means that when a tax favored plan invests in an annuity contract, it generally does not result in any additional tax benefits (such as income tax deferral and income tax free transfers). Types of Tax Favored Plans IRAs. If you buy a contract for use as an IRA, we will provide you a copy of the prospectus and contract. The "IRA Disclosure Statement" contains information about eligibility, contribution limits, tax particulars, and other IRA information. In addition to this information (some of which is summarized below), the IRS requires that you have a "free look" after making an initial contribution to the contract. During this time, you can cancel the contract by notifying us in writing, and we will refund all of the purchase payments under the contract (or, if provided by applicable state law, the amount credited under the contract, if greater), less any applicable federal and state income tax withholding. Contributions Limits/Rollovers. Because of the way the contract is designed, you may purchase a contract for an IRA in connection with a "rollover" of amounts from a qualified retirement plan or transfer from another IRA. In 2005 the limit is $4,000; increasing to $5,000 in 2008. After 2008 the contribution amount will be indexed for inflation. The tax law also provides for a catch-up provision for individuals who are age 50 and above. These taxpayers will be permitted to contri- bute an additional $500, increasing to $1,000 in 2006 and years thereafter. The "rollover" rules under the Code are fairly technical; however, an individual (or his or her surviving spouse) may generally "roll over" certain distributions from tax favored retirement plans (either directly or within 60 days from the date of these distributions) if he or she meets the requirements for distribution. Once you buy the contract, you can make regular IRA contributions under the contract (to the extent permitted by law). However, if you make such regular IRA contributions, you should note that you will not be able to treat the contract as a "conduit IRA," which means that you will not retain possible favorable tax treatment if you subsequently "roll over" the contract funds originally derived from a qualified retirement plan or TDA into another Section 401(a) plan or TDA. Required Provisions. Contracts that are IRAs (or endorsements that are part of the contract) must contain certain provisions: o You, as owner of the contract, must be the "annuitant" under the contract (except in certain cases involving the division of property under a decree of divorce); o Your rights as owner are non-forfeitable; o You cannot sell, assign or pledge the contract; o The annual contribution you pay cannot be greater than the maximum amount allowed by law, including catch-up contributions if applicable (which does not include any rollover amounts); o The date on which annuity payments must begin cannot be later than April 1st of the calendar year after the calendar year you turn age 70-1/2; and o Death and annuity payments must meet "minimum distribution requirements" described below. Usually, the full amount of any distribution from an IRA (including a distribution from this contract) which is not a rollover is taxable. As taxable income, these distributions are subject to the general tax withholding rules described earlier. In addition to this normal tax liability, you may also be liable for the following, depending on your actions: o A 10% "early distribution penalty" described below; o Liability for "prohibited transactions" if you, for example, borrow against the value of an IRA; or o Failure to take a minimum distribution also described below. 92 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP must satisfy the same general requirements described under IRAs (above). There are, however, some differences: o If you participate in a SEP, you generally do not include in income any employer contributions made to the SEP on your behalf up to the lesser of (a) $42,000 in 2005 or (b) 25% of the employee's earned income (not including contribution as "earned income" for these purposes). However, for these purposes, compensation in excess of certain limits established by the IRS will not be considered. In 2005, this limit is $210,000; o SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and o SEPs for small employers permit salary deferrals up to $14,000 in 2005 with the employer making these contributions to the SEP. However, no new "salary reduction" or "SARSEPs" can be established after 1996. Individuals participating in a SARSEP who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. You will also be provided the same information, and have the same "free look" period, as you would have if you purchased the contract for a standard IRA. ROTH IRAs. Like standard IRAs, income within a Roth IRA accumulates tax-free, and contributions are subject to specific limits. Roth IRAs have, however, the following differences: o Contributions to a Roth IRA cannot be deducted from your gross income; o "Qualified distributions" from a Roth IRA are excludable from gross income. A "qualified distribution" is a distribution that satisfies two requirements: (1) the distribution must be made (a) after the owner of the IRA attains age 59-1/2; (b) after the owner's death; (c) due to the owner's disability; or (d) for a qualified first time homebuyer distribution within the meaning of Section 72(t)(2)(F) of the Code; and (2) the distribution must be made in the year that is at least five tax years after the first year for which a contribution was made to any Roth IRA established for the owner or five years after a rollover, transfer, or conversion was made from a traditional IRA to a Roth IRA. Distributions from a Roth IRA that are not qualified distributions will be treated as made first from contributions and then from earnings, and taxed generally in the same manner as distributions from a traditional IRA. o If eligible (including meeting income limitations and earnings requirements), you may make contributions to a Roth IRA after attaining age 70-1/2, and distributions are not required to begin upon attaining such age or at any time thereafter. Because of the way the contract is designed, you may purchase a contract for a Roth IRA in connection with a "rollover" of amounts of another traditional IRA, conduit IRA, SEP, SIMPLE-IRA or Roth IRA. The Code permits persons who meet certain income limitations (generally, adjusted gross income under $100,000), and who receive certain qualifying distributions from such non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of all or any part of the amount of such distribution to a Roth IRA which they establish. This conversion triggers current taxation (but is not subject to a 10% early distribution penalty). Once the contract has been purchased, regular Roth IRA contributions will be accepted to the extent permitted by law. TDAs. You may own a TDA generally if you are either an employer or employee of a tax-exempt organization (as defined under Code Section 501 (c)(3)) or a public educational organization, and you may make contributions to a TDA so long as the employee's rights to the annuity are nonforfeitable. Contributions to a TDA, and any earnings, are not taxable until distribution. You may also make contributions to a TDA under a salary reduction agreement, generally up to a maximum of $14,000 in 2005. Individuals participating in a TDA who are age 50 or above by the end of the year will be permitted to contribute an additional $4,000 in 2005, increasing to $5,000 in 2006. Thereafter, the amount is indexed for inflation. Further, you may roll over TDA amounts to another TDA or an IRA. You may also roll over TDA amounts to a qualified retirement plan, a SEP and a 457 government plan. A contract may only qualify as a TDA if distributions (other than "grandfathered" amounts held as of December 31, 1988) may be made only on account of: o Your attainment of age 59-1/2; o Your severance of employment; o Your death; o Your total and permanent disability; or o Hardship (under limited circumstances, and only related to salary deferrals and any earnings attributable to these amounts). 93 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Tax Considerations continued - -------------------------------------------------------------------------------- In any event, you must begin receiving distributions from your TDA by April 1st of the calendar year after the calendar year you turn age 70-1/2 or retire, whichever is later. These distribution limits do not apply either to transfers or exchanges of investments under the contract, or to any "direct transfer" of your interest in the contract to another TDA or to a mutual fund "custodial account" described under Code Section 403(b)(7). Employer contributions to TDAs are subject to the same general contribution, nondiscrimination, and minimum participation rules applicable to "qualified" retirement plans. Minimum Distribution Requirements and Payment Option If you hold the contract under an IRA (or other tax-favored plan), IRS minimum distribution requirements must be satisfied. This means that generally payments must start by April 1 of the year after the year you reach age 70-1/2 and must be made for each year thereafter. The amount of the payment must at least equal the minimum required under the IRS rules. Several choices are available for calculating the minimum amount. More information on the mechanics of this calculation is available on request. Please contact us at a reasonable time before the IRS deadline so that a timely distribution is made. Please note that there is a 50% tax penalty on the amount of any minimum distribution not made in a timely manner. Effective in 2006, in accordance with recent changes in laws and regulations, required minimum distributions will be calculated based on the sum of the contract value and the actuarial value of any additional death benefits and benefits from optional riders that you have purchased under the contract. As a result, the required minimum distributions may be larger than if the calculation were based on the contract value only, which may in turn result in an earlier (but not before the required beginning date) distribution under the Contract and an increased amount of taxable income distributed to the contract owner, and a reduction of death benefits and the benefits of any optional riders. You can use the Minimum Distribution option to satisfy the IRS minimum distribution requirements for this contract without either beginning annuity payments or surrendering the contract. We will distribute to you this minimum distribution amount, less any other partial withdrawals that you made during the year. Although the IRS rules determine the required amount to be distributed from your IRA each year, certain payment alternatives are still available to you. If you own more than one IRA, you can choose to satisfy your minimum distribution requirement for each of your IRAs by withdrawing that amount from any of your IRAs. Penalty for Early Withdrawals You may owe a 10% tax penalty on the taxable part of distributions received from an IRA, SEP, Roth IRA, TDA or qualified retirement plan before you attain age 59-1/2. Amounts are not subject to this tax penalty if: o the amount is paid on or after you reach age 59-1/2 or die; o the amount received is attributable to your becoming disabled; or o generally the amount paid or received is in the form of substantially equal payments not less frequently than annually. (Please note that substantially equal payments must continue until the later of reaching age 59-1/2 or 5 years. Modification of payments during that time period will result in retroactive application of the 10% tax penalty.) Other exceptions to this tax may apply. You should consult your tax advisor for further details. Withholding Unless a distribution is an eligible rollover distribution that is "directly" rolled over into another qualified plan, IRA (including the IRA variations described above), SEP, 457 government plan or TDA, we will withhold federal income tax at the rate of 20%. This 20% withholding does not apply to distributions from IRAs and Roth IRAs. For all other distributions, unless you elect otherwise, we will withhold federal income tax from the taxable portion of such distribution at an appropriate percentage. The rate of withholding on annuity payments where no mandatory withholding is required is determined on the basis of the withholding certificate that you file with us. If you do not file a certificate, we will automatically withhold federal taxes on the following basis: o For any annuity payments not subject to mandatory withholding, you will have taxes withheld by us as if you are a married individual, with 3 exemptions; and o For all other distributions, we will withhold at a 10% rate. We will provide you with forms and instructions concerning the right to elect that no amount be withheld from payments in the ordinary course. However, you should know that, in any event, you are liable for payment of federal income taxes on the taxable portion of the distributions, and you should consult with your tax advisor to find out more information on your potential liability if you fail to pay such taxes. There may be additional state income tax withholding requirements. 94 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- ERISA Disclosure/Requirements ERISA (the "Employee Retirement Income Security Act of 1974") and the Code prevents a fiduciary and other "parties in interest" with respect to a plan (and, for these purposes, an IRA would also constitute a "plan") from receiving any benefit from any party dealing with the plan, as a result of the sale of the contract. Administrative exemptions under ERISA generally permit the sale of insurance/annuity products to plans, provided that certain information is disclosed to the person purchasing the contract. This information has to do primarily with the fees, charges, discounts and other costs related to the contract, as well as any commissions paid to any agent selling the contract. Information about any applicable fees, charges, discounts, penalties or adjustments may be found in the applicable sections of this Prospectus. Information about sales representatives and commissions may be found in the sections of this Prospectus addressing distribution of the Annuity. Please consult your tax advisor if you have any additional questions. Spousal Consent Rules for Retirement Plans -- Qualified Contracts If you are married at the time your payments commence, you may be required by federal law to choose an income option that provides survivor annuity income to your spouse, unless your spouse waives that right. Similarly, if you are married at the time of your death, federal law may require all or a portion of the death benefit to be paid to your spouse, even if you designated someone else as your beneficiary. A brief explanation of the applicable rules follows. For more information, consult the terms of your retirement arrangement. Defined Benefit Plans and Money Purchase Pension Plans. If you are married at the time your payments commence, federal law requires that benefits be paid to you in the form of a "qualified joint and survivor annuity" (QJSA), unless you and your spouse waive that right, in writing. Generally, this means that you will receive a reduced payment during your life and, upon your death, your spouse will receive at least one-half of what you were receiving for life. You may elect to receive another income option if your spouse consents to the election and waives his or her right to receive the QJSA. If your spouse consents to the alternative form of payment, your spouse may not receive any benefits from the plan upon your death. Federal law also requires that the plan pay a death benefit to your spouse if you are married and die before you begin receiving your benefit. This benefit must be available in the form of an annuity for your spouse's lifetime and is called a "qualified pre-retirement survivor annuity" (QPSA). If the plan pays death benefits to other beneficiaries, you may elect to have a beneficiary other than your spouse receive the death benefit, but only if your spouse consents to the election and waives his or her right to receive the QPSA. If your spouse consents to the alternate beneficiary, your spouse will receive no benefits from the plan upon your death. Any QPSA waiver prior to your attaining age 35 will become null and void on the first day of the calendar year in which you attain age 35, if still employed. Defined Contribution Plans (including 401(k) Plans and ERISA 403(b) Annuities). Spousal consent to a distribution is generally not required. Upon your death, your spouse will receive the entire death benefit, even if you designated someone else as your beneficiary, unless your spouse consents in writing to waive this right. Also, if you are married and elect an annuity as a periodic income option, federal law requires that you receive a QJSA (as described above), unless you and your spouse consent to waive this right. IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a distribution is not required. Upon your death, any death benefit will be paid to your designated beneficiary. Additional Information For additional information about federal tax law requirements applicable to tax favored plans, see the IRA Disclosure Statement. 95 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS General Information - -------------------------------------------------------------------------------- HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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.prudential.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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation, a Prudential Financial Company ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"), whose ultimate parent is Prudential Financial, Inc. American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; and (c) both fixed and variable immediate adjustable annuities. Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, Prudential Financial exercises significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance 96 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge, Distribution Charge (when applicable) and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B was consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which was subsequently renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B has multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B had no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion of Separate Account D. From time to time additional investment managers may be employed or investment 97 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS General Information continued - -------------------------------------------------------------------------------- managers may cease being employed. We are under no obliga- tion to employ or continue to employ any investment manager(s) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its co-investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC, subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI, Prudential Investments LLC and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. We may add new Sub-accounts that invest in a series of underlying funds other than the Trust that is managed by an affiliate. Such series of funds may have a similar order from the SEC. You also should review the prospectuses for the other underlying funds in which various Sub-accounts invest as to whether they have obtained similar orders from the SEC. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of the underlying Portfolios. Under the terms of these agreements, American Skandia may provide administrative and support services to the Portfolios for which it receives a fee of up to 0.75% (currently) of the average assets allocated to the Portfolios under the Annuity from the investment adviser, distributor and/or the fund. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. 98 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- In addition, the investment adviser, sub-advisor or distributor of the underlying Portfolios may also compensate us by providing reimbursement or paying directly for, among other things, marketing and/or administrative services and/or other services they provide in connection with the Annuity. These services may include, but are not limited to: co-sponsoring various meetings and seminars attended by broker-dealer firms' registered representatives and creating marketing material discussing the Annuity and the available options. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and co-distributor American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration ("firms"). Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Commissions are paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of his or her firm. Commissions are generally based on a percentage of Purchase Payments made, up to a maximum of 4.0%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation to the distributing firm for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, in an effort to promote the sale of our products (which may include the placement of American Skandia and/or the Annuity on a preferred or recommended company or product list and/or access to the firm's registered representatives), we or ASM may enter into compensation arrangements with certain broker-dealer firms with respect to certain or all registered representatives of such firms under which such firms may receive separate compensation or reimbursement for, among other things, training of sales personnel and/or marketing and/or administrative services and/or other services they provide. These services may include, but are not limited to: educating customers of the firm on the Annuity's features; conducting due diligence and analysis, providing office access, operations and systems support; holding seminars intended to educate the firm's registered representatives and make them more knowledgeable about the Annuity; providing a dedicated marketing coordinator; providing priority sales desk support; and providing expedited marketing compliance approval. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or non-cash compensation. These arrangements may not be offered to all firms and the terms of such arrangements may differ between firms. A list of the firms to whom American Skandia pays an amount of greater than $10,000 under these arrangements is provided in the Statement of Additional Information, which is available upon request. You should note that firms and individual registered representatives and branch managers within some firms participating in one of these compensation arrangements might receive greater compensation for selling the Annuity than for selling a different annuity that is not eligible for these compensation arrangements. While compensation is generally taken into account as an expense in considering the charges applicable to an annuity product, any such compensation will be paid by us or ASM and will not result in any additional charge to you. Overall compensation paid to the distributing firm does not exceed, based on actuarial assumptions, 8.5% of the total Purchase Payments made. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. 99 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS General Information continued - -------------------------------------------------------------------------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by an independent registered public accounting firm. American Skandia's annual report for the year ended December 31, 2004, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia -- Variable Annuities; P.O. Box 7960, Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room by calling (202) 942-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. FINANCIAL STATEMENTS The financial statements of the separate account and American Skandia Life Assurance Corporation are included in the Statement of Additional Information. HOW TO CONTACT US You can contact us by: o calling our Customer Service Team at 1-800-680-8920, or Skandia's telephone automated response system at 1-800-766-4530. o writing to us via regular mail at American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American Skandia -- Variable Annuities, Attention: Stagecoach Annuity, 2101 Welsh Road, Dresher, PA 19025. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. o sending an email to service@prudential.com or visiting our Internet Website at www.americanskandia.prudential.com. o accessing information about your Annuity through our Internet Website at www.americanskandia.prudential.com. You can obtain account information by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. Please note that unless you tell us otherwise, we deem that all transactions that are directed by your Investment Professional with respect to your Annuity have been authorized by you. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN by calling our automated response system and at www.americanskandia.prudential.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, 100 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia o American Skandia Life Assurance Corporation o American Skandia Life Assurance Corporation Variable Account B o American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor -- American Skandia Marketing, Incorporated Payments Made to Promote Sale of Our Products How the Unit Price is Determined Additional Information on Fixed Allocations o How We Calculate the Market Value Adjustment General Information o Voting Rights o Modification o Deferral of Transactions o Misstatement of Age or Sex o Ending the Offer Annuitization Experts Legal Experts Financial Statements 101 This page intentionally left blank APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B - -------------------------------------------------------------------------------- Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. Since November 18, 2002, we have been determining, on a daily basis, multiple Unit Prices for each Sub-account of Separate Account B. We compute multiple Unit Prices because several of our variable annuities invest in the same Sub-accounts, and these annuities deduct varying charges that correspond to each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charges for each optional benefit. Where an asset-based charge corresponding to a particular Sub-account within a new annuity product is identical to that in the same Sub-account within an existing annuity, the Unit Price for the new annuity will be identical to that of the existing annuity. In such cases, we will for reference purposes depict, in the condensed financial information for the new annuity, Unit Prices of the existing annuity. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. When a Unit Price was first calculated for a particular Sub-account, we set the price of that Unit at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2005. A-1 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- International Equity(1) (2000) With No Optional Benefits Unit Price $ 13.70 $ 12.71 9.83 Number of Units 36,282 30,093 4,125 With any one of GRO Plus, EBP or HAV Unit Price $ 13.63 -- -- Number of Units 3,086 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.55 -- -- Number of Units 1,400 -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Small-Cap Growth(2) (1999) With No Optional Benefits Unit Price $ 15.25 $ 13.63 9.74 Number of Units 31,804 27,988 2,121 With any one of GRO Plus, EBP or HAV Unit Price $ 15.17 -- -- Number of Units 4,467 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------------------------
A-2 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------------ Wells Fargo Variable Trust -- Growth(3) (1994) With No Optional Benefits Unit Price $ 12.42 $ 11.65 9.59 Number of Units 9,541 8,938 1,090 With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value $ 11.01 -- -- Number of Units 714 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------------------ Wells Fargo Variable Trust -- Large Company Growth(4) (1999) With No Optional Benefits Unit Price $ 11.81 $ 11.63 9.36 Number of Units 145,943 94,737 8,608 With any one of GRO Plus, EBP or HAV Unit Price $ 11.74 $ 11.59 -- Number of Units 12,589 1,333 -- With GMWB Unit Value $ 10.50 -- -- Number of Units 6,708 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------------------
A-3 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ Wells Fargo Variable Trust -- Equity Value(5) (1998) With No Optional Benefits Unit Price $ 13.47 $ 12.32 9.97 Number of Units 43,291 30,911 900 With any one of GRO Plus, EBP or HAV Unit Price $ 13.40 -- -- Number of Units 6,651 -- -- With GMWB Unit Value $ 13.37 -- -- Number of Units 931 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 9.53 $ 8.77 -- Number of Units 2,185 2,290 -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------------ Wells Fargo Variable Trust -- Equity Income(6) (1999) With No Optional Benefits Unit Price $ 11.18 $ 10.23 8.25 Number of Units 590,808 314,757 196,720 With any one of GRO Plus, EBP or HAV Unit Price $ 13.36 $ 12.26 9.90 Number of Units 285,526 251,071 10,707 With GMWB Unit Value $ 13.33 $ 12.25 -- Number of Units 39,530 5,900 -- With any two of GRO Plus, EBP or HAV Unit Value $ 13.29 $ 12.23 9.90 Number of Units 63,454 15,983 91 With any one of EBP or HAV and GMWB Unit Price $ 16.60 $ 15.29 -- Number of Units 14,303 15,958 -- With HAV, EBP and GRO Plus Unit Price $ 13.22 -- -- Number of Units 480 -- -- With HAV, EBP and GMWB Unit Value $ 11.61 -- -- Number of Units 13 -- -- - ------------------------------------------------------------------------------------------------
A-4 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Asset Allocation(7) (1994) With No Optional Benefits Unit Price $ 12.67 $ 11.79 9.82 Number of Units 88,663 62,075 2,641 With any one of GRO Plus, EBP or HAV Unit Price $ 12.61 $ 11.75 -- Number of Units 903 701 -- With GMWB Unit Value $ 11.07 -- -- Number of Units 5,863 -- -- With any two of GRO Plus, EBP or HAV Unit Value $ 12.54 -- -- Number of Units 961 -- -- With any one of EBP or HAV and GMWB Unit Price $ 11.24 -- -- Number of Units 1,339 -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust -- Total Return Bond(8) (1999) With No Optional Benefits Unit Price $ 11.19 $ 10.89 10.21 Number of Units 38,158 29,473 74 With any one of GRO Plus, EBP or HAV Unit Price $ 11.13 $ 10.86 -- Number of Units 0 89 -- With GMWB Unit Value $ 10.26 -- -- Number of Units 1,190 -- -- With any two of GRO Plus, EBP or HAV Unit Value -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Price $ 10.29 -- -- Number of Units 354 -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------------------
A-5 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------- AST JP Morgan International Equity Portfolio With No Optional Benefits Unit Price $ 12.67 $ 11.00 8.56 Number of Units 3,227,381 2,415,394 2,569,506 With any one of GRO Plus, EBP or HAV Unit Price $ 14.65 $ 12.75 9.95 Number of Units 2,064,681 936,678 90,759 With GMWB Unit Value $ 14.62 $ 12.74 -- Number of Units 217,166 17,098 -- With any two of GRO Plus, EBP or HAV Unit Value $ 14.57 $ 12.72 9.95 Number of Units 284,319 141,470 6,047 With any one of EBP or HAV and GMWB Unit Value $ 7.86 $ 6.87 -- Number of Units 428,765 400,112 -- With HAV, EBP and GRO Plus Unit Price $ 14.49 $ 12.68 -- Number of Units 38,292 13,590 -- With HAV, EBP and GMWB Unit Price $ 12.32 -- -- Number of Units 20,718 -- -- - ----------------------------------------------------------------------------------------------- AST William Blair International Growth (1997) With No Optional Benefits Unit Price $ 15.30 $ 13.39 9.72 Number of Units 11,265,469 5,547,558 835,523 With any one of GRO Plus, EBP or HAV Unit Price $ 15.21 $ 13.35 9.72 Number of Units 15,481,627 6,498,151 78,368 With GMWB Unit Value $ 15.18 $ 13.34 -- Number of Units 1,821,923 103,740 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.13 $ 13.32 9.71 Number of Units 2,722,552 1,009,679 5,178 With any one of EBP or HAV and GMWB Unit Value $ 15.74 $ 13.86 -- Number of Units 545,075 29,434 -- With HAV, EBP and GRO Plus Unit Price $ 15.05 $ 13.28 -- Number of Units 325,809 32,626 -- With HAV, EBP and GMWB Unit Price $ 11.94 -- -- Number of Units 135,829 -- -- - -----------------------------------------------------------------------------------------------
A-6 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------- AST LSV International Value (1994) With No Optional Benefits Unit Price $ 12.84 $ 10.79 8.19 Number of Units 1,897,469 1,201,268 269,995 With any one of GRO Plus, EBP or HAV Unit Price $ 15.27 $ 12.86 9.79 Number of Units 810,108 368,945 22,770 With GMWB Unit Value $ 15.24 $ 12.85 -- Number of Units 69,494 5,504 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.19 $ 12.82 -- Number of Units 119,845 24,374 -- With any one of EBP or HAV and GMWB Unit Value $ 6.69 $ 5.65 -- Number of Units 122,795 72,406 -- With HAV, EBP and GRO Plus Unit Price $ 15.11 $ 12.79 -- Number of Units 16,366 1,767 -- With HAV, EBP and GMWB Unit Value $ 12.70 -- -- Number of Units 5,736 -- -- - --------------------------------------------------------------------------------------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price $ 13.16 $ 11.30 9.04 Number of Units 2,276,801 1,393,001 969,509 With any one of GRO Plus, EBP or HAV Unit Price $ 14.29 $ 12.31 9.87 Number of Units 1,897,254 916,888 32,306 With GMWB Unit Value $ 14.26 $ 12.29 -- Number of Units 98,046 4,306 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.22 $ 12.27 -- Number of Units 219,580 62,490 -- With any one of EBP or HAV and GMWB Unit Value $ 10.48 $ 9.06 -- Number of Units 273,401 308,725 -- With HAV, EBP and GRO Plus Unit Price $ 14.14 $ 12.24 -- Number of Units 26,943 6,069 -- With HAV, EBP and GMWB Unit Value $ 12.40 -- -- Number of Units 5,188 -- -- - ---------------------------------------------------------------------------------------
A-7 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST State Street Research Small-Cap Growth (9) With No Optional Benefits Unit Price $ 9.05 $ 9.89 6.92 Number of Units 2,242,129 3,292,593 1,970,250 With any one of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 13.50 9.48 Number of Units 1,200,247 1,059,046 47,261 With GMWB Unit Value $ 12.30 $ 13.49 -- Number of Units 113,913 9,676 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.26 $ 13.46 9.47 Number of Units 136,313 138,936 6,595 With any one of EBP or HAV and GMWB Unit Value $ 15.30 $ 16.82 -- Number of Units 67,370 64,850 -- With HAV, EBP and GRO Plus Unit Price $ 12.19 $ 13.43 -- Number of Units 23,253 4,691 -- With HAV, EBP and GMWB Unit Value $ 9.32 -- -- Number of Units 1,043 -- -- - --------------------------------------------------------------------------------------------- AST DeAM Small-Cap Growth (1999) With No Optional Benefits Unit Price $ 11.98 $ 11.13 7.67 Number of Units 1,618,719 1,682,193 639,695 With any one of GRO Plus, EBP or HAV Unit Price $ 15.10 $ 14.06 9.71 Number of Units 779,045 480,221 12,122 With GMWB Unit Value $ 15.07 $ 14.05 -- Number of Units 56,414 1,850 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.02 $ 14.02 9.71 Number of Units 192,105 89,708 1,728 With any one of EBP or HAV and GMWB Unit Value $ 7.07 $ 6.61 -- Number of Units 129,475 131,605 -- With HAV, EBP and GRO Plus Unit Price $ 14.94 $ 13.98 -- Number of Units 18,825 3,753 -- With HAV, EBP and GMWB Unit Value $ 11.03 -- -- Number of Units 3,398 -- -- - ---------------------------------------------------------------------------------------------
A-8 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $ 15.42 $ 12.74 7.64 Number of Units 4,808,453 3,085,373 1,255,415 With any one of GRO Plus, EBP or HAV Unit Price $ 19.79 $ 16.40 9.86 Number of Unit 5,192,694 2,615,505 63,097 With GMWB Unit Value $ 19.75 $ 16.38 -- Number of Units 562,771 37,078 -- With any two of GRO Plus, EBP or HAV Unit Price $ 19.69 $ 16.35 9.86 Number of Units 808,007 362,906 4,107 With any one of EBP or HAV and GMWB Unit Value $ 9.70 $ 8.06 -- Number of Units 324,340 79,226 -- With HAV, EBP and GRO Plus Unit Price $ 19.58 $ 16.30 -- Number of Units 95,514 20,181 -- With HAV, EBP and GMWB Unit Value $ 12.64 -- -- Number of Units 53,866 -- -- - --------------------------------------------------------------------------------------------- AST Small-Cap Value (1997) With No Optional Benefits Unit Price $ 14.22 $ 12.42 9.30 Number of Units 10,785,030 10,183,346 6,141,523 With any one of GRO Plus, EBP or HAV Unit Price $ 15.34 $ 13.43 10.08 Number of Units 10,169,483 5,824,200 209,790 With GMWB Unit Value $ 15.31 $ 13.41 -- Number of Units 1,007,926 100,155 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.26 $ 13.39 10.08 Number of Units 1,690,870 767,455 17,411 With any one of EBP or HAV and GMWB Unit Value $ 15.87 $ 13.95 -- Number of Units 465,784 275,971 -- With HAV, EBP and GRO Plus Unit Price $ 15.17 $ 13.35 -- Number of Units 166,852 34,978 -- With HAV, EBP and GMWB Unit Value $ 12.11 -- -- Number of Units 91,011 -- -- - ---------------------------------------------------------------------------------------------
A-9 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST DeAM Small-Cap Value (2002) With No Optional Benefits Unit Price $ 12.99 $ 10.81 7.66 Number of Units 2,143,020 1,134,865 423,387 With any one of GRO Plus, EBP or HAV Unit Price $ 17.00 $ 14.19 10.08 Number of Units 1,054,696 434,509 11,686 With GMWB Unit Value $ 16.96 $ 14.17 -- Number of Units 236,402 10,756 -- With any two of GRO Plus, EBP or HAV Unit Price $ 16.90 $ 14.15 10.08 Number of Units 213,632 70,597 5,211 With any one of EBP or HAV and GMWB Unit Value $ 12.78 $ 10.70 -- Number of Units 63,057 22,847 -- With HAV, EBP and GRO Plus Unit Price $ 16.81 $ 14.11 -- Number of Units 14,277 879 -- With HAV, EBP and GMWB Unit Value $ 12.71 -- -- Number of Units 634 -- -- - --------------------------------------------------------------------------------------------- AST Goldman Sachs Mid-Cap Growth (2000) With No Optional Benefits Unit Price $ 11.80 $ 10.31 7.97 Number of Units 4,375,813 3,027,057 1,273,118 With any one of GRO Plus, EBP or HAV Unit Price $ 14.55 $ 12.75 9.87 Number of Units 5,139,643 2,379,820 66,279 With GMWB Unit Value $ 14.52 $ 12.73 -- Number of Units 516,261 37,400 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.47 $ 12.71 9.87 Number of Units 994,493 365,115 2,488 With any one of EBP or HAV and GMWB Unit Value $ 4.24 $ 3.73 -- Number of Units 457,010 175,708 -- With HAV, EBP and GRO Plus Unit Price $ 14.39 $ 12.68 -- Number of Units 124,672 12,201 -- With HAV, EBP and GMWB Unit Value $ 11.91 -- -- Number of Units 33,665 -- -- - ---------------------------------------------------------------------------------------------
A-10 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Growth (1994) With No Optional Benefits Unit Price $ 10.86 $ 9.51 7.41 Number of Units 4,715,301 3,415,318 2,175,250 With any one of GRO Plus, EBP or HAV Unit Price $ 13.87 $ 12.18 9.51 Number of Units 2,211,800 1,089,649 44,760 With GMWB Unit Value $ 13.84 $ 12.17 -- Number of Units 153,923 16,702 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.80 $ 12.15 9.51 Number of Units 377,548 96,879 1,311 With any one of EBP or HAV and GMWB Unit Value $ 6.81 $ 6.01 -- Number of Units 369,234 294,816 -- With HAV, EBP and GRO Plus Unit Price $ 13.72 $ 12.11 -- Number of Units 38,051 5,407 -- With HAV, EBP and GMWB Unit Value $ 11.70 -- -- Number of Units 18,225 -- -- - --------------------------------------------------------------------------------------------- AST Neuberger Berman Mid-Cap Value (1993) With No Optional Benefits Unit Price $ 14.51 $ 12.01 8.96 Number of Units 11,461,684 8,530,129 5,118,558 With any one of GRO Plus, EBP or HAV Unit Price $ 16.08 $ 13.34 9.98 Number of Units 9,335,291 4,786,623 163,415 With GMWB Unit Value $ 16.04 $ 13.33 -- Number of Units 937,314 87,253 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.99 $ 13.31 9.97 Number of Units 1,457,788 610,598 10,745 With any one of EBP or HAV and GMWB Unit Value $ 15.99 $ 13.32 -- Number of Units 537,445 370,965 -- With HAV, EBP and GRO Plus Unit Price $ 15.91 $ 13.27 -- Number of Units 154,749 21,843 -- With HAV, EBP and GMWB Unit Value $ 12.97 -- -- Number of Units 95,076 -- -- - ---------------------------------------------------------------------------------------------
A-11 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $ 9.67 $ 9.07 6.80 Number of Units 1,798,457 2,002,166 658,419 With any one of GRO Plus, EBP or HAV Unit Price $ 13.25 $ 12.45 9.36 Number of Units 715,598 636,548 6,409 With GMWB Unit Value $ 13.22 $ 12.43 -- Number of Units 119,566 10,356 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.17 $ 12.41 9.36 Number of Units 141,575 106,376 3,466 With any one of EBP or HAV and GMWB Unit Value $ 6.19 $ 5.84 -- Number of Units 107,188 87,326 -- With HAV, EBP and GRO Plus Unit Price $ 13.10 $ 12.38 -- Number of Units 22,732 4,810 -- With HAV, EBP and GMWB Unit Value $ 10.73 -- -- Number of Units 6,346 -- -- - --------------------------------------------------------------------------------------------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $ 12.38 $ 10.91 8.17 Number of Units 2,587,064 2,513,413 1,200,225 With any one of GRO Plus, EBP or HAV Unit Price $ 15.14 $ 13.38 10.04 Number of Units 1,071,978 727,500 28,449 With GMWB Unit Value $ 15.11 $ 13.37 -- Number of Units 116,474 12,627 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.06 $ 13.35 10.04 Number of Units 256,671 127,279 88 With any one of EBP or HAV and GMWB Unit Value $ 11.15 $ 9.89 -- Number of Units 194,765 166,080 -- With HAV, EBP and GRO Plus Unit Price $ 14.98 $ 13.31 -- Number of Units 8,849 1,455 -- With HAV, EBP and GMWB Unit Value $ 12.11 -- -- Number of Units 7,555 -- -- - ---------------------------------------------------------------------------------------------
A-12 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $ 16.25 $ 12.59 9.59 Number of Units 2,040,188 2,011,627 724,670 With any one of GRO Plus, EBP or HAV Unit Price $ 17.60 $ 13.67 10.44 Number of Units 1,025,462 433,891 7,378 With GMWB Unit Value $ 17.56 $ 13.66 -- Number of Units 172,186 24,634 -- With any two of GRO Plus, EBP or HAV Unit Price $ 17.50 $ 13.63 10.44 Number of Units 158,672 77,245 5,472 With any one of EBP or HAV and GMWB Unit Value $ 14.40 $ 11.23 -- Number of Units 41,428 6,747 -- With HAV, EBP and GRO Plus Unit Price $ 17.41 $ 13.60 -- Number of Units 37,779 1,035 -- With HAV, EBP and GMWB Unit Value $ 14.36 -- -- Number of Units 13,775 -- -- - --------------------------------------------------------------------------------------------- AST Alliance Growth (10) (1996) With No Optional Benefits Unit Price $ 9.44 $ 9.08 7.46 Number of Units 2,378,881 2,098,873 1,869,353 With any one of GRO Plus, EBP or HAV Unit Price $ 11.76 $ 11.34 9.34 Number of Units 1,189,655 717,430 31,105 With GMWB Unit Value $ 11.73 $ 11.32 -- Number of Units 84,417 2,206 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.70 $ 11.30 9.34 Number of Units 297,369 114,477 3,975 With any one of EBP or HAV and GMWB Unit Value $ 5.91 $ 5.72 -- Number of Units 307,367 267,109 -- With HAV, EBP and GRO Plus Unit Price $ 11.63 $ 11.27 -- Number of Units 15,562 8,067 -- With HAV, EBP and GMWB Unit Value $ 10.57 -- -- Number of Units 4,945 -- -- - ---------------------------------------------------------------------------------------------
A-13 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST MFS Growth (1999) With No Optional Benefits Unit Price $ 9.97 $ 9.16 7.58 Number of Units 4,529,834 4,784,269 2,930,432 With any one of GRO Plus, EBP or HAV Unit Price $ 12.39 $ 11.41 9.47 Number of Units 2,897,175 2,222,614 134,574 With GMWB Unit Value $ 12.37 $ 11.40 -- Number of Units 304,760 18,900 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 11.38 9.46 Number of Units 442,758 207,063 2,437 With any one of EBP or HAV and GMWB Unit Value $ 6.72 $ 6.21 -- Number of Units 387,463 262,995 -- With HAV, EBP and GRO Plus Unit Price $ 12.26 $ 11.35 -- Number of Units 52,718 10,550 -- With HAV, EBP and GMWB Unit Value $ 11.00 -- -- Number of Units 33,939 -- -- - --------------------------------------------------------------------------------------------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $ 12.26 $ 10.78 8.32 Number of Units 28,117,310 20,138,164 10,144,317 With any one of GRO Plus, EBP or HAV Unit Price $ 13.95 $ 12.30 9.51 Number of Units 30,793,077 14,975,841 457,013 With GMWB Unit Value $ 13.92 $ 12.28 -- Number of Units 3,136,818 215,988 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.88 $ 12.26 9.51 Number of Units 4,692,895 2,031,583 30,465 With any one of EBP or HAV and GMWB Unit Value $ 9.22 $ 8.16 -- Number of Units 2,016,277 925,591 -- With HAV, EBP and GRO Plus Unit Price $ 13.80 $ 12.23 -- Number of Units 578,919 70,776 -- With HAV, EBP and GMWB Unit Value $ 11.61 -- -- Number of Units 263,104 -- -- - ---------------------------------------------------------------------------------------------
A-14 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Goldman Sachs Concentrated Growth (1992) With No Optional Benefits Unit Price $ 9.64 $ 9.45 7.67 Number of Units 2,785,100 2,053,023 1,349,939 With any one of GRO Plus, EBP or HAV Unit Price $ 11.83 $ 11.63 9.46 Number of Units 1,641,544 715,845 41,632 With GMWB Unit Value $ 11.80 $ 11.61 -- Number of Units 122,739 17,452 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.76 $ 11.59 -- Number of Units 277,607 49,620 -- With any one of EBP or HAV and GMWB Unit Value $ 4.46 $ 4.40 -- Number of Units 541,661 395,905 -- With HAV, EBP and GRO Plus Unit Price $ 11.70 $ 11.56 -- Number of Units 10,426 242 -- With HAV, EBP and GMWB Unit Value $ 10.54 -- -- Number of Units 12,303 -- -- - --------------------------------------------------------------------------------------------- AST DeAM Large-Cap Value (2000) With No Optional Benefits Unit Price $ 12.53 $ 10.78 8.66 Number of Units 2,351,197 1,072,256 664,649 With any one of GRO Plus, EBP or HAV Unit Price $ 14.36 $ 12.39 9.98 Number of Units 1,347,344 583,969 18,250 With GMWB Unit Value $ 14.33 $ 12.38 -- Number of Units 175,087 9,674 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.29 $ 12.36 9.97 Number of Units 234,446 58,333 4,906 With any one of EBP or HAV and GMWB Unit Value $ 10.72 $ 9.28 -- Number of Units 199,601 137,247 -- With HAV, EBP and GRO Plus Unit Price $ 14.21 $ 12.32 -- Number of Units 16,355 4,412 -- With HAV, EBP and GMWB Unit Value $ 12.25 -- -- Number of Units 6,163 -- -- - ---------------------------------------------------------------------------------------------
A-15 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ AST Alliance/Bernstein Growth + Value (11) (2001) With No Optional Benefits Unit Price $ 10.72 $ 9.91 7.99 Number of Units 1,620,391 1,387,072 965,912 With any one of GRO Plus, EBP or HAV Unit Price $ 13.07 $ 12.11 9.79 Number of Units 1,011,796 667,395 11,345 With GMWB Unit Value $ 13.05 $ 12.09 -- Number of Units 72,365 5,118 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.00 $ 12.07 9.79 Number of Units 256,194 115,455 704 With any one of EBP or HAV and GMWB Unit Value $ 9.31 $ 8.65 -- Number of Units 215,645 154,955 -- With HAV, EBP and GRO Plus Unit Price $ 12.93 $ 12.04 -- Number of Units 7,165 1,041 -- With HAV, EBP and GMWB Unit Value $ 11.15 -- -- Number of Units 1,191 -- -- - ------------------------------------------------------------------------------------------------ AST Sanford Bernstein Core Value (12) (2001) With No Optional Benefits Unit Price $ 12.39 $ 11.06 8.76 Number of Units 4,643,022 3,621,862 6,005,922 With any one of GRO Plus, EBP or HAV Unit Price $ 14.18 $ 12.69 10.08 Number of Units 3,959,115 2,277,726 386,259 With GMWB Unit Value $ 14.15 $ 12.67 -- Number of Units 220,419 11,518 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.10 $ 12.65 10.08 Number of Units 534,389 328,567 30,510 With any one of EBP or HAV and GMWB Unit Value $ 11.83 $ 10.62 -- Number of Units 303,689 216,416 -- With HAV, EBP and GRO Plus Unit Price $ 14.03 $ 12.62 -- Number of Units 49,912 10,893 -- With HAV, EBP and GMWB Unit Value $ 11.86 -- -- Number of Units 57,669 -- -- - ------------------------------------------------------------------------------------------------
A-16 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------------------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $ 18.49 $ 13.63 10.08 Number of Units 4,080,179 3,097,315 1,563,489 With any one of GRO Plus, EBP or HAV Unit Price $ 18.84 $ 13.92 10.33 Number of Units 2,863,749 1,376,696 41,098 With GMWB Unit Value $ 18.80 $ 13.91 -- Number of Units 184,027 13,615 -- With any two of GRO Plus, EBP or HAV Unit Price $ 18.74 $ 13.88 10.32 Number of Units 538,151 270,852 6,429 With any one of EBP or HAV and GMWB Unit Value $ 14.12 $ 10.47 -- Number of Units 68,406 8,884 -- With HAV, EBP and GRO Plus Unit Price $ 18.64 $ 13.84 Number of Units 17,014 8,189 With HAV, EBP and GMWB Unit Value $ 14.07 -- -- Number of Units 5,246 -- -- - -------------------------------------------------------------------------------------------------- AST Sanford Bernstein Managed Index 500 (13) (1998) With No Optional Benefits Unit Price $ 11.07 $ 10.23 8.17 Number of Units 6,845,369 5,442,511 3,662,406 With any one of GRO Plus, EBP or HAV Unit Price $ 13.22 $ 12.25 9.81 Number of Units 3,486,237 2,209,334 79,915 With GMWB Unit Value $ 13.19 $ 12.24 -- Number of Units 389,368 16,957 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.15 $ 12.22 9.81 Number of Units 352,176 203,573 383 With any one of EBP or HAV and GMWB Unit Value $ 8.58 $ 7.98 -- Number of Units 343,296 293,662 -- With HAV, EBP and GRO Plus Unit Price $ 13.08 $ 12.18 -- Number of Units 9,296 4,899 -- With HAV, EBP and GMWB Unit Value $ 11.31 -- -- Number of Units 43,627 -- -- - --------------------------------------------------------------------------------------------------
A-17 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------- AST American Century Income & Growth (1997) With No Optional Benefits Unit Price $ 11.57 $ 10.45 8.25 Number of Units 4,670,846 2,115,438 1,751,136 With any one of GRO Plus, EBP or HAV Unit Price $ 13.80 $ 12.50 9.89 Number of Units 2,219,323 846,118 36,829 With GMWB Unit Value $ 13.77 $ 12.48 -- Number of Units 198,789 2,386 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.73 $ 12.46 9.89 Number of Units 368,328 124,008 8,874 With any one of EBP or HAV and GMWB Unit Value $ 9.04 $ 8.22 -- Number of Units 372,540 195,232 -- With HAV, EBP and GRO Plus Unit Price $ 13.65 $ 12.43 -- Number of Units 25,550 4,612 -- With HAV, EBP and GMWB Unit Value $ 11.72 -- -- Number of Units 7,406 -- -- - ------------------------------------------------------------------------------------------------- AST Alliance Growth and Income (14) (1992) With No Optional Benefits Unit Price $ 11.46 $ 10.50 8.06 Number of Units 25,850,506 21,264,670 6,667,373 With any one of GRO Plus, EBP or HAV Unit Price $ 13.91 $ 12.77 9.83 Number of Units 27,268,222 13,386,166 165,588 With GMWB Unit Value $ 13.88 $ 12.76 -- Number of Units 2,899,917 187,011 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.83 $ 12.74 9.83 Number of Units 4,694,207 2,029,598 6,100 With any one of EBP or HAV and GMWB Unit Value $ 10.72 $ 9.88 -- Number of Units 1,731,512 976,756 -- With HAV, EBP and GRO Plus Unit Price $ 13.76 $ 12.70 -- Number of Units 564,502 69,435 -- With HAV, EBP and GMWB Unit Value $ 11.50 -- -- Number of Units 228,955 -- -- - -------------------------------------------------------------------------------------------------
A-18 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST Hotchkis & Wiley Large-Cap Value With No Optional Benefits Unit Price $ 11.17 $ 9.83 8.34 Number of Units 3,717,848 2,647,064 2,110,071 With any one of GRO Plus, EBP or HAV Unit Price $ 13.19 $ 11.65 9.90 Number of Units 1,916,775 651,074 30,714 With GMWB Unit Value $ 13.16 $ 11.63 -- Number of Units 173,888 21,961 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.12 $ 11.61 9.90 Number of Units 198,898 90,092 5,934 With any one of EBP or HAV and GMWB Unit Value $ 9.78 $ 8.66 -- Number of Units 419,818 347,275 -- With HAV, EBP and GRO Plus Unit Price $ 13.05 $ 11.58 -- Number of Units 37,159 332 -- With HAV, EBP and GMWB Unit Value $ 11.75 -- -- Number of Units 23,032 -- -- - --------------------------------------------------------------------------------------------- AST DeAM Global Allocation (15) (1993) With No Optional Benefits Unit Price $ 11.19 $ 10.24 8.71 Number of Units 1,061,887 898,161 847,517 With any one of GRO Plus, EBP or HAV Unit Price $ 12.70 $ 11.65 9.94 Number of Units 278,657 155,865 3,088 With GMWB Unit Value $ 12.67 $ 11.64 -- Number of Units 35,622 483 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.63 $ 11.62 9.93 Number of Units 52,110 34,914 94 With any one of EBP or HAV and GMWB Unit Value $ 9.12 $ 8.40 -- Number of Units 290,887 303,295 -- With HAV, EBP and GRO Plus Unit Price $ 12.56 $ 11.58 -- Number of Units 2,849 1,169 -- With HAV, EBP and GMWB Unit Value $ 11.23 -- -- Number of Units 2,193 -- -- - ---------------------------------------------------------------------------------------------
A-19 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $ 11.46 $ 10.69 9.14 Number of Units 2,335,598 2,045,205 1,126,058 With any one of GRO Plus, EBP or HAV Unit Price $ 12.43 $ 11.62 9.97 Number of Units 1,308,462 930,516 15,835 With GMWB Unit Value $ 12.40 $ 11.61 -- Number of Units 175,763 18,977 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.36 $ 11.59 9.97 Number of Units 186,307 58,741 2,760 With any one of EBP or HAV and GMWB Unit Value $ 10.08 $ 9.46 -- Number of Units 218,686 196,909 -- With HAV, EBP and GRO Plus Unit Price $ 12.29 $ 11.56 -- Number of Units 18,231 11,783 -- With HAV, EBP and GMWB Unit Value $ 10.98 -- -- Number of Units 125 -- -- - ----------------------------------------------------------------------------------------------------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $ 12.13 $ 11.09 9.09 Number of Units 3,551,315 2,243,566 921,329 With any one of GRO Plus, EBP or HAV Unit Price $ 13.22 $ 12.12 9.96 Number of Units 2,109,855 955,716 21,928 With GMWB Unit Value $ 13.19 $ 12.11 -- Number of Units 349,177 27,414 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.15 $ 12.09 9.96 Number of Units 464,055 160,339 150 With any one of EBP or HAV and GMWB Unit Value $ 11.38 $ 10.48 -- Number of Units 39,231 2,741 -- With HAV, EBP and GRO Plus Unit Price $ 13.08 $ 12.05 -- Number of Units 46,336 31,706 -- With HAV, EBP and GMWB Unit Value $ 11.35 -- -- Number of Units 9,372 -- -- - -----------------------------------------------------------------------------------------------------
A-20 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ---------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------------- AST T. Rowe Price Global Bond (1994) With No Optional Benefits Unit Price $13.45 $12.59 11.34 Number of Units 4,717,822 2,962,471 1,739,313 With any one of GRO Plus, EBP or HAV Unit Price $12.17 $11.42 10.31 Number of Units 6,387,666 1,827,606 36,822 With GMWB Unit Value $12.14 $11.40 -- Number of Units 712,411 24,361 -- With any two of GRO Plus, EBP or HAV Unit Price $12.10 $11.38 10.31 Number of Units 1,195,848 279,110 3,700 With any one of EBP or HAV and GMWB Unit Value $14.05 $13.23 -- Number of Units 191,816 148,319 -- With HAV, EBP and GRO Plus Unit Price $12.04 $11.35 -- Number of Units 137,089 12,591 -- With HAV, EBP and GMWB Unit Value $10.94 -- -- Number of Units 43,652 -- -- - ---------------------------------------------------------------------------------------------- AST Goldman Sachs High Yield Portfolio With No Optional Benefits Unit Price $12.69 $11.61 9.71 Number of Units 13,717,128 12,201,163 5,592,940 With any one of GRO Plus, EBP or HAV Unit Price $13.34 $12.24 10.26 Number of Units 4,901,936 3,684,174 74,022 With GMWB Unit Value $13.31 $12.23 -- Number of Units 426,333 27,535 -- With any two of GRO Plus, EBP or HAV Unit Price $13.27 $12.21 10.26 Number of Units 707,876 379,114 6,524 With any one of EBP or HAV and GMWB Unit Value $11.51 $10.60 -- Number of Units 545,726 346,126 -- With HAV, EBP and GRO Plus Unit Price $13.20 $12.17 -- Number of Units 54,058 28,237 -- With HAV, EBP and GMWB Unit Value $11.24 -- -- Number of Units 65,084 -- -- - ----------------------------------------------------------------------------------------------
A-21 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $ 12.26 $ 11.61 9.94 Number of Units 8,369,008 7,751,236 4,146,530 With any one of GRO Plus, EBP or HAV Unit Price $ 12.56 $ 11.92 10.23 Number of Units 7,337,467 4,628,945 162,571 With GMWB Unit Value $ 12.53 $ 11.90 -- Number of Units 904,128 42,593 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.49 $ 11.88 10.23 Number of Units 1,314,641 624,019 7,474 With any one of EBP or HAV and GMWB Unit Value $ 12.18 $ 11.60 -- Number of Units 732,155 423,485 -- With HAV, EBP and GRO Plus Unit Price $ 12.42 $ 11.85 -- Number of Units 155,764 28,346 -- With HAV, EBP and GMWB Unit Value $ 10.88 -- -- Number of Units 85,669 -- -- - -------------------------------------------------------------------------------------------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $ 11.31 $ 10.95 10.57 Number of Units 33,208,757 26,287,388 20,544,075 With any one of GRO Plus, EBP or HAV Unit Price $ 10.82 $ 10.51 10.17 Number of Units 30,067,867 16,012,778 604,147 With GMWB Unit Value $ 10.79 $ 10.49 -- Number of Units 3,495,678 378,676 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.76 $ 10.48 10.17 Number of Units 4,319,279 2,192,336 36,236 With any one of EBP or HAV and GMWB Unit Value $ 13.09 $ 12.76 -- Number of Units 2,344,332 1,558,557 -- With HAV, EBP and GRO Plus Unit Price $ 10.70 $ 10.45 -- Number of Units 476,033 119,982 -- With HAV, EBP and GMWB Unit Value $ 10.32 -- -- Number of Units 323,335 -- -- - --------------------------------------------------------------------------------------------
A-22 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $ 10.55 $ 10.51 10.34 Number of Units 21,299,789 15,242,856 11,274,642 With any one of GRO Plus, EBP or HAV Unit Price $ 10.23 $ 10.22 10.08 Number of Units 19,103,280 5,152,783 215,314 With GMWB Unit Value $ 10.21 $ 10.21 -- Number of Units 2,764,809 36,640 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.17 $ 10.19 10.08 Number of Units 2,785,690 636,860 80,547 With any one of EBP or HAV and GMWB Unit Value $ 11.62 $ 11.65 -- Number of Units 1,143,298 329,629 -- With HAV, EBP and GRO Plus Unit Price $ 10.12 $ 10.16 -- Number of Units 301,108 35,430 -- With HAV, EBP and GMWB Unit Value $ 9.96 -- -- Number of Units 240,337 -- -- - --------------------------------------------------------------------------------------------- AST Money Market (1992) With No Optional Benefits Unit Price $ 9.78 $ 9.86 9.96 Number of Units 29,870,585 32,730,501 36,255,772 With any one of GRO Plus, EBP or HAV Unit Price $ 9.75 $ 9.86 9.99 Number of Units 8,152,893 7,176,983 999,737 With GMWB Unit Value $ 9.73 $ 9.85 -- Number of Units 1,312,018 81,304 -- With any two of GRO Plus, EBP or HAV Unit Price $ 9.70 $ 9.83 9.99 Number of Units 1,742,703 1,118,618 70,899 With any one of EBP or HAV and GMWB Unit Value $ 9.98 $ 10.13 -- Number of Units 234,402 35,505 -- With HAV, EBP and GRO Plus Unit Price $ 9.65 $ 9.80 -- Number of Units 432,144 149,705 -- With HAV, EBP and GMWB Unit Value $ 9.79 -- -- Number of Units 61,321 -- -- - ---------------------------------------------------------------------------------------------
A-23 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------------------------------------------- Gartmore Variable Investment Trust -- GVIT Developing Markets (1996) With No Optional Benefits Unit Price $ 16.02 $ 13.60 8.66 Number of Units 2,103,950 1,763,660 283,466 With any one of GRO Plus, EBP or HAV Unit Price $ 18.29 $ 15.56 9.93 Number of Units 934,258 415,864 21,816 With GMWB Unit Value $ 18.25 $ 15.54 -- Number of Units 161,653 12,503 -- With any two of GRO Plus, EBP or HAV Unit Price $ 18.19 $ 15.52 9.93 Number of Units 141,365 44,993 442 With any one of EBP or HAV and GMWB Unit Value $ 12.74 $ 10.88 -- Number of Units 25,630 843 -- With HAV, EBP and GRO Plus Unit Price $ 18.09 $ 15.47 -- Number of Units 17,121 1,871 -- With HAV, EBP and GMWB Unit Value $ 12.70 -- -- Number of Units 11,161 -- -- - ----------------------------------------------------------------------------------------------------------------------------- AIM V.I. -- Dynamics (1999) With No Optional Benefits Unit Price $ 10.72 $ 9.61 7.09 Number of Units 668,032 889,464 543,762 With any one of GRO Plus, EBP or HAV Unit Price $ 14.59 $ 13.12 9.70 Number of Units 590,157 634,308 32,635 With GMWB Unit Value $ 14.56 $ 13.11 -- Number of Units 61,543 4,848 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.51 $ 13.08 9.70 Number of Units 55,199 38,518 576 With any one of EBP or HAV and GMWB Unit Value $ 11.67 -- -- Number of Units 1,825 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.43 $ 13.05 -- Number of Units 4,253 3,083 -- With HAV, EBP and GMWB Unit Value $ 11.63 -- -- Number of Units 13 -- -- - -----------------------------------------------------------------------------------------------------------------------------
A-24 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------- AIM V.I. -- Technology (1999) With No Optional Benefits Unit Price $ 8.09 $ 7.87 5.50 Number of Units 512,424 578,651 293,307 With any one of GRO Plus, EBP or HAV Unit Price $ 13.71 $ 13.35 -- Number of Units 5,184 3,695 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------- AIM V.I. -- Health Sciences (1999) With No Optional Benefits Unit Price $ 10.64 $ 10.05 8.00 Number of Units 937,586 698,364 475,873 With any one of GRO Plus, EBP or HAV Unit Price $ 12.58 $ 11.93 9.51 Number of Units 578,826 381,478 5,444 With GMWB Unit Value $ 12.56 $ 11.91 -- Number of Units 87,037 2,077 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.52 $ 11.89 9.51 Number of Units 181,513 55,867 140 With any one of EBP or HAV and GMWB Unit Value $ 11.41 $ 10.85 -- Number of Units 5,057 1,330 -- With HAV, EBP and GRO Plus Unit Price $ 12.45 -- -- Number of Units 5,438 -- -- With HAV, EBP and GMWB Unit Value $ 11.38 -- -- Number of Units 2,157 -- -- - -------------------------------------------------------------------------------------
A-25 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- AIM V.I. -- Financial Services (1999) With No Optional Benefits Unit Price $ 11.94 $ 11.17 8.76 Number of Units 585,185 607,265 366,258 With any one of GRO Plus, EBP or HAV Unit Price $ 13.44 $ 12.61 9.92 Number of Units 387,921 200,360 1,897 With GMWB Unit Value $ 13.42 $ 12.60 -- Number of Units 67,581 20,268 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.37 $ 12.58 9.92 Number of Units 84,188 50,250 141 With any one of EBP or HAV and GMWB Unit Value $ 11.11 $ 10.46 -- Number of Units 15,566 1,378 -- With HAV, EBP and GRO Plus Unit Price $ 13.30 $ 12.54 -- Number of Units 8,806 751 -- With HAV, EBP and GMWB Unit Value $ 11.08 -- -- Number of Units 468 -- -- - --------------------------------------------------------------------------------------------- Evergreen VA -- International Equity (1999) With No Optional Benefits Unit Price $ 13.66 $ 11.65 8.15 Number of Units 414,631 189,143 113,389 With any one of GRO Plus, EBP or HAV Unit Price $ 14.94 $ 12.78 9.67 Number of Units 195,986 76,749 3,669 With GMWB Unit Value $ 12.21 $ 10.45 -- Number of Units 32,858 827 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.86 $ 12.74 -- Number of Units 67,201 6,492 -- With any one of EBP or HAV and GMWB Unit Value $ 12.40 $ 10.64 -- Number of Units 83,727 81,555 -- With HAV, EBP and GRO Plus Unit Price $ 14.78 $ 12.71 -- Number of Units 7,362 1,395 -- With HAV, EBP and GMWB Unit Value $ 12.36 -- -- Number of Units 2,878 -- -- - ---------------------------------------------------------------------------------------------
A-26 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------ Evergreen VA -- Special Equity (16) (1999) With No Optional Benefits Unit Price $ 11.58 $ 11.12 7.44 Number of Units 702,642 815,621 127,728 With any one of GRO Plus, EBP or HAV Unit Price $ 15.25 $ 14.69 9.85 Number of Units 509,734 293,794 12,520 With GMWB Unit Value $ 15.22 $ 14.67 -- Number of Units 46,748 3,620 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.17 $ 14.65 9.85 Number of Units 177,731 58,548 533 With any one of EBP or HAV and GMWB Unit Value $ 9.13 $ 8.83 -- Number of Units 114,259 23,503 -- With HAV, EBP and GRO Plus Unit Price $ 15.09 -- -- Number of Units 3,411 -- -- With HAV, EBP and GMWB Unit Value $ 10.53 -- -- Number of Units 26,034 -- -- - ------------------------------------------------------------------------------------------ Evergreen VA -- Omega (2000) With No Optional Benefits Unit Price $ 11.29 $ 10.71 7.78 Number of Units 570,123 404,789 39,943 With any one of GRO Plus, EBP or HAV Unit Price $ 13.89 $ 13.21 -- Number of Units 387,492 56,002 -- With GMWB Unit Value $ 13.86 $ 13.19 -- Number of Units 31,153 283 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.81 $ 13.17 -- Number of Units 108,796 25,003 -- With any one of EBP or HAV and GMWB Unit Value $ 9.40 $ 8.97 -- Number of Units 84,876 19,658 -- With HAV, EBP and GRO Plus Unit Price $ 13.74 $ 13.13 -- Number of Units 3,028 1,855 -- With HAV, EBP and GMWB Unit Value $ 10.92 -- -- Number of Units 30,383 -- -- - ------------------------------------------------------------------------------------------
A-27 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------- ProFund VP -- Europe 30 (1999) With No Optional Benefits Unit Price $ 12.17 $ 10.83 7.93 Number of Units 1,812,435 2,116,400 292,396 With any one of GRO Plus, EBP or HAV Unit Price $ 14.80 $ 13.20 9.70 Number of Units 313,111 158,208 2,625 With GMWB Unit Value $ 14.77 $ 13.18 -- Number of Units 99,557 13,365 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.72 $ 13.16 -- Number of Units 162,300 40,636 -- With any one of EBP or HAV and GMWB Unit Value $ 12.39 $ 11.09 -- Number of Units 17,205 3,060 -- With HAV, EBP and GRO Plus Unit Price $ 14.64 -- -- Number of Units 7,739 -- -- With HAV, EBP and GMWB Unit Value $ 12.35 -- -- Number of Units 7,758 -- -- - ----------------------------------------------------------------------------------------- ProFund VP -- Asia 30 (2002) With No Optional Benefits Unit Price $ 12.30 $ 12.57 7.75 Number of Units 896,010 942,605 281,993 With any one of GRO Plus, EBP or HAV Unit Price $ 15.57 $ 15.96 9.86 Number of Units 253,337 131,276 6,995 With GMWB Unit Value $ 15.54 $ 15.94 -- Number of Units 74,988 10,432 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.49 $ 15.91 -- Number of Units 67,805 33,050 -- With any one of EBP or HAV and GMWB Unit Value $ 10.14 $ 10.43 -- Number of Units 28,325 1,873 -- With HAV, EBP and GRO Plus Unit Price $ 15.40 -- -- Number of Units 5,612 -- -- With HAV, EBP and GMWB Unit Value $ 10.10 -- -- Number of Units 6,082 -- -- - -----------------------------------------------------------------------------------------
A-28 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------- ProFund VP -- Japan (2002) With No Optional Benefits Unit Price $ 9.55 $ 9.03 7.24 Number of Units 710,879 426,718 65,845 With any one of GRO Plus, EBP or HAV Unit Price $ 13.40 $ 12.70 10.21 Number of Units 137,584 76,553 351 With GMWB Unit Value $ 13.38 $ 12.69 -- Number of Units 35,968 1,883 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.33 $ 12.67 -- Number of Units 62,668 10,769 -- With any one of EBP or HAV and GMWB Unit Value $ 10.35 -- -- Number of Units 8,278 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.26 -- -- Number of Units 7,559 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------- ProFund VP -- Banks (2002) With No Optional Benefits Unit Price $ 11.98 $ 10.90 8.56 Number of Units 229,711 93,067 101,136 With any one of GRO Plus, EBP or HAV Unit Price $ 14.10 $ 12.86 10.13 Number of Units 171,696 34,962 3,422 With GMWB Unit Value $ 14.07 -- -- Number of Units 8,847 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.03 $ 12.83 -- Number of Units 29,071 6,833 -- With any one of EBP or HAV and GMWB Unit Value $ 11.58 -- -- Number of Units 20,936 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.95 $ 12.79 -- Number of Units 788 1,039 -- With HAV, EBP and GMWB Unit Value $ 11.54 -- -- Number of Units 582 -- -- - --------------------------------------------------------------------------------------
A-29 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------- ProFund VP -- Basic Materials (2002) With No Optional Benefits Unit Price $ 11.87 $ 10.95 8.46 Number of Units 529,237 1,512,864 76,331 With any one of GRO Plus, EBP or HAV Unit Price $ 14.43 $ 13.35 10.34 Number of Units 170,212 100,189 12 With GMWB Unit Value $ 14.40 $ 13.33 -- Number of Units 23,555 8,054 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.35 $ 13.31 -- Number of Units 35,537 15,986 -- With any one of EBP or HAV and GMWB Unit Value $ 12.43 -- -- Number of Units 15,658 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.28 -- -- Number of Units 3,155 -- -- With HAV, EBP and GMWB Unit Value $ 12.40 -- -- Number of Units 1,246 -- -- - ----------------------------------------------------------------------------------------- ProFund VP -- Biotechnology (2001) With No Optional Benefits Unit Price $ 10.52 $ 9.75 7.09 Number of Units 757,678 208,971 130,082 With any one of GRO Plus, EBP or HAV Unit Price $ 14.56 $ 13.53 -- Number of Units 5,878 847 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------------
A-30 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ---------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------- ProFund VP -- Consumer Services (2002) With No Optional Benefits Unit Price $ 9.56 $ 9.04 7.25 Number of Units 430,620 136,269 128,022 With any one of GRO Plus, EBP or HAV Unit Price $ 12.31 $ 11.66 9.37 Number of Units 87,433 30,700 2,426 With GMWB Unit Value $ 12.28 -- -- Number of Units 17,197 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.24 $ 11.62 -- Number of Units 8,198 5,655 -- With any one of EBP or HAV and GMWB Unit Value $ 10.69 -- -- Number of Units 2,087 -- -- With HAV, EBP and GRO Plus Unit Price $ 12.17 $ 11.59 -- Number of Units 1,211 3,817 -- With HAV, EBP and GMWB Unit Value $ 10.66 -- -- Number of Units 14 -- -- - ---------------------------------------------------------------------------------------- ProFund VP -- Consumer Goods (2002) With No Optional Benefits Unit Price $ 10.36 $ 9.64 8.28 Number of Units 369,007 58,425 148,446 With any one of GRO Plus, EBP or HAV Unit Price $ 12.33 $ 11.51 9.90 Number of Units 102,706 12,720 2,303 With GMWB Unit Value $ 12.31 $ 11.49 -- Number of Units 8,437 954 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.27 -- -- Number of Units 54,297 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.40 $ 10.67 -- Number of Units 9,175 4,737 -- With HAV, EBP and GRO Plus Unit Price $ 12.20 -- -- Number of Units 1,731 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ----------------------------------------------------------------------------------------
A-31 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ----------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------------------------------------------- ProFund VP -- Oil & Gas (2001) With No Optional Benefits Unit Price $ 13.33 $ 10.48 8.71 Number of Units 1,856,882 1,225,844 299,833 With any one of GRO Plus, EBP or HAV Unit Price $ 15.40 $ 12.14 10.12 Number of Units 888,111 114,553 1,660 With GMWB Unit Value $ 15.37 $ 12.12 -- Number of Units 58,804 4,007 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.32 $ 12.10 -- Number of Units 174,913 25,623 -- With any one of EBP or HAV and GMWB Unit Value $ 13.80 -- -- Number of Units 29,672 -- -- With HAV, EBP and GRO Plus Unit Price $ 15.23 $ 12.07 -- Number of Units 14,353 2,434 -- With HAV, EBP and GMWB Unit Value $ 13.76 -- -- Number of Units 6,676 -- -- - ----------------------------------------------------------------------------------------- ProFund VP -- Financials (2001) With No Optional Benefits Unit Price $ 12.19 $ 11.23 8.85 Number of Units 553,342 398,159 221,377 With any one of GRO Plus, EBP or HAV Unit Price $ 13.48 $ 12.45 9.84 Number of Units 323,190 134,420 2,066 With GMWB Unit Value $ 13.45 $ 12.44 -- Number of Units 17,749 1,060 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.41 $ 12.42 -- Number of Units 35,528 27,402 -- With any one of EBP or HAV and GMWB Unit Value $ 11.26 -- -- Number of Units 15,974 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.33 -- -- Number of Units 1,103 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -----------------------------------------------------------------------------------------
A-32 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------- ProFund VP -- Health Care (2001) With No Optional Benefits Unit Price $ 9.23 $ 9.17 7.94 Number of Units 1,318,525 707,449 388,508 With any one of GRO Plus, EBP or HAV Unit Price $ 11.10 $ 11.05 9.59 Number of Units 518,389 244,228 6,831 With GMWB Unit Value $ 11.07 $ 11.04 -- Number of Units 8,570 1,969 -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.04 $ 11.02 -- Number of Units 139,890 56,392 -- With any one of EBP or HAV and GMWB Unit Value $ 10.65 -- -- Number of Units 5,322 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.98 $ 10.99 -- Number of Units 4,035 2,123 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------- ProFund VP -- Industrials (2002) With No Optional Benefits Unit Price $ 11.15 $ 10.01 7.93 Number of Units 253,411 318,339 12,642 With any one of GRO Plus, EBP or HAV Unit Price $ 14.27 $ 12.85 -- Number of Units 88,729 20,601 -- With GMWB Unit Value $ 14.24 -- -- Number of Units 4,426 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.20 $ 12.81 -- Number of Units 14,026 4,507 -- With any one of EBP or HAV and GMWB Unit Value $ 12.08 -- -- Number of Units 4,381 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.12 -- -- Number of Units 945 -- -- With HAV, EBP and GMWB Unit Value $ 12.04 -- -- Number of Units 807 -- -- - ---------------------------------------------------------------------------------------
A-33 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Internet (2002) With No Optional Benefits Unit Price $ 17.89 $ 15.00 8.57 Number of Units 992,879 206,876 306,572 With any one of GRO Plus, EBP or HAV Unit Price $ 19.83 $ 16.67 -- Number of Units 3,806 1,210 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- Pharmaceuticals (2002) With No Optional Benefits Unit Price $ 7.93 $ 8.89 8.56 Number of Units 527,336 266,978 136,559 With any one of GRO Plus, EBP or HAV Unit Price $ 8.88 $ 9.97 9.63 Number of Units 246,789 77,105 2,545 With GMWB Unit Value $ 8.86 $ 9.96 -- Number of Units 23,137 2,871 -- With any two of GRO Plus, EBP or HAV Unit Price $ 8.83 $ 9.94 -- Number of Units 70,946 6,346 -- With any one of EBP or HAV and GMWB Unit Value $ 9.44 -- -- Number of Units 5,382 -- -- With HAV, EBP and GRO Plus Unit Price $ 8.78 $ 9.91 -- Number of Units 3,939 1,646 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------------
A-34 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Precious Metals (2002) With No Optional Benefits Unit Price $ 11.77 $ 13.29 9.70 Number of Units 1,479,384 1,329,806 1,175,651 With any one of GRO Plus, EBP or HAV Unit Price $ 13.64 $ 15.44 11.3 Number of Units 457,761 390,896 19,964 With GMWB Unit Value $ 13.61 -- -- Number of Units 42,627 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.57 $ 15.39 -- Number of Units 111,588 44,664 -- With any one of EBP or HAV and GMWB Unit Value $ 10.17 -- -- Number of Units 93,541 -- -- With HAV, EBP and GRO Plus Unit Price $ 13.49 $ 15.35 -- Number of Units 7,072 1,458 -- With HAV, EBP and GMWB Unit Value $ 10.14 $ 11.55 -- Number of Units 11,671 23,284 -- - ------------------------------------------------------------------------------------------- ProFund VP -- Real Estate (2001) With No Optional Benefits Unit Price $ 16.15 $ 12.91 9.86 Number of Units 1,816,706 462,906 441,318 With any one of GRO Plus, EBP or HAV Unit Price $ 16.63 $ 13.33 10.20 Number of Units 509,763 136,941 12,789 With GMWB Unit Value $ 16.60 $ 13.31 -- Number of Units 58,062 3,835 -- With any two of GRO Plus, EBP or HAV Unit Price $ 16.54 $ 13.29 -- Number of Units 128,625 32,970 -- With any one of EBP or HAV and GMWB Unit Value $ 13.06 -- -- Number of Units 22,857 -- -- With HAV, EBP and GRO Plus Unit Price $ 16.45 -- -- Number of Units 629 -- -- With HAV, EBP and GMWB Unit Value $ 13.02 -- -- Number of Units 1,198 -- -- - -------------------------------------------------------------------------------------------
A-35 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------------- ProFund VP -- Semiconductor (2002) With No Optional Benefits Unit Price $ 7.15 $ 9.51 5.14 Number of Units 694,352 423,958 93,241 With any one of GRO Plus, EBP or HAV Unit Price $ 11.95 $ 15.93 -- Number of Units 3,639 3,475 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------- ProFund VP -- Technology (2001) With No Optional Benefits Unit Price $ 8.48 $ 8.66 6.03 Number of Units 727,580 497,972 254,131 With any one of GRO Plus, EBP or HAV Unit Price $ 12.99 $ 13.30 -- Number of Units 9,239 6,845 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------------
A-36 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - --------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - --------------------------------------------------------------------------------------------- ProFund VP -- Telecommunications (2001) With No Optional Benefits Unit Price $ 8.19 $ 7.21 7.15 Number of Units 460,848 398,350 272,408 With any one of GRO Plus, EBP or HAV Unit Price $ 11.43 $ 10.08 10.03 Number of Units 212,127 47,283 3,642 With GMWB Unit Value $ 11.40 -- -- Number of Units 6,379 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.37 $ 10.05 -- Number of Units 34,691 13,783 -- With any one of EBP or HAV and GMWB Unit Value $ 12.54 -- -- Number of Units 4,099 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.31 -- -- Number of Units 11,741 -- -- With HAV, EBP and GMWB Unit Value $ 12.50 -- -- Number of Units 2,691 -- -- - --------------------------------------------------------------------------------------------- ProFund VP -- Utilities (2001) With No Optional Benefits Unit Price $ 11.13 $ 9.34 7.83 Number of Units 1,060,939 618,427 521,419 With any one of GRO Plus, EBP or HAV Unit Price $ 15.00 $ 12.63 10.61 Number of Units 332,768 93,690 8,871 With GMWB Unit Value $ 14.97 $ 12.62 -- Number of Units 57,208 8,137 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.92 $ 12.60 -- Number of Units 87,691 10,588 -- With any one of EBP or HAV and GMWB Unit Value $ 12.51 -- -- Number of Units 21,365 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.84 -- -- Number of Units 7,490 -- -- With HAV, EBP and GMWB Unit Value $ 12.47 -- -- Number of Units 573 -- -- - ---------------------------------------------------------------------------------------------
A-37 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Bull (2002) With No Optional Benefits Unit Price $ 10.53 $ 9.84 7.97 Number of Units 8,215,357 3,563,562 954,792 With any one of GRO Plus, EBP or HAV Unit Price $ 12.82 $ 12.01 9.75 Number of Units 2,052,501 708,248 10,297 With GMWB Unit Value $ 12.79 $ 12.00 -- Number of Units 171,187 1,179 -- With any two of GRO Plus, EBP or HAV Unit Price $ 12.75 $ 11.98 9.75 Number of Units 570,114 58,349 400 With any one of EBP or HAV and GMWB Unit Value $ 11.25 $ 10.58 -- Number of Units 31,600 427 -- With HAV, EBP and GRO Plus Unit Price $ 12.68 $ 11.94 -- Number of Units 88,697 10,714 -- With HAV, EBP and GMWB Unit Value $ 11.21 -- -- Number of Units 12,971 -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- Bear (2001) With No Optional Benefits Unit Price $ 7.45 $ 8.44 11.38 Number of Units 1,202,243 1,886,515 1,532,543 With any one of GRO Plus, EBP or HAV Unit Price $ 6.60 $ 7.49 10.13 Number of Units 289,105 716,467 28,618 With GMWB Unit Value $ 6.58 -- -- Number of Units 41,480 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 6.56 $ 7.47 10.13 Number of Units 60,475 36,686 1,514 With any one of EBP or HAV and GMWB Unit Value $ 8.15 $ 9.29 -- Number of Units 10,709 7,927 -- With HAV, EBP and GRO Plus Unit Price $ 6.52 $ 7.45 -- Number of Units 14,578 13,622 -- With HAV, EBP and GMWB Unit Value $ 8.12 $ 9.29 -- Number of Units 1,620 7,293 -- - -------------------------------------------------------------------------------------------
A-38 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- UltraBull (2001) With No Optional Benefits Unit Price $ 11.76 $ 10.20 6.78 Number of Units 2,817,803 1,431,345 297,435 With any one of GRO Plus, EBP or HAV Unit Price $ 16.58 $ 14.42 9.61 Number of Units 9,518 1,432 245 With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- OTC (2001) With No Optional Benefits Unit Price $ 9.94 $ 9.32 6.45 Number of Units 4,885,351 4,445,234 1,346,852 With any one of GRO Plus, EBP or HAV Unit Price $ 14.34 $ 13.47 9.36 Number of Units 1,807,904 810,005 13,113 With GMWB Unit Value $ 14.31 $ 13.46 -- Number of Units 128,923 5,378 -- With any two of GRO Plus, EBP or HAV Unit Price $ 14.27 $ 13.44 -- Number of Units 225,055 34,480 -- With any one of EBP or HAV and GMWB Unit Value $ 10.92 -- -- Number of Units 28,507 -- -- With HAV, EBP and GRO Plus Unit Price $ 14.19 -- -- Number of Units 32,376 -- -- With HAV, EBP and GMWB Unit Value $ 10.88 -- -- Number of Units 14,308 -- -- - -------------------------------------------------------------------------------------------
A-39 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Short OTC (2002) With No Optional Benefits Unit Price $ 5.93 $ 6.78 11.00 Number of Units 908,064 1,535,439 433,181 With any one of GRO Plus, EBP or HAV Unit Price $ 5.60 $ 6.42 10.43 Number of Units 181,352 196,526 15,308 With GMWB Unit Value $ 5.58 -- -- Number of Units 7,191 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 5.57 $ 6.40 -- Number of Units 65,148 20,167 -- With any one of EBP or HAV and GMWB Unit Value -- $ 9.49 -- Number of Units -- 7,708 -- With HAV, EBP and GRO Plus Unit Price $ 5.54 $ 6.38 -- Number of Units 16,306 16,907 -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- UltraOTC (1999) With No Optional Benefits Unit Price $ 7.89 $ 7.03 3.53 Number of Units 6,592,447 3,410,589 1,003,123 With any one of GRO Plus, EBP or HAV Unit Price $ 19.36 $ 17.30 8.70 Number of Units 22,282 5,905 233 With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------------
A-40 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Mid-Cap Value (2002) With No Optional Benefits Unit Price $ 11.67 $ 10.23 7.66 Number of Units 2,632,869 1,455,513 438,387 With any one of GRO Plus, EBP or HAV Unit Price $ 15.24 $ 13.40 10.06 Number of Units 626,618 462,172 4,777 With GMWB Unit Value $ 15.21 $ 13.39 -- Number of Units 110,312 4,164 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.16 $ 13.36 10.06 Number of Units 304,648 99,189 4,799 With any one of EBP or HAV and GMWB Unit Value $ 12.20 $ 10.77 -- Number of Units 39,454 3,516 -- With HAV, EBP and GRO Plus Unit Price $ 15.08 $ 13.33 -- Number of Units 12,473 916 -- With HAV, EBP and GMWB Unit Value $ 12.17 -- -- Number of Units 3,507 -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- Mid-Cap Growth (2002) With No Optional Benefits Unit Price $ 10.58 $ 9.69 7.70 Number of Units 2,220,901 1,009,867 439,054 With any one of GRO Plus, EBP or HAV Unit Price $ 13.42 $ 12.32 9.82 Number of Units 579,666 295,528 1,587 With GMWB Unit Value $ 13.39 $ 12.31 -- Number of Units 53,472 2,028 -- With any two of GRO Plus, EBP or HAV Unit Price $ 13.35 $ 12.28 9.81 Number of Units 163,302 47,141 1,583 With any one of EBP or HAV and GMWB Unit Value $ 11.12 $ 10.24 -- Number of Units 21,341 3,933 -- With HAV, EBP and GRO Plus Unit Price $ 13.28 $ 12.25 -- Number of Units 6,489 1,274 -- With HAV, EBP and GMWB Unit Value $ 11.09 -- -- Number of Units 9,859 -- -- - -------------------------------------------------------------------------------------------
A-41 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- UltraMid-Cap (2002) With No Optional Benefits Unit Price $ 11.99 $ 9.55 5.71 Number of Units 3,106,849 1,112,311 477,953 With any one of GRO Plus, EBP or HAV Unit Price $ 20.62 $ 16.46 9.86 Number of Units 338,303 136,523 1,673 With GMWB Unit Value $ 20.57 $ 16.44 -- Number of Units 101,493 3,746 -- With any two of GRO Plus, EBP or HAV Unit Price $ 20.51 $ 16.41 -- Number of Units 150,540 88,028 -- With any one of EBP or HAV and GMWB Unit Value $ 13.86 -- -- Number of Units 27,449 -- -- With HAV, EBP and GRO Plus Unit Price $ 20.40 $ 16.37 -- Number of Units 2,161 557 -- With HAV, EBP and GMWB Unit Value $ 13.81 -- -- Number of Units 14,660 -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- Small-Cap Value (2002) With No Optional Benefits Unit Price $ 11.10 $ 9.39 7.09 Number of Units 4,088,760 5,144,632 994,778 With any one of GRO Plus, EBP or HAV Unit Price $ 15.80 $ 13.41 10.15 Number of Units 2,597,154 1,218,990 19,019 With GMWB Unit Value $ 15.76 $ 13.39 -- Number of Units 163,443 24,769 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.71 $ 13.37 -- Number of Units 596,413 207,523 -- With any one of EBP or HAV and GMWB Unit Value $ 12.53 $ 10.67 -- Number of Units 31,732 4,223 -- With HAV, EBP and GRO Plus Unit Price $ 15.63 $ 13.33 -- Number of Units 29,856 28,687 -- With HAV, EBP and GMWB Unit Value $ 12.49 -- -- Number of Units 6,158 -- -- - -------------------------------------------------------------------------------------------
A-42 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------- ProFund VP -- Small-Cap Growth (2002) With No Optional Benefits Unit Price $ 11.98 $ 10.16 7.69 Number of Units 4,677,820 3,868,951 772,260 With any one of GRO Plus, EBP or HAV Unit Price $ 15.34 $ 13.05 9.91 Number of Units 1,611,060 1,289,398 10,572 With GMWB Unit Value $ 15.31 $ 13.04 -- Number of Units 170,800 21,997 -- With any two of GRO Plus, EBP or HAV Unit Price $ 15.26 $ 13.01 -- Number of Units 285,725 210,595 -- With any one of EBP or HAV and GMWB Unit Value $ 12.23 $ 10.44 -- Number of Units 42,134 2,529 -- With HAV, EBP and GRO Plus Unit Price $ 15.17 $ 12.98 -- Number of Units 9,388 30,164 -- With HAV, EBP and GMWB Unit Value $ 12.19 -- -- Number of Units 13,290 -- -- - ------------------------------------------------------------------------------------------- ProFund VP -- UltraSmall-Cap (1999) With No Optional Benefits Unit Price $ 15.52 $ 12.04 6.14 Number of Units 5,098,565 1,702,558 212,085 With any one of GRO Plus, EBP or HAV Unit Price $ 24.98 $ 19.43 -- Number of Units 32,780 13,082 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------------------
A-43 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ---------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ---------------------------------------------------------------------------------------------------- ProFund VP -- U.S. Government Plus (2002) With No Optional Benefits Unit Price $ 11.79 $ 11.08 11.56 Number of Units 1,051,158 731,470 2,486,854 With any one of GRO Plus, EBP or HAV Unit Price $ 10.34 $ 9.75 10.19 Number of Units 372,142 291,892 22,148 With GMWB Unit Value $ 10.32 $ 9.73 -- Number of Units 120,311 14,956 -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.29 $ 9.72 10.19 Number of Units 111,072 32,854 609 With any one of EBP or HAV and GMWB Unit Value $ 10.80 -- -- Number of Units 4,588 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.23 -- -- Number of Units 13,114 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ---------------------------------------------------------------------------------------------------- ProFund VP -- Rising Rates Opportunity (2002) With No Optional Benefits Unit Price $ 6.63 $ 7.56 8.02 Number of Units 5,314,528 1,817,924 165,792 With any one of GRO Plus, EBP or HAV Unit Price $ 7.97 $ 9.12 9.69 Number of Units 2,060,525 445,486 9,028 With GMWB Unit Value $ 7.95 $ 9.11 -- Number of Units 333,355 4,991 -- With any two of GRO Plus, EBP or HAV Unit Price $ 7.93 $ 9.09 -- Number of Units 588,490 82,598 -- With any one of EBP or HAV and GMWB Unit Value $ 8.31 -- -- Number of Units 219,942 -- -- With HAV, EBP and GRO Plus Unit Price $ 7.89 $ 9.07 -- Number of Units 52,002 10,876 -- With HAV, EBP and GMWB Unit Value $ 8.28 -- -- Number of Units 14,108 -- -- - ----------------------------------------------------------------------------------------------------
A-44 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------------- ProFund VP -- Large-Cap Growth With No Optional Benefits Unit Price $ 10.37 -- -- Number of Units 72,725 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.37 -- -- Number of Units 18,860 -- -- With GMWB Unit Value $ 10.37 -- -- Number of Units 2,860 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.37 -- -- Number of Units 6,286 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.37 -- -- Number of Units 554 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.37 -- -- Number of Units 84 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------- ProFund VP -- Large-Cap Value With No Optional Benefits Unit Price $ 10.37 -- -- Number of Units 159,605 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.36 -- -- Number of Units 36,170 -- -- With GMWB Unit Value $ 10.36 -- -- Number of Units 3,802 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.36 -- -- Number of Units 1,123 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.36 -- -- Number of Units 554 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.36 -- -- Number of Units 84 -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------------
A-45 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - -------------------------------------------------------------------------- Sub-account 2004 2003 2002 - -------------------------------------------------------------------------- ProFund VP -- Short Mid-Cap With No Optional Benefits Unit Price $ 9.70 -- -- Number of Units 39,360 -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------- ProFund VP -- Short Small-Cap With No Optional Benefits Unit Price $ 9.54 -- -- Number of Units 136,809 -- -- With any one of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - --------------------------------------------------------------------------
A-46 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------------------------ First Trust(TM) 10 Uncommon Values (2000) With No Optional Benefits Unit Price $ 10.03 $ 9.16 6.8 Number of Units 91,924 66,435 19,826 With any one of GRO Plus, EBP or HAV Unit Price $ 14.39 $ 13.17 -- Number of Units 28 467 -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------------------------ First Trust Global Target 15 (17) With No Optional Benefits Unit Price $ 11.85 -- -- Number of Units 311,233 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.83 -- -- Number of Units 303,452 -- -- With GMWB Unit Value $ 11.82 -- -- Number of Units 108,014 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.81 -- -- Number of Units 65,909 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.80 -- -- Number of Units 6,777 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.79 -- -- Number of Units 4,718 -- -- With HAV, EBP and GMWB Unit Value $ 11.78 -- -- Number of Units 3,816 -- -- - ------------------------------------------------------------------------------------------------
A-47 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------- First Trust Target Managed VIP With No Optional Benefits Unit Price $ 11.32 -- -- Number of Units 1,777,316 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 11.30 -- -- Number of Units 1,562,079 -- -- With GMWB Unit Value $ 11.30 -- -- Number of Units 1,057,901 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 11.28 -- -- Number of Units 429,320 -- -- With any one of EBP or HAV and GMWB Unit Value $ 11.28 -- -- Number of Units 40,194 -- -- With HAV, EBP and GRO Plus Unit Price $ 11.27 -- -- Number of Units 217,324 -- -- With HAV, EBP and GMWB Unit Value $ 11.26 -- -- Number of Units 23,730 -- -- - ------------------------------------------------------------------------------- First Trust NASDAQ Target 15 With No Optional Benefits Unit Price $ 10.66 -- -- Number of Units 82,809 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.64 -- -- Number of Units 1,635 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - -------------------------------------------------------------------------------
A-48 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------ First Trust S&P Target 24 With No Optional Benefits Unit Price $ 10.75 -- -- Number of Units 173,851 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.73 -- -- Number of Units 152,355 -- -- With GMWB Unit Value $ 10.72 -- -- Number of Units 38,677 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.71 -- -- Number of Units 72,575 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.70 -- -- Number of Units 11,933 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.69 -- -- Number of Units 3,409 -- -- With HAV, EBP and GMWB Unit Value $ 10.68 -- -- Number of Units 2,359 -- -- - ------------------------------------------------------------------------------ First Trust The Dow(SM) Dart 10 With No Optional Benefits Unit Price $ 10.48 -- -- Number of Units 155,695 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.46 -- -- Number of Units 160,820 -- -- With GMWB Unit Value $ 10.46 -- -- Number of Units 78,082 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.45 -- -- Number of Units 82,728 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.44 -- -- Number of Units 3,913 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.43 -- -- Number of Units 10,531 -- -- With HAV, EBP and GMWB Unit Value $ 10.42 -- -- Number of Units 105 -- -- - ------------------------------------------------------------------------------
A-49 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, - ------------------------------------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------------------------------------------ First Trust Value Line(TM) Target 25 With No Optional Benefits Unit Price $ 12.59 -- -- Number of Units 389,792 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 12.57 -- -- Number of Units 4,909 -- -- With GMWB Unit Value -- -- -- Number of Units -- -- -- With any two of GRO Plus, EBP or HAV Unit Price -- -- -- Number of Units -- -- -- With any one of EBP or HAV and GMWB Unit Value -- -- -- Number of Units -- -- -- With HAV, EBP and GRO Plus Unit Price -- -- -- Number of Units -- -- -- With HAV, EBP and GMWB Unit Value -- -- -- Number of Units -- -- -- - ------------------------------------------------------------------------------ SP William Blair International Growth With No Optional Benefits Unit Price $ 10.53 -- -- Number of Units 269,671 -- -- With any one of GRO Plus, EBP or HAV Unit Price $ 10.53 -- -- Number of Units 172,859 -- -- With GMWB Unit Value $ 10.53 -- -- Number of Units 73,031 -- -- With any two of GRO Plus, EBP or HAV Unit Price $ 10.52 -- -- Number of Units 23,863 -- -- With any one of EBP or HAV and GMWB Unit Value $ 10.52 -- -- Number of Units 6,604 -- -- With HAV, EBP and GRO Plus Unit Price $ 10.52 -- -- Number of Units 4,127 -- -- With HAV, EBP and GMWB Unit Value $ 10.52 -- -- Number of Units 806 -- -- - ------------------------------------------------------------------------------
A-50 APPENDIX A AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- 1. Effective May 2, 2005 the name of the Wells Fargo Variable Trust International Equity Portfolio has changed to Wells Fargo Variable Trust Advantage International Core Portfolio. 2. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Small-Cap Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Small-Cap Growth Portfolio. 3. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Core Portfolio. 4. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Large Company Growth Portfolio has changed to Wells Fargo Variable Trust Advantage Large Company Growth Portfolio. 5. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Value Portfolio has changed to Wells Fargo Variable Trust Advantage C&B Large-Cap Value Portfolio. 6. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Equity Income Portfolio has changed to Wells Fargo Variable Trust Advantage Equity Income Portfolio. 7. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Asset Allocation Portfolio has changed to Wells Fargo Variable Trust Advantage Asset Allocation Portfolio. 8. Effective May 2, 2005 the name of the Wells Fargo Variable Trust Total Return Bond Portfolio has changed to Wells Fargo Variable Trust Advantage Total Return Bond Portfolio. 9. Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 10. Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 11. Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 12. Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 13. Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 14. Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 15. Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 16. Effective April 15, 2005 the name of the Evergreen VA--Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 17. Effective May 2, 2005 the name of the First Trust Global Target 15 Portfolio has changed to First Trust Global Dividend Target 15 Portfolio. A-51 This page intentionally left blank APPENDIX B AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix B -- Calculation of Optional Death Benefits - -------------------------------------------------------------------------------- Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Account Value of variable investment options plus Interim Purchase Payments - Growth = minus Value of Fixed Allocations proportional withdrawals (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 x 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $85,000
Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $ 50,000
B-1 APPENDIX B AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued - -------------------------------------------------------------------------------- In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 X $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 X 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000
Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. B-2 APPENDIX B AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Highest Anniversary Value = $90,000 - [$90,000 X $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 X $15,000/$75,000)] = max [$80,000, $40,000] = $80,000 The Death Benefit therefore is $80,000.
Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [($80,000 + $15,000) X $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000 The Death Benefit therefore is $88,214.
Examples of Combination 5% Roll-Up and Highest Anniversary Value Death Benefit Calculation The following are examples of how the Combination 5% Roll-Up and Highest Anniversary Value Death Benefit are calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the 7th anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Roll-Up Value is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than both the Roll-Up Value ($67,005) and the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Owner made a withdrawal of $5,000 on the 6th anniversary of the Issue Date when the Account Value was $45,000. The Roll-Up Value on the 6th anniversary of the Issue Date is equal to initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal Limit for the 7th annuity year is equal to 5% of the Roll-Up Value as of the 6th anniversary of the Issue Date, or $3,350. Therefore, the remaining $1,650 of the withdrawal results in a proportional reduction to the Roll-Up Value. On the 7th anniversary of the Issue Date we receive due proof of death, at which time the Account Value is $43,000; however, the Anniversary Value on the 2nd anniversary of the Issue Date was $70,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary B-3 APPENDIX B AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued - -------------------------------------------------------------------------------- AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Value or the basic Death Benefit. Roll-Up Value = {($67,005 - $3,350) - [($67,005 - $3,350) x $1,650/($45,000 - $3,350)]} x 1.05 = ($63,655 - $2,522) x 1.05 = $ 64,190 Highest Anniversary Value = $70,000 - [$70,000 x $5,000/$45,000] = $70,000 - $7,778 = $62,222 Basic Death Benefit = max [$43,000, $50,000 - ($50,000 x $5,000/$45,000)] = max [$43,000, $44,444] = $44,444 The Death Benefit therefore is $64,190.
Example with death after Death Benefit Target Date Assume that the Owner has not made any withdrawals prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Roll-Up Value on the Death Benefit Target Date (the contract anniversary on or following the Owner's 80th birthday) is equal to initial Purchase Payment accumulated at 5% for 10 years, or $81,445. The Highest Anniversary Value on the Death Benefit Target Date was $85,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as of the Death Benefit Target Date; each increased by subsequent purchase payments and reduced proportionally for subsequent withdrawals. Roll-Up Value = $81,445 + $15,000 - [($81,445 + 15,000) x $5,000/$70,000] = $81,445 + $15,000 - $6,889 = $89,556 Highest Anniversary Value = $85,000 + $15,000 - [($85,000 + 15,000) x $5,000/$70,000] = $85,000 + $15,000 - $7,143 = $92,857 Basic Death Benefit = max [$75,000, $50,000 + $15,000 - {(50,000 + $15,000) x $5,000/$70,000}] = max [$75,000, $60,357] = $75,000 The Death Benefit therefore is $92,857.
Examples of Highest Daily Value Death Benefit Calculation The following are examples of how the HDV Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000 (includes any Credits). Each example assumes that there is one Owner who is age 70 on the Issue Date. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Highest Daily Value was $90,000. Assume, as well, that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value or the basic Death Benefit. The Death Benefit would be the HDV ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). B-4 APPENDIX B AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Highest Daily Value ($90,000) was attained during the fifth Annuity Year. Assume, as well, that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Daily Value (proportionally reduced by the subsequent withdrawal) or the basic Death Benefit. Highest Daily Value = $90,000 - [$90,000 x $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = max [$80,000, $50,000 - ($50,000 x $15,000/$75,000)] = max [$80,000, $40,000] = $80,000 The Death Benefit therefore is $80,000.
Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Daily Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Daily Value on the Death Benefit Target Date plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Daily Value = $80,000 + $15,000 - [($80,000 + $15,000) x $5,000/$70,000] = $80,000 + $15,000 - $6,786 = $88,214 Basic Death Benefit = max [$75,000, ($50,000 + $15,000) - {($50,000 + $15,000) x $50,000/$70,000}] = max [$75,000, $60,357] = $75,000 The Death Benefit therefore is $88,214.
B-5 This page intentionally left blank APPENDIX C AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix C -- Additional Information on Asset Allocation Programs - -------------------------------------------------------------------------------- Program Rules - ------------- o You can elect an asset allocator program where the Sub-accounts for each asset class in each model portfolio are designated based on an evaluation of available Sub-accounts. If you elect the Lifetime Five Benefit ("LT5") or the Highest Daily Value Death Benefit ("HDV"), you must enroll in one of the eligible model portfolios. Asset allocation is a sophisticated method of diversification that allocates assets among asset classes in order to manage investment risk and potentially enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. How the Asset Allocation Program Works o Amounts will automatically be allocated in accordance with the percentages and to Sub-accounts indicated for the model portfolio that you choose. If you allocate your Account Value or transfer your Account Value among any Sub-accounts that are outside of your model portfolio, we will allocate these amounts according to the allocation percentages of the applicable model portfolio upon the next rebalancing. You may only choose one model portfolio at a time. When you enroll in the asset allocation program and upon each rebalance thereafter, 100% of your Account Value allocated to the variable Sub-accounts will be allocated to the asset allocation program. Any Account Value not invested in the Sub-accounts will not be part of the program. o Additional Purchase Payments: Unless otherwise requested, any additional Purchase Payments applied to the variable Sub-accounts in the Annuity will be allocated to the Sub-accounts according to the allocation percentages for the model portfolio you choose. Allocation of additional Purchase Payments outside of your model portfolio but into a Sub-account, will be reallocated according to the allocation percentages of the applicable model portfolio upon the next rebalancing. o Rebalancing Your Model Portfolio: Changes in the value of the Sub-account will cause your Account Value allocated to the Sub-accounts to vary from the percentage allocations of the model portfolio you select. By selecting the asset allocation program, you have directed us to periodically (e.g., quarterly) rebalance your Account Value allocated to the Sub-accounts in accordance with the percentage allocations assigned to each Sub-account within your model portfolio at the time you elected the program or as later modified with your consent. Some asset allocation programs will only require that a rebalancing occur when the percent of your Account Value allocated to the Sub-accounts are outside of the acceptable range permitted under such asset allocation program. Note -- Any Account Value not invested in the Sub-accounts will not be affected by any rebalance. o Sub-account Changes Within the Model Portfolios: From time to time you may be notified of a suggested change in a Sub-account or percentage allocated to a Sub-account within your model portfolio. If you consent (in the manner that is then permitted or required) to the suggested change, then it will be implemented upon the next rebalance. If you do not consent then rebalancing will continue in accordance with your unchanged model portfolio, unless the Sub-account is no longer available under your Annuity, in which case your lack of consent will be deemed a request to terminate the asset allocation program and the provisions under "Termination or Modification of the Asset Allocation Program" will apply. o Owner Changes in Choice of Model Portfolio: You may change from the model portfolio that you have elected to any other currently available model portfolio at any time. The change will be implemented on the date we receive all required information in the manner that is then permitted or required. Termination or Modification of the Asset Allocation Program: o You may request to terminate your asset allocation program at any time. Any termination will be effective on the date that American Skandia receives your termination request in good order. If you are enrolled in HDV or LT5, termination of your asset allocation program must coincide with enrollment in a then currently available and approved asset allocation program or other approved option. However, if you are enrolled in LT5 you may terminate the LT5 benefit in order to then terminate your asset allocation program. American Skandia reserves the right to terminate or modify the asset allocation program at any time with respect to any programs. Restrictions on Electing the Asset Allocation: o You cannot participate in auto-rebalancing or a DCA program while enrolled in an asset allocation program. Upon election of an asset allocation program, American Skandia will automatically terminate your enrollment in any auto-rebalancing or DCA program. Finally, Systematic Withdrawals can only be made as flat dollar amounts. C-1 This page intentionally left blank APPENDIX D AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You - -------------------------------------------------------------------------------- American Skandia Life Assurance Corporation offers several deferred variable annuity products. Each annuity has different features and benefits that may be appropriate for you based on your individual financial situation and how you intend to use the annuity. The different features and benefits may include variations on your ability to access funds in your annuity without the imposition of a withdrawal charge as well as different ongoing fees and charges you pay to stay in the contract. Additionally, differences may exist on various optional benefits such as guaranteed living benefits or death benefit protection. Among the factors you should consider when choosing which annuity product may be most appropriate for your individual needs are the following: o Your age; o The amount of your investment and any planned future deposits into the annuity; o How long you intend to hold the annuity (also referred to as investment time horizon); o Your desire to make withdrawals from the annuity; o Your investment return objectives; o The effect of optional benefits that may be elected, and o Your desire to minimize costs and/or maximize return associated with the annuity. The following chart outlines some of the different features for each American Skandia Annuity. The availability of optional features, such as those noted in the chart, may increase the cost of the contract. Therefore you should carefully consider which features you plan to use when selecting your annuity. You should also consider the investment objectives, risks, charges and expenses of an investment carefully before investing. In addition, the hypothetical illustrations below reflect the account value and surrender value of each variable annuity over a variety of holding periods. These charts are meant to reflect how your annuities can grow or decrease depending on market conditions and the comparable value of each of the annuities (which reflects the charges associated with the annuities) under the assumptions noted. Your registered representative can provide you with prospectuses of one or more of these variable annuities noted in this document and can guide you to Selecting the Variable Annuity That's Right for You. American Skandia Annuity Product Comparison - ------------------------------------------- Below is a summary of American Skandia's annuity products. ASL II refers to American Skandia Lifevest(TM) II, APEX II refers to American Skandia APEX(SM) II, Stagecoach APEX II refers to American Skandia Stagecoach(TM) APEX(SM) II, ASAP III refers to American Skandia Advisor Plan(SM) III, Stagecoach ASAP III refers to American Skandia Stagecoach(TM) ASAP(SM) III, Xtra Credit SIX refers to American Skandia Xtra Credit(SM) SIX and Stagecoach(TM) Xtra Credit(SM) SIX refers to American Skandia Stagecoach(TM) Xtra Credit(SM) SIX. You should consider the investment objectives, risks, charges and expenses of an investment in any Annuity carefully before investing. Each product prospectus as well as the underlying portfolio prospectuses contains this and other information about the variable annuities and underlying investment options. Your Investment Professional can provide you with prospectuses for one or more of these variable annuities and the underlying portfolios and can help you decide upon the product that would be most advantageous for you given your individual needs. Please read the prospectuses carefully before investing. D-1 APPENDIX D AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------ Minimum Investment $15,000 $10,000 $10,000 $10,000 - ------------------------------------------------------------------------------------------------------------------------------ Maximum Issue Age No Maximum Age 85 80 75 - ------------------------------------------------------------------------------------------------------------------------------ Withdrawal Charge None 4 Years 8 Years 10 Years Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, (9%, 9%, 8.5% ,8%, 5%, 4%, 3%, 2%) 7%, 6%, 5%, 4%, 3%, 2%) - ------------------------------------------------------------------------------------------------------------------------------ Insurance and 1.65% 1.65% 1.25% years 1-8; 1.65% years 1-10; Distribution Charge 0.65% years 9+ 0.65% years 11+ - ------------------------------------------------------------------------------------------------------------------------------ Contract Charges Lesser of $35 or Lesser of $35 or Lesser of $35 or Lesser of $35 or 2% of Account 2% of Account 2% of Account 2% of Account Value* Value* Value* Value* - ------------------------------------------------------------------------------------------------------------------------------ Contract Credit No Yes. Effective for No Yes based on year Contracts issued on purchase payment or after June 20, received for first 6 2005. Generally, we years of contract apply a Loyalty Credit (6%, 5%, 4%, 3%, to your Annuity's 2%, 1%) Account Value at the end of your fifth contract year (i.e., on your fifth Contract Anniversary). The Loyalty Credit is equal to 2.25% of total Purchase Payments made during the first four contract years less the cumulative amount of withdrawals made (including the deduction of any CDSC amounts) through the fifth Contract Anniversary - ------------------------------------------------------------------------------------------------------------------------------ Fixed Rate Account Fixed Rates Available Fixed Rates Available Fixed Rates Available Fixed Rates (early withdrawals are (As of May 1, 2005 (As of May 1, 2005 (As of May 1, 2005 Available (As of subject to a Market currently offering currently offering currently offering May 1, 2005 Value Adjustment) durations of: durations of: durations of: currently offering 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) durations of: 1,2,3,5,7,10 years) - ------------------------------------------------------------------------------------------------------------------------------ Variable Investment All options available All options available All options available All options available Options(1) - ------------------------------------------------------------------------------------------------------------------------------
D-2 APPENDIX D AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------ XTra Credit APEXII/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit Six - ------------------------------------------------------------------------------------------------------------------------------ Standard Death Prior to age 85: The The greater of: The greater of: The greater of: Benefit greater of: purchase purchase payments purchase payments purchase payments payments less less proportional less proportional less proportional proportional withdrawals or withdrawals or withdrawals or withdrawals or account value (no account value (no account value (no account value (no MVA Applied). MVA Applied). MVA Applied) less MVA Applied). an amount equal to On or after age 85: the credits applied account value within the 12 months prior to date of death. - ------------------------------------------------------------------------------------------------------------------------------ Optional Death Enhanced Beneficiary EBP II, EBP II, EBP II, Benefits (for an Protection (EBPII) HDV, HDV, HDV, additional cost)(2) Highest Daily Value HAV, HAV, HAV, (HDV) Combo 5% Combo 5% Combo 5% Highest Account Roll-up/HAV Roll-up/HAV Roll-up/HAV Value (HAV) Combo 5% Roll-up/HAV - ------------------------------------------------------------------------------------------------------------------------------ Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, additional cost)(3) Guaranteed GMWB, GMWB, GMWB, Minimum Withdrawal GMIB, GMIB, GMIB, Benefit (GMWB), Lifetime Five Lifetime Five Lifetime Five Guaranteed Minimum Income Benefit (GMIB), Lifetime Five - ------------------------------------------------------------------------------------------------------------------------------ Annuity Rewards(4) Not Available Available after initial Available after initial Available after initial withdrawal period withdrawal period withdrawal period - ------------------------------------------------------------------------------------------------------------------------------
Hypothetical Illustration - ------------------------- The following examples outline the value of each annuity as well as the amount that would be available to an investor as a result of full surrender at the end of each of the contract years specified. The values shown below are based on the following assumptions: An initial investment of $100,000 is made into each contract earning a gross rate of return of 0% and 6% respectively. o No subsequent deposits or withdrawals are made from the contract. o The hypothetical gross rates of return are reduced by the arithmetic average of the fees and expenses of the underlying portfolios and the charges that are deducted from the Annuity at the Separate Account level as follows5: o 1.55% based on the fees and expenses of the underlying portfolios as of December 31, 2004.1 The arithmetic average of all fund expenses are computed by adding portfolio management fees, 12b-1 fees and other expenses of all of the underlying portfolios and then dividing by the number of portfolios. For purposes of the illustrations, we do not reflect any expense reimbursements or expense waivers that might apply and are described in the prospectus fee table. o The Separate Account level charges include the Insurance Charge and Distribution Charge (as applicable). o The Annuity Value and Surrender Value are further reduced by the annual maintenance fee. For XTra Credit SIX, Stagecoach XTra Credit SIX, APEX II, and Stagecoach APEX II, the Annuity Value and Surrender Value also reflect the addition of any applicable bonus credits. D-3 APPENDIX D AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Appendix D -- Selecting the Variable Annuity That's Right for You continued - -------------------------------------------------------------------------------- The Annuity Value displays the current account value assuming no surrender while the Surrender Value assumes a 100% surrender AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS on the day after the contract anniversary, therefore, reflecting the decrease in surrender charge where applicable. The values that you actually experience under an Annuity will be different what is depicted here if any of the assumptions we make here differ from your circumstances, however the relative values for each product reflected below will remain the same. (We will provide you with a personalized illustration upon request). Shaded cells represent the product with the highest customer Surrender Value for the contract year. Multiple shaded cells represent a tie between two or more annuities. 0% Gross Rate of Return
- --------------------------------------------------------------------------------------------------------------- XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - --------------------------------------------------------------------------------------------------------------- Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - --------------------------------------------------------------------------------------------------------------- 1 $96,791 $96,791 $96,791 $88,791 $97,184 $90,184 $102,600 $93,600 - --------------------------------------------------------------------------------------------------------------- 2 $93,683 $93,683 $93,683 $86,683 $94,447 $87,947 $ 99,308 $90,808 - --------------------------------------------------------------------------------------------------------------- 3 $90,674 $90,674 $90,674 $84,674 $91,786 $85,786 $ 96,121 $88,121 - --------------------------------------------------------------------------------------------------------------- 4 $87,761 $87,761 $87,761 $87,761 $89,199 $84,199 $ 93,034 $86,034 - --------------------------------------------------------------------------------------------------------------- 5 $84,940 $84,940 $84,940 $84,940 $86,683 $82,683 $ 90,046 $84,046 - --------------------------------------------------------------------------------------------------------------- 6 $82,208 $82,208 $84,387 $84,387 $84,238 $81,238 $ 87,153 $82,153 - --------------------------------------------------------------------------------------------------------------- 7 $79,564 $79,564 $81,673 $81,673 $81,861 $79,861 $ 84,351 $80,351 - --------------------------------------------------------------------------------------------------------------- 8 $77,003 $77,003 $79,046 $79,046 $79,549 $79,549 $ 81,638 $78,638 - --------------------------------------------------------------------------------------------------------------- 9 $74,524 $74,524 $76,501 $76,501 $77,772 $77,772 $ 79,012 $77,012 - --------------------------------------------------------------------------------------------------------------- 10 $72,123 $72,123 $74,038 $74,038 $76,034 $76,034 $ 76,469 $76,469 - --------------------------------------------------------------------------------------------------------------- 11 $69,799 $69,799 $71,653 $71,653 $74,334 $74,334 $ 74,759 $74,759 - --------------------------------------------------------------------------------------------------------------- 12 $67,548 $67,548 $69,343 $69,343 $72,671 $72,671 $ 73,087 $73,087 - --------------------------------------------------------------------------------------------------------------- 13 $65,369 $65,369 $67,107 $67,107 $71,045 $71,045 $ 71,451 $71,451 - --------------------------------------------------------------------------------------------------------------- 14 $63,259 $63,259 $64,942 $64,942 $69,454 $69,454 $ 69,852 $69,852 - --------------------------------------------------------------------------------------------------------------- 15 $61,215 $61,215 $62,845 $62,845 $67,898 $67,898 $ 68,287 $68,287 - --------------------------------------------------------------------------------------------------------------- 16 $59,237 $59,237 $60,815 $60,815 $66,376 $66,376 $ 66,756 $66,756 - --------------------------------------------------------------------------------------------------------------- 17 $57,322 $57,322 $58,850 $58,850 $64,887 $64,887 $ 65,260 $65,260 - --------------------------------------------------------------------------------------------------------------- 18 $55,467 $55,467 $56,946 $56,946 $63,431 $63,431 $ 63,795 $63,795 - --------------------------------------------------------------------------------------------------------------- 19 $53,671 $53,671 $55,104 $55,104 $62,007 $62,007 $ 62,363 $62,363 - --------------------------------------------------------------------------------------------------------------- 20 $51,933 $51,933 $53,319 $53,319 $60,614 $60,614 $ 60,963 $60,963 - --------------------------------------------------------------------------------------------------------------- 21 $50,249 $50,249 $51,592 $51,592 $59,252 $59,252 $ 59,593 $59,593 - --------------------------------------------------------------------------------------------------------------- 22 $48,619 $48,619 $49,919 $49,919 $57,919 $57,919 $ 58,253 $58,253 - --------------------------------------------------------------------------------------------------------------- 23 $47,041 $47,041 $48,299 $48,299 $56,616 $56,616 $ 56,942 $56,942 - --------------------------------------------------------------------------------------------------------------- 24 $45,512 $45,512 $46,731 $46,731 $55,341 $55,341 $ 55,660 $55,660 - --------------------------------------------------------------------------------------------------------------- 25 $44,033 $44,033 $45,213 $45,213 $54,094 $54,094 $ 54,406 $54,406 - ---------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected D-4 APPENDIX D AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - -------------------------------------------------------------------------------- 6% Gross Rate of Return
- ---------------------------------------------------------------------------------------------------------------------- XTra Credit APEX II/Stagecoach ASAP III/Stagecoach SIX/Stagecoach ASL II APEX II ASAP III XTra Credit SIX - ---------------------------------------------------------------------------------------------------------------------- Annuity Surrender Annuity Surrender Annuity Surrender Annuity Surrender Yr Value Value Value Value Value Value Value Value - ---------------------------------------------------------------------------------------------------------------------- 1 $102,635 $102,635 $102,635 $ 94,635 $103,053 $ 96,053 $108,758 $ 99,758 - ---------------------------------------------------------------------------------------------------------------------- 2 $105,340 $105,340 $105,340 $ 98,340 $106,198 $ 99,698 $111,589 $103,089 - ---------------------------------------------------------------------------------------------------------------------- 3 $108,115 $108,115 $108,115 $102,115 $109,440 $103,440 $114,495 $106,495 - ---------------------------------------------------------------------------------------------------------------------- 4 $110,964 $110,964 $110,964 $110,964 $112,781 $107,781 $117,477 $110,477 - ---------------------------------------------------------------------------------------------------------------------- 5 $113,888 $113,888 $113,888 $113,888 $116,223 $112,223 $120,537 $114,537 - ---------------------------------------------------------------------------------------------------------------------- 6 $116,890 $116,890 $119,199 $119,199 $119,771 $116,771 $123,679 $118,679 - ---------------------------------------------------------------------------------------------------------------------- 7 $119,970 $119,970 $122,340 $122,340 $123,427 $121,427 $126,903 $122,903 - ---------------------------------------------------------------------------------------------------------------------- 8 $123,131 $123,131 $125,564 $125,564 $127,195 $127,195 $130,212 $127,212 - ---------------------------------------------------------------------------------------------------------------------- 9 $126,376 $126,376 $128,872 $128,872 $131,874 $131,874 $133,608 $131,608 - ---------------------------------------------------------------------------------------------------------------------- 10 $129,706 $129,706 $132,268 $132,268 $136,725 $136,725 $137,094 $137,094 - ---------------------------------------------------------------------------------------------------------------------- 11 $133,124 $133,124 $135,754 $135,754 $141,755 $141,755 $142,102 $142,102 - ---------------------------------------------------------------------------------------------------------------------- 12 $136,632 $136,632 $139,331 $139,331 $146,970 $146,970 $147,294 $147,294 - ---------------------------------------------------------------------------------------------------------------------- 13 $140,232 $140,232 $143,003 $143,003 $152,376 $152,376 $152,678 $152,678 - ---------------------------------------------------------------------------------------------------------------------- 14 $143,927 $143,927 $146,771 $146,771 $157,982 $157,982 $158,259 $158,259 - ---------------------------------------------------------------------------------------------------------------------- 15 $147,720 $147,720 $150,638 $150,638 $163,793 $163,793 $164,046 $164,046 - ---------------------------------------------------------------------------------------------------------------------- 16 $151,613 $151,613 $154,608 $154,608 $169,819 $169,819 $170,046 $170,046 - ---------------------------------------------------------------------------------------------------------------------- 17 $155,608 $155,608 $158,682 $158,682 $176,066 $176,066 $176,266 $176,266 - ---------------------------------------------------------------------------------------------------------------------- 18 $159,708 $159,708 $162,863 $162,863 $182,543 $182,543 $182,716 $182,716 - ---------------------------------------------------------------------------------------------------------------------- 19 $163,917 $163,917 $167,155 $167,155 $189,258 $189,258 $189,402 $189,402 - ---------------------------------------------------------------------------------------------------------------------- 20 $168,236 $168,236 $171,560 $171,560 $196,220 $196,220 $196,335 $196,335 - ---------------------------------------------------------------------------------------------------------------------- 21 $172,669 $172,669 $176,081 $176,081 $203,438 $203,438 $203,522 $203,522 - ---------------------------------------------------------------------------------------------------------------------- 22 $177,219 $177,219 $180,720 $180,720 $210,922 $210,922 $210,974 $210,974 - ---------------------------------------------------------------------------------------------------------------------- 23 $181,889 $181,889 $185,483 $185,483 $218,681 $218,681 $218,700 $218,700 - ---------------------------------------------------------------------------------------------------------------------- 24 $186,682 $186,682 $190,370 $190,370 $226,726 $226,726 $226,710 $226,710 - ---------------------------------------------------------------------------------------------------------------------- 25 $191,601 $191,601 $195,387 $195,387 $235,066 $235,066 $235,015 $235,015 - ----------------------------------------------------------------------------------------------------------------------
Assumptions: 1. $100,000 initial investment 2. Fund Expenses = 1.55% 3. No optional death benefits or living benefits elected * Contract charges are waived for account values greater than $100,000. 1) If you are purchasing your Annuity through an Investment Professional that is associated with Wells Fargo, your variable investment option choices are different than those that are offered through other broker-dealers. In addition, due to the differences in the variable investment option choices, the expenses for the underlying portfolios that are available under the "Stagecoach" products are slightly lower and if those expenses were reflected, the values illustrated would be slightly higher. 2) For more information on these benefits, refer to the "Death Benefit" section in the Prospectus. 3) For more information on these benefits, refer to the "Living Benefit Programs" section in the Prospectus. 4) The Annuity Rewards benefit offers Owners an ability to increase the guaranteed death benefit so that the death benefit will at least equal the Annuity's account value on the effective date of the Annuity Rewards benefits, if the terms of the Annuity Rewards benefit are met. 5) These reductions result in hypothetical net rates of return corresponding to the 0% and 6% gross rates of return, respectively as follows: ASLII -1.55% and 4.36%; APEX II and Stagecoach APEX II -3.17% and 2.64%; ASAP III and Stagecoach ASAP III -2.78% and 3.05% in years 1-8 and -2.19% and 3.68% in years 9+, XTra Credit SIX and Stagecoach XTra Credit SIX -3.17% and 2.64% in years 1-10 and -2.19% and 3.68% in years 11+. D-5 - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVXT-SIX-PROS (06/2005). -------------------------------------- (print your name) -------------------------------------- (address) -------------------------------------- (city/state/zip code) NOTES NOTES NOTES NOTES - -------------------------------------------------------------------------------- Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED A Prudential Financial Company A Prudential Financial Company One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-680-8920 Telephone: 203-926-1888 http://www.americanskandia.prudential.com http://www.americanskandia.prudential.com
MAILING ADDRESSES: ------------------ AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity P.O. Box 7960 Philadelphia, PA 19176 EXPRESS MAIL: AMERICAN SKANDIA -- VARIABLE ANNUITIES Attention: Stagecoach Annuity 2101 Welsh Road Dresher, PA 19025 Supplement dated December 5, 2005 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia Advisor Plan III, Stagecoach Advisor Plan III, American Skandia XTra Credit SIX, Stagecoach XTra Credit SIX, American Skandia LifeVest(R) II, American Skandia APEX II, Stagecoach APEX II, Advisors Choice (R)/2000/, American Skandia Variable Adjustable Immediate Annuity, and American Skandia Variable Immediate Annuity, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable or immediate annuity you own, and is not intended to be a prospectus or offer for any other variable or immediate annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST") and to announce five additional AST portfolios (the "AST Asset Allocation Portfolios") that are being offered as new variable investment options under each of the above-referenced products. We are announcing the closure of the asset allocation programs offered in each of the above-referenced products. All of these changes apply to each Prospectus and will be effective on or about December 5, 2005, unless specifically stated otherwise. 1. PORTFOLIO MERGERS The Trustees of AST and shareholders have approved these mergers to be effective as of December 5, 2005: The AST Alger All-Cap Growth Portfolio has merged into the AST Neuberger Berman Mid-Cap Growth Portfolio. As a result of the merger, the AST Alger All-Cap Growth Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST Neuberger Berman Mid-Cap Growth Portfolio remain unchanged. The AST AllianceBernstein Growth + Value Portfolio merged into the AST AllianceBernstein Managed Index 500 Portfolio. As a result of the merger, the AST AllianceBernstein Growth + Value Portfolio has ceased operations and will no longer be offered as an investment option. The investment objective and investment policies of the AST AllianceBernstein Managed Index 500 Portfolio remain unchanged. The following information for the successor portfolios replaces the information previously indicated for these portfolios under the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust" to reflect estimates of what the expenses of the portfolio will be as a result of the mergers:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------------------- Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Neuberger Berman Mid-Cap Growth/1/ 0.90% 0.18% None 1.08% AST AllianceBernstein Managed Index 500/2/ 0.60% 0.16% None 0.76%
- -------- 1 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST Neuberger Berman Mid-Cap Growth Portfolio prior to the Merger were as follows: Management Fee: 0.90%; 12b-1 Fee: None; Other Expenses: 0.22%; Total Annual Portfolio Operating Expenses: 1.12%. 2 Other Expenses are based in part on estimated amounts for the current fiscal year. The annual expenses of the AST AllianceBernstein Managed Index 500 Portfolio prior to the Merger were as follows: Management Fee: 0.60%; 12b-1 Fee: None; Other Expenses: 0.17%; Total Annual Portfolio Operating Expenses: 0.77%. 2. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST and, where necessary, shareholders have approved the following sub-advisor and portfolio name changes to be effective as of December 5, 2005: AST Gabelli All-Cap Value Portfolio EARNEST Partners LLC and Wedge Capital Management, LLP replaced GAMCO Investors, Inc. as Sub-advisors to the AST Gabelli All-Cap Value Portfolio. As a result, the Portfolio's name has changed to the AST Mid-Cap Value Portfolio. Under normal circumstances, the Portfolio will now invest at least 80% of the value its net assets in mid-capitalization companies. AST AllianceBernstein Large-Cap Growth Portfolio T. Rowe Price Associates, Inc. replaced Alliance Capital Management as Sub-advisor to the AST AllianceBernstein Large-Cap Growth Portfolio. As a result, the Portfolio's name has changed to the AST T. Rowe Price Large-Cap Growth Portfolio. AST Hotchkis & Wiley Large-Cap Value Portfolio J.P. Morgan Investment Management, Inc. has been added as a Sub-advisor to the AST Hotchkis & Wiley Large-Cap Value Portfolio and will manage a portion of the Portfolio. Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST Large-Cap Value Portfolio. AST Small-Cap Value Portfolio Salomon Brothers Asset Management Inc. has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. Each of Integrity Asset Management, J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Money Market Portfolio Prudential Investment Management, Inc. replaced Wells Capital Management, Inc. as Sub-advisor to the AST Money Market Portfolio. The name of the Portfolio remains unchanged. As a result of the above sub-advisor, investment objective/policies and name changes, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR ------ -------------------------------------------- ------------------- Mid Cap AST Mid-Cap Value (formerly AST Gabelli EARNEST Partners Value All-Cap Value): seeks to provide capital LLC/Wedge Capital growth by investing primarily in Management, LLP mid-capitalization stocks that appear to be undervalued. The Portfolio has a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its net assets in mid-capitalization companies. Large Cap AST T. Rowe Price Large-Cap Growth (formerly T. Rowe Price Growth AST AllianceBernstein Large-Cap Growth): Associates, Inc. seeks long-term growth of capital by investing predominantly in the equity securities of a limited number of large, carefully selected, high-quality U.S. companies that are judged likely to achieve superior earnings growth. The Portfolio takes a growth approach to investment selection and normally invests at least 80% of its net assets in the common stocks of large cap companies. Large Cap AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Value Wiley Large-Cap Value): seeks current income Capital Management, and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc. its net assets in common stocks of large-cap U.S. companies. The Portfolio focuses on common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small Cap AST Small-Cap Value: seeks to provide Integrity Asset Value long-term capital growth by investing Management; Lee primarily in small-capitalization stocks Munder Investments, that appear to be undervalued. The Portfolio Ltd; J.P. Morgan has a non-fundamental policy to invest, Investment under normal circumstances, at least 80% of Management, Inc.; the value of its net assets in Salomon Brothers small-capitalization stocks. The Portfolio Asset Management will focus on common stocks that appear to Inc. be undervalued. Fixed Income AST Money Market: seeks high current income Prudential while maintaining high levels of liquidity. Investment The Portfolio attempts to accomplish its Management, Inc. objective by maintaining a dollar-weighted average maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. 2 Effective January 1, 2006, The Prudential Series Fund, Inc. will be reorganized as a Delaware statutory trust which will be named The Prudential Series Fund. Effective January 1, 2006, all references to The Prudential Series Fund, Inc. within each Prospectus shall be deemed to refer to The Prudential Series Fund. 3. AST ASSET ALLOCATION PORTFOLIOS Effective December 5, 2005, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", the following information is added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) ------------------------------------------------ Total Annual Management Other Portfolio Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses - -------------------- ---------- -------- ---------- ------------------- AST Aggressive Asset Allocation /1/,/2/ 1.04% 0.26% None 1.30% AST Capital Growth Asset Allocation /1/,/2/ 0.99% 0.25% None 1.24% AST Balanced Asset Allocation /1/,/2/ 0.95% 0.24% None 1.19% AST Conservative Asset Allocation /1/,/2/ 0.93% 0.23% None 1.16% AST Preservation Asset Allocation /1/,/2/ 0.88% 0.22% None 1.10%
- -------- 1. Management Fees are based in part on estimated amounts for the current fiscal year. Each Asset Allocation Portfolio invests primarily in shares of one or more Underlying Portfolios. The only management fee directly paid by an Asset Allocation Portfolio is a 0.15% fee paid to the Investment Managers. The management fee shown in the chart for each Asset Allocation Portfolio is (i) the 0.15% management fee to be paid by the Asset Allocation Portfolios to the Investment Managers plus (ii) a weighted average estimate of the management fees to be paid by the Underlying Portfolios to the Investment Managers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the management fees to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocations for the applicable Asset Allocation Portfolio and the management fee rates for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolios. The management fees paid by an Asset Allocation Portfolio may be greater or less than those indicated above. 2. Other Expenses are based in part on estimated amounts for the current fiscal year. The other expenses shown in the chart for each Asset Allocation Portfolio include: (i) the other expenses expected to be paid by the Asset Allocation Portfolio to the Investment Managers and other service providers plus (ii) a weighted average estimate of the other expenses to be paid by the Underlying Portfolios to the Investment Managers and other service providers, which are borne indirectly by investors in the Asset Allocation Portfolio. Each weighted average estimate of the other expenses to be paid by the Underlying Portfolios is based on the expected initial Underlying Portfolio allocation for the applicable Asset Allocation Portfolio and the annual operating expense ratios for the Underlying Portfolios as set forth in the current Prospectus for the Underlying Portfolio. The other expenses paid by an Asset Allocation Portfolio may be greater or less than those indicated above. A description of the types of costs that are included as other expenses for the Underlying Portfolios is set forth under the caption "Management of the Trust - Other Expenses" in the Underlying Portfolio Prospectus. B. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Aggressive Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 92.5% to 100% of its net assets to underlying portfolios investing primarily in equity securities, and 0% to 7.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Capital Growth Asset Allocation American Skandia Allocation/ Portfolio: seeks the highest potential total Investment Balanced return consistent with its specified level Services, Inc./ of risk tolerance. The Portfolio will invest Prudential its assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 72.5% to 87.5% of its net assets to underlying portfolios investing primarily in equity securities, and 12.5% to 27.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 3 PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- -------------------- Asset AST Balanced Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in equity securities, and 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Conservative Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 47.5% to 62.5% of its net assets to underlying portfolios investing primarily in equity securities, and 37.5% to 52.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. Asset AST Preservation Asset Allocation Portfolio: American Skandia Allocation/ seeks the highest potential total return Investment Balanced consistent with its specified level of risk Services, Inc./ tolerance. The Portfolio will invest its Prudential assets in several other American Skandia Investments LLC Trust Portfolios. Under normal market conditions, the Portfolio will devote between 27.5% to 42.5% of its net assets to underlying portfolios investing primarily in equity securities, and 57.5% to 72.5% of its net assets to underlying portfolios investing primarily in debt securities and money market instruments. 4. CLOSURE OF ASSET ALLOCATION PROGRAMS Effective December 5, 2005, the asset allocation programs that had been made available for use with your Annuity are being closed for new enrollments. As a result, in order to reflect the closure of the programs, the following changes are made to each Prospectus: A. The first paragraph in the section of the Prospectus entitled "Managing Your Account Value", under the sub-section "Are Any Asset Allocation Programs Available?" is replaced with the following: ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE? We currently do not offer any asset allocation programs for use with your Annuity. Prior to December 5, 2005, we made certain asset allocation programs available. If you enrolled in one of the asset allocation programs prior to December 5, 2005, see the Appendix entitled "Additional Information on the Asset Allocation Programs" for more information on how the programs are administered. B. The Appendix entitled "Additional Information on Asset Allocation Programs" is revised to reflect the following changes to the Program Rules for those contract owners that choose to remain in their asset allocation program after December 5, 2005: . The asset allocation program will only perform the function of periodic rebalancing of your Account Value allocated to the variable Sub-accounts in accordance with the percentage allocations for the model portfolio you previously chose. . You will not be permitted to change from one model portfolio to another. Depending on what asset allocation program you had enrolled in, you may be permitted to transfer Account Value among the currently available sub-accounts that are part of the model (e.g., from one large-cap growth sub-account to another large-cap growth sub-account). . If you terminate your asset allocation program, you will not be permitted to re-enroll in the program. If you are enrolled in the Highest Daily Value Death Benefit ("HDV") or the Lifetime Five Income Benefit ("LT5"), or with respect to the American Skandia Variable Adjustable Immediate Annuity you have elected the Guarantee feature, termination of your asset allocation program must coincide with (i) the enrollment in a then currently available and approved asset allocation program or other approved option; or (ii) the allocation of your entire Account Value (or Income Base with respect to the American Skandia Variable Adjustable Immediate Annuity) to the then required investment option(s) available with these benefits or feature. 4 C. In each Prospectus, with the exception of the American Skandia Variable Immediate Annuity and the American Skandia Variable Adjustable Immediate Annuity, the following revisions are made: (i) In the section entitled "Living Benefit Programs", under the sub-section "Lifetime Five Income Benefit (Lifetime Five)": . the last two sentences in the box are replaced with the following: As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. . under the heading "Other Important Considerations", the fourth bullet is replaced with the following: You must allocate your Account Value in accordance with the then permitted and available option(s) with this program in order to elect and maintain the Lifetime Five program. (ii) In the section entitled "Death Benefit", under the sub-section "Highest Daily Value Death Benefit ("HDV")", the second paragraph within the first box is replaced with the following: If you elect this benefit, you must allocate your Account Value in accordance with the then permitted and available option(s) with this benefit. Because this benefit, once elected, may not be terminated you must keep your Account Value allocated to a permitted option throughout the life of the Annuity. D. In the Prospectus for the American Skandia Variable Adjustable Immediate Annuity, the sub-section entitled "Am I Required to Participate in an Asset Allocation Program?" under the section entitled "Managing Your Annuity", is replaced with the following: Am I Required to Participate in an Asset Allocation Program? If you purchased your Annuity prior to December 5, 2005 and chose the Optional Guarantee Feature, your Net Premium (plus any applicable Credit) was required to be allocated in accordance with an asset allocation model, and your Income Base also had to be allocated in accordance with such model. If you purchase your Annuity on or after December 5, 2005 and you choose the Optional Guarantee Feature, you must allocate your Net Premium/Income Base in accordance with the then permitted and available investment option(s) with this feature. 5. OTHER MATTERS A. In the Prospectus for the American Skandia LifeVest(R) II Annuity, in the section entitled "Summary of Contract Fees and Charges" in the table under the sub-section "Your Optional Benefit Fees and Charges", under the heading "Highest Daily Value Death Benefit ("HDV")", the Total Annual Charge in the third column is replaced and corrected as follows: HIGHEST DAILY VALUE DEATH BENEFIT ("HDV") ** 0.50% of average 2.15% We offer an Optional Death Benefit that provides an daily net assets of enhanced level of protection for your the Sub-accounts beneficiary(ies) by providing a death benefit equal to the greater of the basic Death Benefit and the Highest Daily Value, less proportional withdrawals. B. In the Prospectus for the American Skandia Xtra Credit SIX Annuity, in the section entitled "Managing Your Account Value", sub-section "May I Give My Investment Professional Permission To Manage My Account Value?", the first two sentences are replaced and corrected as follows: Yes. Your Investment Professional may direct the allocation of your Account Value and request financial transactions between investment options while you are living, subject to our rules and unless you tell us otherwise. 5 Supplement to Prospectus Dated May 2, 2005 Supplement dated March 20, 2006 Supplement dated March 20, 2006 to the May 2, 2005 Prospectuses for the following annuity products: American Skandia XTra Credit SIX and Stagecoach XTra Credit SIX, as previously supplemented (the "Prospectuses"). This Supplement should be read and retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). This Supplement is intended to update certain information in the Prospectus for the variable annuity you own, and is not intended to be a prospectus or offer for any other variable annuity listed here that you do not own. If you would like another copy of the current Prospectus, please contact American Skandia at 1-800-752-6342. We are issuing this supplement to describe certain changes to the above-referenced Prospectuses, including changes made with respect to certain portfolios of American Skandia Trust ("AST"), the addition of three AST portfolios that are being offered as new variable investment options and a new living benefit. All of these changes apply to each Prospectus and will be effective on or about March 20, 2006, unless specifically stated otherwise. 1. SUB-ADVISOR and PORTFOLIO NAME CHANGES The Trustees of AST have approved the following sub-advisor and portfolio name changes to be effective as of March 20, 2006: AST Goldman Sachs High Yield Portfolio Pacific Investment Management Company LLC has been added as a Sub-advisor to the AST Goldman Sachs High Yield Portfolio and will manage a portion of the Portfolio. Goldman Sachs Asset Management, L.P. will continue to manage a portion of the Portfolio. As a result, the Portfolio's name has changed to the AST High Yield Portfolio. AST Large-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Large-Cap Value Portfolio and will manage a portion of the Portfolio. Both J.P. Morgan Investment Management, Inc. and Hotchkis & Wiley Capital Management, LLC will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. AST Small-Cap Value Portfolio Dreman Value Management LLC has been added as a Sub-advisor to the AST Small-Cap Value Portfolio and will manage a portion of the Portfolio. In addition, Integrity Asset Management will no longer be a Sub-advisor to the Portfolio. Each of Salomon Brothers Asset Management Inc., J.P. Morgan Investment Management, Inc., and Lee Munder Investments, Ltd. will continue to manage a portion of the Portfolio. The name of the Portfolio remains unchanged. As a result, the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?" is revised as follows: Investment Options WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? STYLE/ PORTFOLIO ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- ------------------- Fixed Income AST High Yield (formerly AST Goldman Sachs Goldman Sachs Asset High Yield): seeks a high level of current Management, L.P.; income and may also consider the potential Pacific Investment for capital appreciation. The Portfolio Management Company invests, under normal circumstances, at LLC (PIMCO) least 80% of its net assets plus any borrowings for investment purposes (measured at time of purchase) in high yield, fixed-income securities that, at the time of purchase, are non-investment grade securities. Large Cap AST Large-Cap Value (formerly AST Hotchkis & Hotchkis & Wiley Value Wiley Large-Cap Value): seeks current income Capital Management, and long-term growth of income, as well as LLC; J.P. Morgan capital appreciation. The Portfolio invests, Investment under normal circumstances, at least 80% of Management, Inc.; its net assets in common stocks of large-cap Dreman Value U.S. companies. The Portfolio focuses on Management LLC common stocks that have a high cash dividend or payout yield relative to the market or that possess relative value within sectors. Small Cap AST Small-Cap Value: seeks to provide Lee Munder Value long-term capital growth by investing Investments, Ltd; primarily in small- capitalization stocks J.P. Morgan that appear to be undervalued. The Portfolio Investment has a non-fundamental policy to invest, Management, Inc.; under normal circumstances, at least 80% of Salomon Brothers the value of its net assets in Asset Management small-capitalization stocks. The Portfolio Inc.; Dreman Value will focus on common stocks that appear to Management LLC be undervalued. 2. NEW SUB-ACCOUNTS Effective March 20, 2006, the underlying portfolios listed below are being offered as new Sub-accounts under your Annuity. In order to reflect these additions: A. The following is being added to the chart in each Prospectus in the section entitled "Investment Options/What are the Investment Objectives and Policies of the Portfolios?": STYLE/ PORTFOLIO ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------ -------------------------------------------- ------------------- Asset AST First Trust Balanced Target: seeks First Trust Allocation/ long-term capital growth balanced by current Advisors L.P. Balanced income. The portfolio normally invests approximately 65% of its total assets in equity securities and 35% in fixed income securities. Depending on market conditions, the equity portion may range between 60-70% and the fixed income portion between 30-40%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST First Trust Capital Appreciation Target: First Trust Allocation/ seeks long-term growth of capital. The Advisors L.P. Balanced portfolio normally invests approximately 80% of its total assets in equity securities and 20% in fixed income securities. Depending on market conditions, the equity portion may range between 75-85% and the fixed income portion between 15-25%. The Portfolio allocates its assets across a number of uniquely specialized quantitative investment strategies. Asset AST Advanced Strategies: seeks a high level Marsico Capital Allocation/ of absolute return. The Portfolio invests Management, LLC; T. Balanced primarily in a diversified portfolio of Rowe Price equity and fixed income securities across Associates, Inc.; different investment categories and LSV Asset investment managers. The Portfolio pursues a Management; William combination of traditional and Blair & Company, non-traditional investment strategies. L.L.C.; Pacific Investment Management Company LLC (PIMCO); B. In the section of each Prospectus entitled "Summary of Contract Fees and Charges", sub-section "Underlying Mutual Fund Portfolio Annual Expenses", under the heading "American Skandia Trust", following portfolios have been added:
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - ----------------------------------------------------------------------------------------------- Total Annual UNDERLYING PORTFOLIO Management Other Portfolio Operating American Skandia Trust: Fees Expenses 12b-1 Fees Expenses - ----------------------- ---------- -------- ---------- ------------------- AST First Trust Balanced Target 0.85% 0.19% None 1.04% AST First Trust Capital Appreciation Target 0.85% 0.19% None 1.04% AST Advanced Strategies 0.85% 0.18% None 1.03%
2 3. NEW INSURANCE FEATURE We are adding the Spousal Lifetime Five(SM) Income Benefit ("Spousal Lifetime Five"), that guarantees until the later death of two designated lives the ability to withdraw an annual amount of an initial principal value regardless of market-based declines in account value. As a result, the following revisions are made to the Prospectus: A. The following information has been added to "YOUR OPTIONAL BENEFIT FEES AND CHARGES" table in the "Summary of Contract Fees and Charges" section of the Prospectus:
OPTIONAL BENEFIT FEE/ TOTAL ANNUAL CHARGE CHARGE ------------------- ------------------- SPOUSAL LIFETIME FIVE INCOME BENEFIT* We offer a program that guarantees until the 0.75% of average 2.40% in Annuity later death of two Designated Lives (as defined daily net assets of Years 1-10; 1.40% in this Prospectus) the ability to withdraw an the Sub-accounts in Annuity Years 11 annual amount equal to 5% of an initial principal and later value regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals.
- -------- * This optional benefit is not available under the Qualified BCO. B. The Spousal Lifetime Five program is not available if you elect any other optional living or optional death benefit, therefore all references in the Prospectus that reflect the availability of the optional living benefits are revised accordingly. C. The following description of the new optional living benefit is added as the last section under "Living Benefit Programs" in the Prospectus: SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE) The Spousal Lifetime Five program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Currently, if you elect Spousal Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Spousal Lifetime Five and Lifetime Five. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Spousal Lifetime Five must be elected based on two Designated Lives, as described below. Each Designated Life must be at least 55 years old when the benefit is elected. The Spousal Lifetime Five program is not available if you elect any other optional living benefit or Death Benefit. As long as your Spousal Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. We offer a program that guarantees until the later death of two natural persons that are each other's spouses at the time of election of Spousal Lifetime Five and at the first death of one of them (the "Designated Lives", each a "Designated Life") the ability to withdraw an annual amount ("Spousal Life Income Benefit") equal to a percentage of an initial principal value (the "Protected Withdrawal Value") regardless of the impact of market performance on the Account Value, subject to our program rules regarding the timing and amount of withdrawals. The Spousal Life Income Benefit may remain in effect even if the Account Value of the Annuity is zero. The program may be appropriate if you intend to make periodic withdrawals from your Annuity, wish to ensure that market performance will not affect your ability to receive annual payments and wish either spouse to be able to continue the Spousal Life Income Benefit after the death of the first. You are not required to make withdrawals as part of the program -- the guarantees are not lost if you withdraw less than the maximum allowable amount each year under the rules of the program. KEY FEATURE -- Initial Protected Withdrawal Value The initial Protected Withdrawal Value is used to determine the amount of initial annual payment under the Spousal Life Income Benefit. The initial Protected Withdrawal Value is determined as of the date you make your first withdrawal under the Annuity following your election of Spousal Lifetime Five. The initial Protected Withdrawal Value is equal to the greater of (A) the Account Value on the date you elect Spousal Lifetime Five, plus any additional Purchase Payments growing at 5% per year from the date of your election of the program, (or application of the Purchase Payment if later) to your Annuity, as applicable, until the date of your first withdrawal or the 10th anniversary of the benefit effective date, if earlier (B) the Account Value as of the date of the first withdrawal from your Annuity, prior to the withdrawal, and (C) the highest Account Value on each Annuity anniversary prior to the first withdrawal or on the first 10 Annuity anniversaries if earlier than the date of your first withdrawal after the benefit effective date. With respect to (A) and (C) above, each value is increased by the amount of any subsequent Purchase Payments. Credits are added to Purchase Payments for purposes of calculating Protected Withdrawal Value and the Annual Income Amount (see below for a description of Annual Income Amount). 3 . If you elect the Spousal Lifetime Five program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. . For existing Owners who are electing the Spousal Lifetime Five benefit, the Account Value on the date of your election of the Spousal Lifetime Five program will be used to determine the initial Protected Withdrawal Value. KEY FEATURE -- Annual Income Amount under the Spousal Life Income Benefit The initial Annual Income Amount is equal to 5% of the initial Protected Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in the Annuity Year. If your cumulative withdrawals are in excess of the Annual Income Amount ("Excess Income"), your Annual Income Amount in subsequent years will be reduced (except with regard to required minimum distributions) by the result of the ratio of the Excess Income to the Account Value immediately prior to such withdrawal (see examples of this calculation below). Reductions include the actual amount of the withdrawal, including any CDSC that may apply. You may elect to step-up your Annual Income Amount if, due to positive market performance, 5% of your Account Value is greater than the Annual Income Amount. You are eligible to step-up the Annual Income Amount on or after the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program. The Annual Income Amount can be stepped up again on or after the 3rd anniversary of the preceding step-up. If you elect to step-up the Annual Income Amount under the program, and on the date you elect to step-up, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such step-up. When you elect a step-up, your Annual Income Amount increases to equal 5% of your Account Value after the step-up. Your Annual Income Amount also increases if you make additional Purchase Payments. The amount of the increase is equal to 5% of any additional Purchase Payments. Any increase will be added to your Annual Income Amount beginning on the day that the step-up is effective or the Purchase Payment is made. A determination of whether you have exceeded your Annual Income Amount is made at the time of each withdrawal; therefore a subsequent increase in the Annual Income Amount will not offset the effect of a withdrawal that exceeded the Annual Income Amount at the time the withdrawal was made. We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Spousal Lifetime Five or after you have elected Spousal Lifetime Five. If, on the date that we implement an auto step-up to your Annual Income Amount, the charges under the Spousal Lifetime Five program have changed for new purchasers, your program may be subject to the new charge at the time of such auto step-up. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary on or next following the 3rd anniversary of the first withdrawal under the Spousal Lifetime Five program, and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is affected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. The Spousal Lifetime Five program does not affect your ability to make withdrawals under your Annuity or limit your ability to request withdrawals that exceed the Annual Income Amount. Under Spousal Lifetime Five, if your cumulative withdrawals in an Annuity Year are less than or equal to the Annual Income Amount, they will not reduce your Annual Income Amount in subsequent Annuity Years, but any such withdrawals will reduce the Annual Income Amount on a dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw an amount less than the Annual Income Amount under the Spousal Life Income Benefit in any Annuity Year, you cannot carry-over the unused portion of the Annual Income Amount to subsequent Annuity Years. The following examples of dollar-for-dollar and proportional reductions and the step-up of the Annual Income Amount assume: 1.) the Issue Date and the Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.) an initial Purchase Payment of $250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.) the first withdrawal occurs on March 1, 2006 when the Account Value is equal to $263,000; and 5.) the Account Value on March 1, 2009 is equal to $280,000. The values set forth here are purely hypothetical, and do not reflect the charge for the Spousal Lifetime Five. The initial Protected Withdrawal Value is calculated as the greatest of (a), (b) and (c): (a) Purchase payment accumulated at 5% per year from February 1, 2005 until March 1, 2006 (393 days) = $250,000 X 1.05 (393/365) = $263,484.33 (b) Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000 (c) Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000 Therefore, the initial Protected Withdrawal Value is equal to $265,000. The Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit (5% of $265,000). 4 Example 1. Dollar-for-dollar reduction If $10,000 was withdrawn (less than the Annual Income Amount) on March 1, 2006, then the following values would result: . Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000 = $3,250 Annual Income Amount for future Annuity Years remains at $13,250 Example 2. Dollar-for-dollar and proportional reductions (a) If $15,000 was withdrawn (more than the Annual Income Amount) on March 1, 2006, then the following values would result: . Remaining Annual Income Amount for current Annuity Year = $0 Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750) reduces Annual Income Amount for future Annuity Years. . Reduction to Annual Income Amount = Excess Income/Account Value before Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X $ 13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157 Example 3. Step-up of the Annual Income Amount If a step-up of the Annual Income Amount is requested on March 1, 2009, the request will be accepted because 5% of the Account Value, which is $14,000 (5% of $280,000), is greater than the Annual Income Amount of $13,250. The new Annual Income Amount will be equal to $14,000. BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM . To the extent that your Account Value was reduced to zero as a result of cumulative withdrawals that are equal to or less than the Annual Income Amount and amounts are still payable under the Spousal Life Income Benefit, we will make an additional payment for that Annuity Year equal to the remaining Annual Income Amount for the Annuity Year, if any. Thus, in that scenario, the remaining Annual Income Amount would be payable even though your Account Value was reduced to zero. In subsequent Annuity Years we make payments that equal the Annual Income Amount as described in this Prospectus. No further Purchase Payments will be accepted under your Annuity. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. To the extent that cumulative withdrawals in the current Annuity Year that reduced your Account Value to zero are more than the Annual Income Amount, the Spousal Life Income Benefit terminates and no additional payments will be made. . If annuity payments are to begin under the terms of your Annuity or if you decide to begin receiving annuity payments and there is any Annual Income Amount due in subsequent Annuity Years, you can elect one of the following two options: (1) apply your Account Value to any annuity option available; or (2) request that, as of the date annuity payments are to begin, we make annuity payments each year equal to the Annual Income Amount. We will make payments until the first of the Designated Lives to die, and will continue to make payments until the death of the second Designated Life as long as the Designated Lives were spouses at the time of the first death. We must receive your request in a form acceptable to us at our office. . In the absence of an election when mandatory annuity payments are to begin, we will make annual annuity payments as a joint and survivor or single (as applicable) life fixed annuity with five payments certain using the same basis that is used to calculate the greater of the annuity rates then currently available or the annuity rates guaranteed in your Annuity. The amount that will be applied to provide such annuity payments will be the greater of: (1) the present value of future Annual Income Amount payments. Such present value will be calculated using the same basis that is used to calculate the single life fixed annuity rates then currently available or the single life fixed annuity rates guaranteed in your Annuity; and (2) the Account Value. . If no withdrawal was ever taken, we will determine an initial Protected Withdrawal Value and calculate an Annual Income Amount as if you made your first withdrawal on the date the annuity payments are to begin. Other Important Considerations . Withdrawals under the Spousal Lifetime Five program are subject to all of the terms and conditions of the Annuity, including any CDSC. . Withdrawals made while the Spousal Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other withdrawals under the Annuity. The Spousal Lifetime Five program does not directly affect the Annuity's Account Value or Surrender Value, but any withdrawal will decrease the Account Value by the amount of the withdrawal (plus any applicable CDSC). If you surrender your Annuity, you will receive the current Surrender Value. 5 . You can make withdrawals from your Annuity while your Account Value is greater than zero without purchasing the Spousal Lifetime Five program. The Spousal Lifetime Five program provides a guarantee that if your Account Value declines due to market performance, you will be able to receive your Annual Income Amount in the form of periodic benefit payments. . You must allocate your Account Value in accordance with the then available option(s) that we may permit in order to elect and maintain the Spousal Lifetime Five program. . There may be circumstances where you will continue to be charged the full amount for the Spousal Lifetime Five program even when the benefit is only providing a guarantee of income based on one life with no survivorship. . In order for the Surviving Designated Life to continue the Spousal Lifetime Five program upon the death of an owner, the Designated Life must elect to assume ownership of the Annuity under the spousal continuation option. See "Spousal Owners/Spousal Beneficiaries", "Spousal Beneficiary -- Assumption of Annuity" and "Qualified Beneficiary Continuation Option" in this Prospectus. Election of and Designations under the Program Spousal Lifetime Five can only be elected based on two Designated Lives. Designated Lives must be natural persons who are each other's spouses at the time of election of the program and at the death of the first of the Designated Lives to die. Currently, the program may only be elected where the Owner, Annuitant and Beneficiary designations are as follows: . One Annuity Owner, where the Annuitant and the Owner are the same person and the beneficiary is the Owner's spouse. The Owner/Annuitant and the beneficiary each must be at least 55 years old at the time of election; or . Co-Annuity Owners, where the Owners are each other's spouses. The Beneficiary designation must be the surviving spouse. The first named Owner must be the Annuitant. Both Owners must each be 55 years old at the time of election. No Ownership changes or Annuitant changes will be permitted once this program is elected. However, if the Annuity is co-owned, the Owner that is not the Annuitant may be removed without affecting the benefit. The Spousal Lifetime Five program can be elected at the time that you purchase your Annuity. We also offer existing Owners the option to elect the Spousal Lifetime Five program after the Issue Date of their Annuity, subject to our eligibility rules and restrictions. Your Account Value as the date of election will be used as a basis to calculate the initial Protected Withdrawal Value and the Annual Income Amount. Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. We reserve the right to further limit the election frequency in the future. Before making any such change to the election frequency, we will provide prior notice to Owners who have an effective Spousal Lifetime Five Income Benefit. Termination of the Program The program terminates automatically when your Annual Income Amount equals zero. You may terminate the program at any time by notifying us. If you terminate the program, any guarantee provided by the benefit will terminate as of the date the termination is effective and certain restrictions on re-election of the benefit will apply as described above. We reserve the right to further limit the frequency election in the future. The program terminates upon your surrender of the Annuity, upon the first Designated Life to die if the Annuity is not continued, upon the second Designated Life to die or upon your election to begin receiving annuity payments. The charge for the Spousal Lifetime Five program will no longer be deducted from your Account Value upon termination of the program. Additional Tax Considerations for Qualified Contracts If you purchase an Annuity as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA or Tax Sheltered Annuity (or 403(b)), the minimum distribution rules under the Code require that you begin receiving periodic amounts from your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity, this required beginning date can generally be deferred to after retirement, if later. Roth IRAs are not subject to these rules during the Owner's lifetime. The amount required under the Code may exceed the Annual Income Amount, which will cause us to increase the Annual Income Amount in any Annuity Year that required minimum distributions due from your Annuity are greater than such amounts. In addition, the amount and duration of payments under the annuity payment and Death Benefit provisions may be adjusted so that the payments do not trigger any penalty or excise taxes due to tax considerations such as minimum distribution requirements. 6 4. LIFETIME FIVE INCOME BENEFIT In order to reflect certain administrative changes to the Lifetime Five Income Benefit, the box in the section of the prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), is replaced with: The Lifetime Five Income Benefit program described below is only being offered in those jurisdictions where we have received regulatory approval and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. Lifetime Five can be elected only where the Annuitant and the Owner are the same person or, if the Annuity Owner is an entity, where there is only one Annuitant. Currently, if you elect Lifetime Five and subsequently terminate the benefit, there will be a restriction on your ability to re-elect Lifetime Five and Spousal Lifetime Five. The Annuitant must be at least 45 years old when the program is elected. The Lifetime Five Income Benefit program is not available if you elect any other optional living benefit. As long as your Lifetime Five Income Benefit is in effect, you must allocate your Account Value in accordance with the then permitted and available option(s) with this program. In the section of each Prospectus entitled "Living Benefit Programs", sub-section "Lifetime Five Income Benefit" (Lifetime Five), under the heading "Key Feature - Protected Withdrawal Value" the following information is added after the 3rd paragraph: You may elect to step-up your Protected Withdrawal Value if, due to positive market performance, your Account Value is greater than the Protected Withdrawal Value. If you elected the Lifetime Five program prior to March 20, 2006 and that original election remains in effect, then you are eligible to step-up the Protected Withdrawal Value on or after the 5th anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected prior to March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 5th anniversary following the preceding step-up. If you elected the Lifetime Five program on or after March 20, 2006, then you are eligible to step-up the Protected Withdrawal Value on or after the 3rd anniversary of the first withdrawal under the Lifetime Five program. Under Annuities with Lifetime Five elected on or after March 20, 2006, the Protected Withdrawal Value can be stepped up again on or after the 3rd anniversary following the preceding step-up. In either scenario (i.e., elections before or after March 20, 2006) if you elect to step-up the Protected Withdrawal Value under the program, and on the date you elect to step-up, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. Under the same heading "Key Feature - Protected Withdrawal Value", before the last paragraph, the following information is added: We also offer an "auto step-up" feature at no additional cost. You may elect this feature either at the time you elect Lifetime Five or after you have elected Lifetime Five. If, on the date that we implement an auto step-up to your Protected Withdrawal Value, the charges under the Lifetime Five program have changed for new purchasers, your program may be subject to the new charge going forward. We implement an auto step-up only at specific times and if Account Value has attained or exceeded a certain amount. Specifically, if you have never implemented a step-up, then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary of the first withdrawal under the Lifetime Five program (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) and can occur each Annuity anniversary thereafter. If you have implemented a step-up (whether initiated directly by you or effected under the auto step-up program), then an auto step-up can occur on the Annuity anniversary next following the 3rd anniversary (or 5th anniversary for elections of Lifetime Five made prior to March 20, 2006) of the prior step-up, and can occur each Annuity anniversary thereafter. We will effect an auto step-up only if, on the Annuity anniversary that the auto step-up is scheduled to occur, 5% of the Account Value exceeds 105% times the Annual Income Amount. Because the formula that determines when an auto step-up is effected differs from that which allows you to initiate a step-up on your own, scenarios may arise in which you may be allowed to initiate a step-up even though no auto step-up would occur. Under the heading "Election of the Program", the following information is added: Currently, if you terminate the program, you will only be permitted to re-elect the program or elect the Spousal Lifetime Five Income Benefit on any anniversary of the Issue Date that is at least 90 calendar days from the date the benefit was last terminated. If you elected Lifetime Five prior to March 20, 2006, and you terminate the program, there will be no waiting period before you can re-elect the program or elect Spousal Lifetime Five provided that you had not previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five. If you had previously elected Lifetime Five after the Issue Date and within the same Annuity Year that you terminate Lifetime Five, you will be able to re-elect the program or elect Spousal Lifetime Five on any date on or after the next anniversary of the Annuity Date. However, once you choose to re-elect/elect, the waiting period described above will apply to subsequent re-elections. We reserve the right to limit the re-election/election frequency in the future. Before making any such change to the re-election/election frequency, we will provide prior notice to Owners who have an effective Lifetime Five Income Benefit. 7 Under the heading "Termination of the Program", the following sentence was added to the end of the first paragraph: While you may terminate Lifetime Five at any time, we may not terminate the benefit other than in the circumstances listed above. However, we may stop offering the program for new elections or re-elections at any time in the future. 5. WACHOVIA SECURITIES In the section entitled "General Information", the following paragraph was added to the end of the heading entitled "Who Distributes Annuities Offered by American Skandia?": On July 1, 2003, Prudential Financial combined its retail securities brokerage and clearing operations with those of Wachovia Corporation ("Wachovia") and formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a joint venture headquartered in Richmond, Virginia. Prudential Financial has a 38% ownership interest in the joint venture, while Wachovia owns the remaining 62%. Wachovia and Wachovia Securities are key distribution partners for certain products of Prudential Financial affiliates, including mutual funds and individual annuities that are distributed through their financial advisors, bank channel and independent channel. In addition, Prudential Financial is a service provider to the managed account platform and certain wrap-fee programs offered by Wachovia Securities. 8 Supplement to Prospectus Dated May 1, 2003 Supplement dated May 1, 2004 This Supplement should be retained with the May 1, 2003 Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a May 1, 2003 Prospectus, please contact American Skandia at 1-800-766-4530. Please be advised that as of May 1, 2004, we are no longer selling any additional contracts that are described in this prospectus. Therefore, please retain your May 1, 2003 prospectus and any supplements thereto for future reference as these documents will continue to constitute the prospectus to which you can refer. 1. Appendix A Financial Information about American Skandia is deleted in its entirety. 2. The "Incorporation of Certain Documents by Reference" section is deleted in its entirety and replaced with the following: "American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial information about American Skandia that is annually audited by independent accountants. American Skandia's annual report for the year ended December 31, 2003, together with subsequent periodic reports that American Skandia files with the SEC, are incorporated by reference into this prospectus. You can obtain copies, at no cost, of any and all of this information, including the American Skandia annual report that is not ordinarily mailed to contract owners, the more current reports and any subsequently filed documents at no cost by contacting us at American Skandia - Variable Annuities; P.O. Box 7040; Bridgeport, CT 06601-7040 (Telephone : 203-926-1888). The SEC file number for American Skandia is 33-44202. You may read and copy any filings made by American Skandia with the SEC at the SEC's Public Reference Room at 450 Fifth Street, Washington, D.C. 20549-0102. You can obtain information on the operation of the Public Reference Room by calling (202) 942-8090. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION One Corporate Drive, Shelton, Connecticut 06484 This Prospectus describes American Skandia ApexSM, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us"). The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 59. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. ================================================================================ American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees and charges may also be different between each annuity. ================================================================================ If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed investment options. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 701/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value. - -------------------------------------------------------------------------------- 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 THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE. - -------------------------------------------------------------------------------- FOR FURTHER INFORMATION CALL 1-800-766-4530. Prospectus Dated: May 1, 2003 Statement of Additional Information Dated: May 1, 2003 ASAPEXPROS- (05/2003) ASAPEXPROS
PLEASE SEE OUR PRIVACY POLICY ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY? |X| This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. |X| This Annuity offers both variable and fixed investment options. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed investment options of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. |X| The Annuity features two distinct periods - the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: American Skandia Trust, Montgomery Variable Series, Wells Fargo Variable Trust, INVESCO Variable Investment Funds, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. |X| During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. |X| This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. |X| You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges. Other product features allow you to access your Account Value as necessary, although a charge may apply. After Annuity Year 4, you are allowed to make unlimited withdrawals from your Annuity without any charges. |X| Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $10,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $10,000. If the Annuity is owned by an individual or individuals, the oldest of those persons must be age 85 or under. If the Annuity is owned by an entity, the annuitant must be age 85 or under. TABLE OF CONTENTS GLOSSARY OF TERMS......................................................................................5 SUMMARY OF CONTRACT FEES AND CHARGES...................................................................6 EXPENSE EXAMPLES......................................................................................10 INVESTMENT OPTIONS....................................................................................11 WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?..................................11 WHAT ARE THE FIXED INVESTMENT OPTIONS?..............................................................26 FEES AND CHARGES......................................................................................26 WHAT ARE THE CONTRACT FEES AND CHARGES?.............................................................26 WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?.......................................27 WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?........................................................28 WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?........................................................28 WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?...........................................28 EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES...........................................................28 PURCHASING YOUR ANNUITY...............................................................................28 WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?...............................................28 MANAGING YOUR ANNUITY.................................................................................29 MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?.....................................29 MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?.......................................................30 MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?............................................................30 MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?........................................30 MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?....................................30 MANAGING YOUR ACCOUNT VALUE...........................................................................30 HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?........................................................30 ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?..........................30 DO YOU OFFER DOLLAR COST AVERAGING?.................................................................31 DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?....................................................31 DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?.................32 MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT?....................................34 HOW DO THE FIXED INVESTMENT OPTIONS WORK?...........................................................34 HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?...................................................34 HOW DOES THE MARKET VALUE ADJUSTMENT WORK?..........................................................35 WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?......................................................36 ACCESS TO ACCOUNT VALUE...............................................................................36 WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?....................................................36 ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?.......................................................36 CAN I WITHDRAW A PORTION OF MY ANNUITY?.............................................................37 HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?.......................................................37 IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?.........................................................38 CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?....................38 DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE?............38 WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?..................................38 CAN I SURRENDER MY ANNUITY FOR ITS VALUE?...........................................................39 WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?.........................................39 WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?........................................................39 HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?................................................40 HOW ARE ANNUITY PAYMENTS CALCULATED?................................................................41
DEATH BENEFIT.........................................................................................42 WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?.......................................................42 Basic Death Benefit.................................................................................42 OPTIONAL DEATH BENEFITS.............................................................................42 PAYMENT OF DEATH BENEFITS...........................................................................44 VALUING YOUR INVESTMENT...............................................................................46 HOW IS MY ACCOUNT VALUE DETERMINED?.................................................................46 WHAT IS THE SURRENDER VALUE OF MY ANNUITY?..........................................................46 HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?.........................................................46 HOW DO YOU VALUE FIXED ALLOCATIONS?.................................................................46 WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?.........................................................46 WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?.......................47 TAX CONSIDERATIONS....................................................................................48 WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?....................................48 HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?...........................................48 IN GENERAL, HOW ARE ANNUITIES TAXED?................................................................48 HOW ARE DISTRIBUTIONS TAXED?........................................................................48 WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?........50 HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?...............................................51 GENERAL TAX CONSIDERATIONS..........................................................................52 GENERAL INFORMATION...................................................................................53 HOW WILL I RECEIVE STATEMENTS AND REPORTS?..........................................................53 WHO IS AMERICAN SKANDIA?............................................................................53 WHAT ARE SEPARATE ACCOUNTS?.........................................................................53 WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?................................................55 WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?..............................................55 AVAILABLE INFORMATION...............................................................................57 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.....................................................57 HOW TO CONTACT US...................................................................................57 INDEMNIFICATION.....................................................................................58 LEGAL PROCEEDINGS...................................................................................58 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................................59 APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA..............................................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION..............11 APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B..................................1 APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS....................................................1 APPENDIX D -PLUS40(TM)OPTIONAL LIFE INSURANCE RIDER....................................................1 APPENDIX E - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT.................................................1
GLOSSARY OF TERMS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. Account Value: 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. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC") and/or any Annual Maintenance Fee. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. Annuitization: The application of Account Value to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply. Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. Code: The Internal Revenue Code of 1986, as amended from time to time. Fixed Allocation: An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. Guarantee Period: A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. Interim Value: The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. Issue Date: The effective date of your Annuity. MVA: A market value adjustment used in the determination of Account Value of each Fixed Allocation on a day more than 30 days prior to the Maturity Date of such Fixed Allocation. Owner: With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. Surrender Value: The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and the charge for any optional benefits. Unit: A measure used to calculate your Account Value in a Sub-account during the accumulation period. Valuation Day: Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. SUMMARY OF CONTRACT FEES AND CHARGES Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the Insurance Charge, which is the combination of a mortality and expense risk charge, a charge for administration of the Annuity, and the charge for any optional benefits you elect. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. Tax charges may vary by state and in certain states, a premium tax charge may be applicable. All of these fees and charges are described in more detail within this Prospectus. The following table provides a summary of the fees and charges you will incur if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus. - -------------------------------------------------------------------------------- YOUR TRANSACTION FEES AND CHARGES - -------------------------------------------------------------------------------- (assessed against the Annuity) - -------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------------------------------------------------- Contingent Deferred Sales Charge* 8.5% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period is measured from the Issue Date of the Annuity. - -------------------------------------------------------------------------------- Transfer Fee $10.00 (Deducted after the 20th transfer each Annuity Year) - -------------------------------------------------------------------------------- * The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yrs. 5+ ----- ----- ----- ----- ------- 8.5% 8.0% 7.0% 6.0% 0.0% ----- ----- ----- ----- ------- The following table provides a summary of the periodic fees and charges you will incur while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus. - -------------------------------------------------------------------------------- YOUR PERIODIC FEES AND CHARGES - -------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINT THE ANNUITY - -------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------------------------------------------------- Annual Maintenance Fee Smaller of $35 or (Only applicable if Account Value is less than $100,000) 2% of Account Value (Assessed annually on the Annuity's anniversary date or upon surrender) - -------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS* (as a percentage of the average daily net assets of the Sub-accounts) - -------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------------------------------------------------- Mortality & Expense Risk Charge 1.25% - -------------------------------------------------------------------------------- Administration Charge 0.15% - -------------------------------------------------------------------------------- Total Annual Charges of the Sub-accounts** 1.40% per year of the value of each Sub-account - -------------------------------------------------------------------------------- * These charges are deducted daily and apply to Variable Investment Options only. ** The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. The following table provides a summary of the fees and charges you will incur if you elect any of the following optional benefits. These fees and charges are described in more detail within this Prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------ YOUR OPTIONAL BENEFIT FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ Optional Benefit Total Annual Fee/Charge Optional Benefit Charge* - --------------------------------------------------------------------------------------------- --------------------- ---------------- GUARANTEED RETURN OPTION 1.65% We offer a program that guarantees a "return of premium" at a future date, while 0.25% of average allowing you to allocate all or a portion of your Account Value to the Sub-accounts of daily net assets of your choice. the Sub-accounts - - ------------------------------------------------------------------------------------------- --------------------- ---------------- ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT 1.65% We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing amounts in addition to the basic Death Benefit that daily net assets of can be used to offset federal and state taxes payable on any taxable gains in your the Sub-accounts Annuity at the time of your death. - --------------------------------------------------------------------------------------------- --------------------- ---------------- HIGHEST ANNIVERSARY VALUE DEATH BENEFIT We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing a death benefit equal to the greater of the basic daily net assets of 1.65% Death Benefit or the Highest Anniversary Value. the Sub-accounts - --------------------------------------------------------------------------------------------- --------------------- ---------------- Please refer to the section of the Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - ------------------------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge assessed against the Annuity. If you elect more than one optional benefit, the Total Annual Charge includes the charge for each optional benefit. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2002. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. - -------------------------------------------------------------------------------- Total Annual Portfolio Operating Expenses - -------------------------------------------------------------------------------- Minimum Maximum - -------------------------------------------------------------------------------- Total Portfolio Operating Expense 0.14%* 3.14% - -------------------------------------------------------------------------------- * The minimum total annual portfolio operating expenses are those of a Portfolio that may invest in mutual funds, which also charge their own operating expenses. Thus, the total annual portfolio operating expenses may be higher than indicated. The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2002, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee is being waived and/or other expenses are being partially reimbursed. "N/A" indicates that no portion of the management fee and/or other expenses is being waived and/or reimbursed. The "Net Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees, net of any fee waivers and expense reimbursements. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530.
- ----------------------------------------------------------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - ----------------------------------------------------------------------------------------------------------------------------------- Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - ----------------------------------------------------------------------------------------------------------------------------------- American Skandia Trust: /1/ AST Strong International Equity 0.88% 0.21% 0.12% 1.21% 0.00% 1.21% AST William Blair International Growth 1.00% 0.23% 0.10% 1.33% 0.10% 1.23% AST American Century International Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% AST DeAM International Equity 1.00% 0.44% 0.00% 1.44% 0.15% 1.29% AST MFS Global Equity 1.00% 0.41% 0.00% 1.41% 0.00% 1.41% AST PBHG Small-Cap Growth 0.90% 0.22% 0.11% 1.23% 0.00% 1.23% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% 0.15% 1.00% AST Federated Aggressive Growth 0.95% 0.43% 0.00% 1.38% 0.03% 1.35% AST Goldman Sachs Small-Cap Value 0.95% 0.21% 0.11% 1.27% 0.00% 1.27% AST Gabelli Small-Cap Value 0.90% 0.19% 0.01% 1.10% 0.00% 1.10% AST DeAM Small-Cap Value 0.95% 0.53% 0.00% 1.48% 0.33% 1.15% AST Goldman Sachs Mid-Cap Growth 1.00% 0.26% 0.07% 1.33% 0.10% 1.23% AST Neuberger Berman Mid-Cap Growth 0.90% 0.20% 0.06% 1.16% 0.00% 1.16% AST Neuberger Berman Mid-Cap Value 0.90% 0.17% 0.09% 1.16% 0.00% 1.16% AST Alger All-Cap Growth 0.95% 0.19% 0.15% 1.29% 0.00% 1.29% AST Gabelli All-Cap Value 0.95% 0.24% 0.00% 1.19% 0.00% 1.19% AST T. Rowe Price Natural Resources 0.90% 0.23% 0.03% 1.16% 0.00% 1.16% AST Alliance Growth 0.90% 0.20% 0.03% 1.13% 0.00% 1.13% AST MFS Growth 0.90% 0.18% 0.10% 1.18% 0.00% 1.18% AST Marsico Capital Growth 0.90% 0.16% 0.04% 1.10% 0.01% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.15% 0.04% 1.09% 0.06% 1.03% AST DeAM Large-Cap Growth 0.85% 0.23% 0.00% 1.08% 0.10% 0.98% AST DeAM Large-Cap Value 0.85% 0.24% 0.04% 1.13% 0.10% 1.03% AST Alliance/Bernstein Growth + Value 0.90% 0.23% 0.00% 1.13% 0.00% 1.13% AST Sanford Bernstein Core Value 0.75% 0.25% 0.00% 1.00% 0.00% 1.00% AST Cohen & Steers Realty 1.00% 0.23% 0.03% 1.26% 0.00% 1.26% AST Sanford Bernstein Managed Index 500 0.60% 0.16% 0.08% 0.84% 0.00% 0.84% AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% 0.00% 0.98% AST Alliance Growth and Income 0.75% 0.15% 0.08% 0.98% 0.02% 0.96% AST MFS Growth with Income 0.90% 0.28% 0.01% 1.19% 0.00% 1.19% AST INVESCO Capital Income 0.75% 0.17% 0.03% 0.95% 0.00% 0.95% AST DeAM Global Allocation 0.10% 0.04% 0.00% 0.14% 0.00% 0.14% AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% 0.00% 1.10% AST T. Rowe Price Asset Allocation 0.85% 0.26% 0.00% 1.11% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.26% 0.00% 1.06% 0.00% 1.06% AST Federated High Yield 0.75% 0.19% 0.00% 0.94% 0.00% 0.94% AST Lord Abbett Bond-Debenture 0.80% 0.24% 0.00% 1.04% 0.00% 1.04% AST DeAM Bond 0.85% 0.23% 0.00% 1.08% 0.15% 0.93% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% 0.02% 0.78% AST PIMCO Limited Maturity Bond 0.65% 0.18% 0.00% 0.83% 0.00% 0.83% AST Money Market 0.50% 0.13% 0.00% 0.63% 0.05% 0.58% Montgomery Variable Series: Emerging Markets 1.25% 0.43% 0.00% 1.68% 0.00% 1.68% Wells Fargo Variable Trust: Equity Income 0.55% 0.30% 0.25% 1.10% 0.10% 1.00% - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - ----------------------------------------------------------------------------------------------------------------------------------- INVESCO Variable Investment Funds, Inc.: Dynamics 0.75% 0.37% 0.00% 1.12% 0.00% 1.12% Technology 0.75% 0.36% 0.00% 1.11% 0.00% 1.11% Health Sciences 0.75% 0.32% 0.00% 1.07% 0.00% 1.07% Financial Services 0.75% 0.34% 0.00% 1.09% 0.00% 1.09% Telecommunications 0.75% 0.47% 0.00% 1.22% 0.00% 1.22% Evergreen Variable Annuity Trust: Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% ProFund VP: Europe 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Asia 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Japan 0.75% 1.06% 0.25% 2.06% 0.08% 1.98% Banks 0.75% 1.11% 0.25% 2.11% 0.13% 1.98% Basic Materials 0.75% 1.21% 0.25% 2.21% 0.23% 1.98% Biotechnology 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Consumer Cyclical 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Consumer Non-Cyclical 0.75% 1.10% 0.25% 2.10% 0.12% 1.98% Energy 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Financial 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Healthcare 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Industrial 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Internet 0.75% 1.04% 0.25% 2.04% 0.06% 1.98% Pharmaceuticals 0.75% 1.12% 0.25% 2.12% 0.14% 1.98% Precious Metals 0.75% 0.98% 0.25% 1.98% N/A 1.98% Real Estate 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% Semiconductor 0.75% 1.33% 0.25% 2.33% 0.35% 1.98% Technology 0.75% 1.27% 0.25% 2.27% 0.29% 1.98% Telecommunications 0.75% 1.19% 0.25% 2.19% 0.21% 1.98% Utilities 0.75% 1.17% 0.25% 2.17% 0.19% 1.98% Bull 0.75% 0.91% 0.25% 1.91% N/A 1.91% Bear 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% UltraBull /2/ 0.75% 1.12% 0.25% 2.12% 0.27% 1.85% OTC 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Short OTC 0.75% 0.96% 0.25% 1.96% N/A 1.96% UltraOTC 0.75% 1.08% 0.25% 2.08% 0.13% 1.95% Mid-Cap Value 0.75% 1.25% 0.25% 2.25% 0.27% 1.98% Mid-Cap Growth 0.75% 1.22% 0.25% 2.22% 0.24% 1.98% UltraMid-Cap 0.75% 1.36% 0.25% 2.36% 0.38% 1.98% Small-Cap Value 0.75% 1.45% 0.25% 2.45% 0.47% 1.98% Small-Cap Growth 0.75% 1.20% 0.25% 2.20% 0.22% 1.98% UltraSmall-Cap 0.75% 1.15% 0.25% 2.15% 0.17% 1.98% U.S. Government Plus 0.50% 0.96% 0.25% 1.71% N/A 1.71% Rising Rates Opportunity 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% First Defined Portfolio Fund LLC: First Trust(R)10 Uncommon Values 0.60% 2.29% 0.25% 3.14% 1.95% 1.37% The Prudential Series Fund, Inc.: SP Jennison International Growth 0.85% 0.70% 0.25% 1.80% 0.16% 1.64% - -----------------------------------------------------------------------------------------------------------------------------------
/1/ The Investment Manager of American Skandia Trust (the "Trust") has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2004. The caption "Total Annual Portfolio Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements, while the caption "Net Annual Portfolio Operating Expenses" reflects the effect of such waivers and reimbursements. The Trust adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the sale of shares of such Portfolios. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission takes the position that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Distribution Fee estimates are derived and annualized from data regarding commission amounts directed under the Distribution Plan. Although there are no maximum amounts allowable, actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the last full fiscal year of the Plan's operations may differ from the amounts listed in the above chart. /2/ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. EXPENSE EXAMPLES These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges (when applicable), Annual Maintenance Fee (when applicable), Insurance Charge, and the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), as well as the charges for the optional benefits that are offered under the Annuity. The Securities and Exchange Commission ("SEC") requires these examples. Below are examples showing what you would pay in expenses at the end of the stated time periods for each Sub-account had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.40% per year; (c) the Annual Maintenance Fee (when applicable) is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other transactions for which we charge a fee for during the period shown; (f) no tax charge applies; (g) the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above) are reflected; and (h) the charge for each optional benefit is reflected as an additional charge equal to 0.25% per year, respectively, for the Guaranteed Return Option, the Enhanced Beneficiary Protection and the Highest Anniversary Value Death Benefit. Amounts shown in the examples are rounded to the nearest dollar. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. 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 WILL BE LESS THAN THOSE SHOWN IF YOU DO NOT ELECT ALL OF THE OPTIONAL BENEFITS AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. If your Account Value is less than $100,000, so that the Annual Maintenance Fee does apply. Please see the description below regarding how the Expense Examples change for Annuities with Account Value greater than $100,000. If you surrender your contract at the end of the applicable time period: - ---------------- --------------- ---------------- -------------- 1 year 3 years 5 years 10 years - ---------------- --------------- ---------------- -------------- 1402 2346 2726 5365 - ---------------- --------------- ---------------- -------------- If you annuitize at the end of the applicable time period: - ---------------- --------------- ---------------- -------------- 1 year 3 years 5 years 10 years - ---------------- --------------- ---------------- -------------- 552 1646 2726 5365 - ---------------- --------------- ---------------- -------------- If you do not surrender your contract: - ---------------- --------------- ---------------- -------------- 1 year 3 years 5 years 10 years - ---------------- --------------- ---------------- -------------- 552 1646 2726 5365 - ---------------- --------------- ---------------- -------------- - -------------------------------------------------------------------------------- The Expense Examples shown above assume your Account Value is less than $100,000 so that the Annual Maintenance Fee applies. If your Account Value is greater than $100,000 such that the Annual Maintenance Fee does not apply, the amounts indicated in the Expense Examples shown above would be reduced. - -------------------------------------------------------------------------------- INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information.) Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services, Incorporated, an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day investment decisions. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. ================================================================================ Effective close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value portfolio is no longer offered as a Sub-account under the Annuity, except as noted below. Annuity contracts with Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or before June 28, 2002 may continue to allocate Account Value and make transfers into the AST Goldman Sachs Small-Cap Value Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. Owners of Annuities issued after June 28, 2002 will not be allowed to allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-account. ================================================================================ ================================================================================ The AST Goldman Sachs Small-Cap Value Sub-account may be offered to new Owners at some future date; however, at the present time, American Skandia has no intention to do so. ================================================================================ Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts.
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST Strong International Equity: seeks long-term capital growth by investing in a diversified Strong Capital EQUITY portfolio of international equity securities the issuers of which are considered to have Management, Inc. strong earnings momentum. The Portfolio seeks to meet its objective by investing, under normal market conditions, at least 80% of its total assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The Sub-advisor intends to focus on companies with an above-average potential for long-term growth and attractive relative valuations. The Sub-advisor selects companies based on five key factors: growth, valuation, management, risk and sentiment. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST William Blair International Growth (f/k/a AST Janus Overseas Growth): seeks long-term William Blair & EQUITY growth of capital. The Portfolio pursues its objective primarily through investments in Company, L.L.C. equity securities of issuers located outside the United States. The Portfolio normally invests at least 80% of its total assets in securities of issuers from at least five different countries, excluding the United States. The Portfolio invests primarily in companies selected for their growth potential. Securities are generally selected without regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST American Century International Growth: seeks capital growth. The Portfolio will seek to American Century EQUITY achieve its investment objective by investing primarily in equity securities of international Investment companies that the Sub-advisor believes will increase in value over time. Under normal Management, Inc. conditions, the Portfolio will invest at least 65% of its assets in equity securities of issuers from at least three countries outside of the United States. The Sub-advisor uses a growth investment strategy it developed that looks for companies with earnings and revenue growth. The Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST DeAM International Equity: seeks capital growth. The Portfolio pursues its objective by Deutsche Asset EQUITY investing at least 80% of the value of its assets in the equity securities of companies in Management, Inc. developed non-U.S. countries that are represented in the MSCI EAFE(R)Index. The target of this Portfolio is to track the performance of the MSCI EAFE(R)Index within 4% with a standard deviation expected of +/- 4%. The Sub-advisor considers a number of factors in determining whether to invest in a stock, including earnings growth rate, analysts' estimates of future earnings and industry-relative price multiples. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL EQUITY AST MFS Global Equity: seeks capital growth. Under normal circumstances the Portfolio invests Massachusetts at least 80% of its assets in equity securities of U.S. and foreign issuers (including issuers Financial Services in developing countries). The Portfolio generally seeks to purchase securities of companies Company with relatively large market capitalizations relative to the market in which they are traded. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST PBHG Small-Cap Growth: seeks capital growth. The Portfolio pursues its objective by Pilgrim Baxter & GROWTH primarily investing at least 80% of the value of its assets in the common stocks of Associates, Ltd. small-sized companies, whose market capitalizations are similar to market capitalizations of the companies in the Russell 2000(R)Index at the time of the Portfolio's investment. The Sub-advisor expects to focus primarily on those securities whose market capitalizations or annual revenues are less than $1billion at the time of purchase. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital from a portfolio of Deutsche Asset GROWTH growth stocks of smaller companies. The Portfolio pursues its objective, under normal Management, Inc. circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R)Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R)Index, but which attempts to outperform the Russell 2000 Growth(R)Index. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST Federated Aggressive Growth: seeks capital growth. The Portfolio pursues its investment Federated GROWTH objective by investing in the stocks of small companies that are traded on national security Investment exchanges, NASDAQ stock exchange and the over-the-counter-market. Small companies will be Counseling/ defined as companies with market capitalizations similar to companies in the Russell 2000 Federated Index or the Standard & Poor's Small Cap 600 Index. Up to 25% of the Portfolio's net assets Global Investment may be invested in foreign securities, which are typically denominated in foreign currencies. Management Corp. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP Goldman Sachs Small-Cap Value: seeks long-term capital appreciation. The Portfolio will AST Goldman Sachs VALUE seek its objective through investments primarily in equity securities that are believed to be Asset Management undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $5 billion or less. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST Gabelli Small-Cap Value: seeks to provide long-term capital growth by investing primarily GAMCO VALUE in small-capitalization stocks that appear to be undervalued. The Portfolio will have a Investors, Inc. non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as those with a capitalization of $1.5 billion or less. 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. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. The Portfolio pursues Deutsche Asset VALUE its objective, under normal market conditions, by primarily investing at least 80% of its Management, Inc. total assets in the equity securities of small-sized companies included in the Russell 2000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000(R) Value Index, but which attempts to outperform the Russell 2000(R)Value Index. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP GROWTH AST Goldman Sachs Mid-Cap Growth (f/k/a AST Janus Mid-Cap Growth): seeks long-term capital Goldman Sachs growth. The Portfolio pursues its investment objective, by investing primarily in equity Asset Management securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP GROWTH AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under normal market conditions, Neuberger Berman the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index, at the time of investment, are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP VALUE AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market conditions, the Neuberger Berman Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. - ------------------------------------------------------------------------------------------------------------------------------------ ALL-CAP AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in Fred Alger GROWTH equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in Management, Inc. the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ------------------------------------------------------------------------------------------------------------------------------------ ALL-CAP AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its objective by GAMCO Investors, VALUE investing primarily in readily marketable equity securities including common stocks, preferred Inc. stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. The Portfolio focuses on companies that appear underpriced relative to their private market value ("PMV"). PMV is the value that the Portfolio's Sub-advisor believes informed investors would be willing to pay for a company. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR AST T. Rowe Price Natural Resources: seeks long-term capital growth primarily through the T. Rowe Price common stocks of companies that own or develop natural resources (such as energy products, Associates, Inc. precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio looks for companies that have the ability to expand production, to maintain superior exploration programs and production facilities, and the potential to accumulate new resources. At least 50% of Portfolio assets will be invested in U.S. securities, up to 50% of total assets also may be invested in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Alliance Growth: seeks long-term capital growth. The Portfolio invests at least 80% of Alliance Capital GROWTH its total assets in the equity securities of a limited number of large, carefully selected, Management, L.P. high-quality U.S. companies that are judged likely to achieve superior earnings growth. Normally, about 40-60 companies will be represented in the Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting approximately 70% of the Portfolio's net assets. An emphasis is placed on identifying companies whose substantially above average prospective earnings growth is not fully reflected in current market valuations. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST MFS Growth: seeks long-term capital growth and future income. Under normal market Massachusetts GROWTH conditions, the Portfolio invests at least 80% of its total assets in common stocks and Financial Services related securities, such as preferred stocks, convertible securities and depositary receipts, Company of companies that the Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Marsico Capital Growth: seeks capital growth. Income realization is not an investment Marsico Capital GROWTH objective and any income realized on the Portfolio's investments, therefore, will be Management, LLC incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, a "bottom up" stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Goldman Sachs Concentrated Growth (f/k/a AST JanCap Growth): seeks growth of capital in a Goldman Sachs GROWTH manner consistent with the preservation of capital. Realization of income is not a Asset Management significant investment consideration 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 equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30 - 45 companies that are considered by the Sub-advisor to be positioned for long-term growth. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST DeAM Large-Cap Growth: seeks maximum growth of capital by investing primarily in the Deutsche Asset GROWTH growth stocks of larger companies. The Portfolio pursues its objective, under normal market Management, Inc. conditions, by primarily investing at least 80% of its total assets in the equity securities of large-sized companies included in the Russell 1000(R)Growth Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Growth Index, but which attempts to outperform the Russell 1000(R)Growth Index through active stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST DeAM Large-Cap Value (f/k/a AST Janus Strategic Value): seeks maximum growth of capital by Deutsche Asset VALUE investing primarily in the value stocks of larger companies. The Portfolio pursues its Management, Inc. objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R) Value Index, but which attempts to outperform the Russell 1000(R)Value Index through active stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Alliance/Bernstein Growth + Value: seeks capital growth by investing approximately 50% of Alliance Capital BLEND its assets in growth stocks of large companies and approximately 50% of its assets in value Management, L.P. stocks of large companies. The Portfolio will invest primarily in commons tocks of large U.S. companies included in the Russell 1000(R)Index (the "Russell 1000(R)"). The Russell 1000(R) is a market capitalization-weighted index that measures the performance of the 1,000 largest U.S. companies. Normally, about 60-85 companies will be represented in the Portfolio, with 25-35 companies primarily from the Russell 1000(R)Growth Index constituting approximately 50% of the Portfolio's net assets and 35-50 companies primarily from the Russell 1000(R)Value Index constituting the remainder of the Portfolio's net assets. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Sanford Bernstein Core Value: seeks long-term capital growth by investing primarily in Sanford C. VALUE common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be Bernstein & Co., invested in the common stocks of large companies that appear to be undervalued. Among other LLC things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE AST Cohen & Steers Realty: seeks to maximize total return through investment in real estate Cohen & Steers (REIT) securities. The Portfolio pursues its investment objective by investing, under normal Capital circumstances, at least 80% of its net assets in securities of real estate issuers. Under Management, Inc. normal circumstances, the Portfolio will invest substantially all of its assets in the equity securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. - ------------------------------------------------------------------------------------------------------------------------------------ MANAGED INDEX AST Sanford Bernstein Managed Index 500: will invest, under normal circumstances, at least 80% Sanford C. of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Bernstein & Co., Index (the "S&P(R)500 "). The Portfolio seeks to outperform the S&P 500 through stock LLC selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest primarily in the common stocks of companies included in the S&P 500. 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 fundamental quantitative criteria that are designed to indicate whether a particular stock will predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether the Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the proportion of the S&P 500 that the stock represents. In addition, the Sub-advisor also may determine that based on the quantitative criteria, certain equity securities that are not included in the S&P 500 should be held by the Portfolio. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST American Century Income & Growth: seeks capital growth with current income as a secondary American Century AND objective. The Portfolio invests primarily in common stocks that offer potential for capital Investment INCOME growth, and may, consistent with its investment objective, invest in stocks that offer Management, Inc. potential for current income. The Sub-advisor utilizes a quantitative management technique with a goal of building an equity portfolio that provides better returns than the S&P 500 Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST Alliance Growth and Income: seeks long-term growth of capital and income while attempting Alliance Capital AND to avoid excessive fluctuations in market value. The Portfolio normally will invest in common Management, L.P. INCOME stocks (and securities convertible into common stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST MFS Growth with Income: seeks long term growth of capital with a secondary objective to Massachusetts AND seek reasonable current income. Under normal market conditions, the Portfolio invests at Financial Services INCOME least 65% of its net assets in common stocks and related securities, such as preferred stocks, Company convertible securities and depositary receipts. The stocks in which the Portfolio invests generally will pay dividends. While the Portfolio may invest in companies of any size, the Portfolio generally focuses on companies with larger market capitalizations that the Sub-advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The Portfolio may invest up to 20% of its net assets in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------ EQUITY INCOME AST INVESCO Capital Income (f/k/a AST INVESCO Equity Income): seeks capital growth and current INVESCO Funds income while following sound investment practices. The Portfolio seeks to achieve its Group, Inc. objective by investing in securities that are expected to produce relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular dividends. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED AST DeAM Global Allocation: seeks a high level of total return by investing primarily in a Deutsche Asset diversified portfolio of mutual funds. The Portfolio seeks to achieve its investment Management, Inc. objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. The Portfolio is expected to be invested in at least six such Underlying Portfolios at any time. It is expected that the investment objectives of such AST Portfolios will be diversified. - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED AST American Century Strategic Balanced: seeks capital growth and current income. The American Century Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity Investment securities and the remainder in bonds and other fixed income securities. Both the Portfolio's Management, Inc. equity and fixed income investments will fluctuate in value. The equity securities will fluctuate depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fixed income investments will be affected primarily by rising or falling interest rates and the credit quality of the issuers. - ------------------------------------------------------------------------------------------------------------------------------------ ASSET AST T. Rowe Price Asset Allocation: seeks a high level of total return by investing primarily T. Rowe Price ALLOCATION in a diversified portfolio of fixed income and equity securities. The Portfolio normally Associates, Inc. invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small and medium-sized companies with good growth prospects. The fixed income portion of the Portfolio will be allocated among investment grade securities, high yield or "junk" bonds, foreign high quality debt securities and cash reserves. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL BOND AST T. Rowe Price Global Bond: seeks to provide high current income and capital growth by T. Rowe Price investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will International, invest at least 80% of its total assets in all types of high quality bonds including those Inc. issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. - ------------------------------------------------------------------------------------------------------------------------------------ HIGH YIELD AST Federated High Yield: seeks high current income by investing primarily in a diversified Federated BOND portfolio of fixed income securities. The Portfolio will invest at least 80% of its assets in Investment fixed income securities rated BBB and below. These fixed income securities may include Counseling preferred stocks, convertible securities, bonds, debentures, notes, equipment lease certificates and equipment trust certificates. A fund that invests primarily in lower-rated fixed income securities will be subject to greater risk and share price fluctuation than a typical fixed income fund, and may be subject to an amount of risk that is comparable to or greater than many equity funds. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity for capital Lord, Abbett & appreciation to produce a high total return. To pursue its objective, the Portfolio will Co. LLC invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible in common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST DeAM Bond: seeks a high level of income, consistent with the preservation of capital. Deutsche Asset Under normal circumstances, the Portfolio invests at least 80% of its total assets in Management, Inc. intermediate-term U.S. Treasury, corporate, mortgage-backed and asset-backed, taxable municipal and tax-exempt municipal bonds. The Portfolio invests primarily in investment grade fixed income securities rated within the top three rating categories of a nationally recognized rating organization. Fixed income securities may be issued by U.S. and foreign corporations or entities including banks and various government entities. - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of Pacific Investment capital and prudent investment management. The Portfolio will invest in a diversified Management Company portfolio of fixed-income securities of varying maturities. The average portfolio duration of LLC the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation Pacific Investment of capital and prudent investment management. The Portfolio will invest in a diversified Management Company portfolio of fixed-income securities of varying maturities. The average portfolio duration of LLC the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. - ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET AST Money Market: seeks high current income and maintain high levels of liquidity. The Wells Capital Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average Management, Inc. maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ------------------------------------------------------------------------------------------------------------------------------------ EMERGING Montgomery Variable Series - Emerging Markets: seeks long-term capital appreciation, under Gartmore Global MARKETS normal conditions by investing at least 80% of its total assets in stocks of companies of any Asset Management size based in the world's developing economies. Under normal market conditions, investments Trust/Gartmore are maintained in at least six countries at all times and no more than 35% of total assets in Global Partners any single one of them. - ------------------------------------------------------------------------------------------------------------------------------------ EQUITY INCOME WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income. Wells Fargo Funds The Portfolio pursues its objective primarily by investing in the common stocks of large, Management, LLC domestic companies with above-average return potential based on current market valuations and above-average dividend income. Under normal market conditions, the Portfolio invests at least 80% of its total assets in income producing equity securities and in issues of companies with market capitalizations of $3 billion or more. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY Variable Investment Funds - Dynamics: seek long-term capital growth. The Portfolio INVESCO Funds INVESCO invests at least 65% of its assets in common stocks of mid-sized companies. INVESCO defines Group, Inc. mid-sized companies as companies that are included in the Russell Midcap Growth Index at the time of purchase, or if not included in that Index, have market capitalizations of between $2.5 billion and $15 billion at the time of purchase. The core of the Portfolio's investments are in securities of established companies that are leaders in attractive growth markets with a history of strong returns. The remainder of the Portfolio is invested in securities of companies that show accelerating growth, driven by product cycles, favorable industry or sector conditions, and other factors that INVESCO believes will lead to rapid sales or earnings growth. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR Variable Investment Funds - Technology: seeks capital growth. The Portfolio normally INVESCO Funds INVESCO invests 80% of its net assets in the equity securities and equity-related instruments of Group, Inc. companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. Many of these products and services are subject to rapid obsolescence, which may lower market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR Variable Investment Funds - Health Sciences: seeks capital growth. The Portfolio INVESCO Funds INVESCO normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instrumentsof companies that develop, produce or distribute products or services related to health care. These companies include, but are not limited to, medical equipment or supplies, pharmaceuticals, biotechnology and healthcare providers and service companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR Variable Investment Funds - Financial Services: seeks capital growth. The Portfolio INVESCO Funds INVESCO normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks (regional and money-centers), insurance companies (life, property and casualty, and multiline), investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies) and suppliers to financial services companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR Variable Investment Funds - Telecommunications: seeks capital growth and current INVESCO Funds INVESCO income. The Portfolio normally invests 80% of its net assets in the equity securities and Group, Inc. equity-related instruments of companies engaged in the design, development, manufacture, distribution, or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes, but is not limited to, companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. Many of these products and services are subject to rapid obsolescence, which may lower the market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL EQUITY Evergreen VA Global Leaders: seeks to provide investors with long-term capital growth. The Evergreen Portfolio normally invests as least 65% of its assets in a diversified portfolio of U.S. and Investment non-U.S. equity securities of companies located in the world's major industrialized Management countries. The Portfolio will invest in no less than three countries, which may include the Company, LLC U.S., but may invest more than 25% of its assets in one country. The Portfolio invests only in the best 100 companies, which are selected by the Portfolio's manager based on as high return on equity, consistent earnings growth, established market presence and industries or sectors with significant growth prospects. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP Evergreen VA Special Equity: seeks capital growth. The Portfolio normally invests at least Evergreen EQUITY 80% of its assets in common stocks of small U.S. companies (i.e., companies whose market Investment capitalizations fall within the range of the Russell 2000(R)Index, at the time of purchase). Management The remaining 20% of the Portfolio's assets may be represented by cash or invested in various Company, LLC cash equivalents. The Portfolio's manager selects stocks of companies which it believes have the potential for accelerated growth in earnings and price. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY Evergreen VA Omega: seeks long-term capital growth. The Portfolio invests primarily in common Evergreen stocks and securities convertible into common stocks of U.S. companies across all market Investment capitalizations. The Portfolio's managers employ a growth style of equity management. Management "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated Company, LLC earnings ranging from steady to accelerated growth. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Europe 30: seeks daily investment results, before fees and expenses, that ProFund Advisors EQUITY correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 LLC Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Asia 30: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors EQUITY to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created LLC by ProFund Advisors, is composed of 30 of the companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on the modified market capitalization method. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Japan: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors EQUITY the daily performance of the Nikkei 225 Stock Average. Since the Japanese markets are not LLC open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States. The Nikkei 225 Stock Average is a price-weighted index of 225 large, actively traded Japanese stocks traded on the Tokyo Stock Exchange. The Index is computed and distributed by the Nihon Keizai Shimbun. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Banks: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the Dow Jones U.S. Banks Sector Index. The Dow Jones U.S. Banks LLC Index measures the performance of the banking industry of the U.S. equity market. Component companies include all regional and major U.S. domiciled international banks, savings and loans, savings banks, thrifts, building associations and societies. Investment and merchant banks are excluded. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Basic Materials: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The LLC Dow Jones U.S. Basic materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. Component companies are involved in the production of aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Biotechnology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones LLC U.S. Biotechnology Index measures the performance of the biotechnology industry of the U.S. equity market. Component companies include those engaged in genetic research, and/or the marketing and development of recombinant DNA products. Makers of artificial blood and contract biotechnology researchers are also included in the Index. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Consumer Cyclical: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. The LLC Dow Jones U.S. Consumer Cyclical Sector Index measures the performance of the consumer cyclical economic sector of the U.S. equity market. Component companies include airlines, auto manufacturers, auto parts, tires, casinos, consumer electronics, recreational products and services, restaurants, lodging, toys, home construction, home furnishings and appliances, footwear, clothing and fabrics. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Consumer Non-Cyclical: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector LLC Index. The Dow Jones U.S. Consumer Non-Cyclical Sector Index measures the performance of the consumer non-cyclical economic sector of the U.S. equity market. Component companies include beverage companies, consumer service companies, durable and non-durable household product manufacturers, cosmetic companies, food products and agriculture and tobacco products. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Energy: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Energy Sector Index. The Dow Jones U.S. Energy LLC Sector Index measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Financial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. The Dow LLC Jones U.S. Financial Sector Index measures the performance of the financial services economic sector of the U.S. equity market. Component companies include regional banks, major U.S. domiciled international banks, full line, life, and property and casualty insurance companies, companies that invest, directly or indirectly in real estate, diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders, investment advisers and securities broker-dealers, investment banks, merchant banks, online brokers, publicly traded stock exchanges. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Healthcare: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. The Down LLC Jones U.S. healthcare Sector Index measures the performance of the healthcare economic sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Industrial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. The Dow LLC Jones U.S. Industrial Sector Index measures the performance of the industrial economic sector of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Internet: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Internet Index. The Dow Jones Composite LLC Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce - companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site; and Internet Services - companies that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Pharmaceuticals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Sector Index. The LLC Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry of the U.S. equity market. Component companies include the makers of prescription and over-the-counter drugs, such as aspirin, cold remedies, birth control pills, and vaccines, as well as companies engaged in contract drug research.. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Precious Metals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Philadelphia Stock Exchange Gold & Silver Sector LLC Index. The Philadelphia Stock Exchange Gold and Silver Sector Index measures the performance of the gold and silver mining industry of the global equity market. Component companies include companies involved in the mining and production of gold, silver, and other precious metals, precious stones and pearls. The Index does not include producers of commemorative medals and coins that are made of these metals. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Real Estate: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones LLC U.S. Real Estate Index measures the performance of the real estate industry of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings, housing developments and, real estate investment trusts ("REITs") that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Semiconductor: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones LLC U.S. Semiconductor Index measures the performance of the semiconductor industry of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as circuit boards and motherboards. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Technology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow LLC Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and internet services. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Telecommunications: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The LLC Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed line communications and wireless communications companies. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Utilities: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow LLC Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ THE PROFUND VP PORTFOLIOS DESCRIBED BELOW ARE AVAILABLE AS SUB-ACCOUNTS TO ALL ANNUITY OWNERS. EACH PORTFOLIO PURSUES AN INVESTMENT STRATEGY THAT SEEKS TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH A WIDELY FOLLOWED INDEX, INCREASE BY A SPECIFIED FACTOR RELATIVE TO THE INDEX, MATCH THE INVERSE OF THE INDEX OR THE INVERSE OF THE INDEX MULTIPLIED BY A SPECIFIED FACTOR. THE INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH POSITIVELY AND NEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE APPLICABLE INDEX. IT IS RECOMMENDED THAT ONLY THOSE ANNUITY OWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSET ALLOCATION STRATEGY INVEST IN THESE PORTFOLIOS. WE HAVE ARRANGED THE PORTFOLIOS BASED ON THE INDEX ON WHICH IT'S INVESTMENT STRATEGY IS BASED. - ------------------------------------------------------------------------------------------------------------------------------------ The S&P 500 Index(R)is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization financial viability and public float. - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 ProFund VP Bull: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the S&P 500(R)Index. LLC - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 ProFund VP Bear: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the inverse (opposite) of the daily performance of the S&P 500(R)Index. If ProFund VP Bear is LLC successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500(R)Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 ProFund VP UltraBull (f/k/a ProFund VP Bull Plus): seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of the S&P 500(R)Index. If LLC the ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(R)Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times the daily performance of the S&P 500(R)Index - ------------------------------------------------------------------------------------------------------------------------------------ The NASDAQ-100 Index(R)is a market capitalization weighted index that includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market. - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP OTC: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the NASDAQ-100 Index(R). "OTC" in the name of ProFund VP OTC reflers LLC to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP Short OTC: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index(R). If LLC ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index(R)when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP UltraOTC: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to twice (200%) the daily performance of the NASDAQ-100 Index(R). If ProFund VP UltraOTC is LLC successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------ The S&P MidCap 400 Index(R)is a widely used measure of mid-sized company U.S. stock market performance. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization, financial viability and public float. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP Mid-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Value Index(R). The S&P LLC MidCap400/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP Mid-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Growth Index(R). The S&P MidCap LLC 400/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year.. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP UltraMid-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the S&P MidCap 400 Index(R). If ProFund VP LLC UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ The S&P SmallCap 600 Index(R)consists of 600 domestic stocks chosen for market size, liquidity, and industry group representation. The Index comprises stocks from the industrial, utility, financial, and transportation sectors. - ------------------------------------------------------------------------------------------------------------------------------------ S&P SMALLCAP ProFund VP Small-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors 600 correspond to the daily performance of the S&P SmallCap 600/Barra Value Index(R). The S&P LLC SmallCap 600/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------ S&P SMALLCAP ProFund VP Small-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors 600 correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index(R). The S&P LLC SmallCap 600/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization-of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ The Russell 2000 Index(R)measures the performance of the 2,000 small companies in the Russell 3000 Index(R)representing approximately 8% of the total market capitalization of the Russell 3000 Index(R), which in turn represents approximately 98% of the investable U.S. equity market. - ------------------------------------------------------------------------------------------------------------------------------------ RUSSELL 2000 ProFund VP UltraSmall-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the Russell 2000(R)Index. If ProFund VP LLC UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOV'T ProFund VP U.S. Government Plus: seeks daily investment results, before fees and expenses, ProFund Advisors BOND that correspond to one and one-quarter times (125%) the daily price movement of the most LLC recently issued 30-year U.S. Treasury Bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOV'T ProFund VP Rising Rates Opportunity: seeks daily investment results, before fees and expenses, ProFund Advisors BOND that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price LLC movement of the most recently issued Long Bond. In accordance with its stated objective, the net asset value of ProFund VP rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ Each portfolio of the First Defined Portfolio Fund LLC invests in the securities of a relatively few number of issuers or in a particular sector of the economy. Since the assets of each portfolio are invested in a limited number of issuers or a limited sector of the economy, the net asset value of the portfolio may be more susceptible to a single adverse economic, political or regulatory occurrence. Certain of the portfolios may also be subject to additional market risk due to their policy of investing based on an investment strategy and generally not buying or selling securities in response to market fluctuations. Each portfolio's relative lack of diversity and limited ongoing management may subject Owners to greater market risk than other portfolios. The stock selection date for each of the strategy Portfolios of the First Defined Portfolio Fund LLC is on or about December 31st of each year. The holdings for each strategy Portfolio will be adjusted annually on or about December 31st in accordance with the Portfolio's investment strategy. At that time, the percentage relationship among the shares of each issuer held by the Portfolio is established. Through the next one-year period that percentage will be maintained as closely as practicable when the Portfolio makes subsequent purchases and sales of the securities. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP First Trust(R)10 Uncommon Values: seeks to provide above-average capital appreciation. The Portfolio seeks to achieve its objective by investing primarily in the ten common stocks selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the BLEND greatest potential for capital appreciation during the next year. The stocks included in the First Trust Portfolio are adjusted annually on or about July 1st in accordance with the selections of Advisors L.P. Lehman Brothers. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ INTER- The Prudential Series Fund, Inc. - SP Jennison International Growth: seeks to provide Prudential NATIONAL long-term growth of capital. The Portfolio pursues its objective by investing in Investments LLC/ EQUITY equity-related securities of foreign issuers that the Sub-advisor believes will increase in Jennison value over a period of years. The Portfolio invests primarily in the common stock of large Associates LLC and medium-sized foreign companies. Under normal circumstances, the Portfolio invests at least 65% of its total assets in common stock of foreign companies operating or based in at least five different countries. The Portfolio looks primarily for stocks of companies whose earnings are growing at a faster rate than other companies and that have above-average growth in earnings and cash flow, improving profitability, strong balance sheets, management strength and strong market share for its products. The Portfolio also tries to buy such stocks at attractive prices in relation to their growth prospects. - ------------------------------------------------------------------------------------------------------------------------------------
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment Services, Incorporated. 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. The First Trust(R)10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(R)10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED INVESTMENT OPTIONS? We offer fixed investment options of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-766-4530 to determine availability of Fixed Allocations in your state and for your annuity product. FEES AND CHARGES WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a Contingent Deferred Sales Charge or CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages are shown below. YEARS 1 2 3 4 5+ - --------------- ------------ ------------ ----------- ------------ ------------ CHARGE (%) 8.5% 8.0% 7.0% 6.0% 0.0% - --------------- ------------ ------------ ----------- ------------ ------------ The CDSC period is based on the Issue Date of the Annuity, not on the date each Purchase Payment is applied to the Annuity. Purchase Payments applied to the Annuity after the Issue Date do not have their own CDSC period. During the first four (4) Annuity Years, under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." After four (4) complete Annuity Years, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. For purposes of calculating the CDSC on a surrender or a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party investment advisory service will be subject to the twenty-transfer limit. However, all transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. Currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: Several states and some municipalities charge premium taxes or similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2%. We generally will deduct the amount of tax payable at the time the tax is imposed, but may also decide to deduct tax charges from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily against the average daily assets allocated to the Sub-accounts. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (1.25%) and the Administration Charge (0.15%). The total charge is equal to 1.40% on an annual basis. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits: If you elect to purchase one or more optional benefits, we will deduct an additional charge on a daily basis from your Account Value allocated to the Sub-accounts. The charge for each optional benefit is deducted in addition to the Insurance Charge due to the increased insurance risk associated with the optional benefits. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. Please refer to the section entitled "Death Benefit" for a description of the charge for each Optional Death Benefit. Please refer to the section entitled "Managing Your Account Value - Do you offer programs designed to guarantee a "return of premium" at a future date?" for a description of the charge for the Guaranteed Return Option. WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS? We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. These fees are deducted daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by Underlying Funds". WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? In certain states a tax is due if and when you exercise your right to receive periodic annuity payments. The amount payable will depend on the applicable jurisdiction and on the annuity payment option you select. If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will continue to be subject to an insurance charge. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce the portion of the Insurance Charge attributed to the charge covering administrative costs. PURCHASING YOUR ANNUITY WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $10,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $10,000 in total Purchase Payments. Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 85 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 85 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 85 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 591/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. Owner, Annuitant and Beneficiary Designations: On your Application, we will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. |X| Owner: The Owner(s) holds all rights under the Annuity. You may name more than one Owner in which case all ownership rights are held jointly. However, this Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." |X| Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. |X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. MANAGING YOUR ANNUITY MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us 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: |X| 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; |X| a new Annuitant subsequent to the Annuity Date; |X| for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and |X| a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account Value to the AST Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to allow for delivery of your Annuity. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic purchase payment program. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "American Skandia's Systematic Investment Plan." Purchase Payments made through bank drafting may only be allocated to the variable investment options when applied. Bank drafting allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $10,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $10,000. MANAGING YOUR ACCOUNT VALUE HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. In those states where we are required to return your Purchase Payment if you exercise your right to return the Annuity, we initially allocate all amounts that you choose to allocate to the variable investment options to the AST Money Market Sub-account. At the end of the right to cancel period we will reallocate your Account Value according to your most recent allocation instructions. Where permitted by law, we will allocate your Purchase Payments according to your initial instructions, without temporarily allocating to the AST Money Market Sub-account. To do this, we will ask that you execute our form called a "return waiver" that authorizes us to allocate your Purchase Payment to your chosen Sub-accounts immediately. If you submit the "return waiver" and then decide to return your Annuity during the right to cancel period, you will receive your current Account Value which may be more or less than your initial Purchase Payment (see "May I Return the Annuity if I Change my Mind?"). Subsequent Purchase Payments: We will allocate any additional Purchase Payments you make according to your current allocation instructions. If any rebalancing or asset allocation programs are in effect, the allocation should conform with such a program. We assume that your current allocation instructions are valid for subsequent Purchase Payments until you make a change to those allocations or request new allocations when you submit a new Purchase Payment. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment restrictions. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year, including transfers made as part of any rebalancing, market timing, asset allocation or similar program which you have authorized. Transfers made as part of a dollar cost averaging program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. 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: (a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by one or more of the Portfolios that the purchase or redemption of shares must be restricted because of excessive trading or a specific transfer or group of transfers is deemed to have a detrimental effect on the share prices of affected Portfolios. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. Under such a circumstance, we will process transfers according to our rules then in effect and provide notice if the transfer request was denied. If a transfer request is denied, a new transfer request may be required. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount each month from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. Dollar Cost Averaging allows you to invest regularly each month, regardless of the current unit value (or price) of the Sub-account(s) you invest in. This enables you to purchase more units when the market price is low and fewer units when the market price is high. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. We do not deduct a charge for participating in a Dollar Cost Averaging program. You must have a minimum Account Value of at least $10,000 to enroll in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: |X| You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. |X| You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. |X| Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced quarterly, semi-annually, or annually. On the appropriate date, your variable investment options are rebalanced to the allocation percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. If you request a transfer from or into any variable investment option participating in the automatic rebalancing program, we will assume that you wish to change your rebalancing percentages as well, and will automatically adjust the rebalancing percentages in accordance with the transfer unless we receive alternate instructions from you. You must have a minimum Account Value of at least $10,000 to enroll in automatic rebalancing. All rebalancing transfers made on the same day as part of an automatic rebalancing program are considered as one transfer when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, at least as of a specific date in the future. You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 5.33%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.594948 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $59,495 will be allocated to the Fixed Allocation and the remaining Account Value ($41,505) will be allocated to the variable investment options. Assuming that you do not make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. Guaranteed Return Option (GRO)SM We also offer a seven-year program where we monitor your Account Value daily and systematically transfer amounts between Fixed Allocations and the variable investment options you choose. American Skandia guarantees that at the end of the seventh (7th) year from commencement of the program (or any program restart date), you will receive no less than your Account Value on the date you elected to participate in the program ("commencement value"). On the program maturity date, if your Account Value is below the commencement value, American Skandia will apply additional amounts to your Annuity so that it is equal to commencement value or your Account Value on the date you elect to restart the program duration. Any amounts added to your Annuity will be applied to the AST Money Market Sub-account, unless you provide us with alternative instructions. We will notify you of any amounts added to your Annuity under the program. We do not consider amounts added to your Annuity to be "investment in the contract" for income tax purposes. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts. With the Guaranteed Return Option, your Annuity is able to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. NOTE: If a significant amount of your Account Value is systematically transferred to Fixed Allocations during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the Sub-accounts if there is a subsequent market recovery. Each business day we monitor the performance of your Account Value to determine whether it is greater than, equal to or below our "reallocation trigger", described below. Based on the performance of the Sub-accounts in which you choose to allocate your Account Value relative to the reallocation trigger, we may transfer some or all of your Account Value to or from a Fixed Allocation. You have complete discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to restrict certain Portfolios if you participate in the program. |X| Account Value greater than or equal to reallocation trigger: Your Account Value in the variable investment options remains allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation, those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations. A Market Value Adjustment will apply. |X| Account Value below reallocation trigger: A portion of your Account Value in the variable investment options is transferred to a new Fixed Allocation. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation will have a Guarantee Period equal to the remaining duration in the Guaranteed Return Option. The Account Value applied to the new Fixed Allocation will be credited with the fixed interest rate then being applied to a new Fixed Allocation of the next higher yearly duration. The Account Value will remain invested in the Fixed Allocation until the maturity date of the program unless, at an earlier date, your Account Value is at or above the reallocation trigger and amounts can be transferred to the variable investment options (as described above) while maintaining the guarantee protection under the program. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Any change to the allocation mechanism and/or the reallocation trigger will only apply to programs that begin after the change is effective. Program Termination The Guaranteed Return Option will terminate on its maturity date. You can elect to participate in a new Guaranteed Return Option or re-allocate your Account Value at that time. Upon termination, any Account Value allocated to the Fixed Allocations will be transferred to the AST Money Market Sub-account, unless you provide us with alternative instructions. Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: |X| You may terminate the Guaranteed Return Option at any time. American Skandia does not provide any guarantees upon termination of the program. |X| Withdrawals from your Annuity while the program is in effect will reduce the guaranteed amount under the program in proportion to your Account Value at the time of the withdrawal. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. |X| Additional Purchase Payments applied to the Annuity while the program is in effect will only increase the amount guaranteed; however, all or a portion of any additional Purchase Payments may be allocated to the Fixed Allocations. |X| Annuity Owners cannot transfer Account Value to or from a Fixed Allocation while participating in the program and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| The Guaranteed Return Option will terminate: (a) upon the death of the Owner or the Annuitant (in an entity owned contract); and (b) as of the date Account Value is applied to begin annuity payments. |X| You can elect to restart the seven (7) year program duration on any anniversary of the Issue Date of the Annuity. The Account Value on the date the restart is effective will become the new commencement value. You can only elect the program once per Annuity Year. Charges under the Program We deduct a charge equal to 0.25% per year to participate in the Guaranteed Return Option. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date of the program is less than the amount guaranteed; and (b) administration of the program. - -------------------------------------------------------------------------------- Effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between May 1, 2001 and November 15, 2002 and subsequent to November 19, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 18, 2002 will be subject to the charge method described above. - -------------------------------------------------------------------------------- MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT? Yes. You may authorize your investment professional to direct the allocation of your Account Value and to request financial transactions between investment options while you are living, subject to our rules. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your investment professional if you fail to inform us that such person's authority has been revoked. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. These investment professionals may be firms or persons who also are appointed by us as authorized sellers of the Annuity. However, we do not offer advice about how to allocate your Account Value under any circumstance. Any investment professionals you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such investment professionals make, any market timing or asset allocation programs they choose to follow or any specific transfers they make on your behalf. We may require investment professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) on American Skandia. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED INVESTMENT OPTIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-766-4530. A Guarantee Period for a Fixed Allocation begins: |X| when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; |X| upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or |X| when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. |X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. |X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. |X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: |X| On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity Date is December 31, 2005). |X| The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the Option-adjusted Spread is 5.50% (I = 5.50%). |X| You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3) years, therefore 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. ACCESS TO ACCOUNT VALUE WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through Partial Withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. |X| To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-4 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. |X| You can also make withdrawals in excess of the Free Withdrawal amount. We call this a "Partial Withdrawal." The amount that you may withdraw will depend on the Annuity's Surrender Value. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee, the Tax Charge, any charges for optional benefits and any Market Value Adjustment that may apply to any Fixed Allocations. After any Partial Withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal request as a request to fully surrender your Annuity. The minimum Partial Withdrawal you may request is $100. When we determine if a CDSC applies to Partial Withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial Withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Year 1-4 The maximum Free Withdrawal amount during each of Annuity Year 1 through Annuity Year 4 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payments) is 10% of all Purchase Payments. We may apply a Market Value Adjustment to any Fixed Allocations. The 10% Free Withdrawal amount is not cumulative. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. If, during Annuity Years 1 through 4, all Purchase Payments withdrawn are subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Year 5+ After Annuity Year 4, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first four (4) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first four Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $5,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 and 4 would be 10% of $15,000, or $1,500. From Annuity Year 5 and thereafter, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a Partial Withdrawal during the first four (4) Annuity Years. Whether a CDSC applies and the amount to be charged depends on whether the Partial Withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Issue Date of the Annuity. 1. If you request a Partial Withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount, we determine if a CDSC will apply to the Partial Withdrawal based on the number of years that have elapsed since the Annuity was issued. Any CDSC will only apply to the amount withdrawn that exceeds the Free Withdrawal amount. |X| If the Annuity has been in effect for less than four complete years, a CDSC will be charged on the amount of the Purchase Payment being withdrawn, according to the CDSC table. |X| If the Annuity has been in effect for more than four complete years, no CDSC will be charged on the amount being withdrawn. For purposes of calculating the CDSC on a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals during the first four (4) Annuity Years may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100, we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 1/2if you elect to receive distributions as a series of "substantially equal periodic payments". Distributions received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum that applies to Systematic Withdrawals does not apply to Minimum Distributions. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: |X| the Annuitant must be alive as of the date we pay the proceeds of such surrender request; |X| if the Owner is one or more natural persons, all such Owners must also be alive at such time; |X| we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and |X| this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the "Contingency Event" described above in order to qualify for a medically-related surrender. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 - --------- Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 - --------- 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 - --------- Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 - --------- Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 - --------- Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 6 - --------- Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, choosing an Annuity Date within four (4) years of the Issue Date of the Annuity may limit the available annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. If you have not provided us with your Annuity Date or annuity payment option in writing, then: |X| the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and |X| the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments We offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. |X| Variable Payments (Options 1-3) ----------------- We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. |X| Stabilized Variable Payments (Option 5) ---------------------------- This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. |X| Stabilized Variable Payments with a Guaranteed Minimum (Option 6) ------------------------------------------------------ This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. DEATH BENEFIT WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." Basic Death Benefit The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers two different optional Death Benefits. Either benefit can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. The basic Death Benefit is the greater of: |X| The sum of all Purchase Payments less the sum of all proportional withdrawals. |X| The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Two optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - -------------------------------------------------------------------------------- Currently, these benefits are only offered and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase either of the optional Death Benefits subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. - -------------------------------------------------------------------------------- Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix E for a description of the Enhanced Beneficiary Protection Optional Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - -------------------------------------------------------------------------------- See Appendix C for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. Key Terms Used with the Highest Anniversary Value Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Value" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. |X| Proportional withdrawals result in a reduction to the Highest Anniversary Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Calculation of Highest Anniversary Value Death Benefit The Highest Anniversary Value Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix E for a description of the Guaranteed Minimum Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. - -------------------------------------------------------------------------------- See Appendix C for examples of how the Highest Anniversary Value Death Benefit is calculated. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and Highest Anniversary Value Optional Death Benefit at any time. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year, respectively, if you elect the Highest Anniversary Value Optional Death Benefit or the Enhanced Beneficiary Protection Optional Death Benefit. If you elect both optional Death Benefits, the total charge is equal to 0.50% per year. We deduct the charge to compensate American Skandia for providing increased insurance protection under the optional Death Benefit. The additional annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed: |X| as a lump sum amount at any time within five (5) years of the date of death; or |X| as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary - Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. IRA Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. |X| If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. |X| If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2." Upon election of this IRA Beneficiary Continuation option: |X| the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. |X| the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. |X| the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner. NOTE: The Sub-accounts offered under the IRA Beneficiary Continuation option may be limited. |X| no additional Purchase Payments can be applied to the Annuity. |X| the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. |X| the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. |X| upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. |X| all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the IRA Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including either optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. VALUING YOUR INVESTMENT HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee and the charge for any optional benefits. The Surrender Value will also include any Market Value Adjustment that may apply. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day other than its Maturity Date or within 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next business day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: |X| trading on the NYSE is restricted; |X| an emergency exists making redemption or valuation of securities held in the separate account impractical; or |X| the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) days after we receive all of our requirements to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment with satisfactory allocation instructions. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on Valuation Day prior to the scheduled transaction date. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). You cannot request a transaction involving the purchase, redemption or transfer of units in one of the ProFunds VP Sub-account between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefits: If you terminate the Guaranteed Return Option program or either Optional Death Benefit, we will no longer deduct the charge we apply to purchase the optional benefit. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge and any optional benefit or program still elected, but not the charge for the optional benefit or program that you terminated. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. TAX CONSIDERATIONS WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY? Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a professional tax advisor for tax advice as to your particular situation. HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED? The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I, subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the Separate Accounts with respect to the Annuities. IN GENERAL, HOW ARE ANNUITIES TAXED? Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on: 1. whether the Annuity is used by: |X| a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment under the Code (for purposes of this discussion, a "Qualified Contract"); or |X| an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and 2. whether the Owner is: |X| an individual person or persons; or |X| an entity including a corporation, trust or partnership. Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation. Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity for Federal tax purposes may not be subject to income tax as a result of this provision. HOW ARE DISTRIBUTIONS TAXED? Distributions from an Annuity are taxed as ordinary income and not as capital gains. Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross income. |X| "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate value of all "related contracts" (discussed below). |X| "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous distributions or portions of such distributions from such "related contracts" that were 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, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the contract" for a Qualified Contract will be considered zero for tax reporting purposes. Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable annuity payments. When 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 may be allowed as a deduction on the decedent's final income tax return. Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract (Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This penalty does not apply to certain distributions, including: |X| Distributions made on or after the taxpayer has attained age 591/2; |X| Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant; |X| Distributions attributable to the taxpayer's becoming disabled within the meaning of Code section 72(m)(7); |X| Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and the taxpayer's designated beneficiary); |X| Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982; |X| Payments under an immediate annuity as defined in the Code; |X| Distributions under a qualified funding asset under Code Section 130(d); or |X| 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. Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the contracts will be added together to determine the proper taxation of a distribution from any one contract described under the section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your own tax advisor on this matter. Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or disability. American Skandia does not currently support a section 72(q) program. Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the 10% penalty described above under "Penalty Tax on Distributions" 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 a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed more than one year prior to the annuity starting date 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. Special rules in relation to tax-free exchanges under Section 1035: 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 purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity payments will be considered to come: |X| First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity; |X| Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including income on such original purchase payments after the exchange); |X| Then, from any remaining "income on the contract"; and |X| Lastly, from the amount of any "investment in the contract" made after August 13, 1982. Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14, 1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such an exchange. Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible for non-recognition treatment under Section 1035 of the Code. We will continue to report a partial surrender of a life insurance policy as subject to current taxation to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such a transaction on the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified endowment contract. Special Considerations for Purchasers of the Enhanced Beneficiary Protection Optional Death Benefit: As of the date of this Prospectus, it is our understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected to report them as such. WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries below of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of tax-qualified retirement plans. Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Certain states do not conform to the pension provisions included in EGTRRA. We recommend that you consult with your tax advisor to determine the status of your state's statutes as they relate to EGTRRA and your tax qualified retirement plan. Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations on the amount that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific organizations specified in Section 501(c)(3) for the benefit of their employees. 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 also apply. 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. Individual Retirement Arrangements or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified retirement plans and maintain the tax-deferred status of these amounts. Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However, distributions from a Roth IRA are free from Federal income taxes and are not subject to 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 1/2or 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 Federal income and penalty taxes. 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 or another qualified plan, 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. SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be deductible to the employer. HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED? Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does not apply when the distribution: |X| is part of a properly executed transfer to another IRA or another eligible qualified account; |X| 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); |X| is part of a series 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; |X| is subsequent to a separation from service after the taxpayer attains age 55*; |X| does not exceed the employee's allowable deduction in that tax year for medical care; |X| is made to an alternate payee pursuant to a qualified domestic relations order*; |X| is made pursuant to an IRS levy; |X| is made to pay qualified acquisition costs for a first time home purchase (IRA only); |X| is made to pay qualified higher education expenses (IRA only); and |X| is not more than the cost of your medical insurance (IRA only). The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available. Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of: |X| the calendar year in which the individual attains age 70 1/2; or |X| the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement option is not available to IRAs. The IRS has released Treasury regulations containing new Minimum Distribution rules. For Minimum Distributions required in 2003 and later, individuals are required to use the rules under the 2002 Final Regulations. The 2002 Final Regulations contain a provision which could increase the amount of minimum distributions required for certain individuals. Under the 2002 Final Regulations, individuals are required to include in their annuity contract value the actuarial value of any other benefits that will be provided under the annuity. We and other annuity providers are currently seeking clarification of this new rule. You should consult your tax adviser to determine the impact of this rule on your Minimum Distributions. Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to utilize the actual life expectancies of the participant and the spouse. In most cases, the beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the designated Beneficiary may generally take Minimum Distributions over his/her life expectancy or in a lump sum. If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on the amount that was not properly distributed. Because of the many recent changes to the Minimum Distribution rules, we strongly encourage you to consult with your tax advisor for more detailed information. GENERAL TAX CONSIDERATIONS 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). If the diversification requirements under the Code are not met and the annuity is not treated as an annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations prescribe the diversification requirements for variable annuity contracts. We expect the underlying mutual fund portfolios to comply with the terms of these regulations. 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. 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, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20% withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20% withholding: |X| any portion of a distribution paid as a Minimum Distribution; |X| direct transfers to the trustee of another retirement plan; |X| distributions from an individual retirement account or individual retirement annuity; |X| 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; |X| distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code; and |X| certain other distributions where automatic 20% withholding may not apply. 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 is treated as a distribution subject to taxation under the distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and 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 as Qualified Contracts, 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 someone other than the spouse of the owner (or former spouse incident to a divorce) is treated, for income tax purposes, as a distribution. 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 $1.1 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. We will deduct from your Annuity or from any applicable payment treated as a direct skip any amount of tax we are required to pay. Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. GENERAL INFORMATION HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. Any errors or corrections on transactions for your Annuity must be reported to us at our Office as soon as possible 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 30 days from the date you receive the confirmation. For transactions that are first confirmed on the quarterly statement, we assume all transactions are accurate unless you notify us within 30 days from the date you receive the quarterly statement. All transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 30-day period. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) both fixed and variable immediate adjustable annuities; and (d) a single premium variable life insurance policy that is registered with the SEC. On December 20, 2002, Skandia Insurance Company Ltd. (publ), an insurance company organized under the laws of the Kingdom of Sweden ("Skandia"), and on that date, the ultimate parent company of American Skandia, announced that it and Skandia U.S. Inc. had entered into a definitive Stock Purchase Agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"). Under the terms of the Stock Purchase Agreement, Prudential Financial will acquire Skandia U.S. Inc., a Delaware corporation, from Skandia. Skandia U.S. Inc. is the sole shareholder of ASI, which is the parent company of American Skandia. The transaction is expected to close during the second quarter of 2003. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, following the closing of the acquisition, Prudential Financial will exercise significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002 each Sub-account class of Separate Account B will be consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which will subsequently be renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B will have multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B will have no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with independent broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration. Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Compensation is paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of the firm. Compensation is generally based on a percentage of Purchase Payments made, up to a maximum of 5.5%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, firms may receive separate compensation or reimbursement for, among other things, training of sales personnel, marketing or other services they provide to us or our affiliates. We or ASM may enter into compensation arrangements with certain firms. These arrangements will not be offered to all firms and the terms of such arrangements may differ between firms. Any such compensation will be paid by us or ASM and will not result in any additional charge to you. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or other compensation. Advertising: We may advertise certain information regarding the performance of the investment options. Details on how we calculate performance for the Sub-accounts are found in the Statement of Additional Information. This 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 receive the beneficial tax treatment given to annuities under the Code. We may advertise the performance of the Portfolios in the form of "Standard" and "Non-standard" Total Returns calculated for each Sub-account. "Standard Total Return" figures assume a hypothetical initial investment of $1,000 allocated to a Sub-account during the most recent, one, five and ten year periods (or since the inception date that the Portfolio has been offered as a Sub-account, if less). "Standard Total Return" figures assume that the applicable Insurance Charge and the Annual Maintenance Fee are deducted and that the Annuity is surrendered at the end of the applicable period, meaning that any Contingent Deferred Sales Charge that would apply upon surrender is also deducted. "Non-standard Total Return" figures include any performance figures that do not meet the SEC's rules for Standard Total Returns. Non-standard Total Returns may also assume that the Annual Maintenance Fee does not apply due to the average Account Value being greater than $100,000, where the charge is waived. Non-standard Total Returns are calculated in the same manner as standardized returns except that the figures may not reflect all fees and charges. In particular, they may assume no surrender at the end of the applicable period so that the CDSC does not apply. Standard and Non-standard Total Returns will not reflect the additional asset-based charges that are deducted when you elect any optional benefits. The additional cost associated with any optional benefits you elected will reduce your performance. Non-Standard Total Returns must be accompanied by Standard Total Returns. Some of the underlying 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 Portfolios have been in existence, but the Sub-accounts have not. Such hypothetical historical performance is calculated using the same assumptions employed in calculating actual performance since inception of the Sub-accounts. Hypothetical historical performance of the underlying Portfolios prior to the existence of the Sub-accounts may only be presented as Non-Standard Total Returns. We may advertise the performance of money market-type Sub-accounts using a measure of the "current and effective yield". The current yield of a money market-type Sub-account is calculated based upon the previous seven-day period ending on the date of calculation. The effective yield of a money market-type Sub-account reflects the reinvestment of net income earned daily on the assets of such a Sub-account. The current and effective yields reflect the Insurance Charge and the charge for any optional benefits (if applicable) deducted against the Sub-account. In a low interest rate environment, yields for money market-type Sub-accounts, after deduction of the Insurance Charge, and the charge for any optional benefits (if applicable) may be negative even though the yield (before deducting for such charges) is positive. Current and effective yield information will fluctuate. This information may not provide a basis for comparisons with deposits in banks or other institutions which pay a fixed yield over a stated period of time, or with investment companies which do not serve as underlying mutual funds for variable annuities and/or do not have additional asset-based charges deducted for the insurance protection provided by the Annuity. Performance information on the Sub-accounts is based on past performance only and is not an indication or representation of future performance. Performance of the Sub-accounts is not fixed. Actual performance will depend on the type, quality and, for some of the Sub-accounts, the maturities of the investments held by the underlying mutual funds or portfolios and upon prevailing market conditions and the response of the underlying mutual funds to such conditions. Actual performance will also depend on changes in the expenses of the underlying mutual funds or portfolios. Such changes are reflected, in turn, in the Sub-accounts which invest in such underlying mutual fund or portfolio. In addition, the total amount of asset-based charges assessed against each Sub-account will affect performance. The information we may advertise regarding the Fixed Allocations may include the then current interest rates we are crediting to new Fixed Allocations. Information on current rates will be as of the date specified in such advertisement. Rates will be included in advertisements to the extent permitted by law. Given that the actual rates applicable to any Fixed Allocation are as of the date of any such Fixed Allocation's Guarantee Period begins, the rate credited to a Fixed Allocation may be more or less than those quoted in an advertisement. 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 NASDAQ 100, 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. AVAILABLE INFORMATION A Statement of Additional Information is available from us without charge upon your request. This Prospectus is part of the registration statement we filed with the 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 exhibits thereto at the SEC's public reference facilities at the above address, Room 1024, and at the SEC's Regional Offices, The Woolworth Building, 233 Broadway, New York, NY and 175 W. Jackson Boulevard, Suite 900, Chicago, IL. These documents, as well as documents incorporated by reference, may also be obtained through the SEC's Internet Website (http://www.sec.gov) for this registration statement as well as for other registrants that file electronically with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2002 previously filed by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus. We will 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 will do so upon receipt of your written or oral request. HOW TO CONTACT US You can contact us by: |X| calling Skandia's Telephone Automated Response System (STARS) at 1-800-766-4530. |X| writing to us via regular mail at American Skandia - Variable Annuities, P.O. Box 7040, Bridgeport, Connecticut 06601-7040 OR for express mail American Skandia - Variable Annuities, One Corporate Drive, Shelton, Connecticut 06484. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. |X| sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. |X| accessing information about your Annuity through our Internet Website at www.americanskandia.com. You can obtain account information through Skandia's Telephone Automated Response System (STARS) and at www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or an investment professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN through STARS and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia |X| American Skandia Life Assurance Corporation |X| American Skandia Life Assurance Corporation Variable Account B |X| American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor - American Skandia Marketing, Incorporated How Performance Data is Calculated |X| Current and Effective Yield |X| Total Return How the Unit Price is Determined Additional Information on Fixed Allocations |X| How We Calculate the Market Value Adjustment General Information |X| Voting Rights |X| Modification |X| Deferral of Transactions |X| Misstatement of Age or Sex |X| Ending the Offer Annuitization Independent Auditors Legal Experts Financial Statements |X| Appendix A - American Skandia Life Assurance Corporation Variable Account B APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA SELECTED FINANCIAL DATA (dollars in thousands) The following table summarizes information with respect to the operations of the Company:
For the Year Ended December 31, -------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------- ------------- ------------- ------------- ------------- STATEMENTS OF INCOME DATA Revenues: Annuity and life insurance $ 370,004 $ 388,696 $ 424,578 $ 289,989 $ 186,211 charges and fees /(a) (b)/ Fee income /(b)/ 97,650 111,196 130,610 83,243 50,839 Net investment income 19,632 20,126 18,595 11,477 11,130 Net realized capital (losses) gains and other revenues /(e)/ (7,438) 2,698 4,195 3,688 1,360 ------------- ------------- ------------- ------------- ------------- Total revenues $ 479,848 $ 522,716 $ 577,978 $ 388,397 $ 249,540 ============= ============= ============= ============= ============= Benefits and Expenses: Annuity and life insurance $ 3,391 $ 1,955 $ 751 $ 612 $ 558 benefits Change in annuity and life insurance policy reserves /(c)/ 2,741 (39,898) 49,339 (671) 1,053 Guaranteed minimum death benefit claims, net of 23,256 20,370 2,618 4,785 - hedge /(b)/ Return credited to contract 5,196 5,796 8,463 (1,639) (8,930) owners Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 125,434 86,306 Amortization of deferred acquisition costs /(b) (d)/ 510,059 224,047 184,616 83,861 86,628 Interest expense 14,544 73,424 85,998 69,502 41,004 ------------- ------------- ------------- ------------- ------------- Total benefits and expenses $ 747,915 $ 482,449 $ 482,382 $ 281,884 $ 206,619 ============= ============= ============= ============= ============= Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 $ 30,344 $ 8,154 ============= ============= ============= ============= ============= Net (loss) income $ (165,257) $ 33,099 $ 64,817 $ 76,169 $ 34,767 ============= ============= ============= ============= ============= STATEMENTS OF FINANCIAL CONDITION DATA Total assets /(b)/ $ 23,708,585 $ 28,009,782 $ 31,702,705 $ 30,881,579 $ 18,848,273 ============= ============= ============= ============= ============= Future fees payable to parent $ 708,249 $ 799,472 $ 934,410 $ 576,034 $ 368,978 ============= ============= ============= ============= ============= Surplus notes $ 110,000 $ 144,000 $ 159,000 $ 179,000 $ 193,000 ============= ============= ============= ============= ============= Shareholder's equity $ 683,061 $ 577,668 $ 496,911 $ 359,434 $ 250,417 ============= ============= ============= ============= =============
/a./ On annuity and life insurance sales of $3,472,044, $3,834,167, $8,216,167, $6,862,968, and $4,159,662, during the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively, with contract owner assets under management of $21,894,636, $26,017,847, $29,751,822, $29,396,693, and $17,854,761, as of December 31, 2002, 2001, 2000, 1999, and 1998, respectively. /b./ These items are significantly impacted by equity market volatility. /c./ For the year ended December 31, 2000, change in annuity and life insurance policy reserves reflected increases to those reserves for guaranteed minimum death benefit ("GMDB") exposure. For the year ended December 31, 2001, the Company changed certain of its assumptions related to its GMDB exposure resulting in a benefit to operations. See Results of Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for a further discussion. /d./ During the year ended December 31, 2002, the Company recorded an acceleration of amortization of $206,000 against the deferred acquisition cost asset. See the MD&A for a further discussion. /e./ Net realized capital (losses) gains and other revenues include $5,845 of net realized capital losses on sales of securities during 2002 and an other than temporary impairment charge of $3,769 recorded during 2002 on the Company's equity securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands) Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data. Results of Operations - --------------------- Annuity and life insurance sales were $3,472,044, $3,834,167 and $8,216,167, in 2002, 2001 and 2000, respectively. The decrease in sales in 2002 and 2001 was primarily the result of the general decline in sales in the industry, attributed in large part to the continued uncertainty in the equity markets. In addition, the Company believes uncertainty regarding its future ownership has adversely impacted sales, primarily in the latter part of 2002. The Company announced, in the first quarter of 2002, its intention to focus on the growth of its core variable annuity business. Average assets under management totaled $23,637,559 in 2002, $26,792,877 in 2001 and $31,581,902 in 2000, representing a decrease of 12% and 15% in 2002 and 2001, respectively, due primarily to weak equity markets. The decrease in annuity and life insurance charges and fees and fee income before surrender charge income and reinsurance was consistent with the decline in assets under management. Surrender charge income increased in 2002 as compared to 2001. This was caused by higher lapses when compared to the applicable prior year periods, and was primarily attributable, the Company believes, to concerns by contract holders, rating agencies and the Company's distribution channels, surrounding the uncertainty in the equity markets and its impact on variable annuity companies generally and, prior to the announcement of the Acquisition, uncertainty concerning the Company's future (See Liquidity and Capital Resources for rating agency actions). Net realized capital losses in 2002 were primarily from $9,593 of losses on sales and $3,769 of other-than-temporary impairments of mutual fund investments that are held in support of a deferred compensation program for certain of the Company's employees. The deferred compensation program losses were offset by net gains of $3,746 during 2002 on sales of fixed maturities. Included in those net gains on sales of fixed maturities for 2002, was a realized loss of approximately $1,236 on the sale of a WorldCom, Inc. bond. The net capital gains in 2001 related primarily to sales of fixed maturity investments, were partially offset by losses on securities in the fixed maturity portfolio. The most significant loss was $2,636 related to Enron securities. In addition net realized capital losses of $3,534 in 2001 were incurred due to sales of mutual fund holdings in support of the Company's non-qualified deferred compensation program. The change in annuity and life insurance policy reserves includes changes in reserves related to annuity contracts with mortality risks. During 2001, the Company's Guaranteed Minimum Death Benefit ("GMDB") reserve decreased $43,984, as the result of an update of certain reserve assumptions as to risks inherent in the benefit. Previous assumptions had been based on statutory valuation principles as an approximation for U.S. GAAP. In addition, future mortality rates were lowered in 2001 to reflect favorable past experience. However, offsetting the resulting increase in earnings and equity as a result of changes in the GMDB liability in 2001, assumptions related to GMDB claim costs were also updated in the calculation of the deferred acquisition cost asset, resulting in additional amortization of this asset. The Company uses derivative instruments, which consist of equity option contracts for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. GMDB claims, net of hedge, consist of GMDB claims offset by the mark to market and realized capital gain/loss results of the Company's option contracts. During 2002 and 2001, the fluctuations in GMDB claims, net of hedge, were driven by an increase in hedge related benefits of $19,776 and $14,646, respectively. Hedge related benefits were partially offset by increases in GMDB claims of $22,662 and $32,398 during 2002 and 2001, respectively. Return credited to contract owners consists primarily of net investment results from the Company's fixed, market value adjusted, separate account investment option and changes in the Company's experience rated reinsurance receivables. The decrease in 2002 was primarily due to increased net investment results on the Company's fixed, market value adjusted, separate account investment option. As the equity markets decline, movement from variable investment options to fixed investment options, primarily due to one of the Company's product features, has increased the assets invested in the fixed separate account investment option. Included in 2002 net investment results is $9,849 of realized and unrealized losses on certain securities, of which $5,427 related to WorldCom, Inc. bonds. The increase in net investment results was partially offset by a decrease in experience rated reinsurance receivables in 2002 due to unfavorable experience on certain blocks of variable annuity business. In 2001, return credited to contract owners decreased primarily due to favorable experience on certain blocks of variable annuity contracts increasing the experience rated reinsurance receivable. Partially offsetting the 2001 decrease is net investment losses of $1,662 related to Enron securities. Underwriting, acquisition and other insurance expenses for 2002, 2001 and 2000 were as follows:
2002 2001 2000 ---------- ---------- ---------- Commissions and purchase credits $ 287,612 $ 248,187 $ 430,743 General operating expenses 145,438 157,704 214,957 Acquisition costs deferred (244,322) (209,136) (495,103) ---------- ---------- ---------- Underwriting, acquisition and other insurance expenses $ 188,728 $ 196,755 $ 150,597 ========== ========== ==========
New products launched, as well as a larger proportion of sales of products with higher commissions as compared to 2001 led to an increase in commissions and purchase credits during 2002. Lower sales and asset levels led to a decrease in commissions and purchase credits during 2001. Partially offsetting this decline in 2001, the company launched a commission promotion program that increased commissions as a percentage of new sales. Commission promotions in 2002 were approximately equivalent as compared to 2001. General operating expenses decreased during 2002 and 2001 as a result of lower sales-based compensation, as well as expense reduction programs implemented during 2001 and continued strong expense management in 2002. Variable compensation and long-term incentive plan expenses have decreased due to the slowdown in sales and the decline in the equity markets. Amortization of deferred acquisition costs increased over the past two years, in general, due to the further depressed equity markets in 2002 and 2001, thereby decreasing expectations of future gross profits and actual gross profits from asset based fees and increased expected and actual claim costs associated with minimum death benefit guarantees. During 2002, the Company also performed a recoverability study and an analysis of its short-term assumptions of future gross profits and determined those assumptions of future profits to be excessive. This analysis resulted in a current year acceleration of amortization of $206,000. During 2002 and 2001, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization. See Note 2 of Notes to Consolidated Financial Statements for a further discussion on amortization of deferred acquisition costs. Interest expense decreased during 2002 primarily due to lower interest expense related to the future fees payable to ASI liability (See Note 8). Interest expense on these obligations is driven by the cash flows from the underlying annuity contracts acting as collateral. Due to the depressed asset values of those annuity contracts driven by the decline in the equity markets, the cash flows, and therefore the interest expense, decreased from prior year levels. Interest expense decreased in 2001 as a result of a reduction in borrowing. The Company's income tax (benefit) expense varies directly with increases or decreases in (loss) income from operations. The effective income tax rate varied from the corporate rate of 35% due primarily to the deduction for dividends received. Total assets and liabilities decreased $4,301,197 and $4,406,590, respectively, from December 31, 2001. This change resulted primarily from the declining equity markets. Significant Accounting Policies - ------------------------------- Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. If the Company's long-term fund growth rate assumption was 7% instead of 8%, the Company's deferred acquisition cost asset at December 31, 2002 would be reduced by $26,273. Future Fees Payable to ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, historical mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability. The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management, that the present value of future payments to ASI would be $429,773. Deferred Taxes The Company evaluates the necessity of recording a valuation allowance against its deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, Income Taxes ("SFAS 109"). In performing this evaluation, the Company considers all available evidence in making the determination as to whether it is more likely than not that deferred tax assets are not realizable. For the Company, that evidence includes: cumulative U.S. GAAP pre-tax income in recent years past, whether or not operating losses have expired unused in the past, the length of remaining carryback or carryforward periods, and net taxable income or loss expectations in early future years. The net taxable income or loss projections are based on profit assumptions consistent with those used to amortize deferred acquisition costs (see above discussion on deferred acquisition costs). As of December 31, 2002, the Company has approximately $361,000 gross deferred tax assets related principally to net operating loss carryforwards that expire in 2016 and 2017 and insurance reserve differences. After considering the impact of gross reversing temporary liabilities of $323,000, the Company estimates that the Company will generate sufficient taxable income to fully utilize gross deferred tax assets within 2 years (prior to the expiration of the net operating losses). Liquidity and Capital Resources - ------------------------------- The Company's liquidity requirements have generally been met by cash from insurance operations, investment activities, borrowings from ASI, reinsurance, capital contributions and securitization transactions with ASI (see Note 8). The Company's cash from insurance operations is primarily comprised of fees generated off of assets under management, less commission expense on sales, sales and marketing expenses and other operating expenses. Fund performance driven by the equity markets directly impact assets under management and therefore, the fees the Company can generate off of those assets. During 2002 and 2001, assets under management declined consistent with the equity market declines resulting in reductions in fee revenues. In addition, the equity markets impact sales of variable annuities. As sales have declined in a declining equity market, non-promotional commission expense declined, however, in order to boost sales levels, the Company has offered various sales promotions increasing the use of cash for commission expense. In order to fund the cash strain generated from acquisition costs on current sales, the Company has relied on cash generated from its direct insurance operations as well as reinsurance and securitization transactions. The Company has used modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving , the future fees generated from that book of business. These reinsurance agreements also mitigate the recoverability risk associated with the payment of up-front commissions and other acquisition costs. Similarly, the Company has entered into securitization transactions whereby the Company issues to ASI, in exchange for cash, the right to receive future fees generated off of a specific book of business. On April 12, 2002, the Company entered into a new securitization transaction with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was approximately $101,713. As of December 31, 2002, 2001 and 2000, the Company had short-term borrowings of $10,000, $10,000 and $10,000, respectively, and had long-term surplus notes liabilities of $110,000, $144,000 and $159,000, respectively. During 2002, the Company borrowed $263,091 and paid back $263,091 related to short-term borrowing. During 2002 and 2001, the Company received permission from the State of Connecticut Insurance Department to pay down surplus notes in the amount of $34,000 and $15,000, respectively. See Notes 14 and 15 of Notes to Consolidated Financial Statements for more information on surplus notes and short-term borrowing, respectively. As of December 31, 2002, 2001 and 2000, shareholder's equity totaled $683,061, $577,668 and $496,911, respectively. The Company received capital contributions of $259,720 and $48,000 from ASI during 2002 and 2001, respectively. Of this, $4,520 and $2,500, respectively, was used to support its investment in Skandia Vida. Net (loss) income of ($165,257) and $33,099, for the years ended December 31, 2002 and 2001, respectively, contributed to the respective changes in shareholder's equity in 2002 and 2001. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies that may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest rate risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. During 2002, all of the major rating agencies reviewed the U.S. life insurance sector, including the Company. Based on these reviews the rating agencies have evolving concerns surrounding the risk profile of variable annuity companies due to their significant exposure to equity market performance. This exposure has resulted, and may continue to result, in earnings volatility. Based on the reviews made during 2002, the following ratings actions took place: On May 8, 2002, Fitch Ratings downgraded the Company's "insurer financial strength" rating to A+ from AA- with a "stable" outlook. On September 19, 2002, Fitch Ratings lowered the Company's "insurer financial strength" rating to A- from A+ with an "evolving" outlook. On September 27, 2002, A.M. Best Co. lowered the Company's "financial strength" rating to A- from A with negative implications. On October 16, 2002, Standard and Poor's lowered the Company's "counter party credit" and "financial strength" ratings to A- from A+ with a negative outlook and removed the Company from Credit Watch. Subsequent to the announcement of the Acquisition, Standard and Poor's placed the Company on CreditWatch with positive implications. Effects of Inflation - -------------------- The rate of inflation has not had a significant effect on the Company's financial statements. Outlook - -------- The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in order to gain market share and improve profitability in an increasingly competitive market. The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks, securities firms and insurance companies. This legislative change has created opportunities for continued consolidation in the financial services industry and increased competition as large companies offer a wide array of financial products and services. Various other legislative initiatives could impact the Company such as pension reform and capital gains and estate tax changes. These include the proposed exclusion from tax for corporate dividends, potential changes to the deductibility of dividends received from the Company's separate accounts and newly proposed tax-advantaged savings programs. Additional pension reform may change current tax deferral rules and allow increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less attractive to consumers, which could adversely impact the Company. In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts. Forward Looking Information - --------------------------- The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements, so long as those statements are identified as forward-looking, and the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions. Certain information contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations is forward-looking within the meaning of the 1995 Act or Securities and Exchange Commission rules. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of significant uncertainties and results may differ materially from these statements. You should not put undue reliance on these forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and describes strategies used to manage these risks, and includes "forward-looking statements" that involve risk and uncertainties. The discussion is limited to financial instruments subject to market risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed. Interest Rate Risk - ------------------ Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2002, 91% of assets held under management by the Company are in non-guaranteed Separate Accounts for which the Company's interest rate and equity market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 9% of assets, the interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. At December 31, 2002, the Company held fixed maturity investments in its general account that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities, fixed supplementary contracts, the fixed investment option offered in its variable life insurance contracts, and in support of the Company's target solvency capital. The Company has a conservative investment philosophy with regard to these investments. All investments are investment grade corporate securities, government agency or U.S. government securities. The Company's deferred annuity products offer a fixed investment option which subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract owner. Guarantee period options available range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the guarantee period subjects the contract owner to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of failing to maintain the asset/liability matching program with respect to duration and convexity. Liabilities held in the Company's guaranteed separate account as of December 31, 2002 totaled $1,828,048. Assets, primarily fixed income investments, supporting those liabilities had a fair value of $1,828,048. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2002. The analysis showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities and the corresponding assets of approximately $69,150 and $68,500, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2001, showed a net increase in interest-sensitive liabilities and the corresponding assets of approximately $39,800 and $39,900, respectively. Equity Market Exposure - ---------------------- The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by the Company. Various fees and charges earned are substantially derived as a percentage of the market value of assets under management. In a market decline, this income will be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 2002, sustained throughout 2003, would result in an approximate drop in related mortality and expense charges and annual fee income of $36,350. Another equity market risk exposure of the Company relates to guaranteed minimum death benefit payments. Declines in equity markets and, correspondingly, the performance of the funds underlying the Company's products, increase exposure to guaranteed minimum death benefit payments. As discussed in Note 2D of the consolidated financial statements, the Company uses derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the implementation of this program, the Company used reinsurance to mitigate this risk. The Company has a portfolio of equity investments consisting of mutual funds, which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline; however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the equity markets and consumer behavior, actual results may vary from those predicted by the Company's models. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Report of Independent Auditors To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. /s/ Ernst & Young LLP Hartford, Connecticut February 3, 2003 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Financial Condition (in thousands, except share data)
As of December 31, --------------------------- 2002 2001 ------------ ------------ ASSETS - ------- Investments: Fixed maturities - at fair value (amortized cost of $379,422 and $356,882, respectively) $ 398,601 $ 362,831 Equity securities - at fair value (amortized cost of $52,017 and $49,886, respectively) 51,769 45,083 Derivative instruments - at fair value 10,370 5,525 Policy loans 7,559 6,559 ------------ ------------ Total investments 468,299 419,998 Cash and cash equivalents 51,339 - Accrued investment income 4,196 4,737 Deferred acquisition costs 1,117,544 1,383,281 Reinsurance receivable 5,447 7,733 Receivable from affiliates 3,961 3,283 Income tax receivable - 30,537 Deferred income taxes 38,206 - Fixed assets, at depreciated cost (accumulated depreciation of $7,555 and $4,266, respectively) 12,132 17,752 Other assets 101,848 103,912 Separate account assets 21,905,613 26,038,549 ------------ ------------ Total assets $ 23,708,585 $ 28,009,782 ============ ============ LIABILITIES AND SHAREHOLDER'S EQUITY - ------------------------------------ Liabilities: Reserves for future policy and contract benefits $ 149,349 $ 91,126 Accounts payable and accrued expenses 133,543 192,952 Income tax payable 6,547 - Deferred income taxes - 54,980 Payable to affiliates 2,223 101,035 Future fees payable to American Skandia, Inc. ("ASI") 708,249 799,472 Short-term borrowing 10,000 10,000 Surplus notes 110,000 144,000 Separate account liabilities 21,905,613 26,038,549 ------------ ------------ Total liabilities 23,025,524 27,432,114 ------------ ------------ Commitments and contingent liabilities (Note 18) Shareholder's equity: Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional paid-in capital 595,049 335,329 Retained earnings 73,821 239,078 Accumulated other comprehensive income 11,691 761 ------------ ------------ Total shareholder's equity 683,061 577,668 ------------ ------------ Total liabilities and shareholder's equity $ 23,708,585 $ 28,009,782 ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Income (in thousands)
For the Years Ended December 31, -------------------------------------- 2002 2001 2000 ---------- ---------- ---------- REVENUES - -------- Annuity and life insurance charges and fees $ 370,004 $ 388,696 $ 424,578 Fee income 97,650 111,196 130,610 Net investment income 19,632 20,126 18,595 Net realized capital (losses) gains (9,614) 928 (688) Other 2,176 1,770 4,883 ---------- ---------- ---------- Total revenues 479,848 522,716 577,978 ---------- ---------- ---------- EXPENSES - -------- Benefits: Annuity and life insurance benefits 3,391 1,955 751 Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 Guaranteed minimum death benefit claims, net of hedge 23,256 20,370 2,618 Return credited to contract owners 5,196 5,796 8,463 ---------- ---------- ---------- Total benefits 34,584 (11,777) 61,171 Other: Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 Amortization of deferred acquisition costs 510,059 224,047 184,616 Interest expense 14,544 73,424 85,998 ---------- ---------- ---------- 713,331 494,226 421,211 ---------- ---------- ---------- Total benefits and expenses 747,915 482,449 482,382 ---------- ---------- ---------- (Loss) income from operations before income tax (benefit) expense (268,067) 40,267 95,596 Income tax (benefit) expense (102,810) 7,168 30,779 ---------- ---------- ---------- Net (loss) income $ (165,257) $ 33,099 $ 64,817 ========== ========== ==========
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Shareholder's Equity (in thousands)
Accumulated Other Comprehensive Income ------------------------------------------------------------------------------- Additional Foreign Unrealized Common Paid in Retained Currency Gains Stock Capital Earnings Translation (Losses) Total ---------- ---------- ---------- ----------- ---------- ---------- As of December 31, 1999 $ 2,500 $ 215,879 $ 141,162 $ 148 ($ 255) $ 359,434 Net income 64,817 64,817 Other comprehensive income: Unrealized capital gains 843 843 Reclassification adjustment for realized losses included in net realized capital (losses) gains 433 433 Foreign currency translation (66) (66) ---------- Other comprehensive income 1,210 ---------- Comprehensive income 66,027 Capital contributions 71,450 71,450 ---------- ---------- ---------- ---------- ---------- ---------- As of December 31, 2000 2,500 287,329 205,979 82 1,021 496,911 Net income 33,099 33,099 Other comprehensive loss: Unrealized capital losses (261) (261) Reclassification adjustment for realized gains included in net realized capital (losses) gains (14) (14) Foreign currency translation (67) (67) ---------- Other comprehensive loss (342) ---------- Comprehensive income 32,757 Capital contributions 48,000 48,000 ---------- ---------- ---------- ---------- ---------- ---------- As of December 31, 2001 2,500 335,329 239,078 15 746 577,668 Net loss (165,257) (165,257) Other comprehensive income: Unrealized capital gains 10,434 10,434 Reclassification adjustment for realized losses included in net realized capital (losses) gains 1,126 1,126 Foreign currency translation (630) (630) ---------- Other comprehensive income 10,930 ---------- Comprehensive loss (154,327) Capital contributions 259,720 259,720 ---------- ---------- ---------- ---------- ---------- ---------- As of December 31, 2002 $ 2,500 $ 595,049 $ 73,821 $ (615) $ 12,306 $ 683,061
Unrealized capital gains (losses) is shown net of tax expense (benefit) of $5,618, ($140) and $454 for 2002, 2001 and 2000, respectively. Reclassification adjustment for realized losses (gains) included in net realized capital (losses) gains is shown net of tax expense (benefit) of $606, ($8) and $233 for 2002, 2001 and 2000, respectively. Foreign currency translation is shown net of tax benefit of $339, $36 and $36 for 2002, 2001 and 2000, respectively. See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Cash Flows (in thousands)
For the Years Ended December 31, 2002 2001 2000 ---------- ---------- ---------- Cash flow from operating activities: Net (loss) income $ (165,257) $ 33,099 $ 64,817 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Amortization and depreciation 21,649 13,374 5,758 Deferral of acquisition costs (244,322) (209,136) (495,103) Amortization of deferred acquisition costs 510,059 224,047 184,616 Deferred tax (benefit) expense (99,071) 46,215 60,023 Change in unrealized (gains) losses on derivatives (5,149) 2,902 (2,936) Increase (decrease) in policy reserves 3,293 (38,742) 50,892 (Decrease) increase in net receivable/payable to affiliates (99,490) 103,496 (72,063) Change in net income tax receivable/payable 37,084 4,083 (58,888) Increase in other assets (9,546) (12,105) (65,119) Decrease (increase) in accrued investment income 541 472 (1,155) Decrease (increase) in reinsurance receivable 2,286 (1,849) 420 (Decrease) increase in accounts payable and accrued expenses (59,409) 55,912 (21,550) Net realized capital (gains) losses on derivatives (26,654) (14,929) 5,554 Net realized capital losses (gains) on investments 9,616 (928) 688 ---------- ---------- ---------- Net cash (used in) provided by operating activities (124,370) 205,911 (344,046) ---------- ---------- ---------- Cash flow from investing activities: Purchase of fixed maturity investments (388,053) (462,820) (380,737) Proceeds from sale and maturity of fixed maturity investments 367,263 390,816 303,736 Purchase of derivatives (61,998) (103,533) (14,781) Proceeds from exercise or sale of derivative instruments 88,956 113,051 5,936 Purchase of shares in equity securities and dividend reinvestments (49,713) (55,430) (18,136) Proceeds from sale of shares in equity securities 34,220 25,228 8,345 Purchase of fixed assets (2,423) (10,773) (7,348) Increase in policy loans (1,000) (2,813) (2,476) ---------- ---------- ---------- Net cash used in investing activities (12,748) (106,274) (105,461) ---------- ---------- ---------- Cash flow from financing activities: Capital contribution 259,720 48,000 71,450 Pay down of surplus notes (34,000) (15,000) (20,000) (Decrease) increase in future fees payable to ASI, net (91,223) (137,355) 358,376 Deposits to contract owner accounts 808,209 59,681 172,441 Withdrawals from contract owner accounts (164,964) (130,476) (102,603) Change in contract owner accounts, net of investment earnings (588,315) 62,875 (55,468) ---------- ---------- ---------- Net cash provided by (used in) financing activities 189,427 (112,275) 424,196 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 52,309 (12,638) (25,311) Change in foreign currency translation (970) (103) (101) Cash and cash equivalents at beginning of period - 12,741 38,153 Cash and cash equivalents at end of period $ 51,339 $ - $ 12,741 ========== ========== ========== Income taxes (received) paid $ (40,823) $ (43,130) $ 29,644 ========== ========== ========== Interest paid $ 23,967 $ 56,831 $ 114,394 ========== ========== ==========
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 2002 (dollars in thousands) 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation ("ASLAC" or the "Company"), with its principal offices in Shelton, Connecticut, is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). On December 19, 2002, Skandia Insurance Company Ltd. (publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company, entered into a definitive purchase agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"), whereby Prudential Financial will acquire the Company and certain of its affiliates (the "Acquisition"). Consummation of the transaction is subject to various closing conditions, including regulatory approvals and approval of certain matters by the board of directors and shareholders of the mutual funds advised by American Skandia Investment Services, Inc. ("ASISI"), a subsidiary of ASI. The transaction is expected to close during the second quarter of 2003. The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues term and variable universal life insurance and variable deferred and immediate annuities for individuals and groups in the United States of America and its territories. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida"), which is a life insurance company domiciled in Mexico. Skandia Vida had total shareholder's equity of $5,023 and $4,179 as of December 31, 2002, and 2001, respectively. Skandia Vida has generated net losses of $2,706, $2,619 and $2,540 in 2002, 2001 and 2000, respectively. As part of the Acquisition, it is expected that the Company will sell its ownership interest in Skandia Vida to SICL. The Company has filed for required regulatory approvals from the State of Connecticut and Mexico related to the sale of Skandia Vida. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting ------------------ The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Skandia Vida has been consolidated in these financial statements. Intercompany transactions and balances between the Company and Skandia Vida have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Standard ----------------------- Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"). Derivative instruments held by the Company consist of equity put option contracts utilized to AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) manage the economic risks associated with guaranteed minimum death benefits ("GMDB"). These derivative instruments are carried at fair value. Realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements. Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption of EITF Issue 99-20 did not have a significant effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards. No. 142 "Accounting for Goodwill and Intangible Assets" ("SFAS 142"). Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The adoption of SFAS 142 did not have a significant impact on the Company's financial statements. C. Investments ----------- The Company has classified its fixed maturity investments as available-for-sale and, as such, they are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. The Company has classified its equity securities held in support of a deferred compensation plan (see Note 12) as available-for-sale. Such investments are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized capital gains and losses on disposal of investments are determined by the specific identification method. Other than temporary impairment charges are determined based on an analysis that is performed on a security by security basis and includes quantitative and qualitative factors. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Derivative Instruments ---------------------- The Company uses derivative instruments, which consist of equity put option contracts, for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases. Conversely, as the equity markets increase the Company's exposure to future GMDB claims decreases. The claims exposure is reduced by the market value effect of the option contracts purchased. Based on criteria described in SFAS 133, the Company's fair value hedges do not qualify as "effective" hedges and, therefore, hedge accounting may not be applied. Accordingly, the derivative investments are carried at fair value with changes in unrealized gains and losses being recorded in income as those changes occur. As such, both realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. As of December 31, 2002 and 2001, the accumulated difference between cost and market value on the Company's derivatives was an unrealized gain of $1,434 and an unrealized loss of $3,715, respectively. The amount of realized and unrealized gains (losses) on the Company's derivatives recorded during the years ended December 31, 2002, 2001 and 2000 was $31,803, $12,027 and ($2,619), respectively. E. Cash Equivalents ---------------- The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity date, at acquisition, of three months or less to be cash equivalents. As of December 31, 2002, $50 of cash reflected on the Company's financial statements was restricted in compliance with regulatory requirements. F. State Insurance Licenses ------------------------ Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000 less accumulated amortization of $2,038 at December 31, 2002. Due to the adoption of SFAS 142, the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of December 31, 2002, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore, no impairment charge was required. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. Income Taxes ------------ The Company is included in the consolidated federal income tax return filed by Skandia U.S. Inc. and its U.S. subsidiaries. In accordance with the tax sharing agreement, the federal income tax provision is computed on a separate return basis as adjusted for consolidated items. Pursuant to the terms of this agreement, the Company has the right to recover the value of losses utilized by the consolidated group in the year of utilization. To the extent the Company generates income in future years, the Company is entitled to offset future taxes on that income through the application of its loss carry forward generated in the current year. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. H. Recognition of Revenue and Contract Benefits -------------------------------------------- Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance fees are earned ratably throughout the year. Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Fee income from mutual fund organizations is recognized when assessed against assets under management. Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income reduced by amounts credited to the contract holder for interest. This net spread is included in return credited to contract owners on the consolidated statements of income. Benefit reserves for these contracts represent the account value of the contracts plus a AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) market value adjustment, and are included in the general account reserve for future policy and contract benefits to the extent in excess of the separate account assets, typically for the market value adjustment at the reporting date. Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income, reported as a component of return credited to contract owners. Revenues for fixed 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 applicable actuarial standards with assumed interest rates that vary by issue year and are included in the general account reserve for future policy and contract benefits. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 2002 and 2001. Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs -------------------------- The costs of acquiring new business, which vary with and are primarily related to new business generated, are being deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits, from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Details of deferred acquisition costs and related amortization for the years ended December 31, are as follows:
2002 2001 2000 ------------ ------------ ------------ Balance at beginning of year $ 1,383,281 $ 1,398,192 $ 1,087,705 Acquisition costs deferred during the year 244,322 209,136 495,103 Acquisition costs amortized during the year (510,059) (224,047) (184,616) ------------ ------------ ------------ Balance at end of year $ 1,117,544 $ 1,383,281 $ 1,398,192 ============ ============ ============
As asset growth rates, during 2002 and 2001, have been far below the Company's long-term assumption, the adjustment to the short-term asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study, management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206,000. Throughout the year, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72,000. J. Reinsurance ----------- The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. At December 31, 2002 and 2001, in accordance with the provisions of the modified coinsurance agreements, the Company accrued approximately $5,447 and $7,733, respectively, for amounts receivable from favorable reinsurance experience on certain blocks of variable annuity business. K. Translation of Foreign Currency ------------------------------- The financial position and results of operations of Skandia Vida are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at each year-end. Statements of income and changes in 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 reported as a component of other comprehensive income. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) L. Separate Accounts ----------------- Assets and liabilities in separate accounts are included as separate captions in the consolidated statements of financial condition. Separate account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through ASISI, utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contract holder has the option of directing funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of a contract is borne by the contract holder. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated with the investments that support these fixed options. Included in Separate Account liabilities are reserves of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, relating to deferred annuity investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the Commissioners Annuity Reserve Valuation Method. Separate Account assets of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, consisting of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment income, accrued liabilities and amounts due to/from the General Account are held in support of these annuity obligations, pursuant to state regulation. Included in the general account, within Reserves for Future Policy and Contract Benefits, is the market value adjustment associated with the guaranteed, fixed rate investment options, assuming the market value adjustment at the reporting date. Net investment income (including net realized capital gains and losses) and interest credited to contract holders on separate account assets are not separately reflected in the Consolidated Statements of Income. M. Unearned Performance Credits ---------------------------- The Company defers certain bonus credits applied to contract holder deposits. The credit is reported as a contract holder liability within separate account liabilities and the deferred expense is reported as a component of other assets. As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortizes the deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit is amortized in proportion to expected surrenders and mortality. As of December 31, 2002 and 2001, the unearned performance credit asset was $83,288 and $89,234, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Estimates --------- The preparation of financial statements in conformity with U.S. GAAP 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 estimates of future policy lapses, investment returns and maintenance expenses. Actual results could differ from those estimates. 3. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of fixed maturities and investments in equity securities as of December 31, 2002 and 2001 are shown below. All securities held at December 31, 2002 and 2001 were publicly traded. Investments in fixed maturities as of December 31, 2002 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value --------- --------- ---------- ---------- U.S. Government obligations $ 270,969 $ 15,658 $ (78) $ 286,549 Obligations of state and political subdivisions 253 9 (1) 261 Corporate securities 108,200 3,631 (40) 111,791 --------- --------- ---------- ---------- Totals $ 379,422 $ 19,298 $ (119) $ 398,601 ========= ========= ========== ==========
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2002 are shown below. Actual maturities may differ from contractual maturities due to call or prepayment provisions. Amortized Cost Fair Value --------- ---------- Due in one year or less $ 12,793 $ 12,884 Due after one through five years 165,574 171,830 Due after five through ten years 186,609 198,913 Due after ten years 14,446 14,974 --------- ---------- Total $ 379,422 $ 398,601 ========= ========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) Investments in fixed maturities as of December 31, 2001 consisted of the following: Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value --------- -------- ---------- ---------- U.S. Government obligations $ 198,136 $ 2,869 $ (413) $ 200,592 Obligations of state and political subdivisions 252 8 - 260 Corporate securities 158,494 4,051 (566) 161,979 --------- -------- ---------- ---------- Totals $ 356,882 $ 6,928 $ (979) $ 362,831 ========= ======== ========== ========== Proceeds from sales of fixed maturities during 2002, 2001 and 2000 were $367,213, $386,816 and $302,632, respectively. Proceeds from maturities during 2002, 2001 and 2000 were $50, $4,000 and $1,104, respectively. The cost, gross unrealized gains/losses and fair value of investments in equity securities at December 31 are shown below: Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value ------------ ------------ ------------ ------------ 2002 $ 52,017 $ 136 $ (384) $ 51,769 2001 $ 49,886 $ 122 $ (4,925) $ 45,083 Net realized investment gains (losses), determined on a specific identification basis, were as follows for the years ended December 31: 2002 2001 2000 --------- --------- --------- Fixed maturities: Gross gains $ 8,213 $ 8,849 $ 1,002 Gross losses (4,468) (4,387) (3,450) Investment in equity securities: Gross gains 90 658 1,913 Gross losses (13,451) (4,192) (153) --------- --------- --------- Totals $ (9,616) $ 928 $ (688) ========= ========= ========= During 2002, the Company determined that certain amounts of its investment in equity securities were other than temporarily impaired and, accordingly, recorded a loss of $3,769. As of December 31, 2002, the Company did not own any investments in fixed maturity securities whose carrying value exceeded 10% of the Company's equity. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) As of December 31, 2002, the following fixed maturities were restricted in compliance with regulatory requirements: Security Fair Value - -------- ---------- U.S. Treasury Note, 6.25%, February 2003 $4,345 U.S. Treasury Note, 3.00%, November 2003 183 Puerto Rico Commonwealth, 4.60%, July 2004 210 Puerto Rico Commonwealth, 4.875%, July 2023 52 4. 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 equity securities are based on quoted market prices. The fair value of derivative instruments is determined based on the current value of the underlying index. The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term nature of these investments. The carrying value of policy loans approximates fair value. Fair value of future fees payable to ASI are determined on a discounted cash flow basis, using best estimate assumptions of lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management. The carrying value of short-term borrowings (cost) approximates fair value due to the short-term nature of these liabilities. Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all accrued interest at the maturity date (see Note 14 for payment restrictions). AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 4. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The fair values and carrying values of financial instruments at December 31, 2002 and 2001 are as follows: December 31, 2002 December 31, 2001 ----------------- ----------------- Carrying Carrying Fair Value Value Fair Value Value ---------- ---------- ---------- ---------- Assets - ------ Fixed Maturities $ 398,601 $ 398,601 $ 362,831 $ 362,831 Equity Securities 51,769 51,769 45,083 45,083 Derivative Instruments 10,370 10,370 5,525 5,525 Policy Loans 7,559 7,559 6,559 6,559 Liabilities - ---------- Future Fees Payable to ASI 429,773 708,249 546,357 799,472 Short-term Borrowing 10,000 10,000 10,000 10,000 Surplus Notes and accrued interest of $29,230 and $25,829 in 2002 and 2001, respectively 140,777 139,230 174,454 169,829 5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31 were as follows: 2002 2001 2000 --------- --------- --------- Fixed maturities $ 18,015 $ 18,788 $ 13,502 Cash and cash equivalents 1,116 909 5,209 Equity securities 809 622 99 Policy loans 403 244 97 --------- --------- --------- Total investment income 20,343 20,563 18,907 Investment expenses (711) (437) (312) --------- --------- --------- Net investment income $ 19,632 $ 20,126 $ 18,595 ========= ========= ========= 6. INCOME TAXES The significant components of income tax expense for the years ended December 31 were as follows:
2002 2001 2000 ---------- ---------- ---------- Current tax benefit $ (3,739) $ (39,047) $ (29,244) Deferred tax expense, excluding operating loss carryforwards 35,915 60,587 60,023 Deferred tax benefit for operating and capital loss carryforwards (134,986) (14,372) - ---------- ---------- ---------- Total income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ========== ========== ==========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (continued) Deferred tax assets (liabilities) include the following at December 31: 2002 2001 ---------- ---------- Deferred tax assets: GAAP to tax reserve differences $ 165,348 $ 241,503 Future fees payable to ASI 21,475 63,240 Deferred compensation 20,603 20,520 Net operating loss carry forward 147,360 14,372 Other 6,530 17,276 ---------- ---------- Total deferred tax assets 361,316 356,911 ---------- ---------- Deferred tax liabilities: Deferred acquisition costs, net (312,933) (404,758) Net unrealized gains on fixed maturity securities (6,713) (2,082) Other (3,464) (5,051) ---------- ---------- Total deferred tax liabilities (323,110) (411,891) ---------- ---------- Net deferred tax asset (liability) $ 38,206 $ (54,980) ========== ========== In accordance with SFAS 109, the Company has performed an analysis of its deferred tax assets to assess recoverability. Looking at a variety of items, most notably, the timing of the reversal of temporary items and future taxable income projections, the Company determined that no valuation allowance is needed. The income tax (benefit) 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:
2002 2001 2000 ---------- ---------- ---------- (Loss) income before taxes Domestic $ (265,361) $ 42,886 $ 98,136 Foreign (2,706) (2,619) (2,540) ---------- ---------- ---------- Total (268,067) 40,267 95,596 Income tax rate 35% 35% 35% ---------- ---------- ---------- Tax (benefit) expense at federal statutory income tax rate (93,823) 14,093 33,459 Tax effect of: Dividend received deduction (12,250) (8,400) (7,350) Losses of foreign subsidiary 947 917 889 Meals and entertainment 603 603 841 State income taxes - (62) (524) Federal provision to return differences 709 (177) 3,235 Other 1,004 194 229 ---------- ---------- ---------- Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ========== ========== ==========
The Company's net operating loss carry forwards, totaling approximately $421,029 (pre-tax) at December 31, 2002, will expire in 2016 and 2017. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. COST ALLOCATION AGREEMENTS WITH AFFILIATES Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company. ASLAC signed a written service agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice. The Company has also paid and charged operating costs to several of its affiliates. The total cost to the Company for these items was $8,177, $6,179 and $13,974 in 2002, 2001 and 2000, respectively. Income received for these items was approximately $13,052, $13,166 and $11,186 in 2002, 2001 and 2000, respectively. Allocated depreciation expense was $7,440, $8,764 and $9,073 in 2002, 2001 and 2000, respectively. Allocated lease expense was $5,808, $6,517 and $5,606 in 2002, 2001 and 2000, respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense, was $738, $30 and $0 in 2002, 2001 and 2000, respectively. Assuming that the written service agreement between ASLAC and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease -------- --------- 2003 $ 4,847 $ 1,616 2004 5,275 1,773 2005 5,351 1,864 2006 5,328 1,940 2007 5,215 1,788 2008 and thereafter 19,629 7,380 -------- --------- Total $ 45,645 $ 16,361 ======== ========= Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this agreement, the expenses reimbursed were $8,255, $6,610 and $6,064 in 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, amounts receivable under this agreement were approximately $458 and $639, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, current mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability (see Note 4). On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was $101,713. Payments, representing fees and charges in the aggregate amount, of $186,810, $207,731 and $219,523 were made by the Company to ASI in 2002, 2001 and 2000, respectively. Related interest expense of $828, $59,873 and $70,667 has been included in the consolidated statements of income for 2002, 2001 and 2000, respectively. The Commissioner of the State of Connecticut has approved the transfer 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 restrict the payments due to ASI, into a restricted account, under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI (continued) The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present Transaction Date Date Period Rate Value - ----------- ---------- -------------- ------------------ --------- --------- 1996-1 12/17/96 9/1/96 1/1/94 - 6/30/96 7.5% $50,221 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128 1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632 1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078 2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459 2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399 2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291 2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139 2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
Payments of future fees payable to ASI, according to original amortization schedules, as of December 31, 2002 are as follows: Year Amount - ---- ----------- 2003 $ 186,854 2004 171,093 2005 147,902 2006 117,761 2007 66,270 2008 18,369 ----------- Total $ 708,249 =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company entered into an eleven year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for 2002 and 2001 was $2,583 and $1,602, respectively. Sub-lease rental income was $227 in 2002 and $0 in 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease -------- --------- 2003 $ 1,913 $ 426 2004 1,982 455 2005 2,050 500 2006 2,050 533 2007 2,050 222 2008 and thereafter 8,789 0 -------- --------- Total $ 18,834 $ 2,136 ======== ========= 10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $279,957 and $226,780 at December 31, 2002 and 2001, respectively. The Company incurred statutory basis net losses in 2002 of $192,474 due primarily to significant declines in the equity markets, increasing GMDB reserves calculated on a statutory basis. Statutory basis net losses for 2001 were $121,957, as compared to income of $11,550 in 2000. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. For 2003, no amounts may be distributed without prior approval. 11. STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory basis financial statements in accordance with accounting practices prescribed by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. The NAIC adopted the Codification of Statutory Accounting Principles (Codification) in March 1998. The effective date for codification was January 1, 2001. The Company's state of domicile, Connecticut, has adopted codification and the Company has made the necessary changes in its statutory accounting and reporting required for implementation. The overall impact of adopting codification in 2001 was a one-time, cumulative change in accounting benefit recorded directly in statutory surplus of $12,047. In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its statutory method of accounting for its AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 11. STATUTORY ACCOUNTING PRACTICES (continued) liability associated with securitized variable annuity fees. Under the new method of accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being equal to the Commissioners Annuity Reserve Valuation Method (CARVM) offset related to the securitized contracts. The impact of this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of approximately $20,215. In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40,511. Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5,935 of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus. Amortization expense for the year ended December 31, 2002 was $757. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of its affiliates. Expenses related to this program in 2002, 2001 and 2000 were $719, $2,738 and $3,734, respectively. Company contributions to this plan on behalf of the participants were $921, $2,549 and $4,255 in 2002, 2001 and 2000, respectively. The Company has a deferred compensation plan, which is available to the field marketing staff and certain other employees. Expenses related to this program in 2002, 2001 and 2000 were $3,522, $1,615 and $1,030, respectively. Company contributions to this plan on behalf of the participants were $5,271, $1,678 and $2,134 in 2002, 2001 and 2000, respectively. The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive officers and other personnel. The Company and certain affiliates also have a profit sharing program, which benefits all employees AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 12. EMPLOYEE BENEFITS (continued) below the officer level. These programs consist of multiple plans with new plans 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 programs. The accrued liability representing the value of these units was $7,083 and $13,645 as of December 31, 2002 and 2001, respectively. Expenses (income) related to these programs in 2002, 2001 and 2000, were $1,471, ($9,842) and $2,692, respectively. Payments under these programs were $8,033, $8,377 and $13,697 in 2002, 2001 and 2000, respectively. 13. FINANCIAL REINSURANCE The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, the future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating the financial condition and credit worthiness of reinsurers. The effect of reinsurance for the 2002, 2001 and 2000 was as follows:
2002 Gross Ceded Net - ---- ----------- ----------- ----------- Annuity and life insurance charges and fees $ 406,272 $ (36,268) $ 370,004 Return credited to contract owners $ 5,221 $ (25) $ 5,196 Underwriting, acquisition and other insurance expenses (deferal of acquisition costs) $ 154,588 $ 34,140 $ 188,728 Amortization of deferred acquisition costs $ 542,945 $ (32,886) $ 510,059 2001 - ---- Annuity and life insurance charges and fees $ 430,914 $ (42,218) $ 388,696 Return credited to contract owners $ 5,704 $ 92 $ 5,796 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 163,677 $ 33,078 $ 196,755 Amortization of deferred acquisition costs $ 231,290 $ (7,243) $ 224,047 2000 - ---- Annuity and life insurance charges and fees $ 473,318 $ (48,740) $ 424,578 Return credited to contract owners $ 8,540 $ (77) $ 8,463 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 108,399 $ 42,198 $ 150,597 Amortization of deferred acquisition costs $ 205,174 $ (20,558) $ 184,616
In December 2000, the Company entered into a modified coinsurance agreement with SICL covering certain contracts issued since January 1996. The impact of this treaty to the AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 13. FINANCIAL REINSURANCE (continued) Company was pre-tax (loss) income of ($4,137), $8,394 and $23,341 in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, $675 and $1,137, respectively, was receivable from SICL under this agreement. 14. SURPLUS NOTES The Company has issued surplus notes to ASI in exchange for cash. Surplus notes outstanding as of December 31, 2002 and 2001, and interest expense for 2002, 2001 and 2000 were as follows:
Liability as of December 31, Interest Expense Interest For the Years Note Issue Date Rate 2002 2001 2002 2001 2000 - ------------------ ----------- --------- --------- --------- --------- --------- February 18, 1994 7.28% - - - - 732 March 28, 1994 7.90% - - - - 794 September 30, 1994 9.13% - - - 1,282 1,392 December 19, 1995 7.52% - 10,000 520 763 765 December 20, 1995 7.49% - 15,000 777 1,139 1,142 December 22, 1995 7.47% - 9,000 465 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,420 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 5,715 --------- --------- --------- --------- --------- Total $ 110,000 $ 144,000 $ 10,872 $ 12,976 $ 14,644 ========= ========= ========= ========= =========
On September 6, 2002, surplus notes for $10,000, dated December 19, 1995, $15,000, dated December 20, 1995, and $9,000, dated December 22, 1995, were repaid. On December 3, 2001, a surplus note, dated September 30, 1994, for $15,000 was repaid. On December 27, 2000, surplus notes for $10,000, dated February 18, 1994, and $10,000, dated March 28, 1994, were repaid. All surplus notes mature seven 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, 2002 and 2001, $29,230 and $25,829, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10,000 short-term loan payable to ASI at December 31, 2002 and 2001 as part of a revolving loan agreement. The loan had an interest rate of 1.97% and matured on January 13, 2003. The loan was subsequently rolled over with a new interest rate of 1.82% and a new maturity date of March 13, 2003. The loan was further extended to April 30, 2003 and a new interest rate of 1.71%. The total related interest expense to the Company was $271, $522 and $687 in 2002, 2001 and 2000, respectively. Accrued interest payable was $10 and $113 as of December 31, 2002 and 2001, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 15. SHORT-TERM BORROWING (continued) On January 3, 2002, the Company entered into a $150,000 credit facility with ASI. This credit facility terminates on December 31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant interest period. Interest expense related to these borrowings was $2,243 for the year ended December 31, 2002. As of December 31, 2002, no amount was outstanding under this credit facility. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners at market value or with market value adjustment. Separate account assets, which are carried at fair value, are adequate to pay such withdrawals, which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. 17. RESTRUCTURING CHARGES On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax severance benefits of $8,500 have been charged against 2001 operations related to these reductions. These charges have been reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of December 31, 2002 and 2001, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $12 and $4,104, respectively. 18. COMMITMENTS AND CONTINGENT LIABILITIES In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable annuities as funding vehicles for tax- qualified retirement accounts. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Southern District of New York on December 12, 2002, by Diane C. Donovan against the Company and certain of its affiliates (the "Donovan Complaint"). The Donovan Complaint seeks unspecified compensatory damages and injunctive relief from the Company and certain of its affiliates. The Donovan Complaint claims that the Company and certain of its affiliates violated federal securities laws in marketing variable annuities. This litigation is in the preliminary stages. The Company believes this action is without merit, and intends to vigorously defend against this action. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. COMMITMENTS AND CONTINGENT LIABILITIES (continued) As discussed previously, on December 19, 2002, SICL entered into a definitive purchase agreement (the "Purchase Agreement") to sell its ownership interest in the Company and certain affiliates to Prudential Financial for approximately $1.265 billion. The closing of this transaction, which is conditioned upon certain customary regulatory and other approvals and conditions, is expected in the second quarter of 2003. The purchase price that was agreed to between SICL and Prudential Financial was based on a September 30, 2002 valuation of the Company and certain affiliates. As a result, assuming the transaction closes, the economics of the Company's business from September 30, 2002 forward will inure to the benefit or detriment of Prudential Financial. Included in the Purchase Agreement, SICL has agreed to indemnify Prudential Financial for certain liabilities that may arise relating to periods prior to September 30, 2002. These liabilities generally include market conduct activities, as well as contract and regulatory compliance (referred to as "Covered Liabilities"). Related to the indemnification provisions contained in the Purchase Agreement, SICL has signed, for the benefit of the Company, an indemnity letter, effective December 19, 2002, to make the Company whole for certain Covered Liabilities that come to fruition during the period beginning December 19, 2002 and ending with the close of the transaction. This indemnification effectively transfers the risk associated with those Covered Liabilities from the Company to SICL concurrent with the signing of the definitive purchase agreement rather than waiting until the transaction closes. 19. SEGMENT REPORTING Assets under management and sales for products other than variable annuities have not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and the Company does not anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity business. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
Three Months Ended ---------------------------------------------------- 2002 March 31 June 30 Sept. 30 Dec. 31 ---------- ---------- ---------- ---------- Premiums and other insurance revenues* $ 118,797 $ 126,614 $ 115,931 $ 108,488 Net investment income 4,965 4,714 5,128 4,825 Net realized capital losses (1,840) (1,584) (2,327) (3,863) ---------- ---------- ---------- ---------- Total revenues 121,922 129,744 118,732 109,450 Benefits and expenses* 112,759 160,721 323,529 150,906 ---------- ---------- ---------- ---------- Pre-tax net income (loss) 9,163 (30,977) (204,797) (41,456) Income tax expense (benefit) 1,703 (11,746) (72,754) (20,013) ---------- ---------- ---------- ---------- Net income (loss) $ 7,460 $ (19,231) $ (132,043) $ (21,443) ========== ========== ========== ==========
* For the quarters ended March 31, 2002 and June 30, 2002, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact.
Three Months Ended -------------------------------------------------- 2001 March 31 June 30 Sept. 30 Dec. 31 ---------- ---------- ---------- ---------- Premiums and other insurance revenues*** $ 130,885 $ 128,465 $ 122,708 $ 119,604 Net investment income** 5,381 4,997 5,006 4,742 Net realized capital gains (losses) 1,902 373 376 (1,723) ---------- ---------- ---------- ---------- Total revenues 138,168 133,835 128,090 122,623 Benefits and expenses** *** 122,729 110,444 123,307 125,969 ---------- ---------- ---------- ---------- Pre-tax net income (loss) 15,439 23,391 4,783 (3,346) Income tax expense (benefit) 4,034 7,451 (480) (3,837) ---------- ---------- ---------- ---------- Net income $ 11,405 $ 15,940 $ 5,263 $ 491 ========== ========== ========== ==========
** For the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. *** For the quarters ended September 30, 2001 and December 31, 2001, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (continued)
Three Months Ended --------------------------------------------------- 2000 March 31 June 30 Sept. 30 Dec. 31 ---------- ---------- ---------- ---------- Premiums and other insurance revenues $ 137,040 $ 139,346 $ 147,819 $ 135,866 Net investment income**** 4,343 4,625 4,619 5,008 Net realized capital gains (losses) 729 (1,436) (858) 877 Total revenues 142,112 142,535 151,580 141,751 Benefits and expenses**** 107,893 122,382 137,843 114,264 Pre-tax net income 34,219 20,153 13,737 27,487 Income tax expense 10,038 5,225 3,167 12,349 Net income $ 24,181 $ 14,928 $ 10,570 $ 15,138 ========== ========== ========== ==========
**** For the quarters ended March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. 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. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2003. Beginning November 18, 2002, multiple Unit Prices will be calculated for each Sub-account of Separate Account B to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under this Annuity. The Unit Prices below reflect the daily charges for each optional benefit offered between November 18, 2002 and December 31, 2002 only.
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price $19.53 24.28 31.88 43.99 27.18 Number of Units 14,140,023 17,388,860 19,112,622 16,903,883 17,748,560 With One Optional Benefit Unit Price $8.56 - - - - Number of Units 2,569,506 - - - - With Any Two Optional Benefits Unit Value $9.95 - - - - Number of Units 90,759 - - - - With All Optional Benefits Unit Price $9.95 - - - - Number of Units 6,047 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST William Blair International Growth /2/(1997) With No Optional Benefits Unit Price $9.92 13.54 17.96 24.16 13.41 Number of Units 29,062,215 40,507,419 57,327,711 61,117,418 43,711,763 With One Optional Benefit Unit Price $9.72 - - - - Number of Units 835,523 - - - - With Any Two Optional Benefits Unit Price $9.72 - - - - Number of Units 78,368 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 5,178 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price 22.95 19.70 18.23 16.80 16.60 Number of Units 17,534,233 17,220,688 14,393,137 14,043,215 9,063,464 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Value - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST William Blair International Growth /2/(1997) With No Optional Benefits Unit Price 11.70 - - - - Number of Units 21,405,891 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price $10.20 12.85 17.92 21.66 13.30 Number of Units 31,813,722 37,487,425 17,007,352 6,855,601 5,670,336 With One Optional Benefit Unit Price $8.52 - - - - Number of Units 2,252,674 - - - - With Any Two Optional Benefits Unit Price $9.69 - - - - Number of Units 116,123 - - - - With All Optional Benefits Unit Price $9.69 - - - - Number of Units 1,896 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price $8.81 10.77 16.12 23.45 12.54 Number of Units 10,185,535 13,627,264 16,245,805 8,818,599 9,207,623 With One Optional Benefit Unit Price $8.19 - - - - Number of Units 269,995 - - - - With Any Two Optional Benefits Unit Price $9.79 - - - - Number of Units 22,770 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Global Equity (1999) With No Optional Benefits Unit Price $7.74 8.94 10.08 11.01 - Number of Units 5,878,055 5,806,567 2,803,013 116,756 - With One Optional Benefit Unit Price $9.04 - - - - Number of Units 969,509 - - - - With Any Two Optional Benefits Unit Price $9.87 - - - - Number of Units 32,306 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price 11.35 - - - - Number of Units 2,857,188 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price 11.46 11.39 10.23 - - Number of Units 9,988,104 9,922,698 2,601,283 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PBHG Small-Cap Growth /5/ (1994) With No Optional Benefits Unit Price $12.83 19.84 21.51 42.08 17.64 Number of Units 17,093,250 23,048,821 25,535,093 32,134,969 15,003,001 With One Optional Benefit Unit Price $6.92 - - - - Number of Units 1,970,250 - - - - With Any Two Optional Benefits Unit Price $9.48 - - - - Number of Units 47,261 - - - - With All Optional Benefits Unit Price $9.47 - - - - Number of Units 6,595 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Small-Cap Growth /6/ (1999) With No Optional Benefits Unit Price $6.13 8.46 11.98 15.37 - Number of Units 44,042,514 60,703,791 63,621,279 53,349,003 - With One Optional Benefit Unit Price $7.67 - - - - Number of Units 639,695 - - - - With Any Two Optional Benefits Unit Price $9.71 - - - - Number of Units 12,122 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 1,728 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $4.96 7.10 9.08 - - Number of Units 5,188,521 6,499,066 196,575 - - With One Optional Benefit Unit Price $7.64 - - - - Number of Units 1,255,415 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 63,097 - - - - With All Optional Benefits Unit Price $9.86 - - - - Number of Units 4,107 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PBHG Small-Cap Growth /5/ (1994) With No Optional Benefits Unit Price 17.28 16.54 13.97 10.69 - Number of Units 14,662,728 12,282,211 6,076,373 2,575,105 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Small-Cap Growth /6/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Small-Cap Value /7/ (1998) With No Optional Benefits Unit Price $13.72 15.12 13.95 10.57 9.85 Number of Units 20,004,839 26,220,860 15,193,053 6,597,544 4,081,870 With One Optional Benefit Unit Price $9.26 - - - - Number of Units 1,492,775 - - - - With Any Two Optional Benefits Unit Price $10.09 - - - - Number of Units 624 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Gabelli Small-Cap Value /8/ (1997) With No Optional Benefits Unit Price $12.58 14.08 13.35 11.11 11.20 Number of Units 32,549,396 35,483,530 23,298,524 21,340,168 24,700,211 With One Optional Benefit Unit Price $9.30 - - - - Number of Units 6,141,523 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 209,790 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 17,411 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 581,833 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 423,387 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 11,686 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 5,211 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Small-Cap Value /7/ (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Gabelli Small-Cap Value /8/ (1997) With No Optional Benefits Unit Price 12.70 - - - - Number of Units 14,612,510 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price $2.78 3.88 6.58 - - Number of Units 16,748,577 17,045,776 9,426,102 - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 1,273,118 - - - - With Any Two Optional Benefits Unit Price $9.87 - - - - Number of Units 66,279 - - - - With All Optional Benefits Unit Price $9.87 - - - - Number of Units 2,488 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price $12.86 18.95 25.90 28.58 19.15 Number of Units 19,674,777 25,717,164 26,517,850 13,460,525 13,389,289 With One Optional Benefit Unit Price $7.41 - - - - Number of Units 2,175,250 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 44,760 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 1,311 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price $17.78 20.16 21.09 16.78 16.10 Number of Units 37,524,187 47,298,313 44,558,699 37,864,586 16,410,121 With One Optional Benefit Unit Price $8.96 - - - - Number of Units 5,118,558 - - - - With Any Two Optional Benefits Unit Price $9.98 - - - - Number of Units 163,415 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 10,745 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price 16.10 13.99 12.20 9.94 - Number of Units 11,293,799 9,563,858 3,658,836 301,267 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price 16.72 13.41 12.20 9.81 10.69 Number of Units 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $3.51 5.54 6.74 - - Number of Units 85,441,507 125,442,916 28,229,631 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 658,419 - - - - With Any Two Optional Benefits Unit Price $9.36 - - - - Number of Units 6,409 - - - - With All Optional Benefits Unit Price $9.36 - - - - Number of Units 3,466 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $7.59 9.71 10.06 - - Number of Units 11,924,124 14,934,570 1,273,094 - - With One Optional Benefit Unit Price $8.17 - - - - Number of Units 1,200,225 - - - - With Any Two Optional Benefits Unit Price $10.04 - - - - Number of Units 28,449 - - - - With All Optional Benefits Unit Price $10.04 - - - - Number of Units 88 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $18.36 19.71 19.86 15.88 12.57 Number of Units 5,891,582 6,565,088 6,520,983 6,201,327 5,697,453 With One Optional Benefit Unit Price $9.59 - - - - Number of Units 724,670 - - - - With Any Two Optional Benefits Unit Price $10.44 - - - - Number of Units 7,378 - - - - With All Optional Benefits Unit Price $10.44 - - - - Number of Units 5,472 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price 14.46 14.19 11.01 - - Number of Units 7,550,076 6,061,852 808,605 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance Growth /13/ (1996) With No Optional Benefits Unit Price $9.94 14.61 17.38 20.44 15.48 Number of Units 21,295,907 29,478,257 25,796,792 17,059,819 19,009,242 With One Optional Benefit Unit Price $7.46 - - - - Number of Units 1,869,353 - - - - With Any Two Optional Benefits Unit Price $9.34 - - - - Number of Units 31,105 - - - - With All Optional Benefits Unit Price $9.34 - - - - Number of Units 3,975 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Growth (1999) With No Optional Benefits Unit Price $5.68 8.02 10.38 11.27 - Number of Units 85,193,279 117,716,242 7,515,486 409,467 - With One Optional Benefit Unit Price $7.58 - - - - Number of Units 2,930,432 - - - - With Any Two Optional Benefits Unit Price $9.47 - - - - Number of Units 134,574 - - - - With All Optional Benefits Unit Price $9.46 - - - - Number of Units 2,437 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $11.44 13.74 17.81 21.06 14.00 Number of Units 81,046,482 85,895,802 94,627,691 78,684,943 40,757,449 With One Optional Benefit Unit Price $8.32 - - - - Number of Units 10,144,317 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 457,013 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 30,465 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alliance Growth /13/ (1996) With No Optional Benefits Unit Price 12.33 10.89 - - - Number of Units 18,736,994 4,324,161 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price 10.03 - - - - Number of Units 714,309 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Concentrated Growth /14/ (1992) With No Optional Benefits Unit Price $19.17 27.71 41.14 60.44 39.54 Number of Units 56,016,467 84,116,221 99,250,773 94,850,623 80,631,598 With One Optional Benefit Unit Price $7.67 - - - - Number of Units 1,349,939 - - - - With Any Two Optional Benefits Unit Price $9.46 - - - - Number of Units 41,632 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAm Large-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.67 - - - - Number of Units 986,566 - - - - With One Optional Benefit Unit Price $7.65 - - - - Number of Units 207,816 - - - - With Any Two Optional Benefits Unit Price $9.64 - - - - Number of Units 9,837 - - - - With All Optional Benefits Unit Price $9.64 - - - - Number of Units 3,697 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAm Large-Cap Value /15/ (2000) With No Optional Benefits Unit Price $7.64 9.15 9.82 - - Number of Units 4,621,831 4,575,558 586,058 - - With One Optional Benefit Unit Price $8.66 - - - - Number of Units 664,649 - - - - With Any Two Optional Benefits Unit Price $9.98 - - - - Number of Units 18,250 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 4,906 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Concentrated Growth /14/ (1992) With No Optional Benefits Unit Price 23.83 18.79 14.85 10.91 11.59 Number of Units 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAm Large-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAm Large-Cap Value /15/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price $7.12 9.63 - - - Number of Units 3,031,899 3,351,836 - - - With One Optional Benefit Unit Price $7.99 - - - - Number of Units 965,912 - - - - With Any Two Optional Benefits Unit Price $9.79 - - - - Number of Units 11,345 - - - - With All Optional Benefits Unit Price $9.79 - - - - Number of Units 704 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price $8.59 10.04 - - - Number of Units 15,239,844 4,207,869 - - - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 6,005,922 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 386,259 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 30,510 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $10.67 10.54 10.39 8.35 8.28 Number of Units 14,017,528 12,268,426 11,891,188 6,224,365 3,771,461 With One Optional Benefit Unit Price $10.08 - - - - Number of Units 1,563,486 - - - - With Any Two Optional Benefits Unit Price $10.33 - - - - Number of Units 41,098 - - - - With All Optional Benefits Unit Price $10.32 - - - - Number of Units 6,429 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Sanford Bernstein Managed Index 500 /16/ (1998) With No Optional Benefits Unit Price $9.41 12.03 13.55 15.08 12.61 Number of Units 39,938,791 48,018,721 48,835,089 39,825,951 22,421,754 With One Optional Benefit Unit Price $8.17 - - - - Number of Units 3,662,406 - - - - With Any Two Optional Benefits Unit Price $9.81 - - - - Number of Units 79,915 - - - - With All Optional Benefits Unit Price $9.81 - - - - Number of Units 383 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century Income & Growth /17/ (1997) With No Optional Benefits Unit Price $10.16 12.86 14.24 16.19 13.35 Number of Units 22,410,834 27,386,278 32,388,202 21,361,995 13,845,190 With One Optional Benefit Unit Price $8.25 - - - - Number of Units 1,751,136 - - - - With Any Two Optional Benefits Unit Price $9.89 - - - - Number of Units 36,829 - - - - With All Optional Benefits Unit Price $9.89 - - - - Number of Units 8,874 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance Growth and Income /18/ (1992) With No Optional Benefits Unit Price $21.31 28.18 28.72 27.60 24.11 Number of Units 49,030,576 63,123,316 53,536,296 52,766,579 47,979,349 With One Optional Benefit Unit Price $8.06 - - - - Number of Units 6,667,373 - - - - With Any Two Optional Benefits Unit Price $9.83 - - - - Number of Units 165,588 - - - - With All Optional Benefits Unit Price $9.83 - - - - Number of Units 6,100 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Sanford Bernstein Managed Index 500 /16/ (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century Income & Growth /17/ (1997) With No Optional Benefits Unit Price 12.06 - - - - Number of Units 9,523,815 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alliance Growth and Income /18/ (1992) With No Optional Benefits Unit Price 21.74 17.79 15.22 11.98 11.88 Number of Units 42,197,002 28,937,085 18,411,759 7,479,449 4,058,228 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Growth with Income (1999) With No Optional Benefits Unit Price $6.68 8.64 10.36 10.49 - Number of Units 11,173,177 11,896,688 6,937,627 741,323 - With One Optional Benefit Unit Price $8.09 - - - - Number of Units 1,053,007 - - - - With Any Two Optional Benefits Unit Price $9.71 - - - - Number of Units 17,242 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 538 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST INVESCO Capital Income /19/ (1994) With No Optional Benefits Unit Price $16.14 19.84 22.01 21.31 19.34 Number of Units 37,055,825 48,595,962 50,171,495 46,660,160 40,994,187 With One Optional Benefit Unit Price $8.34 - - - - Number of Units 2,110,071 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 30,714 - - - - With All Optional Benefits Unit Price $9.90 - - - - Number of Units 5,934 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Global Allocation /20/ (1993) With No Optional Benefits Unit Price $14.50 17.39 19.98 21.19 17.78 Number of Units 18,212,529 26,641,422 30,290,413 23,102,272 22,634,344 With One Optional Benefit Unit Price $8.71 - - - - Number of Units 847,517 - - - - With Any Two Optional Benefits Unit Price $9.94 - - - - Number of Units 3,088 - - - - With All Optional Benefits Unit Price $9.93 - - - - Number of Units 94 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST INVESCO Capital Income /19/ (1994) With No Optional Benefits Unit Price 17.31 14.23 12.33 9.61 - Number of Units 33,420,274 23,592,226 13,883,712 6,633,333 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Global Allocation /20/ (1993) With No Optional Benefits Unit Price 15.98 13.70 12.49 10.34 10.47 Number of Units 22,109,373 20,691,852 20,163,848 13,986,604 8,743,758 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $12.01 13.50 14.23 14.90 13.37 Number of Units 12,683,097 14,369,895 14,498,180 13,944,535 6,714,065 With One Optional Benefit Unit Price $9.14 - - - - Number of Units 1,126,058 - - - - With Any Two Optional Benefits Unit Price $9.97 - - - - Number of Units 15,835 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 2,760 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $16.13 18.15 19.33 19.70 18.12 Number of Units 15,466,227 17,579,107 19,704,198 22,002,028 18,469,315 With One Optional Benefit Unit Price $9.09 - - - - Number of Units 921,329 - - - - With Any Two Optional Benefits Unit Price $9.96 - - - - Number of Units 21,928 - - - - With All Optional Benefits Unit Price $9.96 - - - - Number of Units 150 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Global Bond /21/ (1994) With No Optional Benefits Unit Price $12.04 10.62 10.49 10.69 11.82 Number of Units 14,576,376 9,668,062 11,219,503 12,533,037 12,007,692 With One Optional Benefit Unit Price $11.34 - - - - Number of Units 1,739,313 - - - - With Any Two Optional Benefits Unit Price $10.31 - - - - Number of Units 36,822 - - - - With All Optional Benefits Unit Price $10.31 - - - - Number of Units 3,700 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price 11.18 - - - - Number of Units 2,560,866 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price 15.53 13.30 11.92 9.80 - Number of Units 13,524,781 8,863,840 4,868,956 2,320,063 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Global Bond /21/ (1994) With No Optional Benefits Unit Price 10.45 10.98 10.51 9.59 - Number of Units 12,089,872 8,667,712 4,186,695 1,562,364 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Federated High Yield (1994) With No Optional Benefits Unit Price $12.47 12.64 12.80 14.38 14.30 Number of Units 38,477,793 39,130,467 36,914,825 41,588,401 40,170,144 With One Optional Benefit Unit Price $9.71 - - - - Number of Units 5,592,940 - - - - With Any Two Optional Benefits Unit Price $10.26 - - - - Number of Units 74,022 - - - - With All Optional Benefits Unit Price $10.26 - - - - Number of Units 6,524 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $10.18 10.28 10.12 - - Number of Units 10,468,962 5,506,982 650,253 - - With One Optional Benefit Unit Price $9.94 - - - - Number of Units 4,146,530 - - - - With Any Two Optional Benefits Unit Price $10.23 - - - - Number of Units 162,571 - - - - With All Optional Benefits Unit Price $10.23 - - - - Number of Units 7,474 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Bond /9/ (2002) With No Optional Benefits Unit Price $10.67 - - - - Number of Units 1,487,730 - - - - With One Optional Benefit Unit Price $10.65 - - - - Number of Units 561,446 - - - - With Any Two Optional Benefits Unit Price $10.16 - - - - Number of Units 12,055 - - - - With All Optional Benefits Unit Price $10.15 - - - - Number of Units 595 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Federated High Yield (1994) With No Optional Benefits Unit Price 14.13 12.62 11.27 9.56 - Number of Units 29,663,242 15,460,522 6,915,158 2,106,791 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Bond /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $16.65 15.46 14.40 13.09 13.43 Number of Units 113,007,310 99,028,465 82,545,240 73,530,507 64,224,618 With One Optional Benefit Unit Price $10.57 - - - - Number of Units 20,544,075 - - - - With Any Two Optional Benefits Unit Price $10.17 - - - - Number of Units 604,147 - - - - With All Optional Benefits Unit Price $10.17 - - - - Number of Units 36,236 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $14.26 13.61 12.79 11.96 11.73 Number of Units 61,707,894 42,410,807 31,046,956 32,560,943 28,863,932 With One Optional Benefit Unit Price $10.34 - - - - Number of Units 11,274,642 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 215,314 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 80,547 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Money Market (1992) With No Optional Benefits Unit Price $13.23 13.24 12.94 12.38 12.00 Number of Units 163,759,511 184,612,059 172,493,206 187,609,708 75,855,442 With One Optional Benefit Unit Price $9.96 - - - - Number of Units 36,255,772 - - - - With Any Two Optional Benefits Unit Price $9.99 - - - - Number of Units 999,737 - - - - With All Optional Benefits Unit Price $9.99 - - - - Number of Units 70,899 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price 12.44 11.48 11.26 9.61 - Number of Units 44,098,036 29,921,643 19,061,840 4,577,708 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price 11.26 10.62 10.37 - - Number of Units 25,008,310 18,894,375 15,058,644 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Money Market (1992) With No Optional Benefits Unit Price 11.57 11.16 10.77 10.35 10.12 Number of Units 66,869,998 42,435,169 30,564,442 27,491,389 11,422,783 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price $5.79 6.50 7.09 10.06 6.19 Number of Units 10,957,884 14,095,135 12,899,472 12,060,036 10,534,383 With One Optional Benefit Unit Price $8.66 - - - - Number of Units 283,466 - - - - With Any Two Optional Benefits Unit Price $9.93 - - - - Number of Units 21,816 - - - - With All Optional Benefits Unit Price $9.93 - - - - Number of Units 442 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price $7.46 9.37 10.05 9.96 - Number of Units 1,361,988 1,019,937 502,986 136,006 - With One Optional Benefit Unit Price $8.25 - - - - Number of Units 196,720 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 10,707 - - - - With All Optional Benefits Unit Price $9.90 - - - - Number of Units 91 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - Nova (1999) With No Optional Benefits Unit Price $4.06 6.41 8.50 10.82 - Number of Units 2,629,551 3,990,618 14,799,352 5,474,129 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price 10.05 10.25 - - - Number of Units 10,371,104 2,360,940 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - Nova (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - Ursa (1999) With No Optional Benefits Unit Price $14.45 12.05 10.62 9.28 - Number of Units 234,642 351,487 2,269,599 1,803,669 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - OTC (1999) With No Optional Benefits Unit Price $4.01 6.65 10.40 17.07 - Number of Units 10,686,757 15,866,046 32,179,793 18,520,440 - With One Optional Benefit Unit Price $9.36 - - - - Number of Units 186 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price $6.03 8.98 13.23 13.91 - Number of Units 9,117,894 13,391,660 11,409,827 2,022,585 - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 543,762 - - - - With Any Two Optional Benefits Unit Price $9.70 - - - - Number of Units 32,635 - - - - With All Optional Benefits Unit Price $9.70 - - - - Number of Units 576 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - Ursa (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - OTC (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price $3.49 6.66 12.48 16.52 - Number of Units 18,830,138 26,652,622 29,491,113 4,622,242 - With One Optional Benefit Unit Price $5.50 - - - - Number of Units 293,307 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price $9.37 12.58 14.59 11.34 - Number of Units 11,475,199 17,419,141 19,381,405 786,518 - With One Optional Benefit Unit Price $8.00 - - - - Number of Units 475,873 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 5,444 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 140 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price $10.47 12.48 14.04 11.41 - Number of Units 7,556,596 11,612,048 14,091,636 759,104 - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 366,258 - - - - With Any Two Optional Benefits Unit Price $9.92 - - - - Number of Units 1,897 - - - - With All Optional Benefits Unit Price $9.92 - - - - Number of Units 141 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price $2.43 5.01 11.05 15.17 - Number of Units 9,354,303 13,553,158 17,856,118 4,184,526 - With One Optional Benefit Unit Price $5.78 - - - - Number of Units 94,004 - - - - With Any Two Optional Benefits Unit Price $9.43 - - - - Number of Units 770 - - - - With All Optional Benefits Unit Price $9.42 - - - - Number of Units 454 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price $7.08 9.00 10.55 11.72 - Number of Units 1,442,329 1,520,376 887,758 23,101 - With One Optional Benefit Unit Price $8.15 - - - - Number of Units 113,389 - - - - With Any Two Optional Benefits Unit Price $9.67 - - - - Number of Units 3,669 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price $7.16 9.98 11.01 12.19 - Number of Units 2,205,267 2,540,062 1,731,145 152,342 - With One Optional Benefit Unit Price $7.44 - - - - Number of Units 127,728 - - - - With Any Two Optional Benefits Unit Price $9.85 - - - - Number of Units 12,520 - - - - With All Optional Benefits Unit Price $9.85 - - - - Number of Units 533 - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Omega (2000) With No Optional Benefits Unit Price $4.93 6.71 7.98 - - Number of Units 2,594,817 2,585,848 1,637,475 - - With One Optional Benefit Unit Price $7.78 - - - - Number of Units 39,943 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Omega (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Europe /30/ (1999) With No Optional Benefits Unit Price $5.76 7.87 10.52 12.24 - Number of Units 2,550,567 5,711,763 2,327,562 273,963 - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 292,396 - - - - With Any Two Optional Benefits Unit Price $9.70 - - - - Number of Units 2,625 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Asia 30 /9/ (2002) With No Optional Benefits Unit Price $7.76 - - - - Number of Units 2,060,741 - - - - With One Optional Benefit Unit Price $7.75 - - - - Number of Units 281,993 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 6,995 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Japan /9/ (2002) With No Optional Benefits Unit Price $7.25 - - - - Number of Units 338,472 - - - - With One Optional Benefit Unit Price $7.24 - - - - Number of Units 65,845 - - - - With Any Two Optional Benefits Unit Price $10.21 - - - - Number of Units 351 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Banks /9/ (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 555,999 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 101,136 - - - - With Any Two Optional Benefits Unit Price $10.13 - - - - Number of Units 3,422 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Europe 30 (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Asia 30 /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Japan /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Banks /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price $8.47 - - - - Number of Units 361,568 - - - - With One Optional Benefit Unit Price $8.46 - - - - Number of Units 76,331 - - - - With Any Two Optional Benefits Unit Price $10.34 - - - - Number of Units 12 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Biotechnology (2001) With No Optional Benefits Unit Price $5.16 8.37 - - - Number of Units 2,412,670 5,093,235 - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 130,082 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price $7.26 - - - - Number of Units 319,201 - - - - With One Optional Benefit Unit Price $7.25 - - - - Number of Units 128,022 - - - - With Any Two Optional Benefits Unit Price $9.37 - - - - Number of Units 2,426 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price $8.29 - - - - Number of Units 406,966 - - - - With One Optional Benefit Unit Price $8.28 - - - - Number of Units 148,446 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 2,303 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Biotechnology (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Energy (2001) With No Optional Benefits Unit Price $7.51 9.19 - - - Number of Units 1,985,954 2,299,149 - - - With One Optional Benefit Unit Price $8.71 - - - - Number of Units 299,833 - - - - With Any Two Optional Benefits Unit Price $10.12 - - - - Number of Units 1,660 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Financial (2001) With No Optional Benefits Unit Price $7.74 9.22 - - - Number of Units 1,086,464 2,154,106 - - - With One Optional Benefit Unit Price $8.85 - - - - Number of Units 221,377 - - - - With Any Two Optional Benefits Unit Price $9.84 - - - - Number of Units 2,066 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Healthcare (2001) With No Optional Benefits Unit Price $7.13 9.35 - - - Number of Units 1,313,814 3,489,097 - - - With One Optional Benefit Unit Price $7.94 - - - - Number of Units 388,508 - - - - With Any Two Optional Benefits Unit Price $9.59 - - - - Number of Units 6,831 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Energy (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Financial (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Healthcare (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Industrial /9/ (2002) With No Optional Benefits Unit Price $7.94 - - - - Number of Units 126,611 - - - - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 12,642 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Internet /9/ (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 2,982,656 - - - - With One Optional Benefit Unit Price $8.57 - - - - Number of Units 306,572 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Pharmaceuticals /9/ (2002) With No Optional Benefits Unit Price $8.57 - - - - Number of Units 241,916 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 136,599 - - - - With Any Two Optional Benefits Unit Price $9.63 - - - - Number of Units 2,545 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Industrial /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Internet /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Pharmaceuticals /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Precious Metals /9/ (2002) With No Optional Benefits Unit Price $9.72 - - - - Number of Units 3,992,389 - - - - With One Optional Benefit Unit Price $9.70 - - - - Number of Units 1,175,651 - - - - With Any Two Optional Benefits Unit Price $11.30 - - - - Number of Units 19,964 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price $10.61 10.76 - - - Number of Units 1,489,153 3,592,834 - - - With One Optional Benefit Unit Price $9.86 - - - - Number of Units 441,318 - - - - With Any Two Optional Benefits Unit Price $10.20 - - - - Number of Units 12,789 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP -Semiconductor /9/ (2002) With No Optional Benefits Unit Price $5.14 - - - - Number of Units 608,142 - - - - With One Optional Benefit Unit Price $5.14 - - - - Number of Units 93,241 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - -------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - -------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Precious Metals /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP -Semiconductor /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Technology (2001) With No Optional Benefits Unit Price $3.46 5.91 - - - Number of Units 3,290,202 2,524,295 - - - With One Optional Benefit Unit Price $6.03 - - - - Number of Units 254,131 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price $4.35 7.10 - - - Number of Units 3,082,428 583,065 - - - With One Optional Benefit Unit Price $7.15 - - - - Number of Units 272,408 - - - - With Any Two Optional Benefits Unit Price $10.03 - - - - Number of Units 3,642 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Utilities (2001) With No Optional Benefits Unit Price $6.09 8.12 - - - Number of Units 3,391,766 1,589,344 - - - With One Optional Benefit Unit Price $7.83 - - - - Number of Units 521,419 - - - - With Any Two Optional Benefits Unit Price $10.61 - - - - Number of Units 8,871 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bull 9 (2002) With No Optional Benefits Unit Price $7.98 - - - - Number of Units 6,296,621 - - - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 954,792 - - - - With Any Two Optional Benefits Unit Price $9.75 - - - - Number of Units 10,297 - - - - With All Optional Benefits Unit Price $9.75 - - - - Number of Units 400 - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Technology (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Utilities (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bull 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bear (2001) With No Optional Benefits Unit Price $13.74 11.54 - - - Number of Units 4,011,499 3,059,897 - - - With One Optional Benefit Unit Price $11.38 - - - - Number of Units 1,532,543 - - - - With Any Two Optional Benefits Unit Price $10.13 - - - - Number of Units 28,618 - - - - With All Optional Benefits Unit Price $10.13 - - - - Number of Units 1,514 - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraBull 22 (2001) With No Optional Benefits Unit Price $4.71 7.47 - - - Number of Units 6,435,217 7,628,819 - - - With One Optional Benefit Unit Price $6.78 - - - - Number of Units 297,435 - - - - With Any Two Optional Benefits Unit Price $9.61 - - - - Number of Units 245 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - OTC (2001) With No Optional Benefits Unit Price $3.49 $5.77 - - - Number of Units 18,242,013 11,681,189 - - - With One Optional Benefit Unit Price $6.45 - - - - Number of Units 1,346,852 - - - - With Any Two Optional Benefits Unit Price $9.36 - - - - Number of Units 13,113 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Short OTC 9 (2002) With No Optional Benefits Unit Price $11.02 - - - - Number of Units 682,058 - - - - With One Optional Benefit Unit Price $11.00 - - - - Number of Units 433,181 - - - - With Any Two Optional Benefits Unit Price $10.43 - - - - Number of Units 15,308 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bear (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraBull 22 (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - OTC (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Short OTC 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price $0.58 1.91 6.19 23.58 - Number of Units 70,200,723 50,124,696 17,597,528 2,906,024 - With One Optional Benefit Unit Price $3.53 - - - - Number of Units 1,003,123 - - - - With Any Two Optional Benefits Unit Price $8.70 - - - - Number of Units 233 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 1,089,843 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 438,387 - - - - With Any Two Optional Benefits Unit Price $10.06 - - - - Number of Units 4,777 - - - - With All Optional Benefits Unit Price $10.06 - - - - Number of Units 4,799 - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 1,444,783 - - - - With One Optional Benefit Unit Price $7.70 - - - - Number of Units 439,054 - - - - With Any Two Optional Benefits Unit Price $9.82 - - - - Number of Units 1,587 - - - - With All Optional Benefits Unit Price $9.81 - - - - Number of Units 1,583 - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price $5.72 - - - - Number of Units 2,276,660 - - - - With One Optional Benefit Unit Price $5.71 - - - - Number of Units 477,953 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 1,673 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.10 - - - - Number of Units 2,908,617 - - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 994,778 - - - - With Any Two Optional Benefits Unit Price $10.15 - - - - Number of Units 19,019 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 2,138,861 - - - - With One Optional Benefit Unit Price $7.69 - - - - Number of Units 772,260 - - - - With Any Two Optional Benefits Unit Price $9.91 - - - - Number of Units 10,572 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraSmall-Cap /23/ (1999) With No Optional Benefits Unit Price $4.73 8.37 9.18 11.96 - Number of Units 5,664,617 10,010,482 3,258,574 813,904 - With One Optional Benefit Unit Price $6.14 - - - - Number of Units 212,085 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price $11.58 - - - - Number of Units 7,945,270 - - - - With One Optional Benefit Unit Price $11.56 - - - - Number of Units 2,486,854 - - - - With Any Two Optional Benefits Unit Price $10.19 - - - - Number of Units 22,148 - - - - With All Optional Benefits Unit Price $10.19 - - - - Number of Units 609 - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraSmall-Cap /23/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ----------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price $8.03 - - - - Number of Units 583,657 - - - - With One Optional Benefit Unit Price $8.02 - - - - Number of Units 165,792 - - - - With Any Two Optional Benefits Unit Price $9.69 - - - - Number of Units 9,028 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ First Trust(R)10 Uncommon Values (2000) With No Optional Benefits Unit Price $2.94 4.72 7.43 - - Number of Units 1,716,102 2,255,266 2,690,435 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 19,826 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price $5.62 7.39 - - - Number of Units 550,334 273,843 - - - With One Optional Benefit Unit Price $8.01 - - - - Number of Units 89,806 - - - - With Any Two Optional Benefits Unit Price $9.59 - - - - Number of Units 5,196 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- First Trust(R)10 Uncommon Values (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- ----------- Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ----------- -----------
/1./ Effective December 10, 2001, Strong Capital Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM International Equity." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam International Equity." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Equity Portfolio." /2./ Effective November 11, 2002, William Blair & Company, L.L.C. became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Overseas Growth." /3./ This Portfolio reflects the addition of the net assets of the AST American Century International Growth Portfolio II ("Portfolio II") as a result of the merger between the Portfolio and Portfolio II. /4./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Founders Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Founders Passport." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap Portfolio." /5./ Effective September 17, 2001, Pilgrim Baxter & Associates, Ltd. became Sub-advisor of the Portfolio. Prior to September 17, 2001, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Small-Cap Growth." Prior to December 31, 1998, Founders Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio." /6./ Effective December 10, 2001, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, Zurich Scudder Investments, Inc. served as Sub-advisor of the Portfolio, then named "AST Scudder Small-Cap Growth Portfolio". Prior to May 1, 2001, the Portfolio was named "AST Kemper Small-Cap Growth Portfolio." /7./ Effective May 1, 2001, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to May 1, 2001, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Small Cap Value." /8./ Effective October 23, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio." /9./ These portfolios were first offered as Sub-accounts on May 1, 2002. /10./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Mid-Cap Growth." /11./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor of the Portfolio, then named "Berger Capital Growth Portfolio." /12./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor of the Portfolio, then named "Federated Utility Income Portfolio." /13./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May 1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of the Portfolio, then named "Robertson Stephens Value + Growth Portfolio." /14./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST JanCap Growth." /15./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Strategic Value." /16./ Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio." /17./ Effective May 3, 1999, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Value Growth & Income." /18./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio." /19./ Effective July 1, 2002, the AST INVESCO Equity Income portfolio changed its name to AST INVESCO Capital Income. /20./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM Balanced." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Balanced." Prior to October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced Asset Portfolio." /21./ Effective August 8, 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the Portfolio, then named "AST Scudder International Bond Portfolio." /22./ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. /23./ Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that corresponded to the performance of the Russell 2000(R)Index. APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Growth = Account Value of variable minus Purchase Payments - proportional investment options plus Interim withdrawals Value of Fixed Allocations (no MVA applies)
Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 * 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $85,000 Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 * $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 * 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000 Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value = $90,000 - [$90,000 * $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = $80,000 - [$80,000 * $15,000/$75,000] = $80,000 - $16,000 = $64,000 Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [$80,000 * $5,000/$70,000] = $80,000 + $15,000 - $5,714 = $100,714 Basic Death Benefit = $75,000 APPENDIX D -PLUS40(TM)OPTIONAL LIFE INSURANCE RIDER ================================================================================ American Skandia's Plus40(TM)Optional Life Insurance Rider was offered, in those states where approved, between September 17, 2001 and May 1, 2003. The description below of the Plus40(TM)benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40(TM)benefit. ================================================================================ - -------------------------------------------------------------------------------- The life insurance coverage provided under the Plus40(TM)Optional Life Insurance Rider ("Plus40(TM)rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40(TM)rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. - -------------------------------------------------------------------------------- The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40(TM)rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40(TM)rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable - - the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40(TM)rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40(TM)rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS |X| If you die during the first 24 months following the effective date of the Plus40(TM)rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40(TM)rider if you die within 24 months of its effective date. |X| If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. |X| If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40(TM)rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. |X| If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40(TM)rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. |X| If charges for the Plus40(TM)rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). |X| If the age of any person covered under the Plus40(TM)rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. |X| On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95th birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40(TM)rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40(TM)rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40(TM)rider or similar life insurance coverage. |X| The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. |X| The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40(TM)riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40(TM)rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40(TM)rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40(TM)rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40(TM)rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40(TM)RIDER The Plus40(TM)rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40(TM)rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. Percentage of Attained Age Account Value - ------------------------------ ---------------------------- Age 40-75 .80% - ------------------------------ ---------------------------- Age 76-80 1.60% - ------------------------------ ---------------------------- Age 81-85 3.20% - ------------------------------ ---------------------------- Age 86-90 4.80% - ------------------------------ ---------------------------- Age 91 6.50% - ------------------------------ ---------------------------- Age 92 7.50% - ------------------------------ ---------------------------- Age 93 8.50% - ------------------------------ ---------------------------- Age 94 9.50% - ------------------------------ ---------------------------- Age 95 10.50% - ------------------------------ ---------------------------- The charge for the Plus40(TM)rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. |X| If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. |X| If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40(TM)rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40(TM)rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40(TM)rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40(TM)rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40(TM)rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40(TM)rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40(TM)rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40(TM)rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40(TM)rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40(TM)rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. APPENDIX E - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT If you purchased your Annuity before November 18, 2002 and were not a resident of the State of New York, the following optional death benefits were offered: Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the Annuity's basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - -------------------------------------------------------------------------------- NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Guaranteed Minimum Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. Calculation of Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only) If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. ADDITIONAL CALCULATIONS - ----------------------- Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $75,000 Basic Death Benefit = $75,000 Death Benefit Amount = $75,000 - $50,000 = $25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $75,000 + $12,500 = $87,500 Examples with market decline Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $40,000 Basic Death Benefit = $50,000 Death Benefit Amount = $50,000 - $50,000 = $0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $50,000 + $0 = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Examples of Guaranteed Minimum Death Benefit Calculation The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS ASAPEX-PROS (05/2003). - -------------------------------------------------------------------------------- ------------------------------------------------------- (print your name) ------------------------------------------------------- (address) ------------------------------------------------------- (city/state/zip code) Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-766-4530 Telephone: 203-926-1888 http://www.americanskandia.com http://www.americanskandia.com MAILING ADDRESSES: AMERICAN SKANDIA - VARIABLE ANNUITIES P.O. Box 7040 Bridgeport, CT 06601-7040 EXPRESS MAIL: AMERICAN SKANDIA - VARIABLE ANNUITIES One Corporate Drive Shelton, CT 06484 Supplement to Prospectus Dated May 1, 2003 Supplement dated June 20, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. Montgomery Variable Series - Emerging Markets Portfolio reorganization into the Gartmore GVIT Developing Markets Portfolio American Skandia anticipates that shareholders will approve the Plan of Reorganization of the Montgomery Variable Series - Emerging Markets Portfolio and the Gartmore GVIT Developing Markets Portfolio and that the reorganization will take place on June 20, 2003. Upon completion of the reorganization, the Montgomery Variable Series - Emerging Markets Portfolio will cease to exist and Annuity Owners will have an equivalent Account Value in the Gartmore GVIT Developing Markets Portfolio. The principal investment objective and policies of the Portfolio will be unchanged as a result of this reorganization. UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Gartmore Variable Investment Trust: GVIT Developing Markets 1.15% 0.24% 0.25% 1.64% N/A 1.64%
ASAP/ ASAP2/ FUSI AS2/ ASAP III/ APEX/ ASXT/ FUSI XT/Wells XTVA/ VIA-SUPP (06/20/2003) ASXT-FOUR/ FUSI XT-FOUR/ ASL/ FUSI ASL/ Wells ASL/ ASPro/92001E0603 Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/ ASL II/ FUSI ASL II/ ASXT-SIX/ VIAS/ VIAT/ VIAG -SUPP (06/20/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated October 13, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. WHO IS AMERICAN SKANDIA? The following paragraph is added to this section of the prospectus: Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. GUARANTEED RETURN OPTION PlusSM (GRO PlusSM) The Guaranteed Return Option Plus described below is being offered as of October 13, 2003 in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program, the Guaranteed Minimum Withdrawal Benefit rider or the Guaranteed Minimum Income Benefit rider. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that seven-year period as the "maturity date") and on each anniversary of the maturity date thereafter, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate seven-year period following election of the enhanced guarantee and on each anniversary thereafter, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market increases. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between variable investment options and Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. KEY FEATURE - Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. |X| Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. |X| Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of the seven year period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically increase your base guarantee (or enhanced guarantee, if previously elected) on each anniversary of the program (and create a new, seven year maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the existing base guarantee (or enhanced guarantee, if previously elected) by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity will be applied, if necessary, to any Fixed Allocations needed to support the applicable guarantee amount as of the maturity date or any anniversary of the maturity date. Any remaining amounts will be allocated pro-rata to your Account Value based on your current Sub-account allocations. We will notify you of any amounts added to your Annuity under the program. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM)Optional Life Insurance Rider will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO PlusSM program are October 13, 2003; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2003 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2003 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: .. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). .. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x ( 1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2004 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE - Allocation of Account Value In general, you have discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to prohibit investment in certain Portfolios if you participate in the program. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. This permits your Annuity to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. We monitor fluctuations in your Account Value each business day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). |X| If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. |X| If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred to a new Fixed Allocation(s) to support the applicable guaranteed amount. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the variable investment options if there is a subsequent market recovery. During the period prior to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is extremely low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s). Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value are transferred to the variable investment options while Fixed Allocations in support of an Enhanced Protected Principal Value are not transferred because they must remain invested in the Fixed Allocation in support of the higher enhanced guarantee. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any business day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the business day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated (including the guaranteed amount(s)) and the Guaranteed Return Option Plus program will be added to your Annuity based on the current Account Value. This election of GRO PlusSM may result in a market value adjustment, which could increase or decrease your Account Value. Termination of the Program The Annuity Owner can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. The Annuity Owner also can terminate the Guaranteed Return Option Plus program entirely. An Annuity Owner who terminates the program entirely can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, an Annuity Owner could, for example, terminate the program on a given business day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program prior to the applicable maturity date, the Guaranteed Return Option Plus will no longer provide a guarantee of your Account Value. The surviving spouse may elect the benefit at any time after the death of the Annuity Owner. The surviving spouse's election will be effective on the business day that we receive the required documentation in good order at our home office, and the Account Value on that business day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: [X] Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. |X| Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program, and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Additional Purchase Payments (including any credits associated with such Purchase Payments) applied to the Annuity while the program is in effect will increase the applicable guarantee amount by the actual amount of the Purchase Payment; however, all or a portion of any additional Purchase Payments (including any credits associated with such Purchase Payments) may be allocated by us to Fixed Allocations to support the additional amount guaranteed. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. Charges under the Program We deduct a charge equal to 0.25% of Account Value per year to participate in the Guaranteed Return Option Plus program. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. ASAP2 / FUSI AS2 / EVA / ASAP III / APEX / FUSI XT /EVA XT / WELLS XT / FUSI ASXT-4 / ASL / FUSI ASL / WELLS ASL / WELLS APEX / AS PRO / WELLS VA+ / IMPACT / FT PORTFOLIOS / GAL 3 / ASL II /FUSI ASL II / APEX II - SUPP. (GRO Only) - (10/13/2003) 92001b0903
Supplement to Prospectus Dated May 1, 2003 Supplement dated December 5, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. As described in more detail below, one of the Evergreen portfolios formerly offered as an investment option for your annuity was merged into another Evergreen portfolio. MERGER Evergreen VA Global Leaders Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Global Leaders portfolio merged into the Evergreen VA International Equity portfolio. As a result of the merger, the Evergreen VA Global Leaders portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA International Equity portfolio, the successor portfolio. The following annual expenses for the successor portfolio are estimates of what the expenses of the portfolio will be as a result of the merger: UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios)
Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Evergreen Variable Annuity Trust: International Equity /1/ 0.66% 0.39% 0.00% 1.05% 0.00% 1.05%
/1/ The annual expenses of the Evergreen VA International Equity portfolio prior to the Merger were as follows: Management Fee: 0.66%; 12b-1 Fee: 0.00%; Other Expenses: 0.73%; Total Annual Portfolio Operating Expenses: 1.39%; Fee Waiver and Expense Reimbursement: 0.39%; Net Annual Portfolio Operating Expenses: 1.00%. The following descriptions of the investment objectives are effective as of December 5, 2003. INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?
STYLE/ PORTFOLIO TYPE ADVISOR/ INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL EQUITY Evergreen VA International Equity (acquired Evergreen VA Global Leaders) (f/k/a Evergreen VA Evergreen International Growth): seeks long-term capital growth and, secondarily, modest income. The Investment Portfolio invests primarily in equity securities issued by established, quality, non-U.S. Management companies located in countries with developed markets, but may purchase across all market Company, capitalizations. The Portfolio normally invests at least 65% of its assets in securities of LLC companies in at least three different countries (other than the U.S.), but may invest more than 25% of its assets in one country. The Portfolio also invests in emerging markets.
ASAP / ASAP 2 / ASAP III / APEX / ACII/APEX2/ASAPII/ASAP 3/ASL2/ASXT4/ASXT6 ASXT / ASXT-Four / ASL / AS Pro / EVERSUPP1203 Choice 2 / AS Impact / APEX II /ASL II / ASXT-Six / VIA-S / VIA-T /VIA-G - SUPP. (12/05/2003)
Supplement to Prospectus Dated May 1, 2003 Supplement dated January 29, 2004 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. AST Strong International Equity portfolio Pursuant to the exemptive authority granted to American Skandia Trust, its investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC have changed sub-advisors for the AST Strong International Equity Portfolio ("International Equity Portfolio"). Effective February 23, 2004, J.P. Morgan Investment Management Inc. will become the sub-advisor for the International Equity Portfolio. Accordingly, effective February 23, 2004, all references in the Prospectus and the SAI to the AST Strong International Equity Portfolio are replaced by references to the AST JPMorgan International Equity Portfolio and references to Strong Capital Management, Inc. are replaced by references to J.P. Morgan Investment Management Inc. The investment objective of the International Equity Portfolio is unchanged. ASAP/ ASAP2/ EVA/ FUSI AS2/ ASAP III/ Wells ASAP III/ APEX/VA/ VIA-SUPP (01/2004) ASXT/ EVAXT/ FUSI XT/Wells XT/ASXT-FOUR/ FUSI XT-FOUR/ ASL/92001a0304 FUSI ASL/ Wells ASL/ ASPro/ Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/Wells APEX II/ ASL II/ FUSI ASL II/ASXT-SIX/ Wells XT-SIX/ VIAS/ VIAT/ VIAG -SUPP (01/2004) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION One Corporate Drive, Shelton, Connecticut 06484 This Prospectus describes StagecoachTM ApexSM, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Wells Fargo Bank, N.A. The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 48. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. ================================================================================ American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees and charges may also be different between each annuity. ================================================================================ If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features 06/30will satisfy that need. WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed investment options. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 701/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank subsidiary of Wells Fargo Bank, N.A. are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value. - - -------------------------------------------------------------------------------- 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 THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE. - - -------------------------------------------------------------------------------- FOR FURTHER INFORMATION CALL 1-800-680-8920. Prospectus Dated: May 1, 2003 Statement of Additional Information Dated: May 1, 2003 WFVAPEXPROS- (05/2003) WFVAPEXPROS
PLEASE SEE OUR PRIVACY POLICY ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY? |X| This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. |X| This Annuity offers both variable and fixed investment options. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed investment options of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. |X| The Annuity features two distinct periods - the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: Wells Fargo Variable Trust, American Skandia Trust, Montgomery Variable Series and INVESCO Variable Investment Funds, Inc. |X| During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. |X| This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. |X| You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges. Other product features allow you to access your Account Value as necessary, although a charge may apply. After Annuity Year 4, you are allowed to make unlimited withdrawals from your Annuity without any charges. |X| Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $10,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $10,000. If the Annuity is owned by an individual or individuals, the oldest of those persons must be age 85 or under. If the Annuity is owned by an entity, the annuitant must be age 85 or under. TABLE OF CONTENTS GLOSSARY OF TERMS...............................................................................................................5 SUMMARY OF CONTRACT FEES AND CHARGES............................................................................................6 EXPENSE EXAMPLES................................................................................................................9 INVESTMENT OPTIONS.............................................................................................................10 WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?...........................................................10 WHAT ARE THE FIXED INVESTMENT OPTIONS?.......................................................................................15 FEES AND CHARGES...............................................................................................................15 WHAT ARE THE CONTRACT FEES AND CHARGES?......................................................................................15 WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?................................................................16 WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?.................................................................................17 WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?.................................................................................17 WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?....................................................................17 EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES....................................................................................17 PURCHASING YOUR ANNUITY........................................................................................................17 WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?........................................................................17 MANAGING YOUR ANNUITY..........................................................................................................18 MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?..............................................................18 MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?................................................................................18 MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.....................................................................................19 MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?.................................................................19 MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?.............................................................19 MANAGING YOUR ACCOUNT VALUE....................................................................................................19 HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?.................................................................................19 ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?...................................................19 DO YOU OFFER DOLLAR COST AVERAGING?..........................................................................................20 DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?.............................................................................20 DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?..........................................20 MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT?.............................................................22 HOW DO THE FIXED INVESTMENT OPTIONS WORK?....................................................................................23 HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?............................................................................23 HOW DOES THE MARKET VALUE ADJUSTMENT WORK?...................................................................................24 WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?...............................................................................25 ACCESS TO ACCOUNT VALUE........................................................................................................25 WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?.............................................................................25 ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?................................................................................25 CAN I WITHDRAW A PORTION OF MY ANNUITY?......................................................................................25 HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?................................................................................26 IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?..................................................................................26 CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?.............................................27 DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(T) OF THE INTERNAL REVENUE CODE?.....................................27 WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?...........................................................27 CAN I SURRENDER MY ANNUITY FOR ITS VALUE?....................................................................................28 WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?..................................................................28 WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?.................................................................................28 HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?.........................................................................29 HOW ARE ANNUITY PAYMENTS CALCULATED?.........................................................................................29
DEATH BENEFIT..................................................................................................................31 WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?................................................................................31 BASIC DEATH BENEFIT..........................................................................................................31 OPTIONAL DEATH BENEFITS......................................................................................................31 PAYMENT OF DEATH BENEFITS....................................................................................................33 VALUING YOUR INVESTMENT........................................................................................................35 HOW IS MY ACCOUNT VALUE DETERMINED?..........................................................................................35 WHAT IS THE SURRENDER VALUE OF MY ANNUITY?...................................................................................35 HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?..................................................................................35 HOW DO YOU VALUE FIXED ALLOCATIONS?..........................................................................................35 WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?..................................................................................35 WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?................................................36 TAX CONSIDERATIONS.............................................................................................................36 WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?.............................................................36 HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?....................................................................37 IN GENERAL, HOW ARE ANNUITIES TAXED?.........................................................................................37 HOW ARE DISTRIBUTIONS TAXED?.................................................................................................37 WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?..................................................................................................................39 HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?........................................................................40 GENERAL TAX CONSIDERATIONS...................................................................................................41 GENERAL INFORMATION............................................................................................................42 HOW WILL I RECEIVE STATEMENTS AND REPORTS?...................................................................................42 WHO IS AMERICAN SKANDIA?.....................................................................................................42 WHAT ARE SEPARATE ACCOUNTS?..................................................................................................42 WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?.........................................................................44 WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?.......................................................................44 AVAILABLE INFORMATION........................................................................................................46 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................................................................46 HOW TO CONTACT US............................................................................................................46 INDEMNIFICATION..............................................................................................................47 LEGAL PROCEEDINGS............................................................................................................47 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION..........................................................................48 APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA.......................................................................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.......................................11 APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B...........................................................1 APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS.............................................................................1 APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER............................................................................1 APPENDIX E - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT.........................................................................1
GLOSSARY OF TERMS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. Account Value: 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. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC") and/or any Annual Maintenance Fee. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. Annuitization: The application of Account Value to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply. Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. Code: The Internal Revenue Code of 1986, as amended from time to time. Fixed Allocation: An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. Guarantee Period: A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. Interim Value: The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. Issue Date: The effective date of your Annuity. MVA: A market value adjustment used in the determination of Account Value of each Fixed Allocation on a day more than 30 days prior to the Maturity Date of such Fixed Allocation. Owner: With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. Surrender Value: The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and the charge for any optional benefits. Unit: A measure used to calculate your Account Value in a Sub-account during the accumulation period. Valuation Day: Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. SUMMARY OF CONTRACT FEES AND CHARGES Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the Insurance Charge, which is the combination of a mortality and expense risk charge, a charge for administration of the Annuity, and the charge for any optional benefits you elect. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. Tax charges may vary by state and in certain states, a premium tax charge may be applicable. All of these fees and charges are described in more detail within this Prospectus. The following table provides a summary of the fees and charges you will incur if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus. - - ---------------------------------------------------------------------------------------------------------------------------------- YOUR TRANSACTION FEES AND CHARGES - - ---------------------------------------------------------------------------------------------------------------------------------- (assessed against the Annuity) - - ---------------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - - --------------------------------------------------------------------- ------------------------------------------------------------ Contingent Deferred Sales Charge* 8.5% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period is measured from the Issue Date of the Annuity. - - --------------------------------------------------------------------- ------------------------------------------------------------ Transfer Fee $10.00 (Deducted after the 20th transfer each Annuity Year) - - --------------------------------------------------------------------- ------------------------------------------------------------
* The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yrs. 5+ - -------- -------- -------- -------- -------- 8.5% 8.0% 7.0% 6.0% 0.0% The following table provides a summary of the periodic fees and charges you will incur while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus. - - --------------------------------------------------------------------- ------------------------------------------------------------ YOUR PERIODIC FEES AND CHARGES - - --------------------------------------------------------------------- ------------------------------------------------------------ ANNUAL FEES/CHARGES ASSESSED AGAINT THE ANNUITY - - --------------------------------------------------------------------- ------------------------------------------------------------ FEE/CHARGE Amount Deducted - - --------------------------------------------------------------------- ------------------------------------------------------------ Annual Maintenance Fee Smaller of $35 or 2% of Account Value (Only applicable if Account Value is less than $100,000) (Assessed annually on the Annuity's anniversary date or upon surrender) - - --------------------------------------------------------------------- ------------------------------------------------------------ - - --------------------------------------------------------------------- ------------------------------------------------------------ ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS* (as a percentage of the average daily net assets of the Sub-accounts) - - --------------------------------------------------------------------- ------------------------------------------------------------ FEE/CHARGE Amount Deducted - - --------------------------------------------------------------------- ------------------------------------------------------------ Mortality & Expense Risk Charge 1.25% - - --------------------------------------------------------------------- ------------------------------------------------------------ Administration Charge 0.15% - - --------------------------------------------------------------------- ------------------------------------------------------------ Total Annual Charges of the Sub-accounts** 1.40% per year of the value of each Sub-account - - --------------------------------------------------------------------- ------------------------------------------------------------
* These charges are deducted daily and apply to Variable Investment Options only. ** The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. The following table provides a summary of the fees and charges you will incur if you elect any of the following optional benefits. These fees and charges are described in more detail within this Prospectus. - - ---------------------------------------------------------------------------------------------------------------------------------- YOUR OPTIONAL BENEFIT FEES AND CHARGES - - ---------------------------------------------------------------------------------------------------------------------------------- Optional Benefit Optional Benefit Total Annual Charge* Fee/ Charge - - ------------------------------------------------------------------------------------------- ------------------- ------------------ - - ------------------------------------------------------------------------------------------- ------------------- ------------------ GUARANTEED RETURN OPTION 1.65% We offer a program that guarantees a "return of premium" at a future date, while 0.25% of average allowing you to allocate all or a portion of your Account Value to the Sub-accounts of daily net assets of your choice. the Sub-accounts - - ------------------------------------------------------------------------------------------- ------------------- ------------------ - - ------------------------------------------------------------------------------------------- ------------------- ------------------ ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT 1.65% We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing amounts in addition to the basic Death Benefit that daily net assets of can be used to offset federal and state taxes payable on any taxable gains in your the Sub-accounts Annuity at the time of your death. - - ------------------------------------------------------------------------------------------- ------------------- ------------------ - - ------------------------------------------------------------------------------------------- ------------------- ------------------ HIGHEST ANNIVERSARY VALUE DEATH BENEFIT We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing a death benefit equal to the greater of the basic daily net assets of 1.65% Death Benefit or the Highest Anniversary Value. the Sub-accounts - - ------------------------------------------------------------------------------------------- ------------------- ------------------ - - ------------------------------------------------------------------------------------------- ------------------- ------------------
Please refer to the section of the Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. * The Total Annual Charge includes the Insurance Charge assessed against the Annuity. If you elect more than one optional benefit, the Total Annual Charge includes the charge for each optional benefit. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2002. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets.
- - --------------------------------------------------------------------------------------------------------------------------------- Total Annual Portfolio Operating Expenses - - --------------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------------- Minimum Maximum - - -------------------------------------------- ------------------------------------------ ------------------------------------------ - - -------------------------------------------- ------------------------------------------ ------------------------------------------ Total Portfolio Operating Expense 0.80% 3.14% - - -------------------------------------------- ------------------------------------------ ------------------------------------------
The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2002, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee is being waived and/or other expenses are being partially reimbursed. "N/A" indicates that no portion of the management fee and/or other expenses is being waived and/or reimbursed. The "Net Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees, net of any fee waivers and expense reimbursements. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-680-8920. - - ---------------------------------------------------------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - - ---------------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------------- Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - - --------------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------------------------------------------------------------------- Wells Fargo Variable Trust: International Equity 0.75% 2.14% 0.25% 3.14% 2.14% 1.00% Small Cap Growth 0.75% 0.33% 0.25% 1.33% 0.13% 1.20% Growth 0.55% 0.35% 0.25% 1.15% 0.15% 1.00% Large Company Growth 0.55% 0.29% 0.25% 1.09% 0.09% 1.00% Equity Value 0.55% 0.48% 0.25% 1.28% 0.28% 1.00% Equity Income 0.55% 0.30% 0.25% 1.10% 0.10% 1.00% Asset Allocation 0.55% 0.23% 0.25% 1.03% 0.03% 1.00% Total Return Bond /1/ 0.45% 0.33% 0.25% 1.03% 0.13% 0.90% Money Market 0.40% 0.32% 0.25% 0.97% 0.22% 0.75% American Skandia Trust: /2/ AST William Blair International Growth 1.00% 0.23% 0.10% 1.33% 0.10% 1.23% AST American Century International Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% AST PBHG Small-Cap Growth 0.90% 0.22% 0.11% 1.23% 0.00% 1.23% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% 0.15% 1.00% AST Goldman Sachs Small-Cap Value 0.95% 0.21% 0.11% 1.27% 0.00% 1.27% AST Gabelli Small-Cap Value 0.90% 0.19% 0.01% 1.10% 0.00% 1.10% AST Goldman Sachs Mid-Cap Growth 1.00% 0.26% 0.07% 1.33% 0.10% 1.23% AST Neuberger Berman Mid-Cap Growth 0.90% 0.20% 0.06% 1.16% 0.00% 1.16% AST Neuberger Berman Mid-Cap Value 0.90% 0.17% 0.09% 1.16% 0.00% 1.16% AST Alger All-Cap Growth 0.95% 0.19% 0.15% 1.29% 0.00% 1.29% AST MFS Growth 0.90% 0.18% 0.10% 1.18% 0.00% 1.18% AST Marsico Capital Growth 0.90% 0.16% 0.04% 1.10% 0.01% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.15% 0.04% 1.09% 0.06% 1.03% AST Cohen & Steers Realty 1.00% 0.23% 0.03% 1.26% 0.00% 1.26% AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% 0.00% 0.98% AST INVESCO Capital Income 0.75% 0.17% 0.03% 0.95% 0.00% 0.95% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% 0.02% 0.78% AST PIMCO Limited Maturity Bond 0.65% 0.18% 0.00% 0.83% 0.00% 0.83% Montgomery Variable Series: Emerging Markets 1.25% 0.43% 0.00% 1.68% 0.00% 1.68% INVESCO Variable Investment Funds, Inc.: Technology 0.75% 0.36% 0.00% 1.11% 0.00% 1.11% Health Sciences 0.75% 0.32% 0.00% 1.07% 0.00% 1.07% - - ---------------------------------------------------------------------------------------------------------------------------------
/1/ Effective May 1, 2003, the Wells Fargo Variable Trust Corporate Bond portfolio changed its name to the Wells Fargo Variable Trust Total Return Bond portfolio. The name change was made in conjunction with a change in investment strategy. /2/ The Investment Manager of American Skandia Trust (the "Trust") has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2004. The caption "Total Annual Portfolio Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements, while the caption "Net Annual Portfolio Operating Expenses" reflects the effect of such waivers and reimbursements. The Trust adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the sale of shares of such Portfolios. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission takes the position that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Distribution Fee estimates are derived and annualized from data regarding commission amounts directed under the Distribution Plan. Although there are no maximum amounts allowable, actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the last full fiscal year of the Plan's operations may differ from the amounts listed in the above chart. EXPENSE EXAMPLES These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges (when applicable), Annual Maintenance Fee (when applicable), Insurance Charge, and the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), as well as the charges for the optional benefits that are offered under the Annuity. The Securities and Exchange Commission ("SEC") requires these examples. Below are examples showing what you would pay in expenses at the end of the stated time periods for each Sub-account had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.40% per year; (c) the Annual Maintenance Fee (when applicable) is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other transactions for which we charge a fee for during the period shown; (f) no tax charge applies; (g) the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above) are reflected; and (h) the charge for each optional benefit is reflected as an additional charge equal to 0.25% per year, respectively, for the Guaranteed Return Option, the Enhanced Beneficiary Protection and the Highest Anniversary Value Death Benefit. Amounts shown in the examples are rounded to the nearest dollar. Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. 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 WILL BE LESS THAN THOSE SHOWN IF YOU DO NOT ELECT ALL OF THE OPTIONAL BENEFITS AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. If your Account Value is less than $100,000, so that the Annual Maintenance Fee does apply. Please see the description below regarding how the Expense Examples change for Annuities with Account Value greater than $100,000. If you surrender your contract at the end of the applicable time period:
- ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- - ----------------------------- --------------------------- --------------------------- -------------------------- 1399 2338 2713 5344 - ----------------------------- --------------------------- --------------------------- -------------------------- If you annuitize at the end of the applicable time period: - ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- - ----------------------------- --------------------------- --------------------------- -------------------------- 549 1638 2713 5344 - ----------------------------- --------------------------- --------------------------- -------------------------- If you do not surrender your contract: - ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- - ----------------------------- --------------------------- --------------------------- -------------------------- 549 1638 2713 5344 - ----------------------------- --------------------------- --------------------------- --------------------------
- -------------------------------------------------------------------------------- The Expense Examples shown above assume your Account Value is less than $100,000 so that the Annual Maintenance Fee applies. If your Account Value is greater than $100,000 such that the Annual Maintenance Fee does not apply, the amounts indicated in the Expense Examples shown above would be reduced. - -------------------------------------------------------------------------------- INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information.) Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services, Incorporated, an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day investment decisions. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. ================================================================================ Effective close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value portfolio is no longer offered as a Sub-account under the Annuity, except as noted below. Annuity contracts with Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or before June 28, 2002 may continue to allocate Account Value and make transfers into the AST Goldman Sachs Small-Cap Value Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. Owners of Annuities issued after June 28, 2002 will not be allowed to allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-account. The AST Goldman Sachs Small-Cap Value Sub-account may be offered to new contract Owners at some future date; however, at the present time, American Skandia has no intention to do so. ================================================================================ Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- INTER-NATIONAL WFVT International Equity: seeks total return, with an emphasis on capital appreciation, over Wells Fargo Funds EQUITY the long-term. The Portfolio pursues its objective by investing primarily in a diversified Management, LLC portfolio of equity securities of companies based in developed non-U.S. countries and in emerging markets of the world. Under normal market conditions, the Portfolio invests at least 80% of its total assets in equity securities of companies located or operating outside the U.S. and in a minimum of five countries exclusive of the U.S. The Portfolio may invest up to 50% of its total assets in any one country and up to 25% of total assets in emerging markets. Generally, the Portfolio invests in issuers with an average market capitalization of $10 billion or more, although it may invest in equity securities of issuers with market capitalization as low as $250 million. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SMALL CAP WFVT Small Cap Growth: seeks long-term capital appreciation. The Portfolio pursues its Wells Fargo Funds EQUITY objective by investing in a diversified portfolio of common stocks issued by companies whose Management, LLC market capitalization falls with the range of the Russell 2000 Index. The Portfolio invests in common stocks of domestic and foreign companies that the Investment Advisor believes have above-average prospects for capital growth, or that may be involved in new or innovative products, services and processes. Under normal market conditions, the Portfolio invests in an actively managed, broadly diversified portfolio of small-cap growth-oriented common stocks and in at least 20 common stock issues spread across multiple industry groups and sectors of the economy. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP WFVT Growth: seeks long-term capital appreciation. The Portfolio pursues its objective by Wells Fargo Funds EQUITY investing primarily in common stocks and other equity securities of companies that have a Management, LLC strong earnings growth trend that the Investment Advisor believes have above-average prospects for future growth. Under normal market conditions, the Portfolio invests at least 65% of total assets in equity securities, including common and preferred stocks and securities convertible into common stocks. The investment strategy is focused on larger capitalization stocks that fall within, but towards the higher end of, the range of the Russell 1000 Index. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP WFVT Large Company Growth: seeks long-term capital appreciation. The Portfolio pursues its Wells Fargo Funds EQUITY objective by investing primarily in common stocks of large, high-quality domestic companies Management, LLC that the Investment Advisor believes have superior growth potential. The Investment Advisor looks for companies whose growth potential is generally unrecognized or misperceived by the market. The Portfolio may invest, under normal market conditions, at least 80% of total assets in securities with market capitalizations of $3 billion or more, and up to 20% of total assets in securities of foreign companies.. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP WFVT Equity Value: seeks long-term capital appreciation and above-average dividend income. Wells Fargo Funds EQUITY The Portfolio pursues its objective by investing primarily in equity securities of U.S. Management, LLC companies with strong return potential based on current market valuations. Under normal circumstances, the Portfolio invests at least 80% of its assets in equity securities with the same characteristics as common stocks, and in preferred stocks, warrants, and securities of foreign companies through ADRs and similar investments. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- EQUITY INCOME WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income. Wells Fargo Funds The Portfolio pursues its objective primarily by investing in the common stocks of large, Management, LLC domestic companies with above-average return potential based on current market valuations and above-average dividend income. Under normal market conditions, the Portfolio invests at least 80% of its total assets in income producing equity securities and in issues of companies with market capitalizations of $3 billion or more. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- ASSET WFVT Asset Allocation: seeks long-term total return, consistent with reasonable risk. The Wells Capital ALLOCATION Portfolio pursues its objective by allocating and reallocating its assets among common stocks Management and U.S. Treasury Bonds. The Investment Advisor manages the allocation of investments in the Incorporated Portfolio assuming a "neutral" target allocation of 60% stocks and 40% bonds. The stock portion of the Portfolio is invested to replicate the weightings of each company comprising the S&P 500 Index. The bond portion of the Portfolio is invested to replicate the Lehman Brothers 20+ Year Treasury Index. - - ------------------- ------------------------------------------------------------------------------------------------ -------------
- - ------------------- ------------------------------------------------------------------------------------------------ ------------- STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- BOND WFVT Total Return Bond (f/k/a WFVT Corporate Bond): seeks total return consisting of income Wells Fargo Funds and capital appreciation. The Portfolio pursues its objective by investing principally in Management, LLC investment-grade debt securities, which include U.S. Government obligations, corporate bonds, asset-backed securities and money market instruments. Under normal circumstances, the Portfolio will invest at least 80% of its assets in bonds. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- WFVT Money Market: seeks high current income, while preserving capital and liquidity. The Investment Advisor actively manages a portfolio of U.S. dollar-denominated high-quality, Wells Fargo Funds MONEY MARKET short-term money market instruments. They also make certain other investments, including Management, LLC repurchase agreements. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- INTERNATIONAL AST William Blair International Growth (f/k/a AST Janus Overseas Growth): seeks long-term William Blair & EQUITY growth of capital. The Portfolio pursues its objective primarily through investments in Company, L.L.C. equity securities of issuers located outside the United States. The Portfolio normally invests at least 80% of its total assets in securities of issuers from at least five different countries, excluding the United States. The Portfolio invests primarily in companies selected for their growth potential. Securities are generally selected without regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- INTERNATIONAL AST American Century International Growth: seeks capital growth. The Portfolio will seek to American Century EQUITY achieve its investment objective by investing primarily in equity securities of international Investment companies that the Sub-advisor believes will increase in value over time. Under normal Management, Inc. conditions, the Portfolio will invest at least 65% of its assets in equity securities of issuers from at least three countries outside of the United States. The Sub-advisor uses a growth investment strategy it developed that looks for companies with earnings and revenue growth. The Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SMALL CAP AST PBHG Small-Cap Growth: seeks capital growth. The Portfolio pursues its objective by Pilgrim Baxter & GROWTH primarily investing at least 80% of the value of its assets in the common stocks of Associates, Ltd. small-sized companies, whose market capitalizations are similar to market capitalizations of the companies in the Russell 2000(R)Index at the time of the Portfolio's investment. The Sub-advisor expects to focus primarily on those securities whose market capitalizations or annual revenues are less than $1billion at the time of purchase. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SMALL CAP AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital from a portfolio of Deutsche Asset GROWTH growth stocks of smaller companies. The Portfolio pursues its objective, under normal Management, Inc. circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R)Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R)Index, but which attempts to outperform the Russell 2000 Growth(R)Index. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SMALL CAP VALUE AST Goldman Sachs Small-Cap Value: seeks long-term capital appreciation. The Portfolio will Goldman Sachs seek its objective through investments primarily in equity securities that are believed to be Asset Management undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $5 billion or less. - - ------------------- ------------------------------------------------------------------------------------------------ -------------
- - ------------------- ------------------------------------------------------------------------------------------------ ------------- STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SMALL CAP VALUE AST Gabelli Small-Cap Value: seeks to provide long-term capital growth by investing primarily GAMCO in small-capitalization stocks that appear to be undervalued. The Portfolio will have a Investors, Inc. non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as those with a capitalization of $1.5 billion or less. 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. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- MID-CAP GROWTH AST Goldman Sachs Mid-Cap Growth (f/k/a AST Janus Mid-Cap Growth): seeks long-term capital Goldman Sachs growth. The Portfolio pursues its investment objective, by investing primarily in equity Asset Management securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- MID-CAP GROWTH AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under normal market conditions, Neuberger Berman the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index, at the time of investment, are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- MID-CAP VALUE AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market conditions, the Neuberger Berman Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- ALL-CAP AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in Fred Alger GROWTH equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in Management, Inc. the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP AST MFS Growth: seeks long-term capital growth and future income. Under normal market Massachusetts GROWTH conditions, the Portfolio invests at least 80% of its total assets in common stocks and Financial related securities, such as preferred stocks, convertible securities and depositary receipts, Services Company of companies that the Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. - - ------------------- ------------------------------------------------------------------------------------------------ -------------
- - ------------------- ------------------------------------------------------------------------------------------------ ------------- STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP AST Marsico Capital Growth: seeks capital growth. Income realization is not an investment Marsico Capital GROWTH objective and any income realized on the Portfolio's investments, therefore, will be Management, LLC incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, a "bottom up" stock selection. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- LARGE CAP AST Goldman Sachs Concentrated Growth (f/k/a AST JanCap Growth): seeks growth of capital in a Goldman Sachs GROWTH manner consistent with the preservation of capital. Realization of income is not a Asset Management significant investment consideration 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 equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30 - 45 companies that are considered by the Sub-advisor to be positioned for long-term growth. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- REAL ESTATE AST Cohen & Steers Realty: seeks to maximize total return through investment in real estate Cohen & Steers (REIT) securities. The Portfolio pursues its investment objective by investing, under normal Capital circumstances, at least 80% of its net assets in securities of real estate issuers. Under Management, Inc. normal circumstances, the Portfolio will invest substantially all of its assets in the equity securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- GROWTH AST American Century Income & Growth: seeks capital growth with current income as a secondary American Century AND objective. The Portfolio invests primarily in common stocks that offer potential for capital Investment INCOME growth, and may, consistent with its investment objective, invest in stocks that offer Management, Inc. potential for current income. The Sub-advisor utilizes a quantitative management technique with a goal of building an equity portfolio that provides better returns than the S&P 500 Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- EQUITY INCOME AST INVESCO Capital Income (f/k/a AST INVESCO Equity Income): seeks capital growth and current INVESCO Funds income while following sound investment practices. The Portfolio seeks to achieve its Group, Inc. objective by investing in securities that are expected to produce relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular dividends. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- BOND AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of Pacific capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a three- to six-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- BOND AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation Pacific of capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a one- to three-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - - ------------------- ------------------------------------------------------------------------------------------------ -------------
- - ------------------- ------------------------------------------------------------------------------------------------ ------------- STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- EMERGING Montgomery Variable Series - Emerging Markets: seeks long-term capital appreciation, under Gartmore Global MARKETS normal conditions by investing at least 80% of its total assets in stocks of companies of any Asset Management size based in the world's developing economies. Under normal market conditions, investments Trust/Gartmore are maintained in at least six countries at all times and no more than 35% of total assets in Global Partners any single one of them. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SECTOR INVESCO Variable Investment Funds - Technology: seeks capital growth. The Portfolio normally INVESCO Funds invests 80% of its net assets in the equity securities and equity-related instruments of Group, Inc. companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. Many of these products and services are subject to rapid obsolescence, which may lower market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------- ------------------------------------------------------------------------------------------------ ------------- - - ------------------- ------------------------------------------------------------------------------------------------ ------------- SECTOR INVESCO Variable Investment Funds - Health Sciences: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instruments of companies that develop, produce or distribute products or services related to health care. These companies include, but are not limited to, medical equipment or supplies, pharmaceuticals, biotechnology and healthcare providers and service companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------- ------------------------------------------------------------------------------------------------ -------------
WHAT ARE THE FIXED INVESTMENT OPTIONS? We offer fixed investment options of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the movement of applicable interest rates payable on Strips of the appropriate duration. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-766-4530 to determine availability of Fixed Allocations in your state and for your annuity product. FEES AND CHARGES WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a Contingent Deferred Sales Charge or CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the Issue Date of your Annuity as Year 1. The amount of the CDSC decreases over time, measured from the Issue Date of the Annuity. The CDSC percentages are shown below.
- ------------------ ------------- ------------- ------------ ------------- ------------- YEARS 1 2 3 4 5+ - ------------------ ------------- ------------- ------------ ------------- ------------- - ------------------ ------------- ------------- ------------ ------------- ------------- CHARGE (%) 8.5% 8.0% 7.0% 6.0% 0.0% - ------------------ ------------- ------------- ------------ ------------- -------------
The CDSC period is based on the Issue Date of the Annuity, not on the date each Purchase Payment is applied to the Annuity. Purchase Payments applied to the Annuity after the Issue Date do not have their own CDSC period. During the first four (4) Annuity Years, under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." After four (4) complete Annuity Years, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. For purposes of calculating the CDSC on a surrender or a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party investment advisory service will be subject to the twenty-transfer limit. However, all transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. Currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: Several states and some municipalities charge premium taxes or similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2%. We generally will deduct the amount of tax payable at the time the tax is imposed, but may also decide to deduct tax charges from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily against the average daily assets allocated to the Sub-accounts. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (1.25%) and the Administration Charge (0.15%). The total charge is equal to 1.40% on an annual basis. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits: If you elect to purchase one or more optional benefits, we will deduct an additional charge on a daily basis from your Account Value allocated to the Sub-accounts. The charge for each optional benefit is deducted in addition to the Insurance Charge due to the increased insurance risk associated with the optional benefits. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. Please refer to the section entitled "Death Benefit" for a description of the charge for each Optional Death Benefit. Please refer to the section entitled "Managing Your Account Value - Do you offer programs designed to guarantee a "return of premium" at a future date?" for a description of the charge for the Guaranteed Return Option. WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS? We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. These fees are deducted daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by Underlying Funds". WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? In certain states a tax is due if and when you exercise your right to receive periodic annuity payments. The amount payable will depend on the applicable jurisdiction and on the annuity payment option you select. If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will continue to be subject to an insurance charge. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce the portion of the Insurance Charge attributed to the charge covering administrative costs. PURCHASING YOUR ANNUITY WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $10,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $10,000 in total Purchase Payments. Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We call our bank drafting program "Auto Saver". We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 85 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 85 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 85 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 591/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. Owner, Annuitant and Beneficiary Designations: On your Application, we will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. |X| Owner: The Owner(s) holds all rights under the Annuity. You may name more than one Owner in which case all ownership rights are held jointly. However, this Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." |X| Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. |X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. MANAGING YOUR ANNUITY MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us 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: |X| 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; |X| a new Annuitant subsequent to the Annuity Date; |X| for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and |X| a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account Value to the WFVT Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to allow for delivery of your Annuity. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in "Auto Saver" or a periodic purchase payment program. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "Auto Saver." Purchase Payments made through Auto Saver may only be allocated to the variable investment options when applied. Auto Saver allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $10,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $10,000. MANAGING YOUR ACCOUNT VALUE HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. In those states where we are required to return your Purchase Payment if you exercise your right to return the Annuity, we initially allocate all amounts that you choose to allocate to the variable investment options to the WFVT Money Market Sub-account. At the end of the right to cancel period we will reallocate your Account Value according to your most recent allocation instructions. Where permitted by law, we will allocate your Purchase Payments according to your initial instructions, without temporarily allocating to the WFVT Money Market Sub-account. To do this, we will ask that you execute our form called a "return waiver" that authorizes us to allocate your Purchase Payment to your chosen Sub-accounts immediately. If you submit the "return waiver" and then decide to return your Annuity during the right to cancel period, you will receive your current Account Value which may be more or less than your initial Purchase Payment (see "May I Return the Annuity if I Change my Mind?"). Subsequent Purchase Payments: We will allocate any additional Purchase Payments you make according to your current allocation instructions. If any rebalancing or asset allocation programs are in effect, the allocation should conform with such a program. We assume that your current allocation instructions are valid for subsequent Purchase Payments until you make a change to those allocations or request new allocations when you submit a new Purchase Payment. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year, including transfers made as part of any rebalancing, market timing, asset allocation or similar program which you have authorized. Transfers made as part of a dollar cost averaging program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. 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: (a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by one or more of the Portfolios that the purchase or redemption of shares must be restricted because of excessive trading or a specific transfer or group of transfers is deemed to have a detrimental effect on the share prices of affected Portfolios. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. Under such a circumstance, we will process transfers according to our rules then in effect and provide notice if the transfer request was denied. If a transfer request is denied, a new transfer request may be required. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount each month from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. Dollar Cost Averaging allows you to invest regularly each month, regardless of the current unit value (or price) of the Sub-account(s) you invest in. This enables you to purchase more units when the market price is low and fewer units when the market price is high. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. We do not deduct a charge for participating in a Dollar Cost Averaging program. You must have a minimum Account Value of at least $10,000 to enroll in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: |X| You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. |X| You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. |X| Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced quarterly, semi-annually, or annually. On the appropriate date, your variable investment options are rebalanced to the allocation percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. If you request a transfer from or into any variable investment option participating in the automatic rebalancing program, we will assume that you wish to change your rebalancing percentages as well, and will automatically adjust the rebalancing percentages in accordance with the transfer unless we receive alternate instructions from you. You must have a minimum Account Value of at least $10,000 to enroll in automatic rebalancing. All rebalancing transfers made on the same day as part of an automatic rebalancing program are considered as one transfer when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, at least as of a specific date in the future. You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 5.33%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.594948 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $59,495 will be allocated to the Fixed Allocation and the remaining Account Value ($41,505) will be allocated to the variable investment options. Assuming that you do not make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. Guaranteed Return Option (GRO)SM We also offer a seven-year program where we monitor your Account Value daily and systematically transfer amounts between Fixed Allocations and the variable investment options you choose. American Skandia guarantees that at the end of the seventh (7th) year from commencement of the program (or any program restart date), you will receive no less than your Account Value on the date you elected to participate in the program ("commencement value"). On the program maturity date, if your Account Value is below the commencement value, American Skandia will apply additional amounts to your Annuity so that it is equal to commencement value or your Account Value on the date you elect to restart the program duration. Any amounts added to your Annuity will be applied to the WFVT Money Market Sub-account, unless you provide us with alternative instructions. We will notify you of any amounts added to your Annuity under the program. We do not consider amounts added to your Annuity to be "investment in the contract" for income tax purposes. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts. With the Guaranteed Return Option, your Annuity is able to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. NOTE: If a significant amount of your Account Value is systematically transferred to Fixed Allocations during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the Sub-accounts if there is a subsequent market recovery. Each business day we monitor the performance of your Account Value to determine whether it is greater than, equal to or below our "reallocation trigger", described below. Based on the performance of the Sub-accounts in which you choose to allocate your Account Value relative to the reallocation trigger, we may transfer some or all of your Account Value to or from a Fixed Allocation. You have complete discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to restrict certain Portfolios if you participate in the program. |X| Account Value greater than or equal to reallocation trigger: Your Account Value in the variable investment options remains allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation, those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations. A Market Value Adjustment will apply. |X| Account Value below reallocation trigger: A portion of your Account Value in the variable investment options is transferred to a new Fixed Allocation. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation will have a Guarantee Period equal to the remaining duration in the Guaranteed Return Option. The Account Value applied to the new Fixed Allocation will be credited with the fixed interest rate then being applied to a new Fixed Allocation of the next higher yearly duration. The Account Value will remain invested in the Fixed Allocation until the maturity date of the program unless, at an earlier date, your Account Value is at or above the reallocation trigger and amounts can be transferred to the variable investment options (as described above) while maintaining the guarantee protection under the program. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Any change to the allocation mechanism and/or the reallocation trigger will only apply to programs that begin after the change is effective. Program Termination The Guaranteed Return Option will terminate on its maturity date. You can elect to participate in a new Guaranteed Return Option or re-allocate your Account Value at that time. Upon termination, any Account Value allocated to the Fixed Allocations will be transferred to the WFVT Money Market Sub-account, unless you provide us with alternative instructions. Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: |X| You may terminate the Guaranteed Return Option at any time. American Skandia does not provide any guarantees upon termination of the program. |X| Withdrawals from your Annuity while the program is in effect will reduce the guaranteed amount under the program in proportion to your Account Value at the time of the withdrawal. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. |X| Additional Purchase Payments applied to the Annuity while the program is in effect will only increase the amount guaranteed; however, all or a portion of any additional Purchase Payments may be allocated to the Fixed Allocations. |X| Annuity Owners cannot transfer Account Value to or from a Fixed Allocation while participating in the program and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| The Guaranteed Return Option will terminate: (a) upon the death of the Owner or the Annuitant (in an entity owned contract); and (b) as of the date Account Value is applied to begin annuity payments. |X| You can elect to restart the seven (7) year program duration on any anniversary of the Issue Date of the Annuity. The Account Value on the date the restart is effective will become the new commencement value. You can only elect the program once per Annuity Year. Charges under the Program We deduct a charge equal to 0.25% per year to participate in the Guaranteed Return Option. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date of the program is less than the amount guaranteed; and (b) administration of the program. - -------------------------------------------------------------------------------- Effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between November 9, 2001 and November 15, 2002 and subsequent to November 19, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 18, 2002 will be subject to the charge method described above. - -------------------------------------------------------------------------------- MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT? Yes. You may authorize your investment professional to direct the allocation of your Account Value and to request financial transactions between investment options while you are living, subject to our rules. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your investment professional if you fail to inform us that such person's authority has been revoked. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. These investment professionals may be firms or persons who also are appointed by us as authorized sellers of the Annuity. However, we do not offer advice about how to allocate your Account Value under any circumstance. Any investment professionals you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such investment professionals make, any market timing or asset allocation programs they choose to follow or any specific transfers they make on your behalf. We may require investment professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) on American Skandia. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED INVESTMENT OPTIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-766-4530. A Guarantee Period for a Fixed Allocation begins: |X| when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; |X| upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or |X| when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. |X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. |X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. |X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: |X| On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity Date is December 31, 2005). |X| The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the Option-adjusted Spread is 5.50% (I = 5.50%). |X| You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3) years, therefore 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the WFVT Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. ACCESS TO ACCOUNT VALUE WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through Partial Withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. |X| To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-4 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. |X| You can also make withdrawals in excess of the Free Withdrawal amount. We call this a "Partial Withdrawal." The amount that you may withdraw will depend on the Annuity's Surrender Value. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee, the Tax Charge, any charges for optional benefits and any Market Value Adjustment that may apply to any Fixed Allocations. After any Partial Withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal request as a request to fully surrender your Annuity. The minimum Partial Withdrawal you may request is $100. When we determine if a CDSC applies to Partial Withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial Withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.com. HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Year 1-4 The maximum Free Withdrawal amount during each of Annuity Year 1 through Annuity Year 4 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payments) is 10% of all Purchase Payments. We may apply a Market Value Adjustment to any Fixed Allocations. The 10% Free Withdrawal amount is not cumulative. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC during Annuity Years 1 through 4. If, during Annuity Years 1 through 4, all Purchase Payments withdrawn are subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Year 5+ After Annuity Year 4, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first four (4) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first four Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $5,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 and 4 would be 10% of $15,000, or $1,500. From Annuity Year 5 and thereafter, you can surrender your Annuity or make a partial withdrawal without a CDSC being deducted from the amount being withdrawn. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a Partial Withdrawal during the first four (4) Annuity Years. Whether a CDSC applies and the amount to be charged depends on whether the Partial Withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Issue Date of the Annuity. 1. If you request a Partial Withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount, we determine if a CDSC will apply to the Partial Withdrawal based on the number of years that have elapsed since the Annuity was issued. Any CDSC will only apply to the amount withdrawn that exceeds the Free Withdrawal amount. |X| If the Annuity has been in effect for less than four complete years, a CDSC will be charged on the amount of the Purchase Payment being withdrawn, according to the CDSC table. |X| If the Annuity has been in effect for more than four complete years, no CDSC will be charged on the amount being withdrawn. For purposes of calculating the CDSC on a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals during the first four (4) Annuity Years may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100, we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 1/2if you elect to receive distributions as a series of "substantially equal periodic payments". Distributions received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum that applies to Systematic Withdrawals does not apply to Minimum Distributions. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, contact our Customer Service Team at 1-800-680-8920 or visit our Internet Website at www.americanskandia.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: |X| the Annuitant must be alive as of the date we pay the proceeds of such surrender request; |X| if the Owner is one or more natural persons, all such Owners must also be alive at such time; |X| we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and |X| this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the "Contingency Event" described above in order to qualify for a medically-related surrender. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 - --------- Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 - --------- 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 - --------- Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 - --------- Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 - --------- Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 6 - --------- Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, choosing an Annuity Date within four (4) years of the Issue Date of the Annuity may limit the available annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. If you have not provided us with your Annuity Date or annuity payment option in writing, then: |X| the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and |X| the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments We offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. |X| Variable Payments (Options 1-3) ------------------- We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. |X| Stabilized Variable Payments (Option 5) ------------------------------ This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. |X| Stabilized Variable Payments with a Guaranteed Minimum (Option 6) -------------------------------------------------------- This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. DEATH BENEFIT WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers two different optional Death Benefits. Either benefit can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. The basic Death Benefit is the greater of: |X| The sum of all Purchase Payments less the sum of all proportional withdrawals. |X| The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Two optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - -------------------------------------------------------------------------------- Currently, these benefits are only offered and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase either of the optional Death Benefits subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. - -------------------------------------------------------------------------------- Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix E for a description of the Enhanced Beneficiary Protection Optional Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - -------------------------------------------------------------------------------- See Appendix C for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. Key Terms Used with the Highest Anniversary Value Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Value" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. |X| Proportional withdrawals result in a reduction to the Highest Anniversary Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Calculation of Highest Anniversary Value Death Benefit The Highest Anniversary Value Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. - -------------------------------------------------------------------------------- The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix E for a description of the Guaranteed Minimum Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. - -------------------------------------------------------------------------------- See Appendix C for examples of how the Highest Anniversary Value Death Benefit is calculated. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and Highest Anniversary Value Optional Death Benefit at any time. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year, respectively, if you elect the Highest Anniversary Value Optional Death Benefit or the Enhanced Beneficiary Protection Optional Death Benefit. If you elect both optional Death Benefits, the total charge is equal to 0.50% per year. We deduct the charge to compensate American Skandia for providing increased insurance protection under the optional Death Benefit. The additional annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed: |X| as a lump sum amount at any time within five (5) years of the date of death; or |X| as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary - Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. IRA Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. |X| If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. |X| If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2." Upon election of this IRA Beneficiary Continuation option: |X| the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. |X| the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. |X| the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner. NOTE: The Sub-accounts offered under the IRA Beneficiary Continuation option may be limited. |X| no additional Purchase Payments can be applied to the Annuity. |X| the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. |X| the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. |X| upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. |X| all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the IRA Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including either optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the WFVT Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. VALUING YOUR INVESTMENT HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. When determining the Account Value on a day more than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee and the charge for any optional benefits. The Surrender Value will also include any Market Value Adjustment that may apply. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day other than its Maturity Date or within 30 days prior to its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next business day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: |X| trading on the NYSE is restricted; |X| an emergency exists making redemption or valuation of securities held in the separate account impractical; or |X| the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) days after we receive all of our requirements to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment with satisfactory allocation instructions. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on Valuation Day prior to the scheduled transaction date. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefits: If you terminate the Guaranteed Return Option program or either Optional Death Benefit, we will no longer deduct the charge we apply to purchase the optional benefit. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge and any optional benefit or program still elected, but not the charge for the optional benefit or program that you terminated. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. TAX CONSIDERATIONS WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY? Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a professional tax advisor for tax advice as to your particular situation. HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED? The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I, subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the Separate Accounts with respect to the Annuities. IN GENERAL, HOW ARE ANNUITIES TAXED? Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on: 1. whether the Annuity is used by: |X| a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment under the Code (for purposes of this discussion, a "Qualified Contract"); or |X| an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and 2. whether the Owner is: |X| an individual person or persons; or |X| an entity including a corporation, trust or partnership. Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation. Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity for Federal tax purposes may not be subject to income tax as a result of this provision. HOW ARE DISTRIBUTIONS TAXED? Distributions from an Annuity are taxed as ordinary income and not as capital gains. Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross income. |X| "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate value of all "related contracts" (discussed below). |X| "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous distributions or portions of such distributions from such "related contracts" that were 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, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the contract" for a Qualified Contract will be considered zero for tax reporting purposes. Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable annuity payments. When 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 may be allowed as a deduction on the decedent's final income tax return. Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract (Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This penalty does not apply to certain distributions, including: |X| Distributions made on or after the taxpayer has attained age 591/2; |X| Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant; |X| Distributions attributable to the taxpayer's becoming disabled within the meaning of Code section 72(m)(7); |X| Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and the taxpayer's designated beneficiary; |X| Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982; |X| Payments under an immediate annuity as defined in the Code; |X| Distributions under a qualified funding asset under Code Section 130(d); or |X| 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. Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the contracts will be added together to determine the proper taxation of a distribution from any one contract described under the section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your own tax advisor on this matter. Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or disability. American Skandia does not currently support a section 72(q) program. Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the 10% penalty described above under "Penalty Tax on Distributions" 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 a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed more than one year prior to the annuity starting date 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. Special rules in relation to tax-free exchanges under Section 1035: 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 purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity payments will be considered to come: |X| First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity; |X| Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including income on such original purchase payments after the exchange); |X| Then, from any remaining "income on the contract"; and |X| Lastly, from the amount of any "investment in the contract" made after August 13, 1982. Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14, 1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such an exchange. Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible for non-recognition treatment under Section 1035 of the Code. We will continue to report a partial surrender of a life insurance policy as subject to current taxation to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such a transaction on the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified endowment contract. Special Considerations for Purchasers of the Enhanced Beneficiary Protection Optional Death Benefit: As of the date of this Prospectus, it is our understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected to report them as such. WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries below of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of tax-qualified retirement plans. Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Certain states do not conform to the pension provisions included in EGTRRA. We recommend that you consult with your tax advisor to determine the status of your state's statutes as they relate to EGTRRA and your tax qualified retirement plan. Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations on the amount that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific organizations specified in Section 501(c)(3) for the benefit of their employees. 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 also apply. 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. Individual Retirement Arrangements or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified retirement plans and maintain the tax-deferred status of these amounts. Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However, distributions from a Roth IRA are free from Federal income taxes and are not subject to 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 1/2or 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 Federal income and penalty taxes. 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 or another qualified plan, 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. SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be deductible to the employer. HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED? Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does not apply when the distribution: |X| is part of a properly executed transfer to another IRA or another eligible qualified account; |X| 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); |X| is part of a series 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; |X| is subsequent to a separation from service after the taxpayer attains age 55*; |X| does not exceed the employee's allowable deduction in that tax year for medical care; |X| is made to an alternate payee pursuant to a qualified domestic relations order*; |X| is made pursuant to an IRS levy; |X| is made to pay qualified acquisition costs for a first time home purchase (IRA only); |X| is made to pay qualified higher education expenses (IRA only); and |X| is not more than the cost of your medical insurance (IRA only. The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available. Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of: |X| the calendar year in which the individual attains age 70 1/2; or |X| the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement option is not available to IRAs. The IRS has released Treasury regulations containing new Minimum Distribution rules. For Minimum Distributions required in 2003 and later, individuals are required to use the rules under the 2002 Final Regulations. The 2002 Final Regulations contain a provision which could increase the amount of minimum distributions required for certain individuals. Under the 2002 Final Regulations, individuals are required to include in their annuity contract value the actuarial value of any other benefits that will be provided under the annuity. We and other annuity providers are currently seeking clarification of this new rule. You should consult your tax adviser to determine the impact of this rule on your Minimum Distributions. Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to utilize the actual life expectancies of the participant and the spouse. In most cases, the beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the designated Beneficiary may generally take Minimum Distributions over his/her life expectancy or in a lump sum. If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on the amount that was not properly distributed. Because of the many recent changes to the Minimum Distribution rules, we strongly encourage you to consult with your tax advisor for more detailed information. GENERAL TAX CONSIDERATIONS 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). If the diversification requirements under the Code are not met and the annuity is not treated as an annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations prescribe the diversification requirements for variable annuity contracts. We expect the underlying mutual fund portfolios to comply with the terms of these regulations. 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. 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, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20% withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20% withholding: |X| any portion of a distribution paid as a Minimum Distribution; |X| direct transfers to the trustee of another retirement plan; |X| distributions from an individual retirement account or individual retirement annuity; |X| 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; |X| distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code; and |X| certain other distributions where automatic 20% withholding may not apply. 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 is treated as a distribution subject to taxation under the distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and 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 as Qualified Contracts, 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 someone other than the spouse of the owner (or former spouse incident to a divorce) is treated, for income tax purposes, as a distribution. 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 $1.1 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. We will deduct from your Annuity or from any applicable payment treated as a direct skip any amount of tax we are required to pay. Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. GENERAL INFORMATION HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. Any errors or corrections on transactions for your Annuity must be reported to us at our Office as soon as possible 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 30 days from the date you receive the confirmation. For transactions that are first confirmed on the quarterly statement, we assume all transactions are accurate unless you notify us within 30 days from the date you receive the quarterly statement. All transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 30-day period. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) both fixed and variable immediate adjustable annuities; and (d) a single premium variable life insurance policy that is registered with the SEC. On December 20, 2002, Skandia Insurance Company Ltd. (publ), an insurance company organized under the laws of the Kingdom of Sweden ("Skandia"), and on that date, the ultimate parent company of American Skandia, announced that it and Skandia U.S. Inc. had entered into a definitive Stock Purchase Agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"). Under the terms of the Stock Purchase Agreement, Prudential Financial will acquire Skandia U.S. Inc., a Delaware corporation, from Skandia. Skandia U.S. Inc. is the sole shareholder of ASI, which is the parent company of American Skandia. The transaction is expected to close during the second quarter of 2003. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, following the closing of the acquisition, Prudential Financial will exercise significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002 each Sub-account class of Separate Account B will be consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which will subsequently be renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B will have multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B will have no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with independent broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration. Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Compensation is paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of the firm. Compensation is generally based on a percentage of Purchase Payments made, up to a maximum of 5.5%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, firms may receive separate compensation or reimbursement for, among other things, training of sales personnel, marketing or other services they provide to us or our affiliates. We or ASM may enter into compensation arrangements with certain firms. These arrangements will not be offered to all firms and the terms of such arrangements may differ between firms. Any such compensation will be paid by us or ASM and will not result in any additional charge to you. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or other compensation. Advertising: We may advertise certain information regarding the performance of the investment options. Details on how we calculate performance for the Sub-accounts are found in the Statement of Additional Information. This 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 receive the beneficial tax treatment given to annuities under the Code. We may advertise the performance of the Portfolios in the form of "Standard" and "Non-standard" Total Returns calculated for each Sub-account. "Standard Total Return" figures assume a hypothetical initial investment of $1,000 allocated to a Sub-account during the most recent, one, five and ten year periods (or since the inception date that the Portfolio has been offered as a Sub-account, if less). "Standard Total Return" figures assume that the applicable Insurance Charge and the Annual Maintenance Fee are deducted and that the Annuity is surrendered at the end of the applicable period, meaning that any Contingent Deferred Sales Charge that would apply upon surrender is also deducted. "Non-standard Total Return" figures include any performance figures that do not meet the SEC's rules for Standard Total Returns. Non-standard Total Returns may also assume that the Annual Maintenance Fee does not apply due to the average Account Value being greater than $100,000, where the charge is waived. Non-standard Total Returns are calculated in the same manner as standardized returns except that the figures may not reflect all fees and charges. In particular, they may assume no surrender at the end of the applicable period so that the CDSC does not apply. Standard and Non-standard Total Returns will not reflect the additional asset-based charges that are deducted when you elect any optional benefits. The additional cost associated with any optional benefits you elected will reduce your performance. Non-Standard Total Returns must be accompanied by Standard Total Returns. Some of the underlying 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 Portfolios have been in existence, but the Sub-accounts have not. Such hypothetical historical performance is calculated using the same assumptions employed in calculating actual performance since inception of the Sub-accounts. Hypothetical historical performance of the underlying Portfolios prior to the existence of the Sub-accounts may only be presented as Non-Standard Total Returns. We may advertise the performance of money market-type Sub-accounts using a measure of the "current and effective yield". The current yield of a money market-type Sub-account is calculated based upon the previous seven-day period ending on the date of calculation. The effective yield of a money market-type Sub-account reflects the reinvestment of net income earned daily on the assets of such a Sub-account. The current and effective yields reflect the Insurance Charge and the charge for any optional benefits (if applicable) deducted against the Sub-account. In a low interest rate environment, yields for money market-type Sub-accounts, after deduction of the Insurance Charge, and the charge for any optional benefits (if applicable) may be negative even though the yield (before deducting for such charges) is positive. Current and effective yield information will fluctuate. This information may not provide a basis for comparisons with deposits in banks or other institutions which pay a fixed yield over a stated period of time, or with investment companies which do not serve as underlying mutual funds for variable annuities and/or do not have additional asset-based charges deducted for the insurance protection provided by the Annuity. Performance information on the Sub-accounts is based on past performance only and is not an indication or representation of future performance. Performance of the Sub-accounts is not fixed. Actual performance will depend on the type, quality and, for some of the Sub-accounts, the maturities of the investments held by the underlying mutual funds or portfolios and upon prevailing market conditions and the response of the underlying mutual funds to such conditions. Actual performance will also depend on changes in the expenses of the underlying mutual funds or portfolios. Such changes are reflected, in turn, in the Sub-accounts which invest in such underlying mutual fund or portfolio. In addition, the total amount of asset-based charges assessed against each Sub-account will affect performance. The information we may advertise regarding the Fixed Allocations may include the then current interest rates we are crediting to new Fixed Allocations. Information on current rates will be as of the date specified in such advertisement. Rates will be included in advertisements to the extent permitted by law. Given that the actual rates applicable to any Fixed Allocation are as of the date of any such Fixed Allocation's Guarantee Period begins, the rate credited to a Fixed Allocation may be more or less than those quoted in an advertisement. 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 NASDAQ 100, 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. AVAILABLE INFORMATION A Statement of Additional Information is available from us without charge upon your request. This Prospectus is part of the registration statement we filed with the 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 exhibits thereto at the SEC's public reference facilities at the above address, Room 1024, and at the SEC's Regional Offices, The Woolworth Building, 233 Broadway, New York, NY and 175 W. Jackson Boulevard, Suite 900, Chicago, IL. These documents, as well as documents incorporated by reference, may also be obtained through the SEC's Internet Website (http://www.sec.gov) for this registration statement as well as for other registrants that file electronically with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2002 previously filed by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus. We will 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 will do so upon receipt of your written or oral request. HOW TO CONTACT US You can contact us by: |X| calling our Customer Service Team at 1-800-680-8920, or Skandia's Telephone Automated Response System (STARS) at 1-800-766-4530. |X| writing to us via regular mail at American Skandia - Variable Annuities, Attention: Stagecoach Annuity, P.O. Box 7040, Bridgeport, Connecticut 06601-7040 OR for express mail American Skandia - Variable Annuities, Attention: Stagecoach Annuity, One Corporate Drive, Shelton, Connecticut 06484. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. |X| sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. |X| accessing information about your Annuity through our Internet Website at www.americanskandia.com. You can obtain account information through Skandia's Telephone Automated Response System (STARS) and at www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or an investment professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN through STARS and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia |X| American Skandia Life Assurance Corporation |X| American Skandia Life Assurance Corporation Variable Account B |X| American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor - American Skandia Marketing, Incorporated How Performance Data is Calculated |X| Current and Effective Yield |X| Total Return How the Unit Price is Determined Additional Information on Fixed Allocations |X| How We Calculate the Market Value Adjustment General Information |X| Voting Rights |X| Modification |X| Deferral of Transactions |X| Misstatement of Age or Sex |X| Ending the Offer Annuitization Independent Auditors Legal Experts Financial Statements |X| Appendix A - American Skandia Life Assurance Corporation Variable Account B APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA SELECTED FINANCIAL DATA (dollars in thousands) The following table summarizes information with respect to the operations of the Company:
For the Year Ended December 31, 2002 2001 2000 1999 1998 ------------- ------------- ------------- ------------- ------------- STATEMENTS OF INCOME DATA Revenues: Annuity and life insurance $ 370,004 $ 388,696 $ 424,578 $ 289,989 $ 186,211 charges and fees (a) (b) Fee income (b) 97,650 111,196 130,610 83,243 50,839 Net investment income 19,632 20,126 18,595 11,477 11,130 Net realized capital (losses) gains and other revenues (e) (7,438) 2,698 4,195 3,688 1,360 ------------- ------------- ------------- ------------- ------------- Total revenues $ 479,848 $ 522,716 $ 577,978 $ 388,397 $ 249,540 ============= ============= ============= ============= ============= Benefits and Expenses: Annuity and life insurance $ 3,391 $ 1,955 $ 751 $ 612 $ 558 benefits Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 (671) 1,053 (c) Guaranteed minimum death benefit claims, net of 23,256 20,370 2,618 4,785 - hedge (b) Return credited to contract 5,196 5,796 8,463 (1,639) (8,930) owners Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 125,434 86,306 Amortization of deferred acquisition costs (b) (d) 510,059 224,047 184,616 83,861 86,628 Interest expense 14,544 73,424 85,998 69,502 41,004 ------------- ------------- ------------- ------------- ------------- Total benefits and expenses $ 747,915 $ 482,449 $ 482,382 $ 281,884 $ 206,619 ============= ============= ============= ============= ============= Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 $ 30,344 $ 8,154 ============= ============= ============= ============= ============= Net (loss) income $ (165,257) $ 33,099 $ 64,817 $ 76,169 $ 34,767 ============= ============= ============= ============= ============= STATEMENTS OF FINANCIAL CONDITION DATA Total assets (b) $ 23,708,585 $ 28,009,782 $ 31,702,705 $ 30,881,579 $ 18,848,273 ============= ============= ============= ============= ============= Future fees payable to parent $ 708,249 $ 799,472 $ 934,410 $ 576,034 $ 368,978 ============= ============= ============= ============= ============= Surplus notes $ 110,000 $ 144,000 $ 159,000 $ 179,000 $ 193,000 ============= ============= ============= ============= ============= Shareholder's equity $ 683,061 $ 577,668 $ 496,911 $ 359,434 $ 250,417 ============= ============= ============= ============= =============
a. On annuity and life insurance sales of $3,472,044, $3,834,167, $8,216,167, $6,862,968, and $4,159,662, during the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively, with contract owner assets under management of $21,894,636, $26,017,847, $29,751,822, $29,396,693, and $17,854,761, as of December 31, 2002, 2001, 2000, 1999, and 1998, respectively. b. These items are significantly impacted by equity market volatility. c. For the year ended December 31, 2000, change in annuity and life insurance policy reserves reflected increases to those reserves for guaranteed minimum death benefit ("GMDB") exposure. For the year ended December 31, 2001, the Company changed certain of its assumptions related to its GMDB exposure resulting in a benefit to operations. See Results of Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for a further discussion. d. During the year ended December 31, 2002, the Company recorded an acceleration of amortization of $206,000 against the deferred acquisition cost asset. See the MD&A for a further discussion. e. Net realized capital (losses) gains and other revenues include $5,845 of net realized capital losses on sales of securities during 2002 and an other than temporary impairment charge of $3,769 recorded during 2002 on the Company's equity securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands) Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data. Results of Operations - --------------------- Annuity and life insurance sales were $3,472,044, $3,834,167 and $8,216,167, in 2002, 2001 and 2000, respectively. The decrease in sales in 2002 and 2001 was primarily the result of the general decline in sales in the industry, attributed in large part to the continued uncertainty in the equity markets. In addition, the Company believes uncertainty regarding its future ownership has adversely impacted sales, primarily in the latter part of 2002. The Company announced, in the first quarter of 2002, its intention to focus on the growth of its core variable annuity business. Average assets under management totaled $23,637,559 in 2002, $26,792,877 in 2001 and $31,581,902 in 2000, representing a decrease of 12% and 15% in 2002 and 2001, respectively, due primarily to weak equity markets. The decrease in annuity and life insurance charges and fees and fee income before surrender charge income and reinsurance was consistent with the decline in assets under management. Surrender charge income increased in 2002 as compared to 2001. This was caused by higher lapses when compared to the applicable prior year periods, and was primarily attributable, the Company believes, to concerns by contract holders, rating agencies and the Company's distribution channels, surrounding the uncertainty in the equity markets and its impact on variable annuity companies generally and, prior to the announcement of the Acquisition, uncertainty concerning the Company's future (See Liquidity and Capital Resources for rating agency actions). Net realized capital losses in 2002 were primarily from $9,593 of losses on sales and $3,769 of other-than-temporary impairments of mutual fund investments that are held in support of a deferred compensation program for certain of the Company's employees. The deferred compensation program losses were offset by net gains of $3,746 during 2002 on sales of fixed maturities. Included in those net gains on sales of fixed maturities for 2002, was a realized loss of approximately $1,236 on the sale of a WorldCom, Inc. bond. The net capital gains in 2001 related primarily to sales of fixed maturity investments, were partially offset by losses on securities in the fixed maturity portfolio. The most significant loss was $2,636 related to Enron securities. In addition net realized capital losses of $3,534 in 2001 were incurred due to sales of mutual fund holdings in support of the Company's non-qualified deferred compensation program. The change in annuity and life insurance policy reserves includes changes in reserves related to annuity contracts with mortality risks. During 2001, the Company's Guaranteed Minimum Death Benefit ("GMDB") reserve decreased $43,984, as the result of an update of certain reserve assumptions as to risks inherent in the benefit. Previous assumptions had been based on statutory valuation principles as an approximation for U.S. GAAP. In addition, future mortality rates were lowered in 2001 to reflect favorable past experience. However, offsetting the resulting increase in earnings and equity as a result of changes in the GMDB liability in 2001, assumptions related to GMDB claim costs were also updated in the calculation of the deferred acquisition cost asset, resulting in additional amortization of this asset. The Company uses derivative instruments, which consist of equity option contracts for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. GMDB claims, net of hedge, consist of GMDB claims offset by the mark to market and realized capital gain/loss results of the Company's option contracts. During 2002 and 2001, the fluctuations in GMDB claims, net of hedge, were driven by an increase in hedge related benefits of $19,776 and $14,646, respectively. Hedge related benefits were partially offset by increases in GMDB claims of $22,662 and $32,398 during 2002 and 2001, respectively. Return credited to contract owners consists primarily of net investment results from the Company's fixed, market value adjusted, separate account investment option and changes in the Company's experience rated reinsurance receivables. The decrease in 2002 was primarily due to increased net investment results on the Company's fixed, market value adjusted, separate account investment option. As the equity markets decline, movement from variable investment options to fixed investment options, primarily due to one of the Company's product features, has increased the assets invested in the fixed separate account investment option. Included in 2002 net investment results is $9,849 of realized and unrealized losses on certain securities, of which $5,427 related to WorldCom, Inc. bonds. The increase in net investment results was partially offset by a decrease in experience rated reinsurance receivables in 2002 due to unfavorable experience on certain blocks of variable annuity business. In 2001, return credited to contract owners decreased primarily due to favorable experience on certain blocks of variable annuity contracts increasing the experience rated reinsurance receivable. Partially offsetting the 2001 decrease is net investment losses of $1,662 related to Enron securities. Underwriting, acquisition and other insurance expenses for 2002, 2001 and 2000 were as follows:
2002 2001 2000 ---------- ---------- ---------- Commissions and purchase credits $ 287,612 $ 248,187 $ 430,743 General operating expenses 145,438 157,704 214,957 Acquisition costs deferred (244,322) (209,136) (495,103) ---------- ---------- ---------- Underwriting, acquisition and other insurance expenses $ 188,728 $ 196,755 $ 150,597 ========== ========== ==========
New products launched, as well as a larger proportion of sales of products with higher commissions as compared to 2001 led to an increase in commissions and purchase credits during 2002. Lower sales and asset levels led to a decrease in commissions and purchase credits during 2001. Partially offsetting this decline in 2001, the company launched a commission promotion program that increased commissions as a percentage of new sales. Commission promotions in 2002 were approximately equivalent as compared to 2001. General operating expenses decreased during 2002 and 2001 as a result of lower sales-based compensation, as well as expense reduction programs implemented during 2001 and continued strong expense management in 2002. Variable compensation and long-term incentive plan expenses have decreased due to the slowdown in sales and the decline in the equity markets. Amortization of deferred acquisition costs increased over the past two years, in general, due to the further depressed equity markets in 2002 and 2001, thereby decreasing expectations of future gross profits and actual gross profits from asset based fees and increased expected and actual claim costs associated with minimum death benefit guarantees. During 2002, the Company also performed a recoverability study and an analysis of its short-term assumptions of future gross profits and determined those assumptions of future profits to be excessive. This analysis resulted in a current year acceleration of amortization of $206,000. During 2002 and 2001, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization. See Note 2 of Notes to Consolidated Financial Statements for a further discussion on amortization of deferred acquisition costs. Interest expense decreased during 2002 primarily due to lower interest expense related to the future fees payable to ASI liability (See Note 8). Interest expense on these obligations is driven by the cash flows from the underlying annuity contracts acting as collateral. Due to the depressed asset values of those annuity contracts driven by the decline in the equity markets, the cash flows, and therefore the interest expense, decreased from prior year levels. Interest expense decreased in 2001 as a result of a reduction in borrowing. The Company's income tax (benefit) expense varies directly with increases or decreases in (loss) income from operations. The effective income tax rate varied from the corporate rate of 35% due primarily to the deduction for dividends received. Total assets and liabilities decreased $4,301,197 and $4,406,590, respectively, from December 31, 2001. This change resulted primarily from the declining equity markets. Significant Accounting Policies - ------------------------------- Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. If the Company's long-term fund growth rate assumption was 7% instead of 8%, the Company's deferred acquisition cost asset at December 31, 2002 would be reduced by $26,273. Future Fees Payable to ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, historical mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability. The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management, that the present value of future payments to ASI would be $429,773. Deferred Taxes The Company evaluates the necessity of recording a valuation allowance against its deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, Income Taxes ("SFAS 109"). In performing this evaluation, the Company considers all available evidence in making the determination as to whether it is more likely than not that deferred tax assets are not realizable. For the Company, that evidence includes: cumulative U.S. GAAP pre-tax income in recent years past, whether or not operating losses have expired unused in the past, the length of remaining carryback or carryforward periods, and net taxable income or loss expectations in early future years. The net taxable income or loss projections are based on profit assumptions consistent with those used to amortize deferred acquisition costs (see above discussion on deferred acquisition costs). As of December 31, 2002, the Company has approximately $361,000 gross deferred tax assets related principally to net operating loss carryforwards that expire in 2016 and 2017 and insurance reserve differences. After considering the impact of gross reversing temporary liabilities of $323,000, the Company estimates that the Company will generate sufficient taxable income to fully utilize gross deferred tax assets within 2 years (prior to the expiration of the net operating losses). Liquidity and Capital Resources - ------------------------------- The Company's liquidity requirements have generally been met by cash from insurance operations, investment activities, borrowings from ASI, reinsurance, capital contributions and securitization transactions with ASI (see Note 8). The Company's cash from insurance operations is primarily comprised of fees generated off of assets under management, less commission expense on sales, sales and marketing expenses and other operating expenses. Fund performance driven by the equity markets directly impact assets under management and therefore, the fees the Company can generate off of those assets. During 2002 and 2001, assets under management declined consistent with the equity market declines resulting in reductions in fee revenues. In addition, the equity markets impact sales of variable annuities. As sales have declined in a declining equity market, non-promotional commission expense declined, however, in order to boost sales levels, the Company has offered various sales promotions increasing the use of cash for commission expense. In order to fund the cash strain generated from acquisition costs on current sales, the Company has relied on cash generated from its direct insurance operations as well as reinsurance and securitization transactions. The Company has used modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving , the future fees generated from that book of business. These reinsurance agreements also mitigate the recoverability risk associated with the payment of up-front commissions and other acquisition costs. Similarly, the Company has entered into securitization transactions whereby the Company issues to ASI, in exchange for cash, the right to receive future fees generated off of a specific book of business. On April 12, 2002, the Company entered into a new securitization transaction with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was approximately $101,713. As of December 31, 2002, 2001 and 2000, the Company had short-term borrowings of $10,000, $10,000 and $10,000, respectively, and had long-term surplus notes liabilities of $110,000, $144,000 and $159,000, respectively. During 2002, the Company borrowed $263,091 and paid back $263,091 related to short-term borrowing. During 2002 and 2001, the Company received permission from the State of Connecticut Insurance Department to pay down surplus notes in the amount of $34,000 and $15,000, respectively. See Notes 14 and 15 of Notes to Consolidated Financial Statements for more information on surplus notes and short-term borrowing, respectively. As of December 31, 2002, 2001 and 2000, shareholder's equity totaled $683,061, $577,668 and $496,911, respectively. The Company received capital contributions of $259,720 and $48,000 from ASI during 2002 and 2001, respectively. Of this, $4,520 and $2,500, respectively, was used to support its investment in Skandia Vida. Net (loss) income of ($165,257) and $33,099, for the years ended December 31, 2002 and 2001, respectively, contributed to the respective changes in shareholder's equity in 2002 and 2001. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies that may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest rate risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. During 2002, all of the major rating agencies reviewed the U.S. life insurance sector, including the Company. Based on these reviews the rating agencies have evolving concerns surrounding the risk profile of variable annuity companies due to their significant exposure to equity market performance. This exposure has resulted, and may continue to result, in earnings volatility. Based on the reviews made during 2002, the following ratings actions took place: On May 8, 2002, Fitch Ratings downgraded the Company's "insurer financial strength" rating to A+ from AA- with a "stable" outlook. On September 19, 2002, Fitch Ratings lowered the Company's "insurer financial strength" rating to A- from A+ with an "evolving" outlook. On September 27, 2002, A.M. Best Co. lowered the Company's "financial strength" rating to A- from A with negative implications. On October 16, 2002, Standard and Poor's lowered the Company's "counter party credit" and "financial strength" ratings to A- from A+ with a negative outlook and removed the Company from Credit Watch. Subsequent to the announcement of the Acquisition, Standard and Poor's placed the Company on CreditWatch with positive implications. Effects of Inflation - -------------------- The rate of inflation has not had a significant effect on the Company's financial statements. Outlook - ------- The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in order to gain market share and improve profitability in an increasingly competitive market. The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks, securities firms and insurance companies. This legislative change has created opportunities for continued consolidation in the financial services industry and increased competition as large companies offer a wide array of financial products and services. Various other legislative initiatives could impact the Company such as pension reform and capital gains and estate tax changes. These include the proposed exclusion from tax for corporate dividends, potential changes to the deductibility of dividends received from the Company's separate accounts and newly proposed tax-advantaged savings programs. Additional pension reform may change current tax deferral rules and allow increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less attractive to consumers, which could adversely impact the Company. In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts. Forward Looking Information - --------------------------- The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements, so long as those statements are identified as forward-looking, and the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions. Certain information contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations is forward-looking within the meaning of the 1995 Act or Securities and Exchange Commission rules. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of significant uncertainties and results may differ materially from these statements. You should not put undue reliance on these forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and describes strategies used to manage these risks, and includes "forward-looking statements" that involve risk and uncertainties. The discussion is limited to financial instruments subject to market risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed. Interest Rate Risk - ------------------ Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2002, 91% of assets held under management by the Company are in non-guaranteed Separate Accounts for which the Company's interest rate and equity market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 9% of assets, the interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. At December 31, 2002, the Company held fixed maturity investments in its general account that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities, fixed supplementary contracts, the fixed investment option offered in its variable life insurance contracts, and in support of the Company's target solvency capital. The Company has a conservative investment philosophy with regard to these investments. All investments are investment grade corporate securities, government agency or U.S. government securities. The Company's deferred annuity products offer a fixed investment option which subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract owner. Guarantee period options available range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the guarantee period subjects the contract owner to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of failing to maintain the asset/liability matching program with respect to duration and convexity. Liabilities held in the Company's guaranteed separate account as of December 31, 2002 totaled $1,828,048. Assets, primarily fixed income investments, supporting those liabilities had a fair value of $1,828,048. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2002. The analysis showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities and the corresponding assets of approximately $69,150 and $68,500, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2001, showed a net increase in interest-sensitive liabilities and the corresponding assets of approximately $39,800 and $39,900, respectively. Equity Market Exposure - ---------------------- The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by the Company. Various fees and charges earned are substantially derived as a percentage of the market value of assets under management. In a market decline, this income will be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 2002, sustained throughout 2003, would result in an approximate drop in related mortality and expense charges and annual fee income of $36,350. Another equity market risk exposure of the Company relates to guaranteed minimum death benefit payments. Declines in equity markets and, correspondingly, the performance of the funds underlying the Company's products, increase exposure to guaranteed minimum death benefit payments. As discussed in Note 2D of the consolidated financial statements, the Company uses derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the implementation of this program, the Company used reinsurance to mitigate this risk. The Company has a portfolio of equity investments consisting of mutual funds, which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline; however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the equity markets and consumer behavior, actual results may vary from those predicted by the Company's models. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Report of Independent Auditors To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. /s/ Ernst & Young LLP Hartford, Connecticut February 3, 2003 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Financial Condition (in thousands, except share data)
As of December 31, 2002 2001 ------------ ------------ ASSETS - ------ Investments: Fixed maturities - at fair value (amortized cost of $379,422 and $356,882, respectively) $ 398,601 $ 362,831 Equity securities - at fair value (amortized cost of $52,017 and $49,886, respectively) 51,769 45,083 Derivative instruments - at fair value 10,370 5,525 Policy loans 7,559 6,559 ------------ ------------ Total investments 468,299 419,998 Cash and cash equivalents 51,339 - Accrued investment income 4,196 4,737 Deferred acquisition costs 1,117,544 1,383,281 Reinsurance receivable 5,447 7,733 Receivable from affiliates 3,961 3,283 Income tax receivable - 30,537 Deferred income taxes 38,206 - Fixed assets, at depreciated cost (accumulated depreciation of $7,555 and $4,266, respectively) 12,132 17,752 Other assets 101,848 103,912 Separate account assets 21,905,613 26,038,549 ------------ ------------ Total assets $ 23,708,585 $ 28,009,782 ============ ============ LIABILITIES AND SHAREHOLDER'S EQUITY - ------------------------------------ Liabilities: Reserves for future policy and contract benefits $ 149,349 $ 91,126 Accounts payable and accrued expenses 133,543 192,952 Income tax payable 6,547 - Deferred income taxes - 54,980 Payable to affiliates 2,223 101,035 Future fees payable to American Skandia, Inc. ("ASI") 708,249 799,472 Short-term borrowing 10,000 10,000 Surplus notes 110,000 144,000 Separate account liabilities 21,905,613 26,038,549 ------------ ------------ Total liabilities 23,025,524 27,432,114 ------------ ------------ Commitments and contingent liabilities (Note 18) Shareholder's equity: Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional paid-in capital 595,049 335,329 Retained earnings 73,821 239,078 Accumulated other comprehensive income 11,691 761 ------------ ------------ Total shareholder's equity 683,061 577,668 ------------ ------------ Total liabilities and shareholder's equity $ 23,708,585 $ 28,009,782 ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Income (in thousands)
For the Years Ended December 31, 2002 2001 2000 ------------ ------------ ------------ REVENUES - - -------- Annuity and life insurance charges and fees $ 370,004 $ 388,696 $ 424,578 Fee income 97,650 111,196 130,610 Net investment income 19,632 20,126 18,595 Net realized capital (losses) gains (9,614) 928 (688) Other 2,176 1,770 4,883 ------------ ------------ ------------ Total revenues 479,848 522,716 577,978 ------------ ------------ ------------ EXPENSES - - -------- Benefits: Annuity and life insurance benefits 3,391 1,955 751 Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 Guaranteed minimum death benefit claims, net of hedge 23,256 20,370 2,618 Return credited to contract owners 5,196 5,796 8,463 ------------ ------------ ------------ Total benefits 34,584 (11,777) 61,171 Other: Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 Amortization of deferred acquisition costs 510,059 224,047 184,616 Interest expense 14,544 73,424 85,998 ------------ ------------ ------------ 713,331 494,226 421,211 ------------ ------------ ------------ Total benefits and expenses 747,915 482,449 482,382 ------------ ------------ ------------ (Loss) income from operations before income tax (benefit) expense (268,067) 40,267 95,596 Income tax (benefit) expense (102,810) 7,168 30,779 ------------ ------------ ------------ Net (loss) income $ (165,257) $ 33,099 $ 64,817 ============ ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Shareholder's Equity (in thousands)
Accumulated Other Comprehensive Income ---------------------------- Additional Foreign Unrealized Common Paid in Retained Currency Gains Stock Capital Earnings Translation (Losses) Total ----------- ------------ ----------- -------------- ------------ ------------ As of December 31, 1999 $ 2,500 $ 215,879 $ 141,162 $ 148 $ (255) $ 359,434 Net income 64,817 64,817 Other comprehensive income: Unrealized capital gains 843 843 Reclassification adjustment for realized losses included in net realized capital (losses) gains 433 433 Foreign currency translation (66) (66) ------------ Other comprehensive income 1,210 ------------ Comprehensive income 66,027 Capital contributions 71,450 71,450 ----------- ------------ ----------- -------------- ------------ ------------ As of December 31, 2000 2,500 287,329 205,979 82 1,021 496,911 Net income 33,099 33,099 Other comprehensive loss: Unrealized capital losses (261) (261) Reclassification adjustment for realized gains included in net realized capital (losses) gains (14) (14) Foreign currency translation (67) (67) ------------ Other comprehensive loss (342) ------------ Comprehensive income 32,757 Capital contributions 48,000 48,000 ----------- ------------ ----------- -------------- ------------ ------------ As of December 31, 2001 2,500 335,329 239,078 15 746 577,668 Net loss (165,257) (165,257) Other comprehensive income: Unrealized capital gains 10,434 10,434 Reclassification adjustment for realized losses included in net realized capital (losses) gains 1,126 1,126 Foreign currency translation (630) (630) ------------ Other comprehensive income 10,930 ------------ Comprehensive loss (154,327) Capital contributions 259,720 259,720 ----------- ------------ ----------- -------------- ------------ ------------ As of December 31, 2002 $ 2,500 $ 595,049 $ 73,821 $ (615)$ 12,306 $ 683,061
Unrealized capital gains (losses) is shown net of tax expense (benefit) of $5,618, ($140) and $454 for 2002, 2001 and 2000, respectively. Reclassification adjustment for realized losses (gains) included in net realized capital (losses) gains is shown net of tax expense (benefit) of $606, ($8) and $233 for 2002, 2001 and 2000, respectively. Foreign currency translation is shown net of tax benefit of $339, $36 and $36 for 2002, 2001 and 2000, respectively. See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Cash Flows (in thousands)
For the Years Ended December 31, 2002 2001 2000 ----------- ---------- ---------- Cash flow from operating activities: Net (loss) income $ (165,257) $ 33,099 $ 64,817 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Amortization and depreciation 21,649 13,374 5,758 Deferral of acquisition costs (244,322) (209,136) (495,103) Amortization of deferred acquisition costs 510,059 224,047 184,616 Deferred tax (benefit) expense (99,071) 46,215 60,023 Change in unrealized (gains) losses on derivatives (5,149) 2,902 (2,936) Increase (decrease) in policy reserves 3,293 (38,742) 50,892 (Decrease) increase in net receivable/payable to affiliates (99,490) 103,496 (72,063) Change in net income tax receivable/payable 37,084 4,083 (58,888) Increase in other assets (9,546) (12,105) (65,119) Decrease (increase) in accrued investment income 541 472 (1,155) Decrease (increase) in reinsurance receivable 2,286 (1,849) 420 (Decrease) increase in accounts payable and accrued expenses (59,409) 55,912 (21,550) Net realized capital (gains) losses on derivatives (26,654) (14,929) 5,554 Net realized capital losses (gains) on investments 9,616 (928) 688 ----------- ---------- ---------- Net cash (used in) provided by operating activities (124,370) 205,911 (344,046) ----------- ---------- ---------- Cash flow from investing activities: Purchase of fixed maturity investments (388,053) (462,820) (380,737) Proceeds from sale and maturity of fixed maturity investments 367,263 390,816 303,736 Purchase of derivatives (61,998) (103,533) (14,781) Proceeds from exercise or sale of derivative instruments 88,956 113,051 5,936 Purchase of shares in equity securities and dividend reinvestments (49,713) (55,430) (18,136) Proceeds from sale of shares in equity securities 34,220 25,228 8,345 Purchase of fixed assets (2,423) (10,773) (7,348) Increase in policy loans (1,000) (2,813) (2,476) ----------- ---------- ---------- Net cash used in investing activities (12,748) (106,274) (105,461) ----------- ---------- ---------- Cash flow from financing activities: Capital contribution 259,720 48,000 71,450 Pay down of surplus notes (34,000) (15,000) (20,000) (Decrease) increase in future fees payable to ASI, net (91,223) (137,355) 358,376 Deposits to contract owner accounts 808,209 59,681 172,441 Withdrawals from contract owner accounts (164,964) (130,476) (102,603) Change in contract owner accounts, net of investment earnings (588,315) 62,875 (55,468) ----------- ---------- ---------- Net cash provided by (used in) financing activities 189,427 (112,275) 424,196 ----------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 52,309 (12,638) (25,311) Change in foreign currency translation (970) (103) (101) Cash and cash equivalents at beginning of period - 12,741 38,153 Cash and cash equivalents at end of period $ 51,339 $ - $ 12,741 =========== ========== ========== Income taxes (received) paid $ (40,823) $ (43,130) $ 29,644 =========== ========== ========== Interest paid $ 23,967 $ 56,831 $ 114,394 =========== ========== ==========
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 2002 (dollars in thousands) 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation ("ASLAC" or the "Company"), with its principal offices in Shelton, Connecticut, is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). On December 19, 2002, Skandia Insurance Company Ltd. (publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company, entered into a definitive purchase agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"), whereby Prudential Financial will acquire the Company and certain of its affiliates (the "Acquisition"). Consummation of the transaction is subject to various closing conditions, including regulatory approvals and approval of certain matters by the board of directors and shareholders of the mutual funds advised by American Skandia Investment Services, Inc. ("ASISI"), a subsidiary of ASI. The transaction is expected to close during the second quarter of 2003. The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues term and variable universal life insurance and variable deferred and immediate annuities for individuals and groups in the United States of America and its territories. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida"), which is a life insurance company domiciled in Mexico. Skandia Vida had total shareholder's equity of $5,023 and $4,179 as of December 31, 2002, and 2001, respectively. Skandia Vida has generated net losses of $2,706, $2,619 and $2,540 in 2002, 2001 and 2000, respectively. As part of the Acquisition, it is expected that the Company will sell its ownership interest in Skandia Vida to SICL. The Company has filed for required regulatory approvals from the State of Connecticut and Mexico related to the sale of Skandia Vida. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting ------------------ The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Skandia Vida has been consolidated in these financial statements. Intercompany transactions and balances between the Company and Skandia Vida have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Standard ----------------------- Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"). Derivative instruments held by the Company consist of equity put option contracts utilized to AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) manage the economic risks associated with guaranteed minimum death benefits ("GMDB"). These derivative instruments are carried at fair value. Realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements. Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption of EITF Issue 99-20 did not have a significant effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards. No. 142 "Accounting for Goodwill and Intangible Assets" ("SFAS 142"). Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The adoption of SFAS 142 did not have a significant impact on the Company's financial statements. C. Investments ----------- The Company has classified its fixed maturity investments as available-for-sale and, as such, they are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. The Company has classified its equity securities held in support of a deferred compensation plan (see Note 12) as available-for-sale. Such investments are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized capital gains and losses on disposal of investments are determined by the specific identification method. Other than temporary impairment charges are determined based on an analysis that is performed on a security by security basis and includes quantitative and qualitative factors. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Derivative Instruments ---------------------- The Company uses derivative instruments, which consist of equity put option contracts, for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases. Conversely, as the equity markets increase the Company's exposure to future GMDB claims decreases. The claims exposure is reduced by the market value effect of the option contracts purchased. Based on criteria described in SFAS 133, the Company's fair value hedges do not qualify as "effective" hedges and, therefore, hedge accounting may not be applied. Accordingly, the derivative investments are carried at fair value with changes in unrealized gains and losses being recorded in income as those changes occur. As such, both realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. As of December 31, 2002 and 2001, the accumulated difference between cost and market value on the Company's derivatives was an unrealized gain of $1,434 and an unrealized loss of $3,715, respectively. The amount of realized and unrealized gains (losses) on the Company's derivatives recorded during the years ended December 31, 2002, 2001 and 2000 was $31,803, $12,027 and ($2,619), respectively. E. Cash Equivalents ---------------- The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity date, at acquisition, of three months or less to be cash equivalents. As of December 31, 2002, $50 of cash reflected on the Company's financial statements was restricted in compliance with regulatory requirements. F. State Insurance Licenses ------------------------ Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000 less accumulated amortization of $2,038 at December 31, 2002. Due to the adoption of SFAS 142, the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of December 31, 2002, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore, no impairment charge was required. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. Income Taxes ------------ The Company is included in the consolidated federal income tax return filed by Skandia U.S. Inc. and its U.S. subsidiaries. In accordance with the tax sharing agreement, the federal income tax provision is computed on a separate return basis as adjusted for consolidated items. Pursuant to the terms of this agreement, the Company has the right to recover the value of losses utilized by the consolidated group in the year of utilization. To the extent the Company generates income in future years, the Company is entitled to offset future taxes on that income through the application of its loss carry forward generated in the current year. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. H. Recognition of Revenue and Contract Benefits -------------------------------------------- Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance fees are earned ratably throughout the year. Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Fee income from mutual fund organizations is recognized when assessed against assets under management. Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income reduced by amounts credited to the contract holder for interest. This net spread is included in return credited to contract owners on the consolidated statements of income. Benefit reserves for these contracts represent the account value of the contracts plus a AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) market value adjustment, and are included in the general account reserve for future policy and contract benefits to the extent in excess of the separate account assets, typically for the market value adjustment at the reporting date. Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income, reported as a component of return credited to contract owners. Revenues for fixed 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 applicable actuarial standards with assumed interest rates that vary by issue year and are included in the general account reserve for future policy and contract benefits. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 2002 and 2001. Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs -------------------------- The costs of acquiring new business, which vary with and are primarily related to new business generated, are being deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits, from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Details of deferred acquisition costs and related amortization for the years ended December 31, are as follows:
2002 2001 2000 ------------- ------------- ------------- Balance at beginning of year $ 1,383,281 $ 1,398,192 $ 1,087,705 Acquisition costs deferred during the year 244,322 209,136 495,103 Acquisition costs amortized during the year (510,059) (224,047) (184,616) ------------- ------------- ------------- Balance at end of year $ 1,117,544 $ 1,383,281 $ 1,398,192 ============= ============= =============
As asset growth rates, during 2002 and 2001, have been far below the Company's long-term assumption, the adjustment to the short-term asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study, management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206,000. Throughout the year, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72,000. J. Reinsurance ----------- The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. At December 31, 2002 and 2001, in accordance with the provisions of the modified coinsurance agreements, the Company accrued approximately $5,447 and $7,733, respectively, for amounts receivable from favorable reinsurance experience on certain blocks of variable annuity business. K. Translation of Foreign Currency ------------------------------- The financial position and results of operations of Skandia Vida are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at each year-end. Statements of income and changes in 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 reported as a component of other comprehensive income. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) L. Separate Accounts ----------------- Assets and liabilities in separate accounts are included as separate captions in the consolidated statements of financial condition. Separate account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through ASISI, utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contract holder has the option of directing funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of a contract is borne by the contract holder. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated with the investments that support these fixed options. Included in Separate Account liabilities are reserves of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, relating to deferred annuity investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the Commissioners Annuity Reserve Valuation Method. Separate Account assets of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, consisting of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment income, accrued liabilities and amounts due to/from the General Account are held in support of these annuity obligations, pursuant to state regulation. Included in the general account, within Reserves for Future Policy and Contract Benefits, is the market value adjustment associated with the guaranteed, fixed rate investment options, assuming the market value adjustment at the reporting date. Net investment income (including net realized capital gains and losses) and interest credited to contract holders on separate account assets are not separately reflected in the Consolidated Statements of Income. M. Unearned Performance Credits ---------------------------- The Company defers certain bonus credits applied to contract holder deposits. The credit is reported as a contract holder liability within separate account liabilities and the deferred expense is reported as a component of other assets. As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortizes the deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit is amortized in proportion to expected surrenders and mortality. As of December 31, 2002 and 2001, the unearned performance credit asset was $83,288 and $89,234, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Estimates --------- The preparation of financial statements in conformity with U.S. GAAP 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 estimates of future policy lapses, investment returns and maintenance expenses. Actual results could differ from those estimates. 3. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of fixed maturities and investments in equity securities as of December 31, 2002 and 2001 are shown below. All securities held at December 31, 2002 and 2001 were publicly traded. Investments in fixed maturities as of December 31, 2002 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------ ----------- ---------- ------------ U.S. Government obligations $ 270,969 $ 15,658 $ (78) $ 286,549 Obligations of state and political subdivisions 253 9 (1) 261 Corporate securities 108,200 3,631 (40) 111,791 ------------ ----------- -------- ------------ Totals $ 379,422 $ 19,298 $ (119) $ 398,601 ============ =========== ======== ============
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2002 are shown below. Actual maturities may differ from contractual maturities due to call or prepayment provisions. Amortized Cost Fair Value ----------- ----------- Due in one year or less $ 12,793 $ 12,884 Due after one through five years 165,574 171,830 Due after five through ten years 186,609 198,913 Due after ten years 14,446 14,974 ----------- ----------- Total $ 379,422 $ 398,601 =========== =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) Investments in fixed maturities as of December 31, 2001 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ---------- ---------- ---------- ---------- U.S. Government obligations $198,136 $2,869 $(413) $200,592 Obligations of state and political subdivisions 252 8 - 260 Corporate securities 158,494 4,051 (566) 161,979 ---------- ---------- ---------- ---------- Totals $356,882 $6,928 $(979) $362,831 ========== ========== ========== ==========
Proceeds from sales of fixed maturities during 2002, 2001 and 2000 were $367,213, $386,816 and $302,632, respectively. Proceeds from maturities during 2002, 2001 and 2000 were $50, $4,000 and $1,104, respectively. The cost, gross unrealized gains/losses and fair value of investments in equity securities at December 31 are shown below:
Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value ---------- ----------- --------- --------- 2002 $ 52,017 $ 136 $ (384) $ 51,769 2001 $ 49,886 $ 122 $ (4,925) $ 45,083
Net realized investment gains (losses), determined on a specific identification basis, were as follows for the years ended December 31: 2002 2001 2000 ---------- -------- -------- Fixed maturities: Gross gains $ 8,213 $ 8,849 $ 1,002 Gross losses (4,468) (4,387) (3,450) Investment in equity securities: Gross gains 90 658 1,913 Gross losses (13,451) (4,192) (153) ---------- -------- -------- Totals $ (9,616) $ 928 $ (688) ========== ======== ======== During 2002, the Company determined that certain amounts of its investment in equity securities were other than temporarily impaired and, accordingly, recorded a loss of $3,769. As of December 31, 2002, the Company did not own any investments in fixed maturity securities whose carrying value exceeded 10% of the Company's equity. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) As of December 31, 2002, the following fixed maturities were restricted in compliance with regulatory requirements: Security Fair Value - -------- ---------- U.S. Treasury Note, 6.25%, February 2003 $4,345 U.S. Treasury Note, 3.00%, November 2003 183 Puerto Rico Commonwealth, 4.60%, July 2004 210 Puerto Rico Commonwealth, 4.875%, July 2023 52 4. 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 equity securities are based on quoted market prices. The fair value of derivative instruments is determined based on the current value of the underlying index. The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term nature of these investments. The carrying value of policy loans approximates fair value. Fair value of future fees payable to ASI are determined on a discounted cash flow basis, using best estimate assumptions of lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management. The carrying value of short-term borrowings (cost) approximates fair value due to the short-term nature of these liabilities. Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all accrued interest at the maturity date (see Note 14 for payment restrictions). AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 4. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The fair values and carrying values of financial instruments at December 31, 2002 and 2001 are as follows:
December 31, 2002 December 31, 2001 ----------------- ----------------- Fair Value Carrying Value Fair Value Carrying Value -------------- ------------------ ------------- ------------------ Assets - ------ Fixed Maturities $398,601 $398,601 $362,831 $362,831 Equity Securities 51,769 51,769 45,083 45,083 Derivative Instruments 10,370 10,370 5,525 5,525 Policy Loans 7,559 7,559 6,559 6,559 Liabilities - ----------- Future Fees Payable to ASI 429,773 708,249 546,357 799,472 Short-term Borrowing 10,000 10,000 10,000 10,000 Surplus Notes and accrued interest of $29,230 and $25,829 in 2002 and 2001, respectively 140,777 139,230 174,454 169,829
5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31 were as follows:
2002 2001 2000 ---------- ---------- ---------- Fixed maturities $ 18,015 $ 18,788 $ 13,502 Cash and cash equivalents 1,116 909 5,209 Equity securities 809 622 99 Policy loans 403 244 97 ---------- ---------- ---------- Total investment income 20,343 20,563 18,907 Investment expenses (711) (437) (312) ---------- ---------- ---------- Net investment income $ 19,632 $ 20,126 $ 18,595 ========== =========== ==========
6. INCOME TAXES The significant components of income tax expense for the years ended December 31 were as follows:
2002 2001 2000 ----------- ---------- ----------- Current tax benefit $ (3,739) $ (39,047) $ (29,244) Deferred tax expense, excluding operating loss carryforwards 35,915 60,587 60,023 Deferred tax benefit for operating and capital loss carryforwards (134,986) (14,372) - ----------- ---------- ----------- Total income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 =========== ========== ===========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (continued) Deferred tax assets (liabilities) include the following at December 31: 2002 2001 ----------- ----------- Deferred tax assets: GAAP to tax reserve differences $ 165,348 $ 241,503 Future fees payable to ASI 21,475 63,240 Deferred compensation 20,603 20,520 Net operating loss carry forward 147,360 14,372 Other 6,530 17,276 ----------- ----------- Total deferred tax assets 361,316 356,911 ----------- ----------- Deferred tax liabilities: Deferred acquisition costs, net (312,933) (404,758) Net unrealized gains on fixed maturity securities (6,713) (2,082) Other (3,464) (5,051) ----------- ----------- Total deferred tax liabilities (323,110) (411,891) ----------- ----------- Net deferred tax asset (liability) $ 38,206 $ (54,980) =========== =========== In accordance with SFAS 109, the Company has performed an analysis of its deferred tax assets to assess recoverability. Looking at a variety of items, most notably, the timing of the reversal of temporary items and future taxable income projections, the Company determined that no valuation allowance is needed. The income tax (benefit) 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:
2002 2001 2000 ------------ ---------- ---------- (Loss) income before taxes Domestic $ (265,361) $ 42,886 $ 98,136 Foreign (2,706) (2,619) (2,540) ------------ ---------- ---------- Total (268,067) 40,267 95,596 Income tax rate 35% 35% 35% ------------- ----------- ----------- Tax (benefit) expense at federal statutory income tax rate (93,823) 14,093 33,459 Tax effect of: Dividend received deduction (12,250) (8,400) (7,350) Losses of foreign subsidiary 947 917 889 Meals and entertainment 603 603 841 State income taxes - (62) (524) Federal provision to return differences 709 (177) 3,235 Other 1,004 194 229 ------------ ---------- ---------- Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ============ ========== ==========
The Company's net operating loss carry forwards, totaling approximately $421,029 (pre-tax) at December 31, 2002, will expire in 2016 and 2017. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. COST ALLOCATION AGREEMENTS WITH AFFILIATES Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company. ASLAC signed a written service agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice. The Company has also paid and charged operating costs to several of its affiliates. The total cost to the Company for these items was $8,177, $6,179 and $13,974 in 2002, 2001 and 2000, respectively. Income received for these items was approximately $13,052, $13,166 and $11,186 in 2002, 2001 and 2000, respectively. Allocated depreciation expense was $7,440, $8,764 and $9,073 in 2002, 2001 and 2000, respectively. Allocated lease expense was $5,808, $6,517 and $5,606 in 2002, 2001 and 2000, respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense, was $738, $30 and $0 in 2002, 2001 and 2000, respectively. Assuming that the written service agreement between ASLAC and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ----------- ----------- 2003 $ 4,847 $ 1,616 2004 5,275 1,773 2005 5,351 1,864 2006 5,328 1,940 2007 5,215 1,788 2008 and thereafter 19,629 7,380 ----------- ----------- Total $ 45,645 $ 16,361 =========== =========== Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this agreement, the expenses reimbursed were $8,255, $6,610 and $6,064 in 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, amounts receivable under this agreement were approximately $458 and $639, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, current mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability (see Note 4). On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was $101,713. Payments, representing fees and charges in the aggregate amount, of $186,810, $207,731 and $219,523 were made by the Company to ASI in 2002, 2001 and 2000, respectively. Related interest expense of $828, $59,873 and $70,667 has been included in the consolidated statements of income for 2002, 2001 and 2000, respectively. The Commissioner of the State of Connecticut has approved the transfer 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 restrict the payments due to ASI, into a restricted account, under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI (continued) The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present Transaction Date Date Period Rate Value - ------------ ------------- -------------- ------------------- ---------- ----------- 1996-1 12/17/96 9/1/96 1/1/94 - 6/30/96 7.5% $50,221 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128 1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632 1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078 2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459 2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399 2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291 2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139 2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
Payments of future fees payable to ASI, according to original amortization schedules, as of December 31, 2002 are as follows: Year Amount - ---- ----------- 2003 $ 186,854 2004 171,093 2005 147,902 2006 117,761 2007 66,270 2008 18,369 ----------- Total $ 708,249 =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company entered into an eleven year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for 2002 and 2001 was $2,583 and $1,602, respectively. Sub-lease rental income was $227 in 2002 and $0 in 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ---------- ---------- 2003 $ 1,913 $ 426 2004 1,982 455 2005 2,050 500 2006 2,050 533 2007 2,050 222 2008 and thereafter 8,789 0 ---------- ---------- Total $ 18,834 $ 2,136 ========== ========== 10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $279,957 and $226,780 at December 31, 2002 and 2001, respectively. The Company incurred statutory basis net losses in 2002 of $192,474 due primarily to significant declines in the equity markets, increasing GMDB reserves calculated on a statutory basis. Statutory basis net losses for 2001 were $121,957, as compared to income of $11,550 in 2000. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. For 2003, no amounts may be distributed without prior approval. 11. STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory basis financial statements in accordance with accounting practices prescribed by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. The NAIC adopted the Codification of Statutory Accounting Principles (Codification) in March 1998. The effective date for codification was January 1, 2001. The Company's state of domicile, Connecticut, has adopted codification and the Company has made the necessary changes in its statutory accounting and reporting required for implementation. The overall impact of adopting codification in 2001 was a one-time, cumulative change in accounting benefit recorded directly in statutory surplus of $12,047. In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its statutory method of accounting for its AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 11. STATUTORY ACCOUNTING PRACTICES (continued) liability associated with securitized variable annuity fees. Under the new method of accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being equal to the Commissioners Annuity Reserve Valuation Method (CARVM) offset related to the securitized contracts. The impact of this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of approximately $20,215. In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40,511. Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5,935 of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus. Amortization expense for the year ended December 31, 2002 was $757. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of its affiliates. Expenses related to this program in 2002, 2001 and 2000 were $719, $2,738 and $3,734, respectively. Company contributions to this plan on behalf of the participants were $921, $2,549 and $4,255 in 2002, 2001 and 2000, respectively. The Company has a deferred compensation plan, which is available to the field marketing staff and certain other employees. Expenses related to this program in 2002, 2001 and 2000 were $3,522, $1,615 and $1,030, respectively. Company contributions to this plan on behalf of the participants were $5,271, $1,678 and $2,134 in 2002, 2001 and 2000, respectively. The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive officers and other personnel. The Company and certain affiliates also have a profit sharing program, which benefits all employees AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 12. EMPLOYEE BENEFITS (continued) below the officer level. These programs consist of multiple plans with new plans 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 programs. The accrued liability representing the value of these units was $7,083 and $13,645 as of December 31, 2002 and 2001, respectively. Expenses (income) related to these programs in 2002, 2001 and 2000, were $1,471, ($9,842) and $2,692, respectively. Payments under these programs were $8,033, $8,377 and $13,697 in 2002, 2001 and 2000, respectively. 13. FINANCIAL REINSURANCE The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, the future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating the financial condition and credit worthiness of reinsurers. The effect of reinsurance for the 2002, 2001 and 2000 was as follows:
2002 Gross Ceded Net - ---- ----------- ----------- ----------- Annuity and life insurance charges and fees $ 406,272 $ (36,268) $ 370,004 Return credited to contract owners $ 5,221 $ (25) $ 5,196 Underwriting, acquisition and other insurance expenses (deferal of acquisition costs) $ 154,588 $ 34,140 $ 188,728 Amortization of deferred acquisition costs $ 542,945 $ (32,886) $ 510,059 2001 - ---- Annuity and life insurance charges and fees $ 430,914 $ (42,218) $ 388,696 Return credited to contract owners $ 5,704 $ 92 $ 5,796 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 163,677 $ 33,078 $ 196,755 Amortization of deferred acquisition costs $ 231,290 $ (7,243) $ 224,047 2000 - ---- Annuity and life insurance charges and fees $ 473,318 $ (48,740) $ 424,578 Return credited to contract owners $ 8,540 $ (77) $ 8,463 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 108,399 $ 42,198 $ 150,597 Amortization of deferred acquisition costs $ 205,174 $ (20,558) $ 184,616
In December 2000, the Company entered into a modified coinsurance agreement with SICL covering certain contracts issued since January 1996. The impact of this treaty to the AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 13. FINANCIAL REINSURANCE (continued) Company was pre-tax (loss) income of ($4,137), $8,394 and $23,341 in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, $675 and $1,137, respectively, was receivable from SICL under this agreement. 14. SURPLUS NOTES The Company has issued surplus notes to ASI in exchange for cash. Surplus notes outstanding as of December 31, 2002 and 2001, and interest expense for 2002, 2001 and 2000 were as follows:
Liability as of December 31, Interest Expense Interest For the Years Note Issue Date Rate 2002 2001 2002 2001 2000 - ---------------------- --------- ---------- --------- --------- --------- --------- February 18, 1994 7.28% - - - - 732 March 28, 1994 7.90% - - - - 794 September 30, 1994 9.13% - - - 1,282 1,392 December 19, 1995 7.52% - 10,000 520 763 765 December 20, 1995 7.49% - 15,000 777 1,139 1,142 December 22, 1995 7.47% - 9,000 465 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,420 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 5,715 --------- ---------- --------- --------- --------- --------- ---------- --------- --------- --------- Total $110,000 $144,000 $10,872 $12,976 $14,644 ========== ========== ========= ========= =========
On September 6, 2002, surplus notes for $10,000, dated December 19, 1995, $15,000, dated December 20, 1995, and $9,000, dated December 22, 1995, were repaid. On December 3, 2001, a surplus note, dated September 30, 1994, for $15,000 was repaid. On December 27, 2000, surplus notes for $10,000, dated February 18, 1994, and $10,000, dated March 28, 1994, were repaid. All surplus notes mature seven 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, 2002 and 2001, $29,230 and $25,829, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10,000 short-term loan payable to ASI at December 31, 2002 and 2001 as part of a revolving loan agreement. The loan had an interest rate of 1.97% and matured on January 13, 2003. The loan was subsequently rolled over with a new interest rate of 1.82% and a new maturity date of March 13, 2003. The loan was further extended to April 30, 2003 and a new interest rate of 1.71%. The total related interest expense to the Company was $271, $522 and $687 in 2002, 2001 and 2000, respectively. Accrued interest payable was $10 and $113 as of December 31, 2002 and 2001, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 15. SHORT-TERM BORROWING (continued) On January 3, 2002, the Company entered into a $150,000 credit facility with ASI. This credit facility terminates on December 31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant interest period. Interest expense related to these borrowings was $2,243 for the year ended December 31, 2002. As of December 31, 2002, no amount was outstanding under this credit facility. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners at market value or with market value adjustment. Separate account assets, which are carried at fair value, are adequate to pay such withdrawals, which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. 17. RESTRUCTURING CHARGES On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax severance benefits of $8,500 have been charged against 2001 operations related to these reductions. These charges have been reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of December 31, 2002 and 2001, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $12 and $4,104, respectively. 18. COMMITMENTS AND CONTINGENT LIABILITIES In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable annuities as funding vehicles for tax- qualified retirement accounts. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Southern District of New York on December 12, 2002, by Diane C. Donovan against the Company and certain of its affiliates (the "Donovan Complaint"). The Donovan Complaint seeks unspecified compensatory damages and injunctive relief from the Company and certain of its affiliates. The Donovan Complaint claims that the Company and certain of its affiliates violated federal securities laws in marketing variable annuities. This litigation is in the preliminary stages. The Company believes this action is without merit, and intends to vigorously defend against this action. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. COMMITMENTS AND CONTINGENT LIABILITIES (continued) As discussed previously, on December 19, 2002, SICL entered into a definitive purchase agreement (the "Purchase Agreement") to sell its ownership interest in the Company and certain affiliates to Prudential Financial for approximately $1.265 billion. The closing of this transaction, which is conditioned upon certain customary regulatory and other approvals and conditions, is expected in the second quarter of 2003. The purchase price that was agreed to between SICL and Prudential Financial was based on a September 30, 2002 valuation of the Company and certain affiliates. As a result, assuming the transaction closes, the economics of the Company's business from September 30, 2002 forward will inure to the benefit or detriment of Prudential Financial. Included in the Purchase Agreement, SICL has agreed to indemnify Prudential Financial for certain liabilities that may arise relating to periods prior to September 30, 2002. These liabilities generally include market conduct activities, as well as contract and regulatory compliance (referred to as "Covered Liabilities"). Related to the indemnification provisions contained in the Purchase Agreement, SICL has signed, for the benefit of the Company, an indemnity letter, effective December 19, 2002, to make the Company whole for certain Covered Liabilities that come to fruition during the period beginning December 19, 2002 and ending with the close of the transaction. This indemnification effectively transfers the risk associated with those Covered Liabilities from the Company to SICL concurrent with the signing of the definitive purchase agreement rather than waiting until the transaction closes. 19. SEGMENT REPORTING Assets under management and sales for products other than variable annuities have not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and the Company does not anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity business. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
Three Months Ended -------------------------------------------------------- 2002 March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ Premiums and other insurance revenues* $ 118,797 $ 126,614 $ 115,931 $ 108,488 Net investment income 4,965 4,714 5,128 4,825 Net realized capital losses (1,840) (1,584) (2,327) (3,863) ----------- ------------ ------------ ------------ Total revenues 121,922 129,744 118,732 109,450 Benefits and expenses* 112,759 160,721 323,529 150,906 ----------- ------------ ------------ ------------ Pre-tax net income (loss) 9,163 (30,977) (204,797) (41,456) Income tax expense (benefit) 1,703 (11,746) (72,754) (20,013) ----------- ------------ ------------ ------------ Net income (loss) $ 7,460 $ (19,231) $ (132,043) $ (21,443) =========== ============ ============ ============
* For the quarters ended March 31, 2002 and June 30, 2002, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact.
Three Months Ended -------------------------------------------------------- 2001 March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ Premiums and other insurance revenues*** $ 130,885 $ 128,465 $ 122,708 $ 119,604 Net investment income** 5,381 4,997 5,006 4,742 Net realized capital gains (losses) 1,902 373 376 (1,723) ----------- ------------ ------------ ------------ Total revenues 138,168 133,835 128,090 122,623 Benefits and expenses** *** 122,729 110,444 123,307 125,969 ----------- ------------ ------------ ------------ Pre-tax net income (loss) 15,439 23,391 4,783 (3,346) Income tax expense (benefit) 4,034 7,451 (480) (3,837) ----------- ------------ ------------- ------------ Net income $ 11,405 $ 15,940 $ 5,263 $ 491 =========== ============ ============ ============
** For the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. *** For the quarters ended September 30, 2001 and December 31, 2001, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (continued)
Three Months Ended -------------------------------------------------------- 2000 March 31 June 30 Sept. 30 Dec. 31 ------------ ------------ ------------- ----------- Premiums and other insurance revenues $ 137,040 $ 139,346 $ 147,819 $ 135,866 Net investment income**** 4,343 4,625 4,619 5,008 Net realized capital gains (losses) 729 (1,436) (858) 877 Total revenues 142,112 142,535 151,580 141,751 Benefits and expenses**** 107,893 122,382 137,843 114,264 Pre-tax net income 34,219 20,153 13,737 27,487 Income tax expense 10,038 5,225 3,167 12,349 Net income $ 24,181 $ 14,928 $ 10,570 $ 15,138 ============ ============ =========== ============
**** For the quarters ended March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. THIS PAGE IS INTENTIONALLY LEFT BLANK. APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. 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. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2003. Beginning November 18, 2002, multiple Unit Prices will be calculated for each Sub-account of Separate Account B to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under this Annuity. The Unit Prices below reflect the daily charges for each optional benefit offered between November 18, 2002 and December 31, 2002 only.
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - International Equity (2000) With No Optional Benefits Unit Price $ 5.60 7.37 8.90 - - Number of Units 256,963 205,255 127,257 - - With One Optional Benefit Unit Price $ 9.83 - - - - Number of Units 4,125 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Small Cap Growth (1999) With No Optional Benefits Unit Price $ 5.72 9.38 12.58 16.48 - Number of Units 775,726 900,655 902,955 247,735 - With One Optional Benefit Unit Price $ 9.74 - - - - Number of Units 2,121 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ----------- ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ---------- ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ---------- ------------ ------------ ----------- ----------- - - -------------------------------------------------- ---------- ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - International Equity (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ---------- ------------ ------------ ----------- ----------- - - -------------------------------------------------- ---------- ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Small Cap Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ---------- ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Growth (1994) With No Optional Benefits Unit Price $13.77 18.83 23.64 27.75 23.37 Number of Units 2,938,967 3,783,815 4,373,354 4,625,477 4,314,842 With One Optional Benefit Unit Price $9.59 - - - - Number of Units 1,090 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Large Company Growth (1999) With No Optional Benefits Unit Price $6.50 9.16 11.75 11.98 - Number of Units 1,737,225 1,900,437 1,563,551 189,740 - With One Optional Benefit Unit Price $9.36 - - - - Number of Units 8,608 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Equity Value (1998) With No Optional Benefits Unit Price $6.61 8.83 9.56 9.17 9.53 Number of Units 2,835,243 3,705,869 4,442,888 2,826,839 1,148,849 With One Optional Benefit Unit Price $9.97 - - - - Number of Units 900 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price $7.46 9.37 10.05 9.96 - Number of Units 1,361,988 1,019,937 502,986 136,006 - With One Optional Benefit Unit Price $8.25 - - - - Number of Units 196,720 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 10,707 - - - - With All Optional Benefits Unit Price $9.90 - - - - Number of Units 91 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Growth (1994) With No Optional Benefits Unit Price 18.40 15.90 13.18 10.34 - Number of Units 3,907,919 2,096,545 823,247 204,067 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Large Company Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Equity Value (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Asset Allocation (1994) With No Optional Benefits Unit Price $17.43 20.28 22.11 22.20 20.59 Number of Units 8,336,977 10,328,629 11,237,827 10,783,373 7,584,157 With One Optional Benefit Unit Price $9.82 - - - - Number of Units 2,641 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Total Return Bond /1/ (1999) With No Optional Benefits Unit Price $12.16 11.44 10.81 9.94 - Number of Units 2,451,502 2,978,591 3,634,317 3,758,299 - With One Optional Benefit Unit Price $10.21 - - - - Number of Units 74 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Money Market (1994) With No Optional Benefits Unit Price $12.82 12.84 12.55 12.04 11.68 Number of Units 5,391,441 5,952,104 3,440,514 3,500,017 2,250,003 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST William Blair International Growth /2/ (1997) With No Optional Benefits Unit Price $9.92 13.54 17.96 24.16 13.41 Number of Units 29,062,215 40,507,419 57,327,711 61,117,418 43,711,763 With One Optional Benefit Unit Price $9.72 - - - - Number of Units 835,523 - - - - With Any Two Optional Benefits Unit Price $9.72 - - - - Number of Units 78,368 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 5,178 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Asset Allocation (1994) With No Optional Benefits Unit Price 16.67 13.99 12.73 10.01 - Number of Units 5,186,216 3,700,609 1,991,150 743,176 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Total Return Bond /1/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Money Market (1994) With No Optional Benefits Unit Price 11.31 10.92 10.58 10.18 - Number of Units 1,304,834 1,157,342 521,291 144,050 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST William Blair International Growth /2/ (1997) With No Optional Benefits Unit Price 11.70 - - - - Number of Units 21,405,891 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price $10.20 12.85 17.92 21.66 13.30 Number of Units 31,813,722 37,487,425 17,007,352 6,855,601 5,670,336 With One Optional Benefit Unit Price $8.52 - - - - Number of Units 2,252,674 - - - - With Any Two Optional Benefits Unit Price $9.69 - - - - Number of Units 116,123 - - - - With All Optional Benefits Unit Price $9.69 - - - - Number of Units 1,896 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PBHG Small-Cap Growth /4/ (1994) With No Optional Benefits Unit Price $12.83 19.84 21.51 42.08 17.64 Number of Units 17,093,250 23,048,821 25,535,093 32,134,969 15,003,001 With One Optional Benefit Unit Price $6.92 - - - - Number of Units 1,970,250 - - - - With Any Two Optional Benefits Unit Price $9.48 - - - - Number of Units 47,261 - - - - With All Optional Benefits Unit Price $9.47 - - - - Number of Units 6,595 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Small-Cap Growth /5/ (1999) With No Optional Benefits Unit Price $6.13 8.46 11.98 15.37 - Number of Units 44,042,514 60,703,791 63,621,279 53,349,003 - With One Optional Benefit Unit Price $7.67 - - - - Number of Units 639,695 - - - - With Any Two Optional Benefits Unit Price $9.71 - - - - Number of Units 12,122 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 1,728 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Small-Cap Value /6/ (1998) With No Optional Benefits Unit Price $13.72 15.12 13.95 10.57 9.85 Number of Units 20,004,839 26,220,860 15,193,053 6,597,544 4,081,870 With One Optional Benefit Unit Price $9.26 - - - - Number of Units 1,492,775 - - - - With Any Two Optional Benefits Unit Price $10.09 - - - - Number of Units 624 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, -------------------------------------------------------------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price 11.35 - - - - Number of Units 2,857,188 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PBHG Small-Cap Growth /4/ (1994) With No Optional Benefits Unit Price 17.28 16.54 13.97 10.69 - Number of Units 14,662,728 12,282,211 6,076,373 2,575,105 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Small-Cap Growth /5/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Small-Cap Value /6/ (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Gabelli Small-Cap Value /7/ (1997) With No Optional Benefits Unit Price $12.58 14.08 13.35 11.11 11.20 Number of Units 32,549,396 35,483,530 23,298,524 21,340,168 24,700,211 With One Optional Benefit Unit Price $9.30 - - - - Number of Units 6,141,523 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 209,790 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 17,411 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Mid-Cap Growth /8/ (2000) With No Optional Benefits Unit Price $2.78 3.88 6.58 - - Number of Units 16,748,577 17,045,776 9,426,102 - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 1,273,118 - - - - With Any Two Optional Benefits Unit Price $9.87 - - - - Number of Units 66,279 - - - - With All Optional Benefits Unit Price $9.87 - - - - Number of Units 2,488 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Growth /9/ (1994) With No Optional Benefits Unit Price $12.86 18.95 25.90 28.58 19.15 Number of Units 19,674,777 25,717,164 26,517,850 13,460,525 13,389,289 With One Optional Benefit Unit Price $7.41 - - - - Number of Units 2,175,250 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 44,760 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 1,311 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Value /10/ (1993) With No Optional Benefits Unit Price $17.78 20.16 21.09 16.78 16.10 Number of Units 37,524,187 47,298,313 44,558,699 37,864,586 16,410,121 With One Optional Benefit Unit Price $8.96 - - - - Number of Units 5,118,558 - - - - With Any Two Optional Benefits Unit Price $9.98 - - - - Number of Units 163,415 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 10,745 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Gabelli Small-Cap Value /7/ (1997) With No Optional Benefits Unit Price 12.70 - - - - Number of Units 14,612,510 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Mid-Cap Growth /8/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Growth /9/ (1994) With No Optional Benefits Unit Price 16.10 13.99 12.20 9.94 - Number of Units 11,293,799 9,563,858 3,658,836 301,267 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Value /10/ (1993) With No Optional Benefits Unit Price 16.72 13.41 12.20 9.81 10.69 Number of Units 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $3.51 5.54 6.74 - - Number of Units 85,441,507 125,442,916 28,229,631 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 658,419 - - - - With Any Two Optional Benefits Unit Price $9.36 - - - - Number of Units 6,409 - - - - With All Optional Benefits Unit Price $9.36 - - - - Number of Units 3,466 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Growth (1999) With No Optional Benefits Unit Price $5.68 8.02 10.38 11.27 - Number of Units 85,193,279 117,716,242 7,515,486 409,467 - With One Optional Benefit Unit Price $7.58 - - - - Number of Units 2,930,432 - - - - With Any Two Optional Benefits Unit Price $9.47 - - - - Number of Units 134,574 - - - - With All Optional Benefits Unit Price $9.46 - - - - Number of Units 2,437 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $11.44 13.74 17.81 21.06 14.00 Number of Units 81,046,482 85,895,802 94,627,691 78,684,943 40,757,449 With One Optional Benefit Unit Price $8.32 - - - - Number of Units 10,144,317 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 457,013 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 30,465 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Concentrated Growth /11/ (1992) With No Optional Benefits Unit Price $19.17 27.71 41.14 60.44 39.54 Number of Units 56,016,467 84,116,221 99,250,773 94,850,623 80,631,598 With One Optional Benefit Unit Price $7.67 - - - - Number of Units 1,349,939 - - - - With Any Two Optional Benefits Unit Price $9.46 - - - - Number of Units 41,632 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price 10.03 - - - - Number of Units 714,309 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Concentrated Growth /11/ (1992) With No Optional Benefits Unit Price 23.83 18.79 14.85 10.91 11.59 Number of Units 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $10.67 10.54 10.39 8.35 8.28 Number of Units 14,017,528 12,268,426 11,891,188 6,224,365 3,771,461 With One Optional Benefit Unit Price $10.08 - - - - Number of Units 1,563,489 - - - - With Any Two Optional Benefits Unit Price $10.33 - - - - Number of Units 41,098 - - - - With All Optional Benefits Unit Price $10.32 - - - - Number of Units 6,429 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century Income & Growth /12/ (1997) With No Optional Benefits Unit Price $10.16 12.86 14.24 16.19 13.35 Number of Units 22,410,834 27,386,278 32,388,202 21,361,995 13,845,190 With One Optional Benefit Unit Price $8.25 - - - - Number of Units 1,751,136 - - - - With Any Two Optional Benefits Unit Price $9.89 - - - - Number of Units 36,829 - - - - With All Optional Benefits Unit Price $9.89 - - - - Number of Units 8,874 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST INVESCO Capital Income /13/ (1994) With No Optional Benefits Unit Price $16.14 19.84 22.01 21.31 19.34 Number of Units 37,055,825 48,595,962 50,171,495 46,660,160 40,994,187 With One Optional Benefit Unit Price $8.34 - - - - Number of Units 2,110,071 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 30,714 - - - - With All Optional Benefits Unit Price 9.90 - - - - Number of Units 5,934 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $16.65 15.46 14.40 13.09 13.43 Number of Units 113,007,310 99,028,465 82,545,240 73,530,507 64,224,618 With One Optional Benefit Unit Price $10.57 - - - - Number of Units 20,544,075 - - - - With Any Two Optional Benefits Unit Price $10.17 - - - - Number of Units 604,147 - - - - With All Optional Benefits Unit Price $10.17 - - - - Number of Units 36,236 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century Income & Growth /12/ (1997) With No Optional Benefits Unit Price 12.06 - - - - Number of Units 9,523,815 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST INVESCO Capital Income /13/ (1994) With No Optional Benefits Unit Price 17.31 14.23 12.33 9.61 - Number of Units 33,420,274 23,592,226 13,883,712 6,633,333 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price 12.44 11.48 11.26 9.61 - Number of Units 44,098,036 29,921,643 19,061,840 4,577,708 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $14.26 13.61 12.79 11.96 11.73 Number of Units 61,707,894 42,410,807 31,046,956 32,560,943 28,863,932 With One Optional Benefit Unit Price $10.34 - - - - Number of Units 11,274,642 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 215,314 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 80,547 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price $5.79 6.50 7.09 10.06 6.19 Number of Units 10,957,884 14,095,135 12,899,472 12,060,036 10,534,383 With One Optional Benefit Unit Price $8.66 - - - - Number of Units 283,466 - - - - With Any Two Optional Benefits Unit Price $9.93 - - - - Number of Units 21,816 - - - - With All Optional Benefits Unit Price $9.93 - - - - Number of Units 442 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price $3.49 6.66 12.48 16.52 - Number of Units 18,830,138 26,652,622 29,491,113 4,622,242 - With One Optional Benefit Unit Price $5.50 - - - - Number of Units 293,307 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price $9.37 12.58 14.59 11.34 - Number of Units 11,475,199 17,419,141 19,381,405 786,518 - With One Optional Benefit Unit Price $8.00 - - - - Number of Units 475,873 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 5,444 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 140 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price 11.26 10.62 10.37 - - Number of Units 25,008,310 18,894,375 15,058,644 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price 10.05 10.25 - - - Number of Units 10,371,104 2,360,940 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
/1./ Effective May 1, 2003, the WFVT Corporate Bond portfolio changed its name to WFVT Total Return Bond portfolio. This name change was made in conjunction with a change in investment strategy. /2./ Effective November 11, 2002, William Blair & Company, L.L.C. became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Overseas Growth." /3./ This Portfolio reflects the addition of the net assets of the AST American Century International Growth Portfolio II ("Portfolio II") as a result of the merger between the Portfolio and Portfolio II. /4./ Effective September 17, 2001, Pilgrim Baxter & Associates, Ltd. became Sub-advisor of the Portfolio. Prior to September 17, 2001, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Small-Cap Growth." Prior to December 31, 1998, Founders Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio." /5./ Effective December 10, 2001, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, Zurich Scudder Investments, Inc. served as Sub-advisor of the Portfolio, then named "AST Scudder Small-Cap Growth Portfolio". Prior to May 1, 2001 the Portfolio was named "AST Kemper Small-Cap Growth Portfolio." /6./ Effective May 1, 2001, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to May 1, 2001, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Small Cap Value." /7./ Effective October 23, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio." /8./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Mid-Cap Growth." /9./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor of the Portfolio, then named "Berger Capital Growth Portfolio." /10./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor of the Portfolio, then named "Federated Utility Income Portfolio." /11./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST JanCap Growth." /12./ Effective May 3, 1999, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Value Growth & Income." /13./ Effective July 1, 2002, the AST INVESCO Equity Income portfolio changed its name to AST INVESCO Capital Income. APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Growth = Account Value of variable minus Purchase Payments - proportional investment options plus Interim Value of Fixed Allocations (no MVA applies) withdrawals Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 * 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $85,000 Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 * $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 * 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000 Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value = $90,000 - [$90,000 * $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = $80,000 - [$80,000 * $15,000/$75,000] = $80,000 - $16,000 = $64,000 Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [$80,000 * $5,000/$70,000] = $80,000 + $15,000 - $5,714 = $100,714 Basic Death Benefit = $75,000 APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER ================================================================================ American Skandia's Plus40(TM)Optional Life Insurance Rider was offered, in those states where approved, between November 9, 2001 and May 1, 2003. The description below of the Plus40(TM)benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40(TM)benefit. ================================================================================ - - ------------------------------------------------------------------------------ The life insurance coverage provided under the Plus40(TM)Optional Life Insurance Rider ("Plus40(TM)rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40(TM)rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. - - ------------------------------------------------------------------------------ The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40(TM)rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40(TM)rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable - - the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40(TM)rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40(TM)rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS |X| If you die during the first 24 months following the effective date of the Plus40(TM)rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40(TM)rider if you die within 24 months of its effective date. |X| If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. |X| If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40(TM)rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. |X| If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40(TM)rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. |X| If charges for the Plus40(TM)rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). |X| If the age of any person covered under the Plus40(TM)rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. |X| On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95th birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40(TM)rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40(TM)rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40(TM)rider or similar life insurance coverage. |X| The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. |X| The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40(TM)riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40(TM)rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40(TM)rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40(TM)rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40(TM)rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40(TM)RIDER The Plus40(TM)rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40(TM)rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. Attained Age Percentage of Account Value ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 40-75 .80% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 76-80 1.60% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 81-85 3.20% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 86-90 4.80% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 91 6.50% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 92 7.50% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 93 8.50% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 94 9.50% ------------------------------ ---------------------------- ------------------------------ ---------------------------- Age 95 10.50% ------------------------------ ---------------------------- The charge for the Plus40(TM)rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. |X| If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. |X| If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40(TM)rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40(TM)rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40(TM)rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40(TM)rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40(TM)rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40(TM)rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40(TM)rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40(TM)rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40(TM)rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40(TM)rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. APPENDIX E - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT If you purchased your Annuity before November 18, 2002 and were not a resident of the State of New York, the following optional death benefits were offered: Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the Annuity's basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - - ------------------------------------------------------------------------------ The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - - ------------------------------------------------------------------------------ NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Guaranteed Minimum Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. Calculation of Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only) If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. ADDITIONAL CALCULATIONS - ------------------------ Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $75,000 Basic Death Benefit = $75,000 Death Benefit Amount = $75,000 - $50,000 = $25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $75,000 + $12,500 = $87,500 Examples with market decline Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $40,000 Basic Death Benefit = $50,000 Death Benefit Amount = $50,000 - $50,000 = $0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $50,000 + $0 = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Examples of Guaranteed Minimum Death Benefit Calculation The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). THIS PAGE IS INTENTIONALLY LEFT BLANK. - - ------------------------------------------------------------------------------ PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVAPEX-PROS (05/2003). - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ------------------------------------------------------- (print your name) ------------------------------------------------------- (address) ------------------------------------------------------- (city/state/zip code) THIS PAGE IS INTENTIONALLY LEFT BLANK. Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-766-4530 Telephone: 203-926-1888 http://www.americanskandia.com http://www.americanskandia.com MAILING ADDRESSES: AMERICAN SKANDIA - VARIABLE ANNUITIES Attention: Stagecoach Annuity P.O. Box 7040 Bridgeport, CT 06601-7040 EXPRESS MAIL: AMERICAN SKANDIA - VARIABLE ANNUITIES Attention: Stagecoach Annuity One Corporate Drive Shelton, CT 06484 Supplement to Prospectus Dated May 1, 2003 Supplement dated June 20, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. Montgomery Variable Series - Emerging Markets Portfolio reorganization into the Gartmore GVIT Developing Markets Portfolio American Skandia anticipates that shareholders will approve the Plan of Reorganization of the Montgomery Variable Series - Emerging Markets Portfolio and the Gartmore GVIT Developing Markets Portfolio and that the reorganization will take place on June 20, 2003. Upon completion of the reorganization, the Montgomery Variable Series - Emerging Markets Portfolio will cease to exist and Annuity Owners will have an equivalent Account Value in the Gartmore GVIT Developing Markets Portfolio. The principal investment objective and policies of the Portfolio will be unchanged as a result of this reorganization. UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- ------------ Gartmore Variable Investment Trust: GVIT Developing Markets 1.15% 0.24% 0.25% 1.64% N/A 1.64%
ASAP/ ASAP2/ FUSI AS2/ ASAP III/ APEX/ ASXT/ FUSI XT/Wells XTVA/ VIA-SUPP (06/20/2003) ASXT-FOUR/ FUSI XT-FOUR/ ASL/ FUSI ASL/ Wells ASL/ ASPro/92001E0603 Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/ ASL II/ FUSI ASL II/ ASXT-SIX/ VIAS/ VIAT/ VIAG -SUPP (06/20/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated October 13, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. WHO IS AMERICAN SKANDIA? The following paragraph is added to this section of the prospectus: Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. GUARANTEED RETURN OPTION PlusSM (GRO PlusSM) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is being offered as of October 13, 2003 in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program, the Guaranteed Minimum Withdrawal Benefit rider or the Guaranteed Minimum Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that seven-year period as the "maturity date") and on each anniversary of the maturity date thereafter, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate seven-year period following election of the enhanced guarantee and on each anniversary thereafter, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market increases. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between variable investment options and Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. KEY FEATURE - Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. |X| Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. |X| Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of the seven year period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically increase your base guarantee (or enhanced guarantee, if previously elected) on each anniversary of the program (and create a new, seven year maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the existing base guarantee (or enhanced guarantee, if previously elected) by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity will be applied, if necessary, to any Fixed Allocations needed to support the applicable guarantee amount as of the maturity date or any anniversary of the maturity date. Any remaining amounts will be allocated pro-rata to your Account Value based on your current Sub-account allocations. We will notify you of any amounts added to your Annuity under the program. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM)Optional Life Insurance Rider will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO PlusSM program are October 13, 2003; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2003 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2003 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: .. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). .. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x ( 1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2004 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE - Allocation of Account Value In general, you have discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to prohibit investment in certain Portfolios if you participate in the program. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. This permits your Annuity to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. We monitor fluctuations in your Account Value each business day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). |X| If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. |X| If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred to a new Fixed Allocation(s) to support the applicable guaranteed amount. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). ================================================================================ If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the variable investment options if there is a subsequent market recovery. During the period prior to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is extremely low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s). ================================================================================ Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value are transferred to the variable investment options while Fixed Allocations in support of an Enhanced Protected Principal Value are not transferred because they must remain invested in the Fixed Allocation in support of the higher enhanced guarantee. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any business day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the business day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated (including the guaranteed amount(s)) and the Guaranteed Return Option Plus program will be added to your Annuity based on the current Account Value. This election of GRO PlusSM may result in a market value adjustment, which could increase or decrease your Account Value. Termination of the Program The Annuity Owner can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. The Annuity Owner also can terminate the Guaranteed Return Option Plus program entirely. An Annuity Owner who terminates the program entirely can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, an Annuity Owner could, for example, terminate the program on a given business day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program prior to the applicable maturity date, the Guaranteed Return Option Plus will no longer provide a guarantee of your Account Value. The surviving spouse may elect the benefit at any time after the death of the Annuity Owner. The surviving spouse's election will be effective on the business day that we receive the required documentation in good order at our home office, and the Account Value on that business day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: |X| Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. |X| Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program, and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Additional Purchase Payments (including any credits associated with such Purchase Payments) applied to the Annuity while the program is in effect will increase the applicable guarantee amount by the actual amount of the Purchase Payment; however, all or a portion of any additional Purchase Payments (including any credits associated with such Purchase Payments) may be allocated by us to Fixed Allocations to support the additional amount guaranteed. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. Charges under the Program We deduct a charge equal to 0.25% of Account Value per year to participate in the Guaranteed Return Option Plus program. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. ASAP2 / FUSI AS2 / EVA / ASAP III / APEX / FUSI XT /EVA XT / WELLS XT / FUSI ASXT-4 / ASL / FUSI ASL / WELLS ASL / WELLS APEX / AS PRO / WELLS VA+ / IMPACT / FT PORTFOLIOS / GAL 3 / ASL II /FUSI ASL II / APEX II - SUPP. (GRO Only) - (10/13/2003) 92001b0903
Supplement to Prospectus Dated May 1, 2003 Supplement dated January 29, 2004 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. AST Strong International Equity portfolio Pursuant to the exemptive authority granted to American Skandia Trust, its investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC have changed sub-advisors for the AST Strong International Equity Portfolio ("International Equity Portfolio"). Effective February 23, 2004, J.P. Morgan Investment Management Inc. will become the sub-advisor for the International Equity Portfolio. Accordingly, effective February 23, 2004, all references in the Prospectus and the SAI to the AST Strong International Equity Portfolio are replaced by references to the AST JPMorgan International Equity Portfolio and references to Strong Capital Management, Inc. are replaced by references to J.P. Morgan Investment Management Inc. The investment objective of the International Equity Portfolio is unchanged. ASAP/ ASAP2/ EVA/ FUSI AS2/ ASAP III/ Wells ASAP III/ APEX/VA/ VIA-SUPP (01/2004) ASXT/ EVAXT/ FUSI XT/Wells XT/ASXT-FOUR/ FUSI XT-FOUR/ ASL/92001a0304 FUSI ASL/ Wells ASL/ ASPro/ Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/Wells APEX II/ ASL II/ FUSI ASL II/ASXT-SIX/ Wells XT-SIX/ VIAS/ VIAT/ VIAG -SUPP (01/2004) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION One Corporate Drive, Shelton, Connecticut 06484 This Prospectus describes American Skandia LifeVest(R)II Premier, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us"). The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 58. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. ================================================================================ American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees and charges may also be different between each annuity. ================================================================================ If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage. WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit plans and defined contribution plans such as 401(k), profit sharing and money purchase plans) or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed investment options. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 701/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. - -------------------------------------------------------------------------------- These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value. - -------------------------------------------------------------------------------- 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 THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE. FOR FURTHER INFORMATION CALL 1-800-766-4530. Prospectus Dated: May 1, 2003 Statement of Additional Information Dated: May 1, 2003 FUSI ASLII-PROS- (05/2003) FUSI ASLIIPROS
PLEASE SEE OUR PRIVACY POLICY ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY? [X] This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. [X] This Annuity offers both variable and fixed investment options. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed investment options of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. [X] The Annuity features two distinct phases - the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: American Skandia Trust, Montgomery Variable Series, Wells Fargo Variable Trust, INVESCO Variable Investment Funds, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. [X] During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. [X] This Annuity offers a basic Death Benefit. [X] There is no Contingent Deferred Sales Charge on surrenders or withdrawals. You can withdraw Account Value from your Annuity free of any charges. [X] Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $15,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $15,000. There is no age restriction to purchase the Annuity. However, the basic Death Benefit provides greater protection for persons under age 85. TABLE OF CONTENTS GLOSSARY OF TERMS........................................................................................5 SUMMARY OF CONTRACT FEES AND CHARGES.....................................................................6 EXPENSE EXAMPLES........................................................................................10 INVESTMENT OPTIONS......................................................................................11 WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?....................................11 WHAT ARE THE FIXED INVESTMENT OPTIONS?................................................................27 FEES AND CHARGES........................................................................................28 WHAT ARE THE CONTRACT FEES AND CHARGES?...............................................................28 WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?.........................................28 WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?..........................................................29 WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?..........................................................29 WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?.............................................29 EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES.............................................................29 PURCHASING YOUR ANNUITY.................................................................................29 WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?.................................................29 MANAGING YOUR ANNUITY...................................................................................30 MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?.......................................30 MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?.........................................................30 MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?..............................................................31 MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?..........................................31 MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?......................................31 MANAGING YOUR ACCOUNT VALUE.............................................................................31 HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?..........................................................31 ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?............................31 DO YOU OFFER DOLLAR COST AVERAGING?...................................................................32 DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?......................................................32 DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?...................32 MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT?......................................34 HOW DO THE FIXED INVESTMENT OPTIONS WORK?.............................................................35 HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?.....................................................35 HOW DOES THE MARKET VALUE ADJUSTMENT WORK?............................................................36 WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?........................................................37 ACCESS TO ACCOUNT VALUE.................................................................................37 WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?......................................................37 ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?.........................................................37 CAN I WITHDRAW A PORTION OF MY ANNUITY?...............................................................38 CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?......................38 DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE?..............38 WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?....................................38 CAN I SURRENDER MY ANNUITY FOR ITS VALUE?.............................................................38 WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?..........................................................39 HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?..................................................40 HOW ARE ANNUITY PAYMENTS CALCULATED?..................................................................40 DEATH BENEFIT...........................................................................................41 WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?.........................................................41 Basic Death Benefit...................................................................................41 OPTIONAL DEATH BENEFITS...............................................................................42 PAYMENT OF DEATH BENEFITS.............................................................................44 VALUING YOUR INVESTMENT.................................................................................45 HOW IS MY ACCOUNT VALUE DETERMINED?...................................................................45 WHAT IS THE SURRENDER VALUE OF MY ANNUITY?............................................................45 HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?...........................................................46 HOW DO YOU VALUE FIXED ALLOCATIONS?...................................................................46 WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?...........................................................46 WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?.........................47 TAX CONSIDERATIONS......................................................................................47 WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?......................................47 HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?.............................................47 IN GENERAL, HOW ARE ANNUITIES TAXED?..................................................................47 HOW ARE DISTRIBUTIONS TAXED?..........................................................................48 WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?..........49 HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?.................................................50 GENERAL TAX CONSIDERATIONS............................................................................51 GENERAL INFORMATION.....................................................................................52 HOW WILL I RECEIVE STATEMENTS AND REPORTS?............................................................52 WHO IS AMERICAN SKANDIA?..............................................................................53 WHAT ARE SEPARATE ACCOUNTS?...........................................................................53 WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?..................................................54 WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?................................................55 AVAILABLE INFORMATION.................................................................................57 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......................................................57 HOW TO CONTACT US.....................................................................................57 INDEMNIFICATION.......................................................................................58 LEGAL PROCEEDINGS.....................................................................................58 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...................................................58 APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA................................................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION................11 APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B....................................1 APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS......................................................1 APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER.....................................................1
GLOSSARY OF TERMS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. Account Value: 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. The Account Value is calculated before we assess any applicable Annual Maintenance Fee. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. Annuitization: The application of Account Value to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply. Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. Code: The Internal Revenue Code of 1986, as amended from time to time. Fixed Allocation: An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. Guarantee Period: A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. Interim Value: The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. Issue Date: The effective date of your Annuity. MVA: A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day other than the Maturity Date of such Fixed Allocation. Owner: With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. Surrender Value: The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus the Annual Maintenance Fee, Tax Charge and the charge for any optional benefits. There is no Contingent Deferred Sales Charge upon surrender or partial withdrawal. Unit: A measure used to calculate your Account Value in a Sub-account during the accumulation period. Valuation Day: Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. SUMMARY OF CONTRACT FEES AND CHARGES Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Transfer Fee and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the Insurance Charge, which is the combination of a mortality and expense risk charge, a charge for administration of the Annuity, and any charge for the Guaranteed Return Option if elected. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. Tax charges may vary by state and in certain states, a premium tax charge may be applicable. All of these fees and charges are described in more detail within this Prospectus. The following table provides a summary of the fees and charges you will incur if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus.
- ------------------------------------------------------------------------------------------------------------------------------------ YOUR TRANSACTION FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ (assessed against the Annuity) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FEE/CHARGE Amount Deducted - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Contingent Deferred Sales Charge There is no Contingent Deferred Sales Charge deducted upon surrender or partial withdrawal. - ------------------------------------------------------------------------------------------------------------------------------------ Transfer Fee $10.00 (Deducted after the 20th transfer each Annuity Year) - ------------------------------------------------------------------------------------------------------------------------------------ The following table provides a summary of the periodic fees and charges you will incur while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus. - ------------------------------------------------------------------------------------------------------------------------------------ YOUR PERIODIC FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FEES/CHARGES ASSESSED AGAINT THE ANNUITY - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ FEE/CHARGE Amount Deducted - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Annual Maintenance Fee Smaller of $35 or 2% of Account Value (Only applicable if Account Value is less than $100,000) (Assessed annually on the Annuity's anniversary date or upon surrender) - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS* (as a percentage of the average daily net assets of the Sub-accounts) - ------------------------------------------------------------------------------------------------------------------------------------ FEE/CHARGE Amount Deducted - ------------------------------------------------------------------------------------------------------------------------------------ Mortality & Expense Risk Charge 1.50% - ------------------------------------------------------------------------------------------------------------------------------------ Administration Charge 0.15% - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Total Annual Charges of the Sub-accounts** 1.65% per year of the value of each Sub-account - ------------------------------------------------------------------------------------------------------------------------------------
* These charges are deducted daily and apply to Variable Investment Options only. ** The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. The following table provides a summary of the fees and charges you will incur if you elect the following optional benefit. These fees and charges are described in more detail within this Prospectus. - ------------------------------------------------------------------------------------------------------------------------------------ YOUR OPTIONAL BENEFIT FEES AND CHARGES - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Optional Benefit Optional Benefit Fee/ Total Annual Charge* Charge - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ GUARANTEED RETURN OPTION 1.90% We offer a program that guarantees a "return of premium" at a future date, while 0.25% of average allowing you to allocate all or a portion of your Account Value to the Sub-accounts of daily net assets of your choice. the Sub-accounts - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Please refer to the section of the Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - ------------------------------------------------------------------------------------------------------------------------------------
* The Total Annual Charge includes the Insurance Charge assessed against the Annuity. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2002. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets.
- ------------------------------------------------------------------------------------------------------------------------------------ Total Annual Portfolio Operating Expenses - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Minimum Maximum - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Total Portfolio Operating Expense 0.14% * 3.14% - ------------------------------------------------------------------------------------------------------------------------------------
* The minimum total annual portfolio operating expenses are those of a Portfolio that may invest in mutual funds, which also charge their own operating expenses. Thus, the total annual portfolio operating expenses may be higher than indicated. The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2002, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee is being waived and/or other expenses are being partially reimbursed. "N/A" indicates that no portion of the management fee and/or other expenses is being waived and/or reimbursed. The "Net Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees, net of any fee waivers and expense reimbursements. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530.
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - ----------------------------------------------------------------------------------------------------------------------------------- American Skandia Trust: /1/ AST Strong International Equity 0.88% 0.21% 0.12% 1.21% 0.00% 1.21% AST William Blair International Growth 1.00% 0.23% 0.10% 1.33% 0.10% 1.23% AST American Century International Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% AST DeAM International Equity 1.00% 0.44% 0.00% 1.44% 0.15% 1.29% AST MFS Global Equity 1.00% 0.41% 0.00% 1.41% 0.00% 1.41% AST PBHG Small-Cap Growth 0.90% 0.22% 0.11% 1.23% 0.00% 1.23% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% 0.15% 1.00% AST Federated Aggressive Growth 0.95% 0.43% 0.00% 1.38% 0.03% 1.35% AST Goldman Sachs Small-Cap Value 0.95% 0.21% 0.11% 1.27% 0.00% 1.27% AST Gabelli Small-Cap Value 0.90% 0.19% 0.01% 1.10% 0.00% 1.10% AST DeAM Small-Cap Value 0.95% 0.53% 0.00% 1.48% 0.33% 1.15% AST Goldman Sachs Mid-Cap Growth 1.00% 0.26% 0.07% 1.33% 0.10% 1.23% AST Neuberger Berman Mid-Cap Growth 0.90% 0.20% 0.06% 1.16% 0.00% 1.16% AST Neuberger Berman Mid-Cap Value 0.90% 0.17% 0.09% 1.16% 0.00% 1.16% AST Alger All-Cap Growth 0.95% 0.19% 0.15% 1.29% 0.00% 1.29% AST Gabelli All-Cap Value 0.95% 0.24% 0.00% 1.19% 0.00% 1.19% AST T. Rowe Price Natural Resources 0.90% 0.23% 0.03% 1.16% 0.00% 1.16% AST Alliance Growth 0.90% 0.20% 0.03% 1.13% 0.00% 1.13% AST MFS Growth 0.90% 0.18% 0.10% 1.18% 0.00% 1.18% AST Marsico Capital Growth 0.90% 0.16% 0.04% 1.10% 0.01% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.15% 0.04% 1.09% 0.06% 1.03% AST DeAM Large-Cap Growth 0.85% 0.23% 0.00% 1.08% 0.10% 0.98% AST DeAM Large-Cap Value 0.85% 0.24% 0.04% 1.13% 0.10% 1.03% AST Alliance/Bernstein Growth + Value 0.90% 0.23% 0.00% 1.13% 0.00% 1.13% AST Sanford Bernstein Core Value 0.75% 0.25% 0.00% 1.00% 0.00% 1.00% AST Cohen & Steers Realty 1.00% 0.23% 0.03% 1.26% 0.00% 1.26% AST Sanford Bernstein Managed Index 500 0.60% 0.16% 0.08% 0.84% 0.00% 0.84% AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% 0.00% 0.98% AST Alliance Growth and Income 0.75% 0.15% 0.08% 0.98% 0.02% 0.96% AST MFS Growth with Income 0.90% 0.28% 0.01% 1.19% 0.00% 1.19% AST INVESCO Capital Income 0.75% 0.17% 0.03% 0.95% 0.00% 0.95% AST DeAM Global Allocation 0.10% 0.04% 0.00% 0.14% 0.00% 0.14% AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% 0.00% 1.10% AST T. Rowe Price Asset Allocation 0.85% 0.26% 0.00% 1.11% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.26% 0.00% 1.06% 0.00% 1.06% AST Federated High Yield 0.75% 0.19% 0.00% 0.94% 0.00% 0.94% AST Lord Abbett Bond-Debenture 0.80% 0.24% 0.00% 1.04% 0.00% 1.04% AST DeAM Bond 0.85% 0.23% 0.00% 1.08% 0.15% 0.93% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% 0.02% 0.78% AST PIMCO Limited Maturity Bond 0.65% 0.18% 0.00% 0.83% 0.00% 0.83% AST Money Market 0.50% 0.13% 0.00% 0.63% 0.05% 0.58% Montgomery Variable Series: Emerging Markets 1.25% 0.43% 0.00% 1.68% 0.00% 1.68% Wells Fargo Variable Trust: Equity Value 0.55% 0.48% 0.25% 1.28% 0.28% 1.00% Equity Income 0.55% 0.30% 0.25% 1.10% 0.10% 1.00% Rydex Variable Trust: Nova 0.75% 0.97% 0.00% 1.72% 0.00% 1.72% Ursa 0.90% 0.89% 0.00% 1.79% 0.00% 1.79% OTC 0.75% 0.99% 0.00% 1.74% 0.00% 1.74%
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios)
Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - ----------------------------------------------------------------------------------------------------------------------------------- INVESCO Variable Investment Funds, Inc.: Dynamics 0.75% 0.37% 0.00% 1.12% 0.00% 1.12% Technology 0.75% 0.36% 0.00% 1.11% 0.00% 1.11% Health Sciences 0.75% 0.32% 0.00% 1.07% 0.00% 1.07% Financial Services 0.75% 0.34% 0.00% 1.09% 0.00% 1.09% Telecommunications 0.75% 0.47% 0.00% 1.22% 0.00% 1.22% Evergreen Variable Annuity Trust: Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% Evergreen Variable Annuity Trust: International Growth 0.66% 0.73% 0.00% 1.39% 0.39% 1.00% Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% Capital Growth 0.80% 0.22% 0.00% 1.02% 0.00% 1.02% Blue Chip 0.61% 0.61% 0.00% 1.22% 0.24% 0.98% Equity Index 0.32% 0.35% 0.00% 0.67% 0.37% 0.30% Foundation 0.75% 0.16% 0.00% 0.91% 0.00% 0.91% ProFund VP: Europe 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Asia 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Japan 0.75% 1.06% 0.25% 2.06% 0.08% 1.98% Banks 0.75% 1.11% 0.25% 2.11% 0.13% 1.98% Basic Materials 0.75% 1.21% 0.25% 2.21% 0.23% 1.98% Biotechnology 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Consumer Cyclical 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Consumer Non-Cyclical 0.75% 1.10% 0.25% 2.10% 0.12% 1.98% Energy 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Financial 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Healthcare 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Industrial 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Internet 0.75% 1.04% 0.25% 2.04% 0.06% 1.98% Pharmaceuticals 0.75% 1.12% 0.25% 2.12% 0.14% 1.98% Precious Metals 0.75% 0.98% 0.25% 1.98% N/A 1.98% Real Estate 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% Semiconductor 0.75% 1.33% 0.25% 2.33% 0.35% 1.98% Technology 0.75% 1.27% 0.25% 2.27% 0.29% 1.98% Telecommunications 0.75% 1.19% 0.25% 2.19% 0.21% 1.98% Utilities 0.75% 1.17% 0.25% 2.17% 0.19% 1.98% Bull 0.75% 0.91% 0.25% 1.91% N/A 1.91% Bear 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% UltraBull /2/ 0.75% 1.12% 0.25% 2.12% 0.27% 1.85% OTC 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Short OTC 0.75% 0.96% 0.25% 1.96% N/A 1.96% UltraOTC 0.75% 1.08% 0.25% 2.08% 0.13% 1.95% Mid-Cap Value 0.75% 1.25% 0.25% 2.25% 0.27% 1.98% Mid-Cap Growth 0.75% 1.22% 0.25% 2.22% 0.24% 1.98% UltraMid-Cap 0.75% 1.36% 0.25% 2.36% 0.38% 1.98% Small-Cap Value 0.75% 1.45% 0.25% 2.45% 0.47% 1.98% Small-Cap Growth 0.75% 1.20% 0.25% 2.20% 0.22% 1.98%
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) UltraSmall-Cap 0.75% 1.15% 0.25% 2.15% 0.17% 1.98% U.S. Government Plus 0.50% 0.96% 0.25% 1.71% N/A 1.71% Rising Rates Opportunity 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% First Defined Portfolio Fund LLC: First Trust(R)10 Uncommon Values 0.60% 2.29% 0.25% 3.14% 1.95% 1.37% The Prudential Series Fund, Inc.: SP Jennison International Growth 0.85% 0.70% 0.25% 1.80% 0.16% 1.64%
/1/ The Investment Manager of American Skandia Trust (the "Trust") has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2004. The caption "Total Annual Portfolio Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements, while the caption "Net Annual Portfolio Operating Expenses" reflects the effect of such waivers and reimbursements. The Trust adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the sale of shares of such Portfolios. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission takes the position that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Distribution Fee estimates are derived and annualized from data regarding commission amounts directed under the Distribution Plan. Although there are no maximum amounts allowable, actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the last full fiscal year of the Plan's operations may differ from the amounts listed in the above chart. /2/ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. EXPENSE EXAMPLES These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Annual Maintenance Fee (when applicable), Insurance Charge, and the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), as well as the charge for the optional benefit that is offered under the Annuity. The Securities and Exchange Commission ("SEC") requires these examples. Below are examples showing what you would pay in expenses at the end of the stated time periods for each Sub-account had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected the optional benefit available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.65% per year; (c) the Annual Maintenance Fee (when applicable) is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other transactions for which we charge a fee during the period shown; (f) no tax charge applies; (g) the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above) are reflected; and (h) the charge for the optional benefit is reflected as a charge equal to 0.25% for the Guaranteed Return Option. Amounts shown in the examples are rounded to the nearest dollar. Expense Examples are provided as follows: 1.) whether or not you surrender the Annuity at the end of the stated time period; and 2.) if you annuitize at the end of the stated time period. 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 WILL BE LESS THAN THOSE SHOWN IF YOU DO NOT ELECT THE OPTIONAL BENEFIT AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. If your Account Value is less than $100,000, so that the Annual Maintenance Fee does apply. Please see the description below regarding how the Expense Examples change for Annuities with Account Value greater than $100,000. Whether or not you surrender your contract at the end of the applicable time period:
1 year 3 years 5 years 10 years - -------------------------------------------------------------------------------- 524 1568 2604 5159 - -------------------------------------------------------------------------------- If you annuitize at the end of the applicable time period: 1 year 3 years 5 years 10 years - -------------------------------------------------------------------------------- 524 1568 2604 5159 - --------------------------------------------------------------------------------
The Expense Examples shown above assume your Account Value is less than $100,000 so that the Annual Maintenance Fee applies. If your Account Value is greater than $100,000 such that the Annual Maintenance Fee does not apply, the amounts indicated in the Expense Examples shown above would be reduced. INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information.) Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services, Incorporated, an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day investment decisions. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. ================================================================================ Effective close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value portfolio is no longer offered as a Sub-account under the Annuity, except as noted below. Annuity contracts with Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or before June 28, 2002 may continue to allocate Account Value and make transfers into the AST Goldman Sachs Small-Cap Value Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. Owners of Annuities issued after June 28, 2002 will not be allowed to allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-account. The AST Goldman Sachs Small-Cap Value Sub-account may be offered to new Owners at some future date; however, at the present time, American Skandia has no intention to do so. ================================================================================ Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts.
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL AST Strong International Equity: seeks long-term capital growth by investing in a diversified Strong Capital EQUITY portfolio of international equity securities the issuers of which are considered to have Management, Inc. strong earnings momentum. The Portfolio seeks to meet its objective by investing, under normal market conditions, at least 80% of its total assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The Sub-advisor intends to focus on companies with an above-average potential for long-term growth and attractive relative valuations. The Sub-advisor selects companies based on five key factors: growth, valuation, management, risk and sentiment. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL AST William Blair International Growth (f/k/a AST Janus Overseas Growth): seeks long-term William Blair & EQUITY growth of capital. The Portfolio pursues its objective primarily through investments in Company, L.L.C. equity securities of issuers located outside the United States. The Portfolio normally invests at least 80% of its total assets in securities of issuers from at least five different countries, excluding the United States. The Portfolio invests primarily in companies selected for their growth potential. Securities are generally selected without regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL AST American Century International Growth: seeks capital growth. The Portfolio will seek to American Century EQUITY achieve its investment objective by investing primarily in equity securities of international Investment companies that the Sub-advisor believes will increase in value over time. Under normal Management, Inc. conditions, the Portfolio will invest at least 65% of its assets in equity securities of issuers from at least three countries outside of the United States. The Sub-advisor uses a growth investment strategy it developed that looks for companies with earnings and revenue growth. The Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL AST DeAM International Equity: seeks capital growth. The Portfolio pursues its objective by Deutsche Asset EQUITY investing at least 80% of the value of its assets in the equity securities of companies in Management, Inc. developed non-U.S. countries that are represented in the MSCI EAFE(R)Index. The target of this Portfolio is to track the performance of the MSCI EAFE(R)Index within 4% with a standard deviation expected of +/- 4%. The Sub-advisor considers a number of factors in determining whether to invest in a stock, including earnings growth rate, analysts' estimates of future earnings and industry-relative price multiples. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GLOBAL EQUITY AST MFS Global Equity: seeks capital growth. Under normal circumstances the Portfolio invests Massachusetts at least 80% of its assets in equity securities of U.S. and foreign issuers (including issuers Financial in developing countries). The Portfolio generally seeks to purchase securities of companies Services Company with relatively large market capitalizations relative to the market in which they are traded. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST PBHG Small-Cap Growth: seeks capital growth. The Portfolio pursues its objective by Pilgrim Baxter & GROWTH primarily investing at least 80% of the value of its assets in the common stocks of Associates, Ltd. small-sized companies, whose market capitalizations are similar to market capitalizations of the companies in the Russell 2000(R)Index at the time of the Portfolio's investment. The Sub-advisor expects to focus primarily on those securities whose market capitalizations or annual revenues are less than $1billion at the time of purchase. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital from a portfolio of Deutsche Asset GROWTH growth stocks of smaller companies. The Portfolio pursues its objective, under normal Management, Inc. circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R)Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R)Index, but which attempts to outperform the Russell 2000 Growth(R)Index. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST Federated Aggressive Growth: seeks capital growth. The Portfolio pursues its investment Federated GROWTH objective by investing in the stocks of small companies that are traded on national security Investment exchanges, NASDAQ stock exchange and the over-the-counter-market. Small companies will be Counseling/ defined as companies with market capitalizations similar to companies in the Russell 2000 Federated Index or the Standard & Poor's Small Cap 600 Index. Up to 25% of the Portfolio's net assets Global Investment may be invested in foreign securities, which are typically denominated in foreign currencies. Management Corp. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST Goldman Sachs Small-Cap Value: seeks long-term capital appreciation. The Portfolio will Goldman Sachs VALUE seek its objective through investments primarily in equity securities that are believed to be Asset Management undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $5 billion or less. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST Gabelli Small-Cap Value: seeks to provide long-term capital growth by investing primarily GAMCO VALUE in small-capitalization stocks that appear to be undervalued. The Portfolio will have a Investors, Inc. non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as those with a capitalization of $1.5 billion or less. 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. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. The Portfolio pursues Deutsche Asset VALUE its objective, under normal market conditions, by primarily investing at least 80% of its Management, Inc. total assets in the equity securities of small-sized companies included in the Russell 2000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000(R)Value Index, but which attempts to outperform the Russell 2000(R)Value Index. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MID-CAP GROWTH AST Goldman Sachs Mid-Cap Growth (f/k/a AST Janus Mid-Cap Growth): seeks long-term capital Goldman Sachs growth. The Portfolio pursues its investment objective, by investing primarily in equity Asset Management securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MID-CAP GROWTH AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under normal market conditions, Neuberger Berman the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index, at the time of investment, are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- MID-CAP VALUE AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market conditions, the Neuberger Berman Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ALL-CAP GROWTH AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in Fred Alger equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in Management, Inc. the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ALL-CAP VALUE AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its objective by GAMCO Investors, investing primarily in readily marketable equity securities including common stocks, preferred Inc. stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. The Portfolio focuses on companies that appear underpriced relative to their private market value ("PMV"). PMV is the value that the Portfolio's Sub-advisor believes informed investors would be willing to pay for a company. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR AST T. Rowe Price Natural Resources: seeks long-term capital growth primarily through the T. Rowe Price common stocks of companies that own or develop natural resources (such as energy products, Associates, Inc. precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio looks for companies that have the ability to expand production, to maintain superior exploration programs and production facilities, and the potential to accumulate new resources. At least 50% of Portfolio assets will be invested in U.S. securities, up to 50% of total assets also may be invested in foreign securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST Alliance Growth: seeks long-term capital growth. The Portfolio invests at least 80% of Alliance Capital GROWTH its total assets in the equity securities of a limited number of large, carefully selected, Management, L.P. high-quality U.S. companies that are judged likely to achieve superior earnings growth. Normally, about 40-60 companies will be represented in the Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting approximately 70% of the Portfolio's net assets. An emphasis is placed on identifying companies whose substantially above average prospective earnings growth is not fully reflected in current market valuations. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST MFS Growth: seeks long-term capital growth and future income. Under normal market Massachusetts GROWTH conditions, the Portfolio invests at least 80% of its total assets in common stocks and Financial related securities, such as preferred stocks, convertible securities and depositary receipts, Services of companies that the Sub-advisor believes offer better than average prospects for long-term Company growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST Marsico Capital Growth: seeks capital growth. Income realization is not an investment Marsico Capital GROWTH objective and any income realized on the Portfolio's investments, therefore, will be Management, LLC incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, a "bottom up" stock selection. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST Goldman Sachs Concentrated Growth (f/k/a AST JanCap Growth): seeks growth of capital in a Goldman Sachs GROWTH manner consistent with the preservation of capital. Realization of income is not a Asset significant investment consideration and any income realized on the Portfolio's investments, Management therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30 - 45 companies that are considered by the Sub-advisor to be positioned for long-term growth. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST DeAM Large-Cap Growth: seeks maximum growth of capital by investing primarily in the Deutsche Asset GROWTH growth stocks of larger companies. The Portfolio pursues its objective, under normal market Management, Inc. conditions, by primarily investing at least 80% of its total assets in the equity securities of large-sized companies included in the Russell 1000(R)Growth Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Growth Index, but which attempts to outperform the Russell 1000(R)Growth Index through active stock selection. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST DeAM Large-Cap Value (f/k/a AST Janus Strategic Value): seeks maximum growth of capital by Deutsche Asset VALUE investing primarily in the value stocks of larger companies. The Portfolio pursues its Management, Inc. objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Value Index, but which attempts to outperform the Russell 1000(R)Value Index through active stock selection. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST Alliance/Bernstein Growth + Value: seeks capital growth by investing approximately 50% of Alliance Capital BLEND its assets in growth stocks of large companies and approximately 50% of its assets in value Management, L.P. stocks of large companies. The Portfolio will invest primarily in commons tocks of large U.S. companies included in the Russell 1000(R)Index (the "Russell 1000(R)"). The Russell 1000(R) is a market capitalization-weighted index that measures the performance of the 1,000 largest U.S. companies. Normally, about 60-85 companies will be represented in the Portfolio, with 25-35 companies primarily from the Russell 1000(R)Growth Index constituting approximately 50% of the Portfolio's net assets and 35-50 companies primarily from the Russell 1000(R)Value Index constituting the remainder of the Portfolio's net assets. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP AST Sanford Bernstein Core Value: seeks long-term capital growth by investing primarily in Sanford C. VALUE common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be Bernstein & Co., invested in the common stocks of large companies that appear to be undervalued. Among other LLC things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- REAL ESTATE AST Cohen & Steers Realty: seeks to maximize total return through investment in real estate Cohen & Steers (REIT) securities. The Portfolio pursues its investment objective by investing, under normal Capital circumstances, at least 80% of its net assets in securities of real estate issuers. Under Management, normal circumstances, the Portfolio will invest substantially all of its assets in the equity Inc. securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MANAGED INDEX AST Sanford Bernstein Managed Index 500: will invest, under normal circumstances, at least 80% Sanford C. of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Bernstein & Co., Index (the "S&P(R)500 "). The Portfolio seeks to outperform the S&P 500 through stock LLC selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest primarily in the common stocks of companies included in the S&P 500. 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 fundamental quantitative criteria that are designed to indicate whether a particular stock will predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether the Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the proportion of the S&P 500 that the stock represents. In addition, the Sub-advisor also may determine that based on the quantitative criteria, certain equity securities that are not included in the S&P 500 should be held by the Portfolio. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GROWTH AND AST American Century Income & Growth: seeks capital growth with current income as a secondary American Century INCOME objective. The Portfolio invests primarily in common stocks that offer potential for capital Investment growth, and may, consistent with its investment objective, invest in stocks that offer Management, Inc. potential for current income. The Sub-advisor utilizes a quantitative management technique with a goal of building an equity portfolio that provides better returns than the S&P 500 Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GROWTH AND AST Alliance Growth and Income: seeks long-term growth of capital and income while attempting Alliance Capital INCOME to avoid excessive fluctuations in market value. The Portfolio normally will invest in common Management, L.P. stocks (and securities convertible into common stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GROWTH AND AST MFS Growth with Income: seeks long term growth of capital with a secondary objective to Massachusetts INCOME seek reasonable current income. Under normal market conditions, the Portfolio invests at Financial least 65% of its net assets in common stocks and related securities, such as preferred stocks, Services Company convertible securities and depositary receipts. The stocks in which the Portfolio invests generally will pay dividends. While the Portfolio may invest in companies of any size, the Portfolio generally focuses on companies with larger market capitalizations that the Sub-advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The Portfolio may invest up to 20% of its net assets in foreign securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- EQUITY INCOME AST INVESCO Capital Income (f/k/a AST INVESCO Equity Income): seeks capital growth and current INVESCO Funds income while following sound investment practices. The Portfolio seeks to achieve its Group, Inc. objective by investing in securities that are expected to produce relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular dividends. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- BALANCED AST DeAM Global Allocation: seeks a high level of total return by investing primarily in a Deutsche Asset diversified portfolio of mutual funds. The Portfolio seeks to achieve its investment Management, Inc. objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. The Portfolio is expected to be invested in at least six such Underlying Portfolios at any time. It is expected that the investment objectives of such AST Portfolios will be diversified. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCED AST American Century Strategic Balanced: seeks capital growth and current income. The American Century Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity Investment securities and the remainder in bonds and other fixed income securities. Both the Portfolio's Management, Inc. equity and fixed income investments will fluctuate in value. The equity securities will fluctuate depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fixed income investments will be affected primarily by rising or falling interest rates and the credit quality of the issuers. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- ASSET AST T. Rowe Price Asset Allocation: seeks a high level of total return by investing primarily T. Rowe Price ALLOCATION in a diversified portfolio of fixed income and equity securities. The Portfolio normally Associates, Inc. invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small and medium-sized companies with good growth prospects. The fixed income portion of the Portfolio will be allocated among investment grade securities, high yield or "junk" bonds, foreign high quality debt securities and cash reserves. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GLOBAL BOND AST T. Rowe Price Global Bond: seeks to provide high current income and capital growth by T. Rowe Price investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will International, invest at least 80% of its total assets in all types of high quality bonds including those Inc. issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- HIGH YIELD AST Federated High Yield: seeks high current income by investing primarily in a diversified Federated BOND portfolio of fixed income securities. The Portfolio will invest at least 80% of its assets in Investment fixed income securities rated BBB and below. These fixed income securities may include Counseling preferred stocks, convertible securities, bonds, debentures, notes, equipment lease certificates and equipment trust certificates. A fund that invests primarily in lower-rated fixed income securities will be subject to greater risk and share price fluctuation than a typical fixed income fund, and may be subject to an amount of risk that is comparable to or greater than many equity funds. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- BOND AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity for capital Lord, Abbett & appreciation to produce a high total return. To pursue its objective, the Portfolio will Co. LLC invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible in common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BOND AST DeAM Bond: seeks a high level of income, consistent with the preservation of capital. Deutsche Asset Under normal circumstances, the Portfolio invests at least 80% of its total assets in Management, Inc. intermediate-term U.S. Treasury, corporate, mortgage-backed and asset-backed, taxable municipal and tax-exempt municipal bonds. The Portfolio invests primarily in investment grade fixed income securities rated within the top three rating categories of a nationally recognized rating organization. Fixed income securities may be issued by U.S. and foreign corporations or entities including banks and various government entities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BOND AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of Pacific capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a three- to six-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BOND AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation Pacific of capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a one- to three-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MONEY MARKET AST Money Market: seeks high current income and maintain high levels of liquidity. The Wells Capital Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average Management, Inc. maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- EMERGING Montgomery Variable Series - Emerging Markets: seeks long-term capital appreciation, under Gartmore Global MARKETS normal conditions by investing at least 80% of its total assets in stocks of companies of any Asset Management size based in the world's developing economies. Under normal market conditions, investments Trust/Gartmore are maintained in at least six countries at all times and no more than 35% of total assets in Global Partners any single one of them. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- EQUITY INCOME WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income. Wells Fargo Funds The Portfolio pursues its objective primarily by investing in the common stocks of large, Management, LLC domestic companies with above-average return potential based on current market valuations and above-average dividend income. Under normal market conditions, the Portfolio invests at least 80% of its total assets in income producing equity securities and in issues of companies with market capitalizations of $3 billion or more. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- STRATEGIC OR Rydex Variable Trust - Nova: seeks to provide investment results that match the performance of Rydex Global TACTICAL a specific benchmark on a daily basis. The Portfolio's current benchmark is 150% of the Advisors ALLOCA-TION performance of the S&P 500(R)Index (the "underlying index"). If the Portfolio meets its (f/k/a PADCO objective, the value of the Portfolio's shares will tend to increase on a daily basis by 150% Advisors II, of the value of any increase in the underlying index. When the value of the underlying index Inc.) declines, the value of the Portfolio's shares should also decrease on a daily basis by 150% of the value of any decrease in the underlying index (e.g., if the underlying index goes down by 5%, the value of the Portfolio's shares should go down by 7.5% on that day). Unlike a traditional index fund, as its primary investment strategy, the Portfolio invests to a significant extent in leveraged instruments, such as swap agreements, futures contracts and options on securities, futures contracts, and stock indices, as well as equity securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- STRATEGIC OR Rydex Variable Trust - Ursa: seeks to provide investment results that will inversely correlate Rydex Global TACTICAL to the performance of the S&P 500(R)Index (the "underlying index"). If the Portfolio meets its Advisors (f/k/a ALLOCA-TION objective, the value of the Portfolio's shares will tend to increase during times when the PADCO Advisors value of the underlying index is decreasing. When the value of the underlying index is II, Inc.) increasing, however, the value of the Portfolio's shares should decrease on a daily basis by an inversely proportionate amount (e.g., if the underlying index goes up by 5%, the value of the Portfolio's shares should go down by 5% on that day). Unlike a traditional index fund, the Portfolio's benchmark is to perform exactly opposite the underlying index, and the Ursa Fund will not own the securities included in the underlying index. Instead, as its primary investment strategy, the Portfolio invests to a significant extent in short sales of securities or futures contracts and in options on securities, futures contracts, and stock indices. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- STRATEGIC OR Rydex Variable Trust - OTC: seeks to provide investment results that correspond to a benchmark Rydex Global TACTICAL for over-the-counter securities. The Portfolio's current benchmark is the NASDAQ 100 Advisors ALLOCA-TION Index(R) (the "underlying index"). If the Portfolio meets its objective, the value of the (f/k/a PADCO Portfolio's shares should increase on a daily basis by the amount of any increase in the Advisors II, value of the underlying index. However, when the value of the underlying index declines, the Inc.) value of the Portfolio's shares should also decrease on a daily basis by the amount of the decrease in value of the underlying index. The Portfolio invests principally in securities of companies included in the underlying index. It also may invest in other instruments whose performance is expected to correspond to that of the underlying index, and may engage in futures and options transactions and enter into swap agreements. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MID-CAP EQUITY INVESCO Variable Investment Funds - Dynamics: seek long-term capital growth. The Portfolio INVESCO Funds invests at least 65% of its assets in common stocks of mid-sized companies. INVESCO defines Group, Inc. mid-sized companies as companies that are included in the Russell Midcap Growth Index at the time of purchase, or if not included in that Index, have market capitalizations of between $2.5 billion and $15 billion at the time of purchase. The core of the Portfolio's investments are in securities of established companies that are leaders in attractive growth markets with a history of strong returns. The remainder of the Portfolio is invested in securities of companies that show accelerating growth, driven by product cycles, favorable industry or sector conditions, and other factors that INVESCO believes will lead to rapid sales or earnings growth. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR INVESCO Variable Investment Funds - Technology: seeks capital growth. The Portfolio normally INVESCO Funds invests 80% of its net assets in the equity securities and equity-related instruments of Group, Inc. companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. Many of these products and services are subject to rapid obsolescence, which may lower market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR INVESCO Variable Investment Funds - Health Sciences: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instrumentsof companies that develop, produce or distribute products or services related to health care. These companies include, but are not limited to, medical equipment or supplies, pharmaceuticals, biotechnology and healthcare providers and service companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR INVESCO Variable Investment Funds - Financial Services: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks (regional and money-centers), insurance companies (life, property and casualty, and multiline), investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies) and suppliers to financial services companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR INVESCO Variable Investment Funds - Telecommunications: seeks capital growth and current INVESCO Funds income. The Portfolio normally invests 80% of its net assets in the equity securities and Group, Inc. equity-related instruments of companies engaged in the design, development, manufacture, distribution, or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes, but is not limited to, companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. Many of these products and services are subject to rapid obsolescence, which may lower the market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL Evergreen VA International Growth: seeks long-term capital growth and, secondarily, modest Evergreen EQUITY income. The Portfolio invests primarily in equity securities issued by established, quality, Investment non-U.S. companies located in countries with developed markets, but may purchase across all Management market capitalizations. The Portfolio normally invests at least 65% of its assets in Company, LLC securities of companies in at least three different countries (other than the U.S.) and may invest in emerging markets and in securities of companies in the formerly communist countries of Eastern Europe. The Portfolio invests in companies that are both growth opportunities and value opportunities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- GLOBAL EQUITY Evergreen VA Global Leaders: seeks to provide investors with long-term capital growth. The Evergreen Portfolio normally invests as least 65% of its assets in a diversified portfolio of U.S. and Investment non-U.S. equity securities of companies located in the world's major industrialized Management countries. The Portfolio will invest in no less than three countries, which may include the Company, U.S., but may invest more than 25% of its assets in one country. The Portfolio invests only LLC in the best 100 companies, which are selected by the Portfolio's manager based on as high return on equity, consistent earnings growth, established market presence and industries or sectors with significant growth prospects. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SMALL CAP Evergreen VA Special Equity: seeks capital growth. The Portfolio normally invests at least Evergreen EQUITY 80% of its assets in common stocks of small U.S. companies (i.e., companies whose market Investment capitalizations fall within the range of the Russell 2000(R)Index, at the time of purchase). Management The remaining 20% of the Portfolio's assets may be represented by cash or invested in various Company, LLC cash equivalents. The Portfolio's manager selects stocks of companies which it believes have the potential for accelerated growth in earnings and price. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- MID-CAP EQUITY Evergreen VA Omega: seeks long-term capital growth. The Portfolio invests primarily in common Evergreen stocks and securities convertible into common stocks of U.S. companies across all market Investment capitalizations. The Portfolio's managers employ a growth style of equity management. Management "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated Company, LLC earnings ranging from steady to accelerated growth. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP Evergreen VA Capital Growth: seeks to provide long-term capital growth. The Portfolio invests Evergreen EQUITY primarily in common stocks. The Portfolio may also invest in preferred stocks, convertible Investment preferred stocks, convertible debentures, and any other class or type of security which the Management portfolio manager believes offers the potential for capital growth. In selecting investments, Company, the investment adviser attempts to identify securities it believes will provide capital growth LLC/ Pilgrim over the intermediate and long-term due to changes in the financial condition of issuers, Baxter & changes in financial conditions generally, or other factors. Associates, Ltd. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP EQUITY Evergreen VA Blue Chip: seeks capital growth with the potential for income. The Portfolio Evergreen normally invests at least 80% of its assets in "blue chip" stocks. Blue chip stocks are the Investment common stocks of well-established, large U.S. companies with a long history of performance, Management typically recognizable names representing a broad range of industries. The market Company, LLC capitalization of the stocks selected will be within the range tracked by the S&P 500 Index, at the time of purchase. The remaining 20% of the Portfolio's assets may be represented by cash or invested in other types of equity securities, various cash equivalents or represented by cash. The Portfolio's stock selection is based on a diversified style of equity management that allows it to invest in both growth- and value-oriented securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 INDEX Evergreen VA Equity Index: seeks investment results that achieve price and yield performance Evergreen similar to the Standards and Poor's 500 Composite Price Index ("S&P 500 Index")*. The Investment Portfolio invests substantially all of its total assets in equity securities that represent a Management composite of the S&P 500 Index. The S&P 500 is an unmanaged index of 500 common stocks chosen Company, LLC to reflect the industries of the U.S. economy and is often considered a proxy for the stock market in general. *"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by Evergreen Investment Management Company, LLC. 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. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- BALANCED Evergreen VA Foundation: seeks capital growth and current income. The Portfolio invests in a Evergreen combination of common stocks, preferred stocks and securities convertible or exchangeable for Investment common stocks of large U.S. companies (i.e., companies whose market capitalization falls Management within the range tracked by the Russell 1000(R)Index, at the time of purchase). Under normal Company, circumstances, the Portfolio will invest at least 25% of its assets in debt securities and the LLC remainder in equity securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL ProFund VP Europe 30: seeks daily investment results, before fees and expenses, that ProFund Advisors EQUITY correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 LLC Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL ProFund VP Asia 30: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors EQUITY to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created LLC by ProFund Advisors, is composed of 30 of the companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on the modified market capitalization method. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER-NATIONAL ProFund VP Japan: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors EQUITY the daily performance of the Nikkei 225 Stock Average. Since the Japanese markets are not LLC open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States. The Nikkei 225 Stock Average is a price-weighted index of 225 large, actively traded Japanese stocks traded on the Tokyo Stock Exchange. The Index is computed and distributed by the Nihon Keizai Shimbun. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Banks: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the Dow Jones U.S. Banks Sector Index. The Dow Jones U.S. Banks LLC Index measures the performance of the banking industry of the U.S. equity market. Component companies include all regional and major U.S. domiciled international banks, savings and loans, savings banks, thrifts, building associations and societies. Investment and merchant banks are excluded. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Basic Materials: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The LLC Dow Jones U.S. Basic materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. Component companies are involved in the production of aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Biotechnology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones LLC U.S. Biotechnology Index measures the performance of the biotechnology industry of the U.S. equity market. Component companies include those engaged in genetic research, and/or the marketing and development of recombinant DNA products. Makers of artificial blood and contract biotechnology researchers are also included in the Index. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Consumer Cyclical: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. The LLC Dow Jones U.S. Consumer Cyclical Sector Index measures the performance of the consumer cyclical economic sector of the U.S. equity market. Component companies include airlines, auto manufacturers, auto parts, tires, casinos, consumer electronics, recreational products and services, restaurants, lodging, toys, home construction, home furnishings and appliances, footwear, clothing and fabrics. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Consumer Non-Cyclical: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector LLC Index. The Dow Jones U.S. Consumer Non-Cyclical Sector Index measures the performance of the consumer non-cyclical economic sector of the U.S. equity market. Component companies include beverage companies, consumer service companies, durable and non-durable household product manufacturers, cosmetic companies, food products and agriculture and tobacco products. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Energy: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Energy Sector Index. The Dow Jones U.S. Energy LLC Sector Index measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Financial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. The Dow LLC Jones U.S. Financial Sector Index measures the performance of the financial services economic sector of the U.S. equity market. Component companies include regional banks, major U.S. domiciled international banks, full line, life, and property and casualty insurance companies, companies that invest, directly or indirectly in real estate, diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders, investment advisers and securities broker-dealers, investment banks, merchant banks, online brokers, publicly traded stock exchanges. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Healthcare: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. The Down LLC Jones U.S. healthcare Sector Index measures the performance of the healthcare economic sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Industrial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. The Dow LLC Jones U.S. Industrial Sector Index measures the performance of the industrial economic sector of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Internet: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Internet Index. The Dow Jones Composite LLC Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce - companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site; and Internet Services - companies that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Pharmaceuticals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Sector Index. The LLC Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry of the U.S. equity market. Component companies include the makers of prescription and over-the-counter drugs, such as aspirin, cold remedies, birth control pills, and vaccines, as well as companies engaged in contract drug research.. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Precious Metals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Philadelphia Stock Exchange Gold & Silver Sector LLC Index. The Philadelphia Stock Exchange Gold and Silver Sector Index measures the performance of the gold and silver mining industry of the global equity market. Component companies include companies involved in the mining and production of gold, silver, and other precious metals, precious stones and pearls. The Index does not include producers of commemorative medals and coins that are made of these metals. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Real Estate: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones LLC U.S. Real Estate Index measures the performance of the real estate industry of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings, housing developments and, real estate investment trusts ("REITs") that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Semiconductor: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones LLC U.S. Semiconductor Index measures the performance of the semiconductor industry of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as circuit boards and motherboards. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Technology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow LLC Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and internet services. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Telecommunications: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The LLC Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed line communications and wireless communications companies. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- SECTOR ProFund VP Utilities: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow LLC Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- THE PROFUND VP PORTFOLIOS DESCRIBED BELOW ARE AVAILABLE AS SUB-ACCOUNTS TO ALL ANNUITY OWNERS. EACH PORTFOLIO PURSUES AN INVESTMENT STRATEGY THAT SEEKS TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH A WIDELY FOLLOWED INDEX, INCREASE BY A SPECIFIED FACTOR RELATIVE TO THE INDEX, MATCH THE INVERSE OF THE INDEX OR THE INVERSE OF THE INDEX MULTIPLIED BY A SPECIFIED FACTOR. THE INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH POSITIVELY AND NEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE APPLICABLE INDEX. IT IS RECOMMENDED THAT ONLY THOSE ANNUITY OWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSET ALLOCATION STRATEGY INVEST IN THESE PORTFOLIOS. WE HAVE ARRANGED THE PORTFOLIOS BASED ON THE INDEX ON WHICH IT'S INVESTMENT STRATEGY IS BASED. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- The S&P 500 Index(R)is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization financial viability and public float. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 ProFund VP Bull: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the S&P 500(R)Index. LLC - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 ProFund VP Bear: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the inverse (opposite) of the daily performance of the S&P 500(R)Index. If ProFund VP Bear is LLC successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500(R)Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P 500 ProFund VP UltraBull (f/k/a ProFund VP Bull Plus): seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of the S&P 500(R)Index. If LLC the ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(R)Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times the daily performance of the S&P 500(R)Index - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- The NASDAQ-100 Index(R)is a market capitalization weighted index that includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NASDAQ 100 ProFund VP OTC: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the NASDAQ-100 Index(R). "OTC" in the name of ProFund VP OTC reflers LLC to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NASDAQ 100 ProFund VP Short OTC: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index(R). If LLC ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index(R)when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NASDAQ 100 ProFund VP UltraOTC: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to twice (200%) the daily performance of the NASDAQ-100 Index(R). If ProFund VP UltraOTC is LLC successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- The S&P MidCap 400 Index(R)is a widely used measure of mid-sized company U.S. stock market performance. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization, financial viability and public float. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P MIDCAP 400 ProFund VP Mid-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Value Index(R). The S&P LLC MidCap400/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P MIDCAP 400 ProFund VP Mid-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Growth Index(R). The S&P LLC MidCap 400/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year.. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P MIDCAP 400 ProFund VP UltraMid-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the S&P MidCap 400 Index(R). If ProFund VP LLC UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- The S&P SmallCap 600 Index(R)consists of 600 domestic stocks chosen for market size, liquidity, and industry group representation. The Index comprises stocks from the industrial, utility, financial, and transportation sectors. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P SMALLCAP ProFund VP Small-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors 600 correspond to the daily performance of the S&P SmallCap 600/Barra Value Index(R). The S&P LLC SmallCap 600/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to emply a price-to-book value calculation whereby the market capitalization of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The ndex is rebalanced twice per year. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- S&P SMALLCAP ProFund VP Small-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors 600 correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index(R). The S&P LLC SmallCap 600/Barra Growth Index(R)is designed to differentitate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization-of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- The Russell 2000 Index(R)measures the performance of the 2,000 small companies in the Russell 3000 Index(R)representing approximately 8% of the total market capitalization of the Russell 3000 Index(R), which in turn represents approximately 98% of the investable U.S. equity market. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- RUSSELL 2000 ProFund VP UltraSmall-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the Russell 2000(R)Index. If ProFund VP LLC UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- U.S. GOV'T ProFund VP U.S. Government Plus: seeks daily investment results, before fees and expenses, ProFund Advisors BOND that correspond to one and one-quarter times (125%) the daily price movement of the most LLC recently issued 30-year U.S. Treasury Bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- U.S. GOV'T ProFund VP Rising Rates Opportunity: seeks daily investment results, before fees and expenses, ProFund Advisors BOND that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price LLC movement of the most recently issued Long Bond. In accordance with its stated objective, the net asset value of ProFund VP rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ----------------------------------------------------------------------------------------------------------------------------------- Each portfolio of the First Defined Portfolio Fund LLC invests in the securities of a relatively few number of issuers or in a particular sector of the economy. Since the assets of each portfolio are invested in a limited number of issuers or a limited sector of the economy, the net asset value of the portfolio may be more susceptible to a single adverse economic, political or regulatory occurrence. Certain of the portfolios may also be subject to additional market risk due to their policy of investing based on an investment strategy and generally not buying or selling securities in response to market fluctuations. Each portfolio's relative lack of diversity and limited ongoing management may subject Owners to greater market risk than other portfolios. The stock selection date for each of the strategy Portfolios of the First Defined Portfolio Fund LLC is on or about December 31st of each year. The holdings for each strategy Portfolio will be adjusted annually on or about December 31st in accordance with the Portfolio's investment strategy. At that time, the percentage relationship among the shares of each issuer held by the Portfolio is established. Through the next one-year period that percentage will be maintained as closely as practicable when the Portfolio makes subsequent purchases and sales of the securities. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- LARGE CAP First Trust(R)10 Uncommon Values: seeks to provide above-average capital appreciation. The First Trust BLEND Portfolio seeks to achieve its objective by investing primarily in the ten common stocks Advisors L.P. selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- INTER- The Prudential Series Fund, Inc. - SP Jennison International Growth: seeks to provide Prudential NATIONAL long-term growth of capital. The Portfolio pursues its objective by investing in Investments LLC/ EQUITY equity-related securities of foreign issuers that the Sub-advisor believes will increase in Jennison value over a period of years. The Portfolio invests primarily in the common stock of large Associates and medium-sized foreign companies. Under normal circumstances, the Portfolio invests at LLC least 65% of its total assets in common stock of foreign companies operating or based in at least five different countries. The Portfolio looks primarily for stocks of companies whose earnings are growing at a faster rate than other companies and that have above-average growth in earnings and cash flow, improving profitability, strong balance sheets, management strength and strong market share for its products. The Portfolio also tries to buy such stocks at attractive prices in relation to their growth prospects. - -----------------------------------------------------------------------------------------------------------------------------------
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment Services, Incorporated. 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. The First Trust(R)10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(R)10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED INVESTMENT OPTIONS? We offer fixed investment options of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the rates that are currently being credited on Fixed Allocations. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-766-4530 to determine availability of Fixed Allocations in your state and for your annuity product. FEES AND CHARGES WHAT ARE THE CONTRACT FEES AND CHARGES? There is no Contingent Deferred Sales Charge applied if you surrender your Annuity or make a partial withdrawal. Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party investment advisory service will be subject to the twenty-transfer limit. However, all transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. Currently, the Annual Maintenance Fee is only deducted if your Account Value is less than $100,000 on the anniversary of the Issue Date or at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: Several states and some municipalities charge premium taxes or similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2%. We generally will deduct the amount of tax payable at the time the tax is imposed, but may also decide to deduct tax charges from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily against the average daily assets allocated to the Sub-accounts. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (1.50%) and the Administration Charge (0.15%). The total charge is equal to 1.65% on an annual basis. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits: If you elect to purchase the Guaranteed Return Option, we will deduct an additional charge on a daily basis from your Account Value allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. If you elect to purchase one or more optional death benefits, we will deduct the annual charge from your Account Value on the anniversary of your Annuity's Issue Date. Under certain circumstances, we may deduct a pro-rata portion of the annual charge for any optional Death Benefit. The charge for each optional benefit is deducted in addition to the Insurance Charge due to the increased insurance risk associated with the optional benefits. Please refer to the section entitled "Death Benefit" for a description of the charge for each Optional Death Benefit. Please refer to the section entitled "Managing Your Account Value - Do you offer programs designed to guarantee a "return of premium" at a future date?" for a description of the charge for the Guaranteed Return Option. WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS? We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. These fees are deducted daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by Underlying Funds". WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? In certain states a tax is due if and when you exercise your right to receive periodic annuity payments. The amount payable will depend on the applicable jurisdiction and on the annuity payment option you select. If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will continue to be subject to an insurance charge. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce the portion of the Insurance Charge attributed to the charge covering administrative costs. PURCHASING YOUR ANNUITY WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $15,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $15,000 in total Purchase Payments. Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: There is no age restriction to purchase the Annuity. However, the basic Death Benefit provides greater protection for persons under age 85. There is no Contingent Deferred Sales Charge deducted upon surrender or partial withdrawal. However, if you take a distribution prior to age 591/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. Owner, Annuitant and Beneficiary Designations: On your Application, we will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. |X| Owner: The Owner(s) holds all rights under the Annuity. You may name more than one Owner in which case all ownership rights are held jointly. However, this Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." |X| Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. |X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. MANAGING YOUR ANNUITY MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us 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: |X| 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; |X| a new Annuitant subsequent to the Annuity Date; |X| for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and |X| a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity, and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity, during the applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account Value to the AST Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to allow for delivery of your Annuity. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic purchase payment program. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "American Skandia's Systematic Investment Plan." Purchase Payments made through bank drafting may only be allocated to the variable investment options when applied. Bank drafting allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $15,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $15,000. MANAGING YOUR ACCOUNT VALUE HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. In those states where we are required to return your Purchase Payment if you exercise your right to return the Annuity, we initially allocate all amounts that you choose to allocate to the variable investment options to the AST Money Market Sub-account. At the end of the right to cancel period we will reallocate your Account Value according to your most recent allocation instructions. Where permitted by law, we will allocate your Purchase Payments according to your initial instructions, without temporarily allocating to the AST Money Market Sub-account. To do this, we will ask that you execute our form called a "return waiver" that authorizes us to allocate your Purchase Payment to your chosen Sub-accounts immediately. If you submit the "return waiver" and then decide to return your Annuity during the right to cancel period, you will receive your current Account Value which may be more or less than your initial Purchase Payment (see "May I Return the Annuity if I Change my Mind?"). Subsequent Purchase Payments: We will allocate any additional Purchase Payments you make according to your current allocation instructions. If any rebalancing or asset allocation programs are in effect, the allocation should conform with such a program. We assume that your current allocation instructions are valid for subsequent Purchase Payments until you make a change to those allocations or request new allocations when you submit a new Purchase Payment. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment restrictions. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year, including transfers made as part of any rebalancing, market timing, asset allocation or similar program which you have authorized. Transfers made as part of a dollar cost averaging program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. 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: (a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by one or more of the Portfolios that the purchase or redemption of shares must be restricted because of excessive trading or a specific transfer or group of transfers is deemed to have a detrimental effect on the share prices of affected Portfolios. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. Under such a circumstance, we will process transfers according to our rules then in effect and provide notice if the transfer request was denied. If a transfer request is denied, a new transfer request may be required. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount each month from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. Dollar Cost Averaging allows you to invest regularly each month, regardless of the current unit value (or price) of the Sub-account(s) you invest in. This enables you to purchase more units when the market price is low and fewer units when the market price is high. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. We do not deduct a charge for participating in a Dollar Cost Averaging program. You must have a minimum Account Value of at least $10,000 to enroll in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: |X| You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. |X| You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. |X| Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced quarterly, semi-annually, or annually. On the appropriate date, your variable investment options are rebalanced to the allocation percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. If you request a transfer from or into any variable investment option participating in the automatic rebalancing program, we will assume that you wish to change your rebalancing percentages as well, and will automatically adjust the rebalancing percentages in accordance with the transfer unless we receive alternate instructions from you. You must have a minimum Account Value of at least $10,000 to enroll in automatic rebalancing. All rebalancing transfers made on the same day as part of an automatic rebalancing program are considered as one transfer when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, at least as of a specific date in the future. You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 5.33%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.594948 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $59,495 will be allocated to the Fixed Allocation and the remaining Account Value ($41,505) will be allocated to the variable investment options. Assuming that you do not make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. Guaranteed Return Option (GRO)SM We also offer a seven-year program where we monitor your Account Value daily and systematically transfer amounts between Fixed Allocations and the variable investment options you choose. American Skandia guarantees that at the end of the seventh (7th) year from commencement of the program (or any program restart date), you will receive no less than your Account Value on the date you elected to participate in the program ("commencement value"). On the program maturity date, if your Account Value is below the commencement value, American Skandia will apply additional amounts to your Annuity so that it is equal to commencement value or your Account Value on the date you elect to restart the program duration. Any amounts added to your Annuity will be applied to the AST Money Market Sub-account, unless you provide us with alternative instructions. We will notify you of any amounts added to your Annuity under the program. We do not consider amounts added to your Annuity to be "investment in the contract" for income tax purposes. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts. With the Guaranteed Return Option, your Annuity is able to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. NOTE: If a significant amount of your Account Value is systematically transferred to Fixed Allocations during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the Sub-accounts if there is a subsequent market recovery. Each business day we monitor the performance of your Account Value to determine whether it is greater than, equal to or below our "reallocation trigger", described below. Based on the performance of the Sub-accounts in which you choose to allocate your Account Value relative to the reallocation trigger, we may transfer some or all of your Account Value to or from a Fixed Allocation. You have complete discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to restrict certain Portfolios if you participate in the program. |X| Account Value greater than or equal to reallocation trigger: Your Account Value in the variable investment options remains allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation, those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations. A Market Value Adjustment will apply. |X| Account Value below reallocation trigger: A portion of your Account Value in the variable investment options is transferred to a new Fixed Allocation. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation will have a Guarantee Period equal to the remaining duration in the Guaranteed Return Option. The Account Value applied to the new Fixed Allocation will be credited with the fixed interest rate then being applied to a new Fixed Allocation of the next higher yearly duration. The Account Value will remain invested in the Fixed Allocation until the maturity date of the program unless, at an earlier date, your Account Value is at or above the reallocation trigger and amounts can be transferred to the variable investment options (as described above) while maintaining the guarantee protection under the program. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Any change to the allocation mechanism and/or the reallocation trigger will only apply to programs that begin after the change is effective. Program Termination The Guaranteed Return Option will terminate on its maturity date. You can elect to participate in a new Guaranteed Return Option or re-allocate your Account Value at that time. Upon termination, any Account Value allocated to the Fixed Allocations will be transferred to the AST Money Market Sub-account, unless you provide us with alternative instructions. Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: [X] You may terminate the Guaranteed Return Option at any time. American Skandia does not provide any guarantees upon termination of the program. [X] Withdrawals from your Annuity while the program is in effect will reduce the guaranteed amount under the program in proportion to your Account Value at the time of the withdrawal. Withdrawals will be subject to all other provisions of the Annuity, including any Market Value Adjustment that would apply. [X] Additional Purchase Payments applied to the Annuity while the program is in effect will only increase the amount guaranteed; however, all or a portion of any additional Purchase Payments may be allocated to the Fixed Allocations. [X] Annuity Owners cannot transfer Account Value to or from a Fixed Allocation while participating in the program and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. [X] Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. [X] Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. [X] The Guaranteed Return Option will terminate: (a) upon the death of the Owner or the Annuitant (in an entity owned contract); and (b) as of the date Account Value is applied to begin annuity payments. [X] You can elect to restart the seven (7) year program duration on any anniversary of the Issue Date of the Annuity. The Account Value on the date the restart is effective will become the new commencement value. You can only elect the program once per Annuity Year. Charges under the Program We deduct a charge equal to 0.25% per year to participate in the Guaranteed Return Option. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date of the program is less than the amount guaranteed; and (b) administration of the program. Effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between May 1, 2001 and November 15, 2002 and subsequent to November 19, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 18, 2002 will be subject to the charge method described above. MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT? Yes. You may authorize your investment professional to direct the allocation of your Account Value and to request financial transactions between investment options while you are living, subject to our rules. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your investment professional if you fail to inform us that such person's authority has been revoked. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. These investment professionals may be firms or persons who also are appointed by us as authorized sellers of the Annuity. However, we do not offer advice about how to allocate your Account Value under any circumstance. Any investment professionals you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such investment professionals make, any market timing or asset allocation programs they choose to follow or any specific transfers they make on your behalf. We may require investment professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) on American Skandia. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED INVESTMENT OPTIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period". Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-766-4530. A Guarantee Period for a Fixed Allocation begins: [X] when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; [X] upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or [X] when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. |X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. |X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. |X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: |X| On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity Date is December 31, 2005). |X| The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the Option-adjusted Spread is 5.50% (I = 5.50%). |X| You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3) years, therefore 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. ACCESS TO ACCOUNT VALUE WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through Partial Withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. There is no Contingent Deferred Sales Charge applied upon surrender or partial withdrawal. However, if you surrender your Annuity, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations being withdrawn or surrendered. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. We call this a "Partial Withdrawal." The amount that you may withdraw will equal your Surrender Value as of the date we process the withdrawal request. There is no Contingent Deferred Sales Charge applied if you surrender your Annuity or make a partial withdrawal. After any Partial Withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal request as a request to fully surrender your Annuity. The minimum Partial Withdrawal you may request is $100. We may apply a Market Value Adjustment to any Fixed Allocations. Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Account Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100, we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 1/2if you elect to receive distributions as a series of "substantially equal periodic payments". We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum that applies to Systematic Withdrawals does not apply to Minimum Distributions. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 6 Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? If you have not provided us with your Annuity Date or annuity payment option in writing, then: |X| the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and |X| the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments We offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first annuity payment. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. |X| Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. |X| Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. |X| Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. DEATH BENEFIT WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." Basic Death Benefit The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers two different optional Death Benefits. Either benefit can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. The basic Death Benefit depends on the decedent's age on the date of death: If death occurs prior to the decedent's age 85: The Death Benefit is the greater of: |X| The sum of all Purchase Payments less the sum of all proportional withdrawals; and |X| The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations. If death occurs after the decedent's age 85 or older: The Death Benefit is your Account Value. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for the purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Between January 17, 2002 and November 15, 2002, in those jurisdictions where we received regulatory approval, American Skandia offered the following optional Death Benefits. For Annuity Owners who purchased either of these Optional Death Benefits during the applicable period, the optional Death Benefits will be calculated as described below. These optional Death Benefits were only offered and must have been elected at the time you purchased your Annuity. You can purchase either of two optional Death Benefits with your Annuity to provide an enhanced level of protection for your beneficiaries. NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. The Enhanced Beneficiary Protection Optional Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each prior withdrawal represented when withdrawn. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. See Appendix C for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Guaranteed Minimum Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. |X| A Proportional Reduction is a reduction to the value being measured caused by a withdrawal, equaling the percentage of the withdrawal as compared to the Account Value as of the date of the withdrawal. For example, if your Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will reduce both your Anniversary Value and the amount determined by Purchase Payments increasing at the appropriate interest rate by 20%. Calculation of Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. See Appendix C for examples of how the Guaranteed Minimum Death Benefit is calculated. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only). If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed: |X| as a lump sum amount at any time within five (5) years of the date of death; or |X| as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary - Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. Any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity. See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. IRA Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. |X| If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. |X| If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2." Upon election of this IRA Beneficiary Continuation option: |X| the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. |X| the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. |X| the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner. NOTE: The Sub-accounts offered under the IRA Beneficiary Continuation option may be limited. |X| no additional Purchase Payments can be applied to the Annuity. |X| the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. |X| the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time. |X| upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. |X| all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the IRA Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including either optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. VALUING YOUR INVESTMENT HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. When determining the Account Value on any day other than a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is equal to your Account Value minus the Annual Maintenance Fee and the charge for any optional benefits. The Surrender Value will also include any Market Value Adjustment that may apply. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day other than its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next business day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: |X| trading on the NYSE is restricted; |X| an emergency exists making redemption or valuation of securities held in the separate account impractical; or |X| the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) days after we receive all of our requirements to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) days, we are required to return the Purchase Payment to you at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment with satisfactory allocation instructions. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on Valuation Day prior to the scheduled transaction date. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Death Benefits: Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). You cannot request a transaction involving the purchase, redemption or transfer of Units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefit: If you terminate the Guaranteed Return Option program, we will no longer deduct the charge we apply to purchase the optional benefit. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge, but not the charge for the optional program that you terminated. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge. TAX CONSIDERATIONS WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY? Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a professional tax advisor for tax advice as to your particular situation. HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED? The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I, subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the Separate Accounts with respect to the Annuities. IN GENERAL, HOW ARE ANNUITIES TAXED? Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on: 1. whether the Annuity is used by: |X| a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment under the Code (for purposes of this discussion, a "Qualified Contract"); or |X| an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and 2. whether the Owner is: |X| an individual person or persons; or |X| an entity including a corporation, trust or partnership. Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation. Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity for Federal tax purposes may not be subject to income tax as a result of this provision. HOW ARE DISTRIBUTIONS TAXED? Distributions from an Annuity are taxed as ordinary income and not as capital gains. Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross income. |X| "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate value of all "related contracts" (discussed below). |X| "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous distributions or portions of such distributions from such "related contracts" that were 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, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the contract" for a Qualified Contract will be considered zero for tax reporting purposes. Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable annuity payments. When 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 may be allowed as a deduction on the decedent's final income tax return. Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract (Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This penalty does not apply to certain distributions, including: |X| Distributions made on or after the taxpayer has attained age 591/2; |X| Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant; |X| Distributions attributable to the taxpayer's becoming disabled within the meaning of Code section 72(m)(7); |X| Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and the taxpayer's designated beneficiary; |X| Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982; |X| Payments under an immediate annuity as defined in the Code; |X| Distributions under a qualified funding asset under Code Section 130(d); or |X| 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. Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the contracts will be added together to determine the proper taxation of a distribution from any one contract described under the section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your own tax advisor on this matter. Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or disability. American Skandia does not currently support a section 72(q) program. Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the 10% penalty described above under "Penalty Tax on Distributions" 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 a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed more than one year prior to the annuity starting date 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. Special rules in relation to tax-free exchanges under Section 1035: 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 purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity payments will be considered to come: |X| First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity; |X| Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including income on such original purchase payments after the exchange); |X| Then, from any remaining "income on the contract"; and |X| Lastly, from the amount of any "investment in the contract" made after August 13, 1982. Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14, 1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such an exchange. Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible for non-recognition treatment under Section 1035 of the Code. We will continue to report a partial surrender of a life insurance policy as subject to current taxation to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such a transaction on the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified endowment contract. Special Considerations for Purchasers of the Enhanced Beneficiary Protection Optional Death Benefit: As of the date of this Prospectus, it is our understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected to report them as such. WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries below of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of tax-qualified retirement plans. Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Certain states do not conform to the pension provisions included in EGTRRA. We recommend that you consult with your tax advisor to determine the status of your state's statutes as they relate to EGTRRA and your tax qualified retirement plan. Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations on the amount that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific organizations specified in Section 501(c)(3) for the benefit of their employees. 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 also apply. 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. Individual Retirement Arrangements or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified retirement plans and maintain the tax-deferred status of these amounts. Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However, distributions from a Roth IRA are free from Federal income taxes and are not subject to 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 1/2or 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 Federal income and penalty taxes. 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 or another qualified plan, 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. SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be deductible to the employer. HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED? Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does not apply when the distribution: |X| is part of a properly executed transfer to another IRA or another eligible qualified account; |X| 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); |X| is part of a series 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; |X| is subsequent to a separation from service after the taxpayer attains age 55*; |X| does not exceed the employee's allowable deduction in that tax year for medical care; |X| is made to an alternate payee pursuant to a qualified domestic relations order*; |X| is made pursuant to an IRS levy; |X| is made to pay qualified acquisition costs for a first time home purchase (IRA only); |X| is made to pay qualified higher education expenses (IRA only); and |X| is not more than the cost of your medical insurance (IRA only). The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available. Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of: |X| the calendar year in which the individual attains age 70 1/2; or |X| the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement option is not available to IRAs. The IRS has released Treasury regulations containing new Minimum Distribution rules. For Minimum Distributions required in 2003 and later, individuals are required to use the rules under the 2002 Final Regulations. The 2002 Final Regulations contain a provision which could increase the amount of minimum distributions required for certain individuals. Under the 2002 Final Regulations, individuals are required to include in their annuity contract value the actuarial value of any other benefits that will be provided under the annuity. We and other annuity providers are currently seeking clarification of this new rule. You should consult your tax adviser to determine the impact of this rule on your Minimum Distributions. Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to utilize the actual life expectancies of the participant and the spouse. In most cases, the beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the designated Beneficiary may generally take Minimum Distributions over his/her life expectancy or in a lump sum. If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on the amount that was not properly distributed. Because of the many recent changes to the Minimum Distribution rules, we strongly encourage you to consult with your tax advisor for more detailed information. GENERAL TAX CONSIDERATIONS 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). If the diversification requirements under the Code are not met and the annuity is not treated as an annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations prescribe the diversification requirements for variable annuity contracts. We expect the underlying mutual fund portfolios to comply with the terms of these regulations. 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. 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, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20% withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20% withholding: |X| any portion of a distribution paid as a Minimum Distribution; |X| direct transfers to the trustee of another retirement plan; |X| distributions from an individual retirement account or individual retirement annuity; |X| 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; |X| distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code; and |X| certain other distributions where automatic 20% withholding may not apply. 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 is treated as a distribution subject to taxation under the distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and 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 as Qualified Contracts, 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 someone other than the spouse of the owner (or former spouse incident to a divorce) is treated, for income tax purposes, as a distribution. 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 $1.1 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. We will deduct from your Annuity or from any applicable payment treated as a direct skip any amount of tax we are required to pay. Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. GENERAL INFORMATION HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. Any errors or corrections on transactions for your Annuity must be reported to us at our Office as soon as possible 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 30 days from the date you receive the confirmation. For transactions that are first confirmed on the quarterly statement, we assume all transactions are accurate unless you notify us within 30 days from the date you receive the quarterly statement. All transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 30-day period. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) both fixed and variable immediate adjustable annuities; and (d) a single premium variable life insurance policy that is registered with the SEC. On December 20, 2002, Skandia Insurance Company Ltd. (publ), an insurance company organized under the laws of the Kingdom of Sweden ("Skandia"), and on that date, the ultimate parent company of American Skandia, announced that it and Skandia U.S. Inc. had entered into a definitive Stock Purchase Agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"). Under the terms of the Stock Purchase Agreement, Prudential Financial will acquire Skandia U.S. Inc., a Delaware corporation, from Skandia. Skandia U.S. Inc. is the sole shareholder of ASI, which is the parent company of American Skandia. The transaction is expected to close during the second quarter of 2003. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, following the closing of the acquisition, Prudential Financial will exercise significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B will be consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which will subsequently be renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B will have multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B will have no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with independent broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration. Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Compensation is paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of the firm. Compensation may be payable based on a percentage of Purchase Payments made, up to a maximum of 2.0%. Ongoing compensation of up to 1.00% per year of the Account Value is also payable. We may also provide compensation for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. In addition, firms may receive separate compensation or reimbursement for, among other things, training of sales personnel, marketing or other services they provide to us or our affiliates. We or ASM may enter into compensation arrangements with certain firms. These arrangements will not be offered to all firms and the terms of such arrangements may differ between firms. Any such compensation will be paid by us or ASM and will not result in any additional charge to you. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or other compensation. Advertising: We may advertise certain information regarding the performance of the investment options. Details on how we calculate performance for the Sub-accounts are found in the Statement of Additional Information. This 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 receive the beneficial tax treatment given to annuities under the Code. We may advertise the performance of the Portfolios in the form of "Standard" and "Non-standard" Total Returns calculated for each Sub-account. "Standard Total Return" figures assume a hypothetical initial investment of $1,000 allocated to a Sub-account during the most recent one, five and ten year periods (or since the inception date that the Portfolio has been offered as a Sub-account, if less). "Standard Total Return" figures assume that the applicable Insurance Charge and the Annual Maintenance Fee are deducted and that the Annuity is surrendered at the end of the applicable period, meaning that any Contingent Deferred Sales Charge that would apply upon surrender is also deducted. Since the Annuity does not deduct a Contingent Deferred Sales Charge upon surrender, no such charge is deducted when calculating Standard Total Returns. "Non-standard Total Return" figures include any performance figures that do not meet the SEC's rules for Standard Total Returns. Non-standard Total Returns are calculated in the same manner as standardized returns except that the figures may not reflect all fees and charges. Non-standard Total Returns may also assume that the Annual Maintenance Fee does not apply due to the average Account Value being greater than $100,000, where the charge is waived. Standard and Non-standard Total Returns will not reflect the additional asset-based charges that are deducted when you elect any optional benefits. The additional cost associated with any optional benefits you elected will reduce your performance. Non-standard Total Returns must be accompanied by Standard Total Returns. Some of the underlying 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 Portfolios have been in existence, but the Sub-accounts have not. Such hypothetical historical performance is calculated using the same assumptions employed in calculating actual performance since inception of the Sub-accounts. Hypothetical historical performance of the underlying Portfolios prior to the existence of the Sub-accounts may only be presented as Non-standard Total Returns. We may advertise the performance of money market-type Sub-accounts using a measure of the "current and effective yield". The current yield of a money market-type Sub-account is calculated based upon the previous seven-day period ending on the date of calculation. The effective yield of a money market-type Sub-account reflects the reinvestment of net income earned daily on the assets of such a Sub-account. The current and effective yields reflect the Insurance Charge and the charge for any optional benefits (if applicable) deducted against the Sub-account. In a low interest rate environment, yields for money market-type Sub-accounts, after deduction of the Insurance Charge, and the charge for any optional benefits (if applicable) may be negative even though the yield (before deducting for such charges) is positive. Current and effective yield information will fluctuate. This information may not provide a basis for comparisons with deposits in banks or other institutions which pay a fixed yield over a stated period of time, or with investment companies which do not serve as underlying mutual funds for variable annuities and/or do not have additional asset-based charges deducted for the insurance protection provided by the Annuity. Performance information on the Sub-accounts is based on past performance only and is not an indication or representation of future performance. Performance of the Sub-accounts is not fixed. Actual performance will depend on the type, quality and, for some of the Sub-accounts, the maturities of the investments held by the underlying mutual funds or portfolios and upon prevailing market conditions and the response of the underlying mutual funds to such conditions. Actual performance will also depend on changes in the expenses of the underlying mutual funds or portfolios. Such changes are reflected, in turn, in the Sub-accounts which invest in such underlying mutual fund or portfolio. In addition, the total amount of asset-based charges assessed against each Sub-account will affect performance. The information we may advertise regarding the Fixed Allocations may include the then current interest rates we are crediting to new Fixed Allocations. Information on current rates will be as of the date specified in such advertisement. Rates will be included in advertisements to the extent permitted by law. Given that the actual rates applicable to any Fixed Allocation are as of the date of any such Fixed Allocation's Guarantee Period begins, the rate credited to a Fixed Allocation may be more or less than those quoted in an advertisement. 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 NASDAQ 100, 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. AVAILABLE INFORMATION A Statement of Additional Information is available from us without charge upon your request. This Prospectus is part of the registration statement we filed with the 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 exhibits thereto at the SEC's public reference facilities at the above address, Room 1024, and at the SEC's Regional Offices, The Woolworth Building, 233 Broadway, New York, NY and 175 W. Jackson Boulevard, Suite 900, Chicago, IL. These documents, as well as documents incorporated by reference, may also be obtained through the SEC's Internet Website (http://www.sec.gov) for this registration statement as well as for other registrants that file electronically with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2002 previously filed by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus. We will 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 will do so upon receipt of your written or oral request. HOW TO CONTACT US You can contact us by: |X| calling Skandia's Telephone Automated Response System (STARS) at 1-800-766-4530. |X| writing to us via regular mail at American Skandia - Variable Annuities, P.O. Box 7040, Bridgeport, Connecticut 06601-7040 OR for express mail American Skandia - Variable Annuities, One Corporate Drive, Shelton, Connecticut 06484. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. |X| sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com |X| accessing information about your Annuity through our Internet Website at www.americanskandia.com You can obtain account information through Skandia's Telephone Automated Response System (STARS) and at www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or an investment professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN through STARS and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia |X| American Skandia Life Assurance Corporation |X| American Skandia Life Assurance Corporation Variable Account B |X| American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor - American Skandia Marketing, Incorporated How Performance Data is Calculated |X| Current and Effective Yield |X| Total Return How the Unit Price is Determined Additional Information on Fixed Allocations |X| How We Calculate the Market Value Adjustment General Information |X| Voting Rights |X| Modification |X| Deferral of Transactions |X| Misstatement of Age or Sex |X| Ending the Offer Annuitization Independent Auditors Legal Experts Financial Statements APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA SELECTED FINANCIAL DATA (dollars in thousands) The following table summarizes information with respect to the operations of the Company:
For the Year Ended December 31, ------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------ ------------ STATEMENTS OF INCOME DATA Revenues: Annuity and life insurance $ 370,004 $ 388,696 $ 424,578 $ 289,989 $ 186,211 charges and fees /(a) (b)/ Fee income /(b)/ 97,650 111,196 130,610 83,243 50,839 Net investment income 19,632 20,126 18,595 11,477 11,130 Net realized capital (losses) gains and other revenues /(e)/ (7,438) 2,698 4,195 3,688 1,360 Total revenues $ 479,848 $ 522,716 $ 577,978 $ 388,397 $ 249,540 Benefits and Expenses: Annuity and life insurance $ 3,391 $ 1,955 $ 751 $ 612 $ 558 benefits Change in annuity and life insurance policy reserves /(c)/ 2,741 (39,898) 49,339 (671) 1,053 Guaranteed minimum death benefit claims, net of 23,256 20,370 2,618 4,785 - hedge /(b)/ Return credited to contract 5,196 5,796 8,463 (1,639) (8,930) owners Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 125,434 86,306 Amortization of deferred acquisition costs /(b) (d)/ 510,059 224,047 184,616 83,861 86,628 Interest expense 14,544 73,424 85,998 69,502 41,004 Total benefits and expenses $ 747,915 $ 482,449 $ 482,382 $ 281,884 $ 206,619 Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 $ 30,344 $ 8,154 Net (loss) income $ (165,257) $ 33,099 $ 64,817 $ 76,169 $ 34,767 STATEMENTS OF FINANCIAL CONDITION DATA Total assets /(b)/ $ 23,708,585 $ 28,009,782 $ 31,702,705 $ 30,881,579 $ 18,848,273 Future fees payable to parent $ 708,249 $ 799,472 $ 934,410 $ 576,034 $ 368,978 Surplus notes $ 110,000 $ 144,000 $ 159,000 $ 179,000 $ 193,000 Shareholder's equity $ 683,061 $ 577,668 $ 496,911 $ 359,434 $ 250,417
/a./ On annuity and life insurance sales of $3,472,044, $3,834,167, $8,216,167, $6,862,968, and $4,159,662, during the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively, with contract owner assets under management of $21,894,636, $26,017,847, $29,751,822, $29,396,693, and $17,854,761, as of December 31, 2002, 2001, 2000, 1999, and 1998, respectively. /b./ These items are significantly impacted by equity market volatility. /c./ For the year ended December 31, 2000, change in annuity and life insurance policy reserves reflected increases to those reserves for guaranteed minimum death benefit ("GMDB") exposure. For the year ended December 31, 2001, the Company changed certain of its assumptions related to its GMDB exposure resulting in a benefit to operations. See Results of Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for a further discussion. /d./ During the year ended December 31, 2002, the Company recorded an acceleration of amortization of $206,000 against the deferred acquisition cost asset. See the MD&A for a further discussion. /e./ Net realized capital (losses) gains and other revenues include $5,845 of net realized capital losses on sales of securities during 2002 and an other than temporary impairment charge of $3,769 recorded during 2002 on the Company's equity securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands) Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data. Results of Operations Annuity and life insurance sales were $3,472,044, $3,834,167 and $8,216,167, in 2002, 2001 and 2000, respectively. The decrease in sales in 2002 and 2001 was primarily the result of the general decline in sales in the industry, attributed in large part to the continued uncertainty in the equity markets. In addition, the Company believes uncertainty regarding its future ownership has adversely impacted sales, primarily in the latter part of 2002. The Company announced, in the first quarter of 2002, its intention to focus on the growth of its core variable annuity business. Average assets under management totaled $23,637,559 in 2002, $26,792,877 in 2001 and $31,581,902 in 2000, representing a decrease of 12% and 15% in 2002 and 2001, respectively, due primarily to weak equity markets. The decrease in annuity and life insurance charges and fees and fee income before surrender charge income and reinsurance was consistent with the decline in assets under management. Surrender charge income increased in 2002 as compared to 2001. This was caused by higher lapses when compared to the applicable prior year periods, and was primarily attributable, the Company believes, to concerns by contract holders, rating agencies and the Company's distribution channels, surrounding the uncertainty in the equity markets and its impact on variable annuity companies generally and, prior to the announcement of the Acquisition, uncertainty concerning the Company's future (See Liquidity and Capital Resources for rating agency actions). Net realized capital losses in 2002 were primarily from $9,593 of losses on sales and $3,769 of other-than-temporary impairments of mutual fund investments that are held in support of a deferred compensation program for certain of the Company's employees. The deferred compensation program losses were offset by net gains of $3,746 during 2002 on sales of fixed maturities. Included in those net gains on sales of fixed maturities for 2002, was a realized loss of approximately $1,236 on the sale of a WorldCom, Inc. bond. The net capital gains in 2001 related primarily to sales of fixed maturity investments, were partially offset by losses on securities in the fixed maturity portfolio. The most significant loss was $2,636 related to Enron securities. In addition net realized capital losses of $3,534 in 2001 were incurred due to sales of mutual fund holdings in support of the Company's non-qualified deferred compensation program. The change in annuity and life insurance policy reserves includes changes in reserves related to annuity contracts with mortality risks. During 2001, the Company's Guaranteed Minimum Death Benefit ("GMDB") reserve decreased $43,984, as the result of an update of certain reserve assumptions as to risks inherent in the benefit. Previous assumptions had been based on statutory valuation principles as an approximation for U.S. GAAP. In addition, future mortality rates were lowered in 2001 to reflect favorable past experience. However, offsetting the resulting increase in earnings and equity as a result of changes in the GMDB liability in 2001, assumptions related to GMDB claim costs were also updated in the calculation of the deferred acquisition cost asset, resulting in additional amortization of this asset. The Company uses derivative instruments, which consist of equity option contracts for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. GMDB claims, net of hedge, consist of GMDB claims offset by the mark to market and realized capital gain/loss results of the Company's option contracts. During 2002 and 2001, the fluctuations in GMDB claims, net of hedge, were driven by an increase in hedge related benefits of $19,776 and $14,646, respectively. Hedge related benefits were partially offset by increases in GMDB claims of $22,662 and $32,398 during 2002 and 2001, respectively. Return credited to contract owners consists primarily of net investment results from the Company's fixed, market value adjusted, separate account investment option and changes in the Company's experience rated reinsurance receivables. The decrease in 2002 was primarily due to increased net investment results on the Company's fixed, market value adjusted, separate account investment option. As the equity markets decline, movement from variable investment options to fixed investment options, primarily due to one of the Company's product features, has increased the assets invested in the fixed separate account investment option. Included in 2002 net investment results is $9,849 of realized and unrealized losses on certain securities, of which $5,427 related to WorldCom, Inc. bonds. The increase in net investment results was partially offset by a decrease in experience rated reinsurance receivables in 2002 due to unfavorable experience on certain blocks of variable annuity business. In 2001, return credited to contract owners decreased primarily due to favorable experience on certain blocks of variable annuity contracts increasing the experience rated reinsurance receivable. Partially offsetting the 2001 decrease is net investment losses of $1,662 related to Enron securities. Underwriting, acquisition and other insurance expenses for 2002, 2001 and 2000 were as follows: 2002 2001 2000 ----------- ----------- ----------- Commissions and purchase credits $ 287,612 $ 248,187 $ 430,743 General operating expenses 145,438 157,704 214,957 Acquisition costs deferred (244,322) (209,136) (495,103) Underwriting, acquisition and other insurance expenses $ 188,728 $ 196,755 $ 150,597 New products launched, as well as a larger proportion of sales of products with higher commissions as compared to 2001 led to an increase in commissions and purchase credits during 2002. Lower sales and asset levels led to a decrease in commissions and purchase credits during 2001. Partially offsetting this decline in 2001, the company launched a commission promotion program that increased commissions as a percentage of new sales. Commission promotions in 2002 were approximately equivalent as compared to 2001. General operating expenses decreased during 2002 and 2001 as a result of lower sales-based compensation, as well as expense reduction programs implemented during 2001 and continued strong expense management in 2002. Variable compensation and long-term incentive plan expenses have decreased due to the slowdown in sales and the decline in the equity markets. Amortization of deferred acquisition costs increased over the past two years, in general, due to the further depressed equity markets in 2002 and 2001, thereby decreasing expectations of future gross profits and actual gross profits from asset based fees and increased expected and actual claim costs associated with minimum death benefit guarantees. During 2002, the Company also performed a recoverability study and an analysis of its short-term assumptions of future gross profits and determined those assumptions of future profits to be excessive. This analysis resulted in a current year acceleration of amortization of $206,000. During 2002 and 2001, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization. See Note 2 of Notes to Consolidated Financial Statements for a further discussion on amortization of deferred acquisition costs. Interest expense decreased during 2002 primarily due to lower interest expense related to the future fees payable to ASI liability (See Note 8). Interest expense on these obligations is driven by the cash flows from the underlying annuity contracts acting as collateral. Due to the depressed asset values of those annuity contracts driven by the decline in the equity markets, the cash flows, and therefore the interest expense, decreased from prior year levels. Interest expense decreased in 2001 as a result of a reduction in borrowing. The Company's income tax (benefit) expense varies directly with increases or decreases in (loss) income from operations. The effective income tax rate varied from the corporate rate of 35% due primarily to the deduction for dividends received. Total assets and liabilities decreased $4,301,197 and $4,406,590, respectively, from December 31, 2001. This change resulted primarily from the declining equity markets. Significant Accounting Policies Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. If the Company's long-term fund growth rate assumption was 7% instead of 8%, the Company's deferred acquisition cost asset at December 31, 2002 would be reduced by $26,273. Future Fees Payable to ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, historical mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability. The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management, that the present value of future payments to ASI would be $429,773. Deferred Taxes The Company evaluates the necessity of recording a valuation allowance against its deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, Income Taxes ("SFAS 109"). In performing this evaluation, the Company considers all available evidence in making the determination as to whether it is more likely than not that deferred tax assets are not realizable. For the Company, that evidence includes: cumulative U.S. GAAP pre-tax income in recent years past, whether or not operating losses have expired unused in the past, the length of remaining carryback or carryforward periods, and net taxable income or loss expectations in early future years. The net taxable income or loss projections are based on profit assumptions consistent with those used to amortize deferred acquisition costs (see above discussion on deferred acquisition costs). As of December 31, 2002, the Company has approximately $361,000 gross deferred tax assets related principally to net operating loss carryforwards that expire in 2016 and 2017 and insurance reserve differences. After considering the impact of gross reversing temporary liabilities of $323,000, the Company estimates that the Company will generate sufficient taxable income to fully utilize gross deferred tax assets within 2 years (prior to the expiration of the net operating losses). Liquidity and Capital Resources The Company's liquidity requirements have generally been met by cash from insurance operations, investment activities, borrowings from ASI, reinsurance, capital contributions and securitization transactions with ASI (see Note 8). The Company's cash from insurance operations is primarily comprised of fees generated off of assets under management, less commission expense on sales, sales and marketing expenses and other operating expenses. Fund performance driven by the equity markets directly impact assets under management and therefore, the fees the Company can generate off of those assets. During 2002 and 2001, assets under management declined consistent with the equity market declines resulting in reductions in fee revenues. In addition, the equity markets impact sales of variable annuities. As sales have declined in a declining equity market, non-promotional commission expense declined, however, in order to boost sales levels, the Company has offered various sales promotions increasing the use of cash for commission expense. In order to fund the cash strain generated from acquisition costs on current sales, the Company has relied on cash generated from its direct insurance operations as well as reinsurance and securitization transactions. The Company has used modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving , the future fees generated from that book of business. These reinsurance agreements also mitigate the recoverability risk associated with the payment of up-front commissions and other acquisition costs. Similarly, the Company has entered into securitization transactions whereby the Company issues to ASI, in exchange for cash, the right to receive future fees generated off of a specific book of business. On April 12, 2002, the Company entered into a new securitization transaction with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was approximately $101,713. As of December 31, 2002, 2001 and 2000, the Company had short-term borrowings of $10,000, $10,000 and $10,000, respectively, and had long-term surplus notes liabilities of $110,000, $144,000 and $159,000, respectively. During 2002, the Company borrowed $263,091 and paid back $263,091 related to short-term borrowing. During 2002 and 2001, the Company received permission from the State of Connecticut Insurance Department to pay down surplus notes in the amount of $34,000 and $15,000, respectively. See Notes 14 and 15 of Notes to Consolidated Financial Statements for more information on surplus notes and short-term borrowing, respectively. As of December 31, 2002, 2001 and 2000, shareholder's equity totaled $683,061, $577,668 and $496,911, respectively. The Company received capital contributions of $259,720 and $48,000 from ASI during 2002 and 2001, respectively. Of this, $4,520 and $2,500, respectively, was used to support its investment in Skandia Vida. Net (loss) income of ($165,257) and $33,099, for the years ended December 31, 2002 and 2001, respectively, contributed to the respective changes in shareholder's equity in 2002 and 2001. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies that may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest rate risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. During 2002, all of the major rating agencies reviewed the U.S. life insurance sector, including the Company. Based on these reviews the rating agencies have evolving concerns surrounding the risk profile of variable annuity companies due to their significant exposure to equity market performance. This exposure has resulted, and may continue to result, in earnings volatility. Based on the reviews made during 2002, the following ratings actions took place: On May 8, 2002, Fitch Ratings downgraded the Company's "insurer financial strength" rating to A+ from AA- with a "stable" outlook. On September 19, 2002, Fitch Ratings lowered the Company's "insurer financial strength" rating to A- from A+ with an "evolving" outlook. On September 27, 2002, A.M. Best Co. lowered the Company's "financial strength" rating to A- from A with negative implications. On October 16, 2002, Standard and Poor's lowered the Company's "counter party credit" and "financial strength" ratings to A- from A+ with a negative outlook and removed the Company from Credit Watch. Subsequent to the announcement of the Acquisition, Standard and Poor's placed the Company on CreditWatch with positive implications. Effects of Inflation The rate of inflation has not had a significant effect on the Company's financial statements. Outlook The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in order to gain market share and improve profitability in an increasingly competitive market. The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks, securities firms and insurance companies. This legislative change has created opportunities for continued consolidation in the financial services industry and increased competition as large companies offer a wide array of financial products and services. Various other legislative initiatives could impact the Company such as pension reform and capital gains and estate tax changes. These include the proposed exclusion from tax for corporate dividends, potential changes to the deductibility of dividends received from the Company's separate accounts and newly proposed tax-advantaged savings programs. Additional pension reform may change current tax deferral rules and allow increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less attractive to consumers, which could adversely impact the Company. In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts. Forward Looking Information The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements, so long as those statements are identified as forward-looking, and the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions. Certain information contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations is forward-looking within the meaning of the 1995 Act or Securities and Exchange Commission rules. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of significant uncertainties and results may differ materially from these statements. You should not put undue reliance on these forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and describes strategies used to manage these risks, and includes "forward-looking statements" that involve risk and uncertainties. The discussion is limited to financial instruments subject to market risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed. Interest Rate Risk Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2002, 91% of assets held under management by the Company are in non-guaranteed Separate Accounts for which the Company's interest rate and equity market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 9% of assets, the interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. At December 31, 2002, the Company held fixed maturity investments in its general account that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities, fixed supplementary contracts, the fixed investment option offered in its variable life insurance contracts, and in support of the Company's target solvency capital. The Company has a conservative investment philosophy with regard to these investments. All investments are investment grade corporate securities, government agency or U.S. government securities. The Company's deferred annuity products offer a fixed investment option which subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract owner. Guarantee period options available range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the guarantee period subjects the contract owner to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of failing to maintain the asset/liability matching program with respect to duration and convexity. Liabilities held in the Company's guaranteed separate account as of December 31, 2002 totaled $1,828,048. Assets, primarily fixed income investments, supporting those liabilities had a fair value of $1,828,048. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2002. The analysis showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities and the corresponding assets of approximately $69,150 and $68,500, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2001, showed a net increase in interest-sensitive liabilities and the corresponding assets of approximately $39,800 and $39,900, respectively. Equity Market Exposure The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by the Company. Various fees and charges earned are substantially derived as a percentage of the market value of assets under management. In a market decline, this income will be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 2002, sustained throughout 2003, would result in an approximate drop in related mortality and expense charges and annual fee income of $36,350. Another equity market risk exposure of the Company relates to guaranteed minimum death benefit payments. Declines in equity markets and, correspondingly, the performance of the funds underlying the Company's products, increase exposure to guaranteed minimum death benefit payments. As discussed in Note 2D of the consolidated financial statements, the Company uses derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the implementation of this program, the Company used reinsurance to mitigate this risk. The Company has a portfolio of equity investments consisting of mutual funds, which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline; however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the equity markets and consumer behavior, actual results may vary from those predicted by the Company's models. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Report of Independent Auditors To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. /s/ Ernst & Young LLP Hartford, Connecticut February 3, 2003 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Financial Condition (in thousands, except share data)
As of December 31, ---------------------------------- 2002 2001 --------------- ---------------- ASSETS Investments: Fixed maturities - at fair value (amortized cost of $379,422 and $356,882, respectively) $ 398,601 $ 362,831 Equity securities - at fair value (amortized cost of $52,017 and $49,886, respectively) 51,769 45,083 Derivative instruments - at fair value 10,370 5,525 Policy loans 7,559 6,559 Total investments 468,299 419,998 Cash and cash equivalents 51,339 - Accrued investment income 4,196 4,737 Deferred acquisition costs 1,117,544 1,383,281 Reinsurance receivable 5,447 7,733 Receivable from affiliates 3,961 3,283 Income tax receivable - 30,537 Deferred income taxes 38,206 - Fixed assets, at depreciated cost (accumulated depreciation of $7,555 and $4,266, respectively) 12,132 17,752 Other assets 101,848 103,912 Separate account assets 21,905,613 26,038,549 Total assets $ 23,708,585 $ 28,009,782 LIABILITIES AND SHAREHOLDER'S EQUITY Liabilities: Reserves for future policy and contract benefits $ 149,349 $ 91,126 Accounts payable and accrued expenses 133,543 192,952 Income tax payable 6,547 - Deferred income taxes - 54,980 Payable to affiliates 2,223 101,035 Future fees payable to American Skandia, Inc. ("ASI") 708,249 799,472 Short-term borrowing 10,000 10,000 Surplus notes 110,000 144,000 Separate account liabilities 21,905,613 26,038,549 Total liabilities 23,025,524 27,432,114 Commitments and contingent liabilities (Note 18) Shareholder's equity: Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional paid-in capital 595,049 335,329 Retained earnings 73,821 239,078 Accumulated other comprehensive income 11,691 761 Total shareholder's equity 683,061 577,668 Total liabilities and shareholder's equity $ 23,708,585 $ 28,009,782
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Income (in thousands)
For the Years Ended December 31, ------------------------------------------ 2002 2001 2000 ------------ ------------ ------------ REVENUES Annuity and life insurance charges and fees $ 370,004 $ 388,696 $ 424,578 Fee income 97,650 111,196 130,610 Net investment income 19,632 20,126 18,595 Net realized capital (losses) gains (9,614) 928 (688) Other 2,176 1,770 4,883 Total revenues 479,848 522,716 577,978 EXPENSES Benefits: Annuity and life insurance benefits 3,391 1,955 751 Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 Guaranteed minimum death benefit claims, net of hedge 23,256 20,370 2,618 Return credited to contract owners 5,196 5,796 8,463 Total benefits 34,584 (11,777) 61,171 Other: Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 Amortization of deferred acquisition costs 510,059 224,047 184,616 Interest expense 14,544 73,424 85,998 713,331 494,226 421,211 Total benefits and expenses 747,915 482,449 482,382 (Loss) income from operations before income tax (benefit) expense (268,067) 40,267 95,596 Income tax (benefit) expense (102,810) 7,168 30,779 Net (loss) income $ (165,257) $ 33,099 $ 64,817
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Shareholder's Equity (in thousands)
Accumulated Other Comprehensive Income ------------------------------------------------------------------------------ -------------- Additional Foreign Unrealized Common Paid in Retained Currency Gains Stock Capital Earnings Translation (Losses) Total ------------ ------------ --------------- ------------- ------------ -------------- As of December 31, 1999 $ 2,500 $ 215,879 $ 141,162 $ 148 $ (255) $ 359,434 Net income 64,817 64,817 Other comprehensive income: Unrealized capital gains 843 843 Reclassification adjustment for realized losses included in net realized capital (losses) gains 433 433 Foreign currency translation (66) (66) Other comprehensive income 1,210 Comprehensive income 66,027 Capital contributions 71,450 71,450 As of December 31, 2000 2,500 287,329 205,979 82 1,021 496,911 Net income 33,099 33,099 Other comprehensive loss: Unrealized capital losses (261) (261) Reclassification adjustment for realized gains included in net realized capital (losses) gains (14) (14) Foreign currency translation (67) (67) Other comprehensive loss (342) Comprehensive income 32,757 Capital contributions 48,000 48,000 As of December 31, 2001 2,500 335,329 239,078 15 746 577,668 Net loss (165,257) (165,257) Other comprehensive income: Unrealized capital gains 10,434 10,434 Reclassification adjustment for realized losses included in net realized capital (losses) gains 1,126 1,126 Foreign currency translation (630) (630) Other comprehensive income 10,930 Comprehensive loss (154,327) Capital contributions 259,720 259,720 As of December 31, 2002 $ 2,500 $ 595,049 $ 73,821 $ (615) $ 12,306 $ 683,061
Unrealized capital gains (losses) is shown net of tax expense (benefit) of $5,618, ($140) and $454 for 2002, 2001 and 2000, respectively. Reclassification adjustment for realized losses (gains) included in net realized capital (losses) gains is shown net of tax expense (benefit) of $606, ($8) and $233 for 2002, 2001 and 2000, respectively. Foreign currency translation is shown net of tax benefit of $339, $36 and $36 for 2002, 2001 and 2000, respectively. See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Cash Flows (in thousands)
For the Years Ended December 31, -------------------------------------------- 2002 2001 2000 ------------ ------------ ------------ Cash flow from operating activities: Net (loss) income $ (165,257) $ 33,099 $ 64,817 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Amortization and depreciation 21,649 13,374 5,758 Deferral of acquisition costs (244,322) (209,136) (495,103) Amortization of deferred acquisition costs 510,059 224,047 184,616 Deferred tax (benefit) expense (99,071) 46,215 60,023 Change in unrealized (gains) losses on derivatives (5,149) 2,902 (2,936) Increase (decrease) in policy reserves 3,293 (38,742) 50,892 (Decrease) increase in net receivable/payable to affiliates (99,490) 103,496 (72,063) Change in net income tax receivable/payable 37,084 4,083 (58,888) Increase in other assets (9,546) (12,105) (65,119) Decrease (increase) in accrued investment income 541 472 (1,155) Decrease (increase) in reinsurance receivable 2,286 (1,849) 420 (Decrease) increase in accounts payable and accrued expenses (59,409) 55,912 (21,550) Net realized capital (gains) losses on derivatives (26,654) (14,929) 5,554 Net realized capital losses (gains) on investments 9,616 (928) 688 Net cash (used in) provided by operating activities (124,370) 205,911 (344,046) Cash flow from investing activities: Purchase of fixed maturity investments (388,053) (462,820) (380,737) Proceeds from sale and maturity of fixed maturity investments 367,263 390,816 303,736 Purchase of derivatives (61,998) (103,533) (14,781) Proceeds from exercise or sale of derivative instruments 88,956 113,051 5,936 Purchase of shares in equity securities and dividend reinvestments (49,713) (55,430) (18,136) Proceeds from sale of shares in equity securities 34,220 25,228 8,345 Purchase of fixed assets (2,423) (10,773) (7,348) Increase in policy loans (1,000) (2,813) (2,476) Net cash used in investing activities (12,748) (106,274) (105,461) Cash flow from financing activities: Capital contribution 259,720 48,000 71,450 Pay down of surplus notes (34,000) (15,000) (20,000) (Decrease) increase in future fees payable to ASI, net (91,223) (137,355) 358,376 Deposits to contract owner accounts 808,209 59,681 172,441 Withdrawals from contract owner accounts (164,964) (130,476) (102,603) Change in contract owner accounts, net of investment earnings (588,315) 62,875 (55,468) Net cash provided by (used in) financing activities 189,427 (112,275) 424,196 Net increase (decrease) in cash and cash equivalents 52,309 (12,638) (25,311) Change in foreign currency translation (970) (103) (101) Cash and cash equivalents at beginning of period - 12,741 38,153 Cash and cash equivalents at end of period $ 51,339 $ - $ 12,741 Income taxes (received) paid $ (40,823) $ (43,130) $ 29,644 Interest paid $ 23,967 $ 56,831 $ 114,394
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 2002 (dollars in thousands) 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation ("ASLAC" or the "Company"), with its principal offices in Shelton, Connecticut, is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). On December 19, 2002, Skandia Insurance Company Ltd. (publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company, entered into a definitive purchase agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"), whereby Prudential Financial will acquire the Company and certain of its affiliates (the "Acquisition"). Consummation of the transaction is subject to various closing conditions, including regulatory approvals and approval of certain matters by the board of directors and shareholders of the mutual funds advised by American Skandia Investment Services, Inc. ("ASISI"), a subsidiary of ASI. The transaction is expected to close during the second quarter of 2003. The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues term and variable universal life insurance and variable deferred and immediate annuities for individuals and groups in the United States of America and its territories. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida"), which is a life insurance company domiciled in Mexico. Skandia Vida had total shareholder's equity of $5,023 and $4,179 as of December 31, 2002, and 2001, respectively. Skandia Vida has generated net losses of $2,706, $2,619 and $2,540 in 2002, 2001 and 2000, respectively. As part of the Acquisition, it is expected that the Company will sell its ownership interest in Skandia Vida to SICL. The Company has filed for required regulatory approvals from the State of Connecticut and Mexico related to the sale of Skandia Vida. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Skandia Vida has been consolidated in these financial statements. Intercompany transactions and balances between the Company and Skandia Vida have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Standard Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"). Derivative instruments held by the Company consist of equity put option contracts utilized to AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) manage the economic risks associated with guaranteed minimum death benefits ("GMDB"). These derivative instruments are carried at fair value. Realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements. Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption of EITF Issue 99-20 did not have a significant effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards. No. 142 "Accounting for Goodwill and Intangible Assets" ("SFAS 142"). Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The adoption of SFAS 142 did not have a significant impact on the Company's financial statements. C. Investments The Company has classified its fixed maturity investments as available-for-sale and, as such, they are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. The Company has classified its equity securities held in support of a deferred compensation plan (see Note 12) as available-for-sale. Such investments are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized capital gains and losses on disposal of investments are determined by the specific identification method. Other than temporary impairment charges are determined based on an analysis that is performed on a security by security basis and includes quantitative and qualitative factors. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Derivative Instruments The Company uses derivative instruments, which consist of equity put option contracts, for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases. Conversely, as the equity markets increase the Company's exposure to future GMDB claims decreases. The claims exposure is reduced by the market value effect of the option contracts purchased. Based on criteria described in SFAS 133, the Company's fair value hedges do not qualify as "effective" hedges and, therefore, hedge accounting may not be applied. Accordingly, the derivative investments are carried at fair value with changes in unrealized gains and losses being recorded in income as those changes occur. As such, both realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. As of December 31, 2002 and 2001, the accumulated difference between cost and market value on the Company's derivatives was an unrealized gain of $1,434 and an unrealized loss of $3,715, respectively. The amount of realized and unrealized gains (losses) on the Company's derivatives recorded during the years ended December 31, 2002, 2001 and 2000 was $31,803, $12,027 and ($2,619), respectively. E. Cash Equivalents The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity date, at acquisition, of three months or less to be cash equivalents. As of December 31, 2002, $50 of cash reflected on the Company's financial statements was restricted in compliance with regulatory requirements. F. State Insurance Licenses Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000 less accumulated amortization of $2,038 at December 31, 2002. Due to the adoption of SFAS 142, the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of December 31, 2002, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore, no impairment charge was required. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. Income Taxes The Company is included in the consolidated federal income tax return filed by Skandia U.S. Inc. and its U.S. subsidiaries. In accordance with the tax sharing agreement, the federal income tax provision is computed on a separate return basis as adjusted for consolidated items. Pursuant to the terms of this agreement, the Company has the right to recover the value of losses utilized by the consolidated group in the year of utilization. To the extent the Company generates income in future years, the Company is entitled to offset future taxes on that income through the application of its loss carry forward generated in the current year. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. H. Recognition of Revenue and Contract Benefits Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance fees are earned ratably throughout the year. Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Fee income from mutual fund organizations is recognized when assessed against assets under management. Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income reduced by amounts credited to the contract holder for interest. This net spread is included in return credited to contract owners on the consolidated statements of income. Benefit reserves for these contracts represent the account value of the contracts plus a AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) market value adjustment, and are included in the general account reserve for future policy and contract benefits to the extent in excess of the separate account assets, typically for the market value adjustment at the reporting date. Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income, reported as a component of return credited to contract owners. Revenues for fixed 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 applicable actuarial standards with assumed interest rates that vary by issue year and are included in the general account reserve for future policyand contract benefits. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 2002 and 2001. Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are being deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits, from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Details of deferred acquisition costs and related amortization for the years ended December 31, are as follows:
2002 2001 2000 ------------ ------------ ------------ Balance at beginning of year $ 1,383,281 $ 1,398,192 $ 1,087,705 Acquisition costs deferred during the year 244,322 209,136 495,103 Acquisition costs amortized during the year (510,059) (224,047) (184,616) Balance at end of year $ 1,117,544 $ 1,383,281 $ 1,398,192
As asset growth rates, during 2002 and 2001, have been far below the Company's long-term assumption, the adjustment to the short-term asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study, management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206,000. Throughout the year, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72,000. J. Reinsurance The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. At December 31, 2002 and 2001, in accordance with the provisions of the modified coinsurance agreements, the Company accrued approximately $5,447 and $7,733, respectively, for amounts receivable from favorable reinsurance experience on certain blocks of variable annuity business. K. Translation of Foreign Currency The financial position and results of operations of Skandia Vida are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at each year-end. Statements of income and changes in 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 reported as a component of other comprehensive income. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) L. Separate Accounts Assets and liabilities in separate accounts are included as separate captions in the consolidated statements of financial condition. Separate account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through ASISI, utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contract holder has the option of directing funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of a contract is borne by the contract holder. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated with the investments that support these fixed options. Included in Separate Account liabilities are reserves of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, relating to deferred annuity investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the Commissioners Annuity Reserve Valuation Method. Separate Account assets of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, consisting of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment income, accrued liabilities and amounts due to/from the General Account are held in support of these annuity obligations, pursuant to state regulation. Included in the general account, within Reserves for Future Policy and Contract Benefits, is the market value adjustment associated with the guaranteed, fixed rate investment options, assuming the market value adjustment at the reporting date. Net investment income (including net realized capital gains and losses) and interest credited to contract holders on separate account assets are not separately reflected in the Consolidated Statements of Income. M. Unearned Performance Credits The Company defers certain bonus credits applied to contract holder deposits. The credit is reported as a contract holder liability within separate account liabilities and the deferred expense is reported as a component of other assets. As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortizes the deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit is amortized in proportion to expected surrenders and mortality. As of December 31, 2002 and 2001, the unearned performance credit asset was $83,288 and $89,234, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Estimates The preparation of financial statements in conformity with U.S. GAAP 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 estimates of future policy lapses, investment returns and maintenance expenses. Actual results could differ from those estimates. 3. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of fixed maturities and investments in equity securities as of December 31, 2002 and 2001 are shown below. All securities held at December 31, 2002 and 2001 were publicly traded. Investments in fixed maturities as of December 31, 2002 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ---------- ----------- ---------- ----------- U.S. Government obligations $ 270,969 $ 15,658 $ (78) $ 286,549 Obligations of state and political subdivisions 253 9 (1) 261 Corporate securities 108,200 3,631 (40) 111,791 Totals $ 379,422 $ 19,298 $ (119) $ 398,601
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2002 are shown below. Actual maturities may differ from contractual maturities due to call or prepayment provisions. Amortized Cost Fair Value ------------ ------------ Due in one year or less $ 12,793 $ 12,884 Due after one through five years 165,574 171,830 Due after five through ten years 186,609 198,913 Due after ten years 14,446 14,974 Total $ 379,422 $ 398,601 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) Investments in fixed maturities as of December 31, 2001 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------ ------------ ------------ ------------ U.S. Government obligations $ 198,136 $ 2,869 $ (413) $ 200,592 Obligations of state and political subdivisions 252 8 - 260 Corporate securities 158,494 4,051 (566) 161,979 Totals $ 356,882 $ 6,928 $ (979) $ 362,831
Proceeds from sales of fixed maturities during 2002, 2001 and 2000 were $367,213, $386,816 and $302,632, respectively. Proceeds from maturities during 2002, 2001 and 2000 were $50, $4,000 and $1,104, respectively. The cost, gross unrealized gains/losses and fair value of investments in equity securities at December 31 are shown below: Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value ------------ ------------ ------------ ------------ 2002 $ 52,017 $ 136 $ (384) $ 51,769 2001 $ 49,886 $ 122 $ (4,925) $ 45,083 Net realized investment gains (losses), determined on a specific identification basis, were as follows for the years ended December 31: 2002 2001 2000 Fixed maturities: ---------- ---------- ---------- Gross gains $ 8,213 $ 8,849 $ 1,002 Gross losses (4,468) (4,387) (3,450) Investment in equity securities: Gross gains 90 658 1,913 Gross losses (13,451) (4,192) (153) Totals $ (9,616) $ 928 $ (688) During 2002, the Company determined that certain amounts of its investment in equity securities were other than temporarily impaired and, accordingly, recorded a loss of $3,769. As of December 31, 2002, the Company did not own any investments in fixed maturity securities whose carrying value exceeded 10% of the Company's equity. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) As of December 31, 2002, the following fixed maturities were restricted in compliance with regulatory requirements: Security Fair Value - ------------------------------------------- ------------ U.S. Treasury Note, 6.25%, February 2003 $ 4,345 U.S. Treasury Note, 3.00%, November 2003 183 Puerto Rico Commonwealth, 4.60%, July 2004 210 Puerto Rico Commonwealth, 4.875%, July 2023 52 4. 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 equity securities are based on quoted market prices. The fair value of derivative instruments is determined based on the current value of the underlying index. The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term nature of these investments. The carrying value of policy loans approximates fair value. Fair value of future fees payable to ASI are determined on a discounted cash flow basis, using best estimate assumptions of lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management. The carrying value of short-term borrowings (cost) approximates fair value due to the short-term nature of these liabilities. Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all accrued interest at the maturity date (see Note 14 for payment restrictions). AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 4. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The fair values and carrying values of financial instruments at December 31, 2002 and 2001 are as follows:
December 31, 2002 December 31, 2001 --------------------------------- --------------------------------- Fair Value Carrying Value Fair Value Carrying Value --------------- --------------- --------------- --------------- Assets Fixed Maturities $ 398,601 $ 398,601 $ 362,831 $ 362,831 Equity Securities 51,769 51,769 45,083 45,083 Derivative Instruments 10,370 10,370 5,525 5,525 Policy Loans 7,559 7,559 6,559 6,559 Liabilities Future Fees Payable to ASI 429,773 708,249 546,357 799,472 Short-term Borrowing 10,000 10,000 10,000 10,000 Surplus Notes and accrued interest of $29,230 and $25,829 in 2002 and 2001, respectively 140,777 139,230 174,454 169,829
5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31 were as follows:
2002 2001 2000 --------------- --------------- --------------- Fixed maturities $ 18,015 $ 18,788 $ 13,502 Cash and cash equivalents 1,116 909 5,209 Equity securities 809 622 99 Policy loans 403 244 97 Total investment income 20,343 20,563 18,907 Investment expenses (711) (437) (312) Net investment income $ 19,632 $ 20,126 $ 18,595
6. INCOME TAXES The significant components of income tax expense for the years ended December 31 were as follows:
2002 2001 2000 ------------ ------------ ------------ Current tax benefit $ (3,739) $ (39,047) $ (29,244) Deferred tax expense, excluding operating loss carryforwards 35,915 60,587 60,023 Deferred tax benefit for operating and capital loss carryforwards (134,986) (14,372) - Total income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (continued) Deferred tax assets (liabilities) include the following at December 31: 2002 2001 ----------- ----------- Deferred tax assets: GAAP to tax reserve differences $ 165,348 $ 241,503 Future fees payable to ASI 21,475 63,240 Deferred compensation 20,603 20,520 Net operating loss carry forward 147,360 14,372 Other 6,530 17,276 Total deferred tax assets 361,316 356,911 Deferred tax liabilities: Deferred acquisition costs, net (312,933) (404,758) Net unrealized gains on fixed maturity securities (6,713) (2,082) Other (3,464) (5,051) Total deferred tax liabilities (323,110) (411,891) Net deferred tax asset (liability) $ 38,206 $ (54,980) In accordance with SFAS 109, the Company has performed an analysis of its deferred tax assets to assess recoverability. Looking at a variety of items, most notably, the timing of the reversal of temporary items and future taxable income projections, the Company determined that no valuation allowance is needed. The income tax (benefit) 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:
2002 2001 2000 ------------ ------------ ------------ (Loss) income before taxes Domestic $ (265,361) $ 42,886 $ 98,136 Foreign (2,706) (2,619) (2,540) Total (268,067) 40,267 95,596 Income tax rate 35% 35% 35% Tax (benefit) expense at federal statutory income tax rate (93,823) 14,093 33,459 Tax effect of: Dividend received deduction (12,250) (8,400) (7,350) Losses of foreign subsidiary 947 917 889 Meals and entertainment 603 603 841 State income taxes - (62) (524) Federal provision to return differences 709 (177) 3,235 Other 1,004 194 229 Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779
The Company's net operating loss carry forwards, totaling approximately $421,029 (pre-tax) at December 31, 2002, will expire in 2016 and 2017. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. COST ALLOCATION AGREEMENTS WITH AFFILIATES Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company. ASLAC signed a written service agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice. The Company has also paid and charged operating costs to several of its affiliates. The total cost to the Company for these items was $8,177, $6,179 and $13,974 in 2002, 2001 and 2000, respectively. Income received for these items was approximately $13,052, $13,166 and $11,186 in 2002, 2001 and 2000, respectively. Allocated depreciation expense was $7,440, $8,764 and $9,073 in 2002, 2001 and 2000, respectively. Allocated lease expense was $5,808, $6,517 and $5,606 in 2002, 2001 and 2000, respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense, was $738, $30 and $0 in 2002, 2001 and 2000, respectively. Assuming that the written service agreement between ASLAC and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ----------- ----------- 2003 $ 4,847 $ 1,616 2004 5,275 1,773 2005 5,351 1,864 2006 5,328 1,940 2007 5,215 1,788 2008 and thereafter 19,629 7,380 Total $ 45,645 $ 16,361 Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this agreement, the expenses reimbursed were $8,255, $6,610 and $6,064 in 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, amounts receivable under this agreement were approximately $458 and $639, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, current mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability (see Note 4). On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was $101,713. Payments, representing fees and charges in the aggregate amount, of $186,810, $207,731 and $219,523 were made by the Company to ASI in 2002, 2001 and 2000, respectively. Related interest expense of $828, $59,873 and $70,667 has been included in the consolidated statements of income for 2002, 2001 and 2000, respectively. The Commissioner of the State of Connecticut has approved the transfer 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 restrict the payments due to ASI, into a restricted account, under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI (continued) The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present Transaction Date Date Period Rate Value - ----------- --------- -------------- ------------------ ------- --------- 1996-1 12/17/96 9/1/96 1/1/94 - 6/30/96 7.5% $ 50,221 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128 1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632 1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078 2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459 2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399 2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291 2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139 2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
Payments of future fees payable to ASI, according to original amortization schedules, as of December 31, 2002 are as follows: Year Amount - ---- ----------- 2003 $ 186,854 2004 171,093 2005 147,902 2006 117,761 2007 66,270 2008 18,369 Total $ 708,249 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company entered into an eleven year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for 2002 and 2001 was $2,583 and $1,602, respectively. Sub-lease rental income was $227 in 2002 and $0 in 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ----------- ----------- 2003 $ 1,913 $ 426 2004 1,982 455 2005 2,050 500 2006 2,050 533 2007 2,050 222 2008 and thereafter 8,789 0 Total $ 18,834 $ 2,136 10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $279,957 and $226,780 at December 31, 2002 and 2001, respectively. The Company incurred statutory basis net losses in 2002 of $192,474 due primarily to significant declines in the equity markets, increasing GMDB reserves calculated on a statutory basis. Statutory basis net losses for 2001 were $121,957, as compared to income of $11,550 in 2000. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. For 2003, no amounts may be distributed without prior approval. 11. STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory basis financial statements in accordance with accounting practices prescribed by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. The NAIC adopted the Codification of Statutory Accounting Principles (Codification) in March 1998. The effective date for codification was January 1, 2001. The Company's state of domicile, Connecticut, has adopted codification and the Company has made the necessary changes in its statutory accounting and reporting required for implementation. The overall impact of adopting codification in 2001 was a one-time, cumulative change in accounting benefit recorded directly in statutory surplus of $12,047. In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its statutory method of accounting for its AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 11. STATUTORY ACCOUNTING PRACTICES (continued) liability associated with securitized variable annuity fees. Under the new method of accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being equal to the Commissioners Annuity Reserve Valuation Method (CARVM) offset related to the securitized contracts. The impact of this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of approximately $20,215. In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40,511. Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5,935 of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus. Amortization expense for the year ended December 31, 2002 was $757. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of its affiliates. Expenses related to this program in 2002, 2001 and 2000 were $719, $2,738 and $3,734, respectively. Company contributions to this plan on behalf of the participants were $921, $2,549 and $4,255 in 2002, 2001 and 2000, respectively. The Company has a deferred compensation plan, which is available to the field marketing staff and certain other employees. Expenses related to this program in 2002, 2001 and 2000 were $3,522, $1,615 and $1,030, respectively. Company contributions to this plan on behalf of the participants were $5,271, $1,678 and $2,134 in 2002, 2001 and 2000, respectively. The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive officers and other personnel. The Company and certain affiliates also have a profit sharing program, which benefits all employees AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 12. EMPLOYEE BENEFITS (continued) below the officer level. These programs consist of multiple plans with new plans 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 programs. The accrued liability representing the value of these units was $7,083 and $13,645 as of December 31, 2002 and 2001, respectively. Expenses (income) related to these programs in 2002, 2001 and 2000, were $1,471, ($9,842) and $2,692, respectively. Payments under these programs were $8,033, $8,377 and $13,697 in 2002, 2001 and 2000, respectively. 13. FINANCIAL REINSURANCE The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, the future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating the financial condition and credit worthiness of reinsurers. The effect of reinsurance for the 2002, 2001 and 2000 was as follows:
Gross Ceded Net ----------- ----------- ----------- 2002 Annuity and life insurance charges and fees $ 406,272 $ (36,268) $ 370,004 Return credited to contract owners $ 5,221 $ (25) $ 5,196 Underwriting, acquisition and other insurance expenses (deferal of acquisition costs) $ 154,588 $ 34,140 $ 188,728 Amortization of deferred acquisition costs $ 542,945 $ (32,886) $ 510,059 2001 Annuity and life insurance charges and fees $ 430,914 $ (42,218) $ 388,696 Return credited to contract owners $ 5,704 $ 92 $ 5,796 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 163,677 $ 33,078 $ 196,755 Amortization of deferred acquisition costs $ 231,290 $ (7,243) $ 224,047 2000 Annuity and life insurance charges and fees $ 473,318 $ (48,740) $ 424,578 Return credited to contract owners $ 8,540 $ (77) $ 8,463 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 108,399 $ 42,198 $ 150,597 Amortization of deferred acquisition costs $ 205,174 $ (20,558) $ 184,616
In December 2000, the Company entered into a modified coinsurance agreement with SICL covering certain contracts issued since January 1996. The impact of this treaty to the AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 13. FINANCIAL REINSURANCE (continued) Company was pre-tax (loss) income of ($4,137), $8,394 and $23,341 in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, $675 and $1,137, respectively, was receivable from SICL under this agreement. 14. SURPLUS NOTES The Company has issued surplus notes to ASI in exchange for cash. Surplus notes outstanding as of December 31, 2002 and 2001, and interest expense for 2002, 2001 and 2000 were as follows:
Liability as of December 31, ------------------------------------------------------------------------------- Interest Expense For the Years ------------------------------------------------------------------------------- Interest Note Issue Date Rate 2002 2001 2002 2001 2000 - ------------------ ------------------------------------------------------------------------------- February 18, 1994 7.28% - - - - 732 March 28, 1994 7.90% - - - - 794 September 30, 1994 9.13% - - - 1,282 1,392 December 19, 1995 7.52% - 10,000 520 763 765 December 20, 1995 7.49% - 15,000 777 1,139 1,142 December 22, 1995 7.47% - 9,000 465 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,420 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 5,715 ------------------------------------------------------------------------------- Total $ 110,000 $144,000 $ 10,872 $ 12,976 $ 14,644 -------------------------------------------------------------------------------
On September 6, 2002, surplus notes for $10,000, dated December 19, 1995, $15,000, dated December 20, 1995, and $9,000, dated December 22, 1995, were repaid. On December 3, 2001, a surplus note, dated September 30, 1994, for $15,000 was repaid. On December 27, 2000, surplus notes for $10,000, dated February 18, 1994, and $10,000, dated March 28, 1994, were repaid. All surplus notes mature seven 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, 2002 and 2001, $29,230 and $25,829, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10,000 short-term loan payable to ASI at December 31, 2002 and 2001 as part of a revolving loan agreement. The loan had an interest rate of 1.97% and matured on January 13, 2003. The loan was subsequently rolled over with a new interest rate of 1.82% and a new maturity date of March 13, 2003. The loan was further extended to April 30, 2003 and a new interest rate of 1.71%. The total related interest expense to the Company was $271, $522 and $687 in 2002, 2001 and 2000, respectively. Accrued interest payable was $10 and $113 as of December 31, 2002 and 2001, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 15. SHORT-TERM BORROWING (continued) On January 3, 2002, the Company entered into a $150,000 credit facility with ASI. This credit facility terminates on December 31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant interest period. Interest expense related to these borrowings was $2,243 for the year ended December 31, 2002. As of December 31, 2002, no amount was outstanding under this credit facility. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners at market value or with market value adjustment. Separate account assets, which are carried at fair value, are adequate to pay such withdrawals, which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. 17. RESTRUCTURING CHARGES On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax severance benefits of $8,500 have been charged against 2001 operations related to these reductions. These charges have been reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of December 31, 2002 and 2001, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $12 and $4,104, respectively. 18. COMMITMENTS AND CONTINGENT LIABILITIES In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable annuities as funding vehicles for tax- qualified retirement accounts. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Southern District of New York on December 12, 2002, by Diane C. Donovan against the Company and certain of its affiliates (the "Donovan Complaint"). The Donovan Complaint seeks unspecified compensatory damages and injunctive relief from the Company and certain of its affiliates. The Donovan Complaint claims that the Company and certain of its affiliates violated federal securities laws in marketing variable annuities. This litigation is in the preliminary stages. The Company believes this action is without merit, and intends to vigorously defend against this action. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. COMMITMENTS AND CONTINGENT LIABILITIES (continued) As discussed previously, on December 19, 2002, SICL entered into a definitive purchase agreement (the "Purchase Agreement") to sell its ownership interest in the Company and certain affiliates to Prudential Financial for approximately $1.265 billion. The closing of this transaction, which is conditioned upon certain customary regulatory and other approvals and conditions, is expected in the second quarter of 2003. The purchase price that was agreed to between SICL and Prudential Financial was based on a September 30, 2002 valuation of the Company and certain affiliates. As a result, assuming the transaction closes, the economics of the Company's business from September 30, 2002 forward will inure to the benefit or detriment of Prudential Financial. Included in the Purchase Agreement, SICL has agreed to indemnify Prudential Financial for certain liabilities that may arise relating to periods prior to September 30, 2002. These liabilities generally include market conduct activities, as well as contract and regulatory compliance (referred to as "Covered Liabilities"). Related to the indemnification provisions contained in the Purchase Agreement, SICL has signed, for the benefit of the Company, an indemnity letter, effective December 19, 2002, to make the Company whole for certain Covered Liabilities that come to fruition during the period beginning December 19, 2002 and ending with the close of the transaction. This indemnification effectively transfers the risk associated with those Covered Liabilities from the Company to SICL concurrent with the signing of the definitive purchase agreement rather than waiting until the transaction closes. 19. SEGMENT REPORTING Assets under management and sales for products other than variable annuities have not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and the Company does not anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity business. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
Three Months Ended -------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ 2002 Premiums and other insurance revenues* $ 118,797 $ 126,614 $ 115,931 $ 108,488 Net investment income 4,965 4,714 5,128 4,825 Net realized capital losses (1,840) (1,584) (2,327) (3,863) Total revenues 121,922 129,744 118,732 109,450 Benefits and expenses* 112,759 160,721 323,529 150,906 Pre-tax net income (loss) 9,163 (30,977) (204,797) (41,456) Income tax expense (benefit) 1,703 (11,746) (72,754) (20,013) Net income (loss) $ 7,460 $ (19,231) $ (132,043) $ (21,443)
* For the quarters ended March 31, 2002 and June 30, 2002, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact.
Three Months Ended -------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ 2001 Premiums and other insurance revenues*** $ 130,885 $ 128,465 $ 122,708 $ 119,604 Net investment income** 5,381 4,997 5,006 4,742 Net realized capital gains (losses) 1,902 373 376 (1,723) Total revenues 138,168 133,835 128,090 122,623 Benefits and expenses** *** 122,729 110,444 123,307 125,969 Pre-tax net income (loss) 15,439 23,391 4,783 (3,346) Income tax expense (benefit) 4,034 7,451 (480) (3,837) Net income $ 11,405 $ 15,940 $ 5,263 $ 491
** For the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. *** For the quarters ended September 30, 2001 and December 31, 2001, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (continued)
Three Months Ended -------------------------------------------------------- March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ 2000 Premiums and other insurance revenues $ 137,040 $ 139,346 $ 147,819 $ 135,866 Net investment income**** 4,343 4,625 4,619 5,008 Net realized capital gains (losses) 729 (1,436) (858) 877 Total revenues 142,112 142,535 151,580 141,751 Benefits and expenses**** 107,893 122,382 137,843 114,264 Pre-tax net income 34,219 20,153 13,737 27,487 Income tax expense 10,038 5,225 3,167 12,349 Net income $ 24,181 $ 14,928 $ 10,570 $ 15,138
**** For the quarters ended March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. 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. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2003. Beginning November 18, 2002, multiple Unit Prices will be calculated for each Sub-account of Separate Account B to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for the optional benefit offered under this Annuity. The Unit Prices below reflect the daily charges for the optional benefit offered between November 18, 2002 and December 31, 2002 only. Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price $ 8.56 Number of Units 2,569,506 With One Optional Benefit Unit Price $ 9.95 Number of Units 90,759 - ------------------------------------------------- ----------- AST William Blair International Growth /2/(1997) With No Optional Benefits Unit Price $ 9.72 Number of Units 835,523 With One Optional Benefit Unit Price $ 9.72 Number of Units 78,368 - ------------------------------------------------- ----------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price $ 8.52 Number of Units 2,252,674 With One Optional Benefit Unit Price $ 9.69 Number of Units 116,123 - ------------------------------------------------- ----------- AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price $ 8.19 Number of Units 269,995 With One Optional Benefit Unit Price $ 9.79 Number of Units 22,770 - ------------------------------------------------- ----------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price $ 9.04 Number of Units 969,509 With One Optional Benefit Unit Price $ 9.87 Number of Units 32,306 - ------------------------------------------------- ----------- AST PBHG Small-Cap Growth /5/ (1994) With No Optional Benefits Unit Price $ 6.92 Number of Units 1,970,250 With One Optional Benefit Unit Price $ 9.48 Number of Units 47,261 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- AST DeAM Small-Cap Growth /6/ (1999) With No Optional Benefits Unit Price $ 7.67 Number of Units 639,695 With All Optional Benefits Unit Price - Number of Units - - ------------------------------------------------- ----------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $ 7.64 Number of Units 1,255,415 With One Optional Benefit Unit Price $ 9.86 Number of Units 63,097 - ------------------------------------------------- ----------- AST Goldman Sachs Small-Cap Value /7/ (1997) With No Optional Benefits Unit Price $ 9.26 Number of Units 1,492,775 With One Optional Benefit Unit Price $ 10.09 Number of Units 624 - ------------------------------------------------- ----------- AST Gabelli Small-Cap Value /8/ (1997) With No Optional Benefits Unit Price $ 9.30 Number of Units 6,141,523 With One Optional Benefit Unit Price $ 10.08 Number of Units 209,790 - ------------------------------------------------- ----------- AST DeAM Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $ 7.66 Number of Units 423,387 With One Optional Benefit Unit Price $ 10.08 Number of Units 11,686 - ------------------------------------------------- ----------- AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price $ 7.97 Number of Units 1,273,118 With One Optional Benefit Unit Price $ 9.87 Number of Units 66,279 - ------------------------------------------------- ----------- AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price $ 7.41 Number of Units 2,175,250 With One Optional Benefit Unit Price $ 9.51 Number of Units 44,760 - ------------------------------------------------- ----------- AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price $ 8.96 Number of Units 5,118,558 With One Optional Benefit Unit Price $ 9.98 Number of Units 163,415 - ------------------------------------------------- ----------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $ 6.80 Number of Units 658,419 With One Optional Benefit Unit Price $ 9.36 Number of Units 6,409 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $ 8.17 Number of Units 1,200,225 With One Optional Benefit Unit Price $ 10.04 Number of Units 28,449 - ------------------------------------------------- ----------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $ 9.59 Number of Units 724,670 With One Optional Benefit Unit Price $ 10.44 Number of Units 7,378 - ------------------------------------------------- ----------- AST Alliance Growth /13/ (1996) With No Optional Benefits Unit Price $ 7.46 Number of Units 1,869,353 With One Optional Benefit Unit Price $ 9.34 Number of Units 31,105 - ------------------------------------------------- ----------- AST MFS Growth (1999) With No Optional Benefits Unit Price $ 7.58 Number of Units 2,930,432 With One Optional Benefit Unit Price $ 9.47 Number of Units 134,574 - ------------------------------------------------- ----------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $ 8.32 Number of Units 10,144,317 With One Optional Benefit Unit Price $ 9.51 Number of Units 457,013 - ------------------------------------------------- ----------- AST Goldman Sachs Concentrated Growth /14/ (1992) With No Optional Benefits Unit Price $ 7.67 Number of Units 1,349,939 With One Optional Benefit Unit Price $ 9.46 Number of Units 41,632 - ------------------------------------------------- ----------- AST DeAm Large-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $ 7.65 Number of Units 207,816 With One Optional Benefit Unit Price $ 9.64 Number of Units 9,837 - ------------------------------------------------- ----------- AST DeAm Large-Cap Value /15/ (2000) With No Optional Benefits Unit Price $ 8.66 Number of Units 664,649 With One Optional Benefit Unit Price $ 9.98 Number of Units 18,250 - ------------------------------------------------- ----------- AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price $ 7.99 Number of Units 965,912 With One Optional Benefit Unit Price $ 9.79 Number of Units 11,345 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price $ 8.76 Number of Units 6,005,922 With One Optional Benefit Unit Price $ 10.08 Number of Units 386,259 - ------------------------------------------------- ----------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $ 10.08 Number of Units 1,563,489 With One Optional Benefit Unit Price $ 10.33 Number of Units 41,098 - ------------------------------------------------- ----------- AST Sanford Bernstein Managed Index 500 /16/ (1998) With No Optional Benefits Unit Price $ 8.17 Number of Units 3,662,406 With One Optional Benefit Unit Price $ 9.81 Number of Units 79,915 - ------------------------------------------------- ----------- AST American Century Income & Growth /17/ (1997) With No Optional Benefits Unit Price $ 8.25 Number of Units 1,751,136 With One Optional Benefit Unit Price $ 9.89 Number of Units 36,829 - ------------------------------------------------- ----------- AST Alliance Growth and Income /18/ (1992) With No Optional Benefits Unit Price $ 8.06 Number of Units 6,667,373 With One Optional Benefit Unit Price $ 9.83 Number of Units 165,588 - ------------------------------------------------- ----------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price $ 8.09 Number of Units 1,053,007 With One Optional Benefit Unit Price $ 9.71 Number of Units 17,242 - ------------------------------------------------- ----------- AST INVESCO Capital Income /19/ (1994) With No Optional Benefits Unit Price $ 8.34 Number of Units 2,110,071 With One Optional Benefit Unit Price $ 9.90 Number of Units 30,714 - ------------------------------------------------- ----------- AST DeAM Global Allocation /20/ (1993) With No Optional Benefits Unit Price $ 8.71 Number of Units 847,517 With One Optional Benefit Unit Price $ 9.94 Number of Units 3,088 - ------------------------------------------------- ----------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $ 9.14 Number of Units 1,126,058 With One Optional Benefit Unit Price $ 9.97 Number of Units 15,835 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $ 9.09 Number of Units 921,329 With One Optional Benefit Unit Price $ 9.96 Number of Units 21,928 - ------------------------------------------------- ----------- AST T. Rowe Price Global Bond /21/ (1994) With No Optional Benefits Unit Price $ 11.34 Number of Units 1,739,313 With One Optional Benefit Unit Price $ 10.31 Number of Units 36,822 - ------------------------------------------------- ----------- AST Federated High Yield (1994) With No Optional Benefits Unit Price $ 9.71 Number of Units 5,592,940 With One Optional Benefit Unit Price $ 10.26 Number of Units 74,022 - ------------------------------------------------- ----------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $ 9.94 Number of Units 4,146,530 With One Optional Benefit Unit Price $ 10.23 Number of Units 162,571 - ------------------------------------------------- ----------- AST DeAM Bond /9/ (2002) With No Optional Benefits Unit Price $ 10.65 Number of Units 561,446 With One Optional Benefit Unit Price $ 10.16 Number of Units 12,055 - ------------------------------------------------- ----------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $ 10.57 Number of Units 20,544,075 With One Optional Benefit Unit Price $ 10.17 Number of Units 604,147 - ------------------------------------------------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $ 10.34 Number of Units 11,274,642 With One Optional Benefit Unit Price $ 10.08 Number of Units 215,314 - ------------------------------------------------- ----------- AST Money Market (1992) With No Optional Benefits Unit Price $ 9.96 Number of Units 36,255,772 With One Optional Benefit Unit Price $ 9.99 Number of Units 999,737 - ------------------------------------------------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price $ 8.66 Number of Units 283,466 With One Optional Benefit Unit Price $ 9.93 Number of Units 21,816 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price $ 8.25 Number of Units 196,720 With One Optional Benefit Unit Price $ 9.90 Number of Units 10,707 - ------------------------------------------------- ----------- INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price $ 7.09 Number of Units 543,762 With One Optional Benefit Unit Price $ 9.70 Number of Units 32,635 - ------------------------------------------------- ----------- INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price $ 5.50 Number of Units 293,307 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price $ 8.00 Number of Units 475,873 With One Optional Benefit Unit Price $ 9.51 Number of Units 5,444 - ------------------------------------------------- ----------- INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price $ 8.76 Number of Units 366,258 With One Optional Benefit Unit Price $ 9.92 Number of Units 1,897 - ------------------------------------------------- ----------- INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price $ 5.78 Number of Units 94,004 With One Optional Benefit Unit Price $ 9.43 Number of Units 770 - ------------------------------------------------- ----------- Evergreen VA - International Growth /22/ (2000) With No Optional Benefits Unit Price - Number of Units - With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price $ 8.15 Number of Units 113,389 With One Optional Benefit Unit Price $ 9.67 Number of Units 3,669 - ------------------------------------------------- ----------- Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price $ 7.44 Number of Units 127,728 With One Optional Benefit Unit Price $ 9.85 Number of Units 12,520 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- Evergreen VA - Omega (2000) With No Optional Benefits Unit Price $ 7.78 Number of Units 39,943 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Evergreen VA - Capital Growth (2000) With No Optional Benefits Unit Price - Number of Units - With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Evergreen VA - Blue Chip (2000) With No Optional Benefits Unit Price $ 8.01 Number of Units 148 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Evergreen VA - Equity Index (2000) With No Optional Benefits Unit Price - Number of Units - With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Evergreen VA - Foundation (2000) With No Optional Benefits Unit Price - Number of Units - With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Europe /30/ (1999) With No Optional Benefits Unit Price $ 7.93 Number of Units 292,396 With One Optional Benefit Unit Price $ 9.70 Number of Units 2,625 - ------------------------------------------------- ----------- ProFund VP - Asia /30/ /9/ (2002) With No Optional Benefits Unit Price $ 7.75 Number of Units 281,993 With One Optional Benefit Unit Price $ 9.86 Number of Units 6,995 - ------------------------------------------------- ----------- ProFund VP - Japan /9/ (2002) With No Optional Benefits Unit Price $ 7.24 Number of Units 65,845 With One Optional Benefit Unit Price $ 10.21 Number of Units 351 With Any Two Optional Benefits Unit Price - Number of Units - With All Optional Benefits Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Banks /9/ (2002) With No Optional Benefits Unit Price $ 8.56 Number of Units 101,136 With One Optional Benefit Unit Price $ 10.13 Number of Units 3,422 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price $ 8.46 Number of Units 76,331 With One Optional Benefit Unit Price $ 10.34 Number of Units 12 - ------------------------------------------------- ----------- ProFund VP - Biotechnology (2001) With No Optional Benefits Unit Price $ 7.09 Number of Units 130,082 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price $ 7.25 Number of Units 128,022 With One Optional Benefit Unit Price $ 9.37 Number of Units 2,426 - ------------------------------------------------- ----------- ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price $ 8.28 Number of Units 148,446 With One Optional Benefit Unit Price $ 9.90 Number of Units 2,303 - ------------------------------------------------- ----------- ProFund VP - Energy (2001) With No Optional Benefits Unit Price $ 8.71 Number of Units 299,833 With One Optional Benefit Unit Price $ 10.12 Number of Units 1,660 - ------------------------------------------------- ----------- ProFund VP - Financial (2001) With No Optional Benefits Unit Price $ 8.85 Number of Units 221,377 With One Optional Benefit Unit Price $ 9.84 Number of Units 2,066 - ------------------------------------------------- ----------- ProFund VP - Healthcare (2001) With No Optional Benefits Unit Price $ 7.94 Number of Units 388,508 With One Optional Benefit Unit Price $ 9.59 Number of Units 6,831 - ------------------------------------------------- ----------- ProFund VP - Industrial /9/ (2002) With No Optional Benefits Unit Price $ 7.93 Number of Units 12,642 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Internet /9/ (2002) With No Optional Benefits Unit Price $ 8.57 Number of Units 306,572 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- ProFund VP - Pharmaceuticals /9/ (2002) With No Optional Benefits Unit Price $ 8.56 Number of Units 136,559 With One Optional Benefit Unit Price $ 9.63 Number of Units 2,545 - ------------------------------------------------- ----------- ProFund VP - Precious Metals /9/ (2002) With No Optional Benefits Unit Price $ 9.70 Number of Units 1,175,651 With One Optional Benefit Unit Price $ 11.30 Number of Units 19,964 - ------------------------------------------------- ----------- ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price $ 9.86 Number of Units 441,318 With One Optional Benefit Unit Price $ 10.20 Number of Units 12,789 - ------------------------------------------------- ----------- ProFund VP -Semiconductor /9/ (2002) With No Optional Benefits Unit Price $ 5.14 Number of Units 93,241 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Technology (2001) With No Optional Benefits Unit Price $ 6.03 Number of Units 254,131 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price $ 7.15 Number of Units 272,408 With One Optional Benefit Unit Price $ 10.03 Number of Units 3,642 - ------------------------------------------------- ----------- ProFund VP - Utilities (2001) With No Optional Benefits Unit Price $ 7.83 Number of Units 521,419 With One Optional Benefit Unit Price $ 10.61 Number of Units 8,871 - ------------------------------------------------- ----------- ProFund VP - Bull /9/ (2002) With No Optional Benefits Unit Price $ 7.97 Number of Units 954,792 With One Optional Benefit Unit Price $ 9.75 Number of Units 10,297 - ------------------------------------------------- ----------- ProFund VP - Bear (2001) With No Optional Benefits Unit Price $ 11.38 Number of Units 1,532,543 With One Optional Benefit Unit Price $ 10.13 Number of Units 28,618 - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- ProFund VP - UltraBull /23/ (2001) With No Optional Benefits Unit Price $ 6.78 Number of Units 297,435 With One Optional Benefit Unit Price $ 9.61 Number of Units 245 - ------------------------------------------------- ----------- ProFund VP - OTC (2001) With No Optional Benefits Unit Price $ 6.45 Number of Units 1,346,852 With One Optional Benefit Unit Price $ 9.36 Number of Units 13,113 - ------------------------------------------------- ----------- ProFund VP - Short OTC /9/(2002) With No Optional Benefits Unit Price $ 11.00 Number of Units 433,181 With One Optional Benefit Unit Price $ 10.43 Number of Units 15,308 - ------------------------------------------------- ----------- ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price $ 3.53 Number of Units 1,003,123 With One Optional Benefit Unit Price $ 8.70 Number of Units 233 - ------------------------------------------------- ----------- ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price $ 7.66 Number of Units 438,387 With One Optional Benefit Unit Price $ 10.06 Number of Units 4,777 - ------------------------------------------------- ----------- ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $ 7.70 Number of Units 439,054 With One Optional Benefit Unit Price $ 9.82 Number of Units 1,587 - ------------------------------------------------- ----------- ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price $ 5.71 Number of Units 477,953 With One Optional Benefit Unit Price $ 9.86 Number of Units 1,673 - ------------------------------------------------- ----------- ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $ 7.09 Number of Units 994,778 With One Optional Benefit Unit Price $ 10.15 Number of Units 19,019 - ------------------------------------------------- ----------- ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $ 7.69 Number of Units 772,260 With One Optional Benefit Unit Price $ 9.91 Number of Units 10,572 - ------------------------------------------------- ----------- ProFund VP - UltraSmall-Cap /24/ (1999) With No Optional Benefits Unit Price $ 6.14 Number of Units 212,085 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Year Ended December 31, - ------------------------------------------------------------------ Sub-account 2002 - ------------------------------------------------- ----------- ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price $ 11.56 Number of Units 2,486,854 With One Optional Benefit Unit Price $ 10.19 Number of Units 22,148 - ------------------------------------------------- ----------- ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price $ 8.02 Number of Units 165,792 With One Optional Benefit Unit Price $ 9.69 Number of Units 9,028 - ------------------------------------------------- ----------- First Trust(R)10 Uncommon Values (2000) With No Optional Benefits Unit Price $ 6.80 Number of Units 19,826 With One Optional Benefit Unit Price - Number of Units - - ------------------------------------------------- ----------- Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price $ 8.01 Number of Units 89,806 With One Optional Benefit Unit Price $ 9.59 Number of Units 5,196 - ------------------------------------------------- ----------- /1./ Effective December 10, 2001, Strong Capital Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM International Equity." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam International Equity." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Equity Portfolio." /2./ Effective November 11, 2002, William Blair & Company, L.L.C. became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Overseas Growth." /3./ This Portfolio reflects the addition of the net assets of the AST American Century International Growth Portfolio II ("Portfolio II") as a result of the merger between the Portfolio and Portfolio II. /4./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Founders Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Founders Passport." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap Portfolio." /5./ Effective September 17, 2001, Pilgrim Baxter & Associates, Ltd. became Sub-advisor of the Portfolio. Prior to September 17, 2001, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Small-Cap Growth." Prior to December 31, 1998, Founders Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio." /6./ Effective December 10, 2001, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, Zurich Scudder Investments, Inc. served as Sub-advisor of the Portfolio, then named "AST Scudder Small-Cap Growth Portfolio". Prior to May 1, 2001, the Portfolio was named "AST Kemper Small-Cap Growth Portfolio." /7./ Effective May 1, 2001, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to May 1, 2001, Lord, Abbett & Company Served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Small Cap Value." /8./ Effective October 23, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio." /9./ These portfolios were first offered as Sub-accounts on May 1, 2002. /10./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Mid-Cap Growth." /11./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor of the Portfolio, then named "Berger Capital Growth Portfolio." /12./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor of the Portfolio, then named "Federated Utility Income Portfolio." /13./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May 1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of the Portfolio, then named "Robertson Stephens Value + Growth Portfolio." /14./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST JanCap Growth." /15./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Strategic Value." /16./ Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio." /17./ Effective May 3, 1999, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Value Growth & Income." /18./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio." /19./ Effective July 1, 2002, the AST INVESCO Equity Income portfolio changed its name to AST INVESCO Capital Income. /20./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM Balanced." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Balanced." Prior to October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced Asset Portfolio." /21./ Effective August 8, 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the Portfolio, then named "AST Scudder International Bond Portfolio." /22./ This Portfolio was first offered as a Sub-account on August 1, 2001. On August 3, 2001, pursuant to a shareholder vote, the Perpetual International portfolio of the Evergreen Variable Annuity Trust was merged with the International Growth portfolio. The Evergreen VA Perpetual International portfolio no longer exits. /23./ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. /24./ Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that corresponded to the performance of the Russell 2000(R)Index. APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $ 50,000 Account Value = $ 75,000 Basic Death Benefit = $ 75,000 Death Benefit Amount = $ 75,000 - $ 50,000 = $ 25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $75,000 + $12,500 = $87,500 Examples with market decline Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $ 50,000 Account Value = $ 40,000 Basic Death Benefit = $ 50,000 Death Benefit Amount = $ 50,000 - $ 50,000 = $ 0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $50,000 + $0 = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Examples of Guaranteed Minimum Death Benefit Calculation The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER American Skandia's Plus40(TM)Optional Life Insurance Rider was offered, in those states where approved, between January 17, 2002 and May 1, 2003. The description below of the Plus40(TM)benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40(TM)benefit. The life insurance coverage provided under the Plus40(TM)Optional Life Insurance Rider ("Plus40(TM)rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40(TM)rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40(TM)rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40(TM)rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable - - the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40(TM)rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40(TM)rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS |X| If you die during the first 24 months following the effective date of the Plus40(TM)rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40(TM)rider if you die within 24 months of its effective date. |X| If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. |X| If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40(TM)rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. |X| If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40(TM)rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. |X| If charges for the Plus40(TM)rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). |X| If the age of any person covered under the Plus40(TM)rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. |X| On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95th birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40(TM)rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40(TM) rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40(TM)rider or similar life insurance coverage. |X| The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. |X| The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40(TM)riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40(TM)rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40(TM)rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40(TM)rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40(TM)rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40(TM)RIDER The Plus40(TM)rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40(TM)rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. Attained Age Percentage of Account Value ------------ ------------- Age 40-75 .80% Age 76-80 1.60% Age 81-85 3.20% Age 86-90 4.80% Age 91 6.50% Age 92 7.50% Age 93 8.50% Age 94 9.50% Age 95 10.50% The charge for the Plus40(TM)rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. |X| If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. |X| If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40(TM)rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40(TM)rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40(TM)rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40(TM)rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40(TM) rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40(TM)rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40(TM) rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40(TM)rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40(TM)rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40(TM)rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS FUSI ASLII-PROS (05/2003). _______________________________________________________ (print your name) _______________________________________________________ (address) _______________________________________________________ (city/state/zip code) THIS PAGE IS INTENTIONALLY LEFT BLANK. Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-766-4530 Telephone: 203-926-1888 http://www.americanskandia.com http://www.americanskandia.com MAILING ADDRESSES: AMERICAN SKANDIA - VARIABLE ANNUITIES P.O. Box 7040 Bridgeport, CT 06601-7040 EXPRESS MAIL: AMERICAN SKANDIA - VARIABLE ANNUITIES One Corporate Drive Shelton, CT 06484 Supplement to Prospectus Dated May 1, 2003 Supplement dated June 13, 2003 This Supplement should be retained with the current Prospectus for your variable annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. PORTFOLIO/SUB-ACCOUNT NAME CHANGE Evergreen VA International Growth Portfolio/Sub-account Effective June 13, 2003, the Evergreen VA International Growth portfolio will change its name to Evergreen VA International Equity. All references in the Prospectus to Evergreen VA International Growth are deleted and replaced with Evergreen VA International Equity. FUSI AS2/ FUSI XT/ FUSI XT-FOUR FSII/ FSXT/FSASL/ FSASL2/ FSXT4 FUSI ASL/ FUSI ASL II - SUPP (06/13/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated June 20, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. Montgomery Variable Series - Emerging Markets Portfolio reorganization into the Gartmore GVIT Developing Markets Portfolio American Skandia anticipates that shareholders will approve the Plan of Reorganization of the Montgomery Variable Series - Emerging Markets Portfolio and the Gartmore GVIT Developing Markets Portfolio and that the reorganization will take place on June 20, 2003. Upon completion of the reorganization, the Montgomery Variable Series - Emerging Markets Portfolio will cease to exist and Annuity Owners will have an equivalent Account Value in the Gartmore GVIT Developing Markets Portfolio. The principal investment objective and policies of the Portfolio will be unchanged as a result of this reorganization. UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Gartmore Variable Investment Trust: GVIT Developing Markets 1.15% 0.24% 0.25% 1.64% N/A 1.64%
ASAP/ ASAP2/ FUSI AS2/ ASAP III/ APEX/ ASXT/ FUSI XT/Wells XTVA/ VIA-SUPP (06/20/2003) ASXT-FOUR/ FUSI XT-FOUR/ ASL/ FUSI ASL/ Wells ASL/ ASPro/92001E0603 Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/ ASL II/ FUSI ASL II/ ASXT-SIX/ VIAS/ VIAT/ VIAG -SUPP (06/20/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated October 13, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. WHO IS AMERICAN SKANDIA? The following paragraph is added to this section of the prospectus: Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. GUARANTEED RETURN OPTION PlusSM (GRO PlusSM) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is being offered as of October 13, 2003 in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program, the Guaranteed Minimum Withdrawal Benefit rider or the Guaranteed Minimum Income Benefit rider. We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that seven-year period as the "maturity date") and on each anniversary of the maturity date thereafter, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate seven-year period following election of the enhanced guarantee and on each anniversary thereafter, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market increases. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between variable investment options and Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. KEY FEATURE - Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. |X| Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. |X| Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of the seven year period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically increase your base guarantee (or enhanced guarantee, if previously elected) on each anniversary of the program (and create a new, seven year maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the existing base guarantee (or enhanced guarantee, if previously elected) by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity will be applied, if necessary, to any Fixed Allocations needed to support the applicable guarantee amount as of the maturity date or any anniversary of the maturity date. Any remaining amounts will be allocated pro-rata to your Account Value based on your current Sub-account allocations. We will notify you of any amounts added to your Annuity under the program. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM)Optional Life Insurance Rider will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO PlusSM program are October 13, 2003; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2003 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2003 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: .. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). .. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x ( 1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2004 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE - Allocation of Account Value In general, you have discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to prohibit investment in certain Portfolios if you participate in the program. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. This permits your Annuity to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. We monitor fluctuations in your Account Value each business day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). |X| If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. |X| If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred to a new Fixed Allocation(s) to support the applicable guaranteed amount. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). ================================================================================ If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the variable investment options if there is a subsequent market recovery. During the period prior to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is extremely low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s). ================================================================================ Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value are transferred to the variable investment options while Fixed Allocations in support of an Enhanced Protected Principal Value are not transferred because they must remain invested in the Fixed Allocation in support of the higher enhanced guarantee. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any business day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the business day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated (including the guaranteed amount(s)) and the Guaranteed Return Option Plus program will be added to your Annuity based on the current Account Value. This election of GRO PlusSM may result in a market value adjustment, which could increase or decrease your Account Value. Termination of the Program The Annuity Owner can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. The Annuity Owner also can terminate the Guaranteed Return Option Plus program entirely. An Annuity Owner who terminates the program entirely can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, an Annuity Owner could, for example, terminate the program on a given business day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program prior to the applicable maturity date, the Guaranteed Return Option Plus will no longer provide a guarantee of your Account Value. The surviving spouse may elect the benefit at any time after the death of the Annuity Owner. The surviving spouse's election will be effective on the business day that we receive the required documentation in good order at our home office, and the Account Value on that business day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: |X| Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. |X| Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program, and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Additional Purchase Payments (including any credits associated with such Purchase Payments) applied to the Annuity while the program is in effect will increase the applicable guarantee amount by the actual amount of the Purchase Payment; however, all or a portion of any additional Purchase Payments (including any credits associated with such Purchase Payments) may be allocated by us to Fixed Allocations to support the additional amount guaranteed. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. Charges under the Program We deduct a charge equal to 0.25% of Account Value per year to participate in the Guaranteed Return Option Plus program. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. ASAP2 / FUSI AS2 / EVA / ASAP III / APEX / FUSI XT /EVA XT / WELLS XT / FUSI ASXT-4 / ASL / FUSI ASL / WELLS ASL / WELLS APEX / AS PRO / WELLS VA+ / IMPACT /FT PORTFOLIOS / GAL 3 / ASL II /FUSI ASL II / APEX II - SUPP. (GRO Only) - (10/13/2003) 92001b0903
Supplement to Prospectus Dated May 1, 2003 Supplement dated December 5, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. As described in more detail below, three of the Evergreen portfolios formerly offered as investment options for your annuity were merged into other Evergreen portfolios. A. MERGER Evergreen VA Global Leaders Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Global Leaders portfolio merged into the Evergreen VA International Equity portfolio. As a result of the merger, the Evergreen VA Global Leaders portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA International Equity portfolio, the successor portfolio. Evergreen VA Capital Growth Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Capital Growth portfolio merged into the Evergreen VA Growth and Income portfolio. As a result of the merger, the Evergreen VA Capital Growth portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA Growth and Income portfolio, the successor portfolio. Evergreen VA Blue Chip Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Blue Chip portfolio merged into the Evergreen VA portfolio. As a result of the merger, the Evergreen VA Blue Chip portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA portfolio, the successor portfolio. The following annual expenses for the successor portfolios are estimates of what the expenses of each successor portfolio will be as a result of the respective mergers: UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- ------------ Evergreen Variable Annuity Trust: International Equity /1/ 0.66% 0.39% 0.00% 1.05% 0.00% 1.05% Growth and Income /2/ 0.75% 0.18% 0.00% 0.93% 0.00% 0.93% VA /3/ 0.75% 0.24% 0.00% 0.99% 0.00% 0.99%
/1/ The annual expenses of the Evergreen VA International Equity portfolio prior to the Merger were as follows: Management Fee: 0.66%; 12b-1 Fee: 0.00%; Other Expenses: 0.73%; Total Annual Portfolio Operating Expenses: 1.39%; Fee Waiver and Expense Reimbursement: 0.39%; Net Annual Portfolio Operating Expenses: 1.00%. /2/ The annual expenses of the Evergreen VA Growth and Income portfolio prior to the Merger are the same as the estimated annual expenses post-Merger. /3/ The annual expenses of the Evergreen VA portfolio prior to the Merger were as follows: Management Fees: 0.75%; 12b-1 Fee: 0.00%; Other Expenses: 0.23%; and Total Annual Portfolio Operating Expenses: 0.98%. The following descriptions of the investment objectives are effective as of December 5, 2003. INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ INTER-NATIONAL Evergreen VA International Equity (acquired Evergreen VA Global Leaders) (f/k/a Evergreen VA Evergreen International Growth): seeks long-term capital growth and, secondarily, modest income. The Investment Portfolio invests primarily in equity securities issued by established, quality, non-U.S. Management Company, companies located in countries with developed markets, but may purchase across all market LLC EQUITY capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.), but may invest more than 25% of its assets in one country. The Portfolio also invests in emerging markets. - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ LARGE CAP VALUE Evergreen VA Growth and Income (acquired Evergreen VA Capital Growth): seeks capital growth Evergreen in the value of its shares and current income. The Portfolio invests primarily in common Investment stocks of medium and mid-sized U.S. companies. The investment adviser selects stocks using Management Company, a diversified style of equity management that allows the Portfolio to invest in both value- LLC and growth-oriented equity securities. Additionally, the investment adviser seeks companies that are temporarily undervalued in the marketplace, sell at a discount to their private market values and display certain characteristics such as earning a high return on investment and having some kind of competitive advantage in their industry. The Portfolio seeks additional income primarily by investing up to 20% of its assets in convertible bonds, including below investment grade bonds, and convertible preferred stocks of any quality. The Portfolio may invest up to 20% of its assets in foreign securities. - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ LARGE CAP BLEND Evergreen VA (acquired Evergreen VA Blue Chip): seeks long-term capital growth. The Evergreen Portfolio invests primarily in common stocks of large U.S. companies, whose market Investment capitalizations fall within the range tracked by the Russell 1000(R)Index, at the time of Management Company, purchase. The Investment adviser selects stocks using a diversified style of equity LLC management that employs a blend between growth- and value-oriented stocks. The Portfolio does not invest in foreign securities. - - ---------------- --------------------------------------------------------------------------------------------- ------------------
As described in more detail below, the Evergreen VA Equity Index portfolio that is currently offered as an investment option for your annuity will no longer be available effective December 23, 2003. B. LIQUIDATION Evergreen VA Equity Index American Skandia anticipates that the shareholders of the Evergreen VA Equity Index portfolio (the "Equity Index portfolio") will approve the liquidation of this portfolio, which is currently scheduled to take place on or about December 23, 2003. Accordingly, effective December 23, 2003, the Evergreen VA Equity Index portfolio will no longer be offered as an investment option. Current shareholders of the Evergreen VA Equity Index portfolio have been sent a separate communication explaining their options. ASAP 2 Premier / EVA / ASXT - Premier / EVA XT / ASL Premier / ASXT-Four Premier/ ASL II Premier - SUPP. (12/05/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated January 29, 2004 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. AST Strong International Equity portfolio Pursuant to the exemptive authority granted to American Skandia Trust, its investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC have changed sub-advisors for the AST Strong International Equity Portfolio ("International Equity Portfolio"). Effective February 23, 2004, J.P. Morgan Investment Management Inc. will become the sub-advisor for the International Equity Portfolio. Accordingly, effective February 23, 2004, all references in the Prospectus and the SAI to the AST Strong International Equity Portfolio are replaced by references to the AST JPMorgan International Equity Portfolio and references to Strong Capital Management, Inc. are replaced by references to J.P. Morgan Investment Management Inc. The investment objective of the International Equity Portfolio is unchanged. ASAP/ ASAP2/ EVA/ FUSI AS2/ ASAP III/ Wells ASAP III/ APEX/VA/ VIA-SUPP (01/2004) ASXT/ EVAXT/ FUSI XT/Wells XT/ASXT-FOUR/ FUSI XT-FOUR/ ASL/92001a0304 FUSI ASL/ Wells ASL/ ASPro/ Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/Wells APEX II/ ASL II/ FUSI ASL II/ASXT-SIX/ Wells XT-SIX/ VIAS/ VIAT/ VIAG -SUPP (01/2004) AMERICAN SKANDIA LIFE ASSURANCE CORPORATION One Corporate Drive, Shelton, Connecticut 06484 This Prospectus describes American Skandia XTra CreditSM FOUR, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us"). The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 63. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. In particular, please refer to Appendix E for a description of certain provisions that apply to Annuities sold to New York residents. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. ================================================================================ American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees and charges may also be different between each annuity. ================================================================================ If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed investment options. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 701/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. - -------------------------------------------------------------------------------- These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value. - -------------------------------------------------------------------------------- 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 THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE. FOR FURTHER INFORMATION CALL 1-800-766-4530 Prospectus Dated: May 1, 2003 Statement of Additional Information Dated: May 1, 2003 ASXT II Four-PROS- (05/2003) ASXT IIPROS
PLEASE SEE OUR PRIVACY POLICY ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. ================================================================================ If you purchase this Annuity, we apply an additional amount (an XTra CreditSM) to your account value with each purchase payment you make, including your initial purchase payment and any additional purchase payments. ================================================================================ This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities. However, if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher and is deducted for a longer period of time as compared to our other variable annuities. As with any annuity that features a CDSC, you should consider your need to access your account value during the CDSC period and whether the liquidity provision under the Annuity will satisfy that need. The CDSC is only deducted if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity. If you make a withdrawal or surrender your Annuity which is subject to a CDSC, we do not recover the XTra CreditSM amount. ================================================================================ ================================================================================ ================================================================================ The XTra CreditSM amount is included in your account value. However, American Skandia may take back the original XTra CreditSM amount applied to your purchase payment if you die, or elect to withdraw all or a portion of your account value under the medically-related surrender provision, within 12 months of having received an XTra CreditSM amount. In either situation, the value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra CreditSM amount will not be taken back. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we take back the XTra CreditSM amount. ================================================================================ ================================================================================ ================================================================================ We offer other annuities where we apply an XTra CreditSM to your annuity with each purchase payment you make. The XTra CreditSM amount we apply to purchase payments on those annuities is initially higher than on this Annuity but reduces over time and only applies during the first six annuity years. The total asset-based charges on those annuities are higher during the first 10 years but are lower than this Annuity after the 10th year. The CDSC is also higher and is deducted for a longer period of time than on this Annuity; however the CDSC on those annuities applies from the issue date of the annuity, not separately to each purchase payment. ================================================================================ ================================================================================ WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY? |X| This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. |X| This Annuity offers both variable and fixed investment options. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed investment options of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. |X| The Annuity features two distinct phases - the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: American Skandia Trust, Montgomery Variable Series, Wells Fargo Variable Trust, INVESCO Variable Investment Funds, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. |X| During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. |X| This Annuity offers a Credit which we add to your Annuity with each Purchase Payment we receive. |X| This Annuity offers a basic Death Benefit. It also offers optional Death Benefits that provide an enhanced level of protection for your beneficiary(ies) for an additional charge. |X| You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges. Other product features allow you to access your Account Value as necessary, although a charge may apply. |X| Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $1,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $1,000. If the Annuity is owned by an individual or individuals, the oldest of those persons must be age 80 or under. If the Annuity is owned by an entity, the annuitant must be age 80 or under.
TABLE OF CONTENTS GLOSSARY OF TERMS...............................................................................................................5 SUMMARY OF CONTRACT FEES AND CHARGES............................................................................................6 EXPENSE EXAMPLES...............................................................................................................10 INVESTMENT OPTIONS.............................................................................................................11 WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?...........................................................11 WHAT ARE THE FIXED INVESTMENT OPTIONS?.......................................................................................26 FEES AND CHARGES...............................................................................................................26 WHAT ARE THE CONTRACT FEES AND CHARGES?......................................................................................26 WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS?................................................................27 WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?.................................................................................28 WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?.................................................................................28 WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?....................................................................28 EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES....................................................................................28 PURCHASING YOUR ANNUITY........................................................................................................28 WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?........................................................................28 MANAGING YOUR ANNUITY..........................................................................................................30 MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?..............................................................30 MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?................................................................................30 MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.....................................................................................30 MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?.................................................................30 MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?.............................................................31 MANAGING YOUR ACCOUNT VALUE....................................................................................................31 HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?.................................................................................31 HOW DO I RECEIVE CREDITS?....................................................................................................31 HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE?.................................................................................32 ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?...................................................33 DO YOU OFFER DOLLAR COST AVERAGING?..........................................................................................34 DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?.............................................................................34 DO YOU OFFER ANY ASSET ALLOCATION PROGRAMS?..................................................................................34 DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?..........................................35 MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT?.............................................................37 HOW DO THE FIXED INVESTMENT OPTIONS WORK?....................................................................................37 HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?............................................................................38 HOW DOES THE MARKET VALUE ADJUSTMENT WORK?...................................................................................38 WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?...............................................................................39 ACCESS TO ACCOUNT VALUE........................................................................................................39 WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?.............................................................................39 ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?................................................................................39 CAN I WITHDRAW A PORTION OF MY ANNUITY?......................................................................................40 HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?................................................................................40 IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?..................................................................................41 CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?.............................................41 DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE?.....................................42 WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?...........................................................42 CAN I SURRENDER MY ANNUITY FOR ITS VALUE?....................................................................................42 WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?..................................................................43 WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?.................................................................................43 HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?.........................................................................44 HOW ARE ANNUITY PAYMENTS CALCULATED?.........................................................................................44 DEATH BENEFIT..................................................................................................................46 WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?................................................................................46 Basic Death Benefit..........................................................................................................46 OPTIONAL DEATH BENEFITS......................................................................................................46 AMERICAN SKANDIA'S ANNUITY REWARDS...........................................................................................48 PAYMENT OF DEATH BENEFITS....................................................................................................49 VALUING YOUR INVESTMENT........................................................................................................50 HOW IS MY ACCOUNT VALUE DETERMINED?..........................................................................................50 WHAT IS THE SURRENDER VALUE OF MY ANNUITY?...................................................................................50 HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?..................................................................................50 HOW DO YOU VALUE FIXED ALLOCATIONS?..........................................................................................51 WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?..................................................................................51 WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?................................................52 TAX CONSIDERATIONS.............................................................................................................52 WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?.............................................................52 HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?....................................................................52 IN GENERAL, HOW ARE ANNUITIES TAXED?.........................................................................................52 HOW ARE DISTRIBUTIONS TAXED?.................................................................................................53 WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?...................................................................................................................54 HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?........................................................................55 GENERAL TAX CONSIDERATIONS...................................................................................................56 GENERAL INFORMATION............................................................................................................57 HOW WILL I RECEIVE STATEMENTS AND REPORTS?...................................................................................57 WHO IS AMERICAN SKANDIA?.....................................................................................................58 WHAT ARE SEPARATE ACCOUNTS?..................................................................................................58 WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?.........................................................................59 WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?.......................................................................60 AVAILABLE INFORMATION........................................................................................................62 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE..............................................................................62 HOW TO CONTACT US............................................................................................................62 INDEMNIFICATION..............................................................................................................63 LEGAL PROCEEDINGS............................................................................................................63 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION..........................................................................63 APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA.......................................................................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.......................................11 APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B...........................................................1 APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS.............................................................................1 APPENDIX D - PLUS40(TM)OPTIONAL LIFE INSURANCE RIDER............................................................................1 APPENDIX E - SALE OF THE CONTRACTS TO RESIDENTS OF THE STATE OF NEW YORK........................................................1 APPENDIX F - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT..........................................................................1
GLOSSARY OF TERMS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. Account Value: 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. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC") and/or any Annual Maintenance Fee. The Account Value includes any Credits we applied to your Purchase Payments that we are entitled to recover under certain circumstances. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. Annuitization: The application of Account Value to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply. Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. Code: The Internal Revenue Code of 1986, as amended from time to time. Fixed Allocation: An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. Guarantee Period: A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. Interim Value: The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. Issue Date: The effective date of your Annuity. MVA: A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day other than the Maturity Date of such Fixed Allocation. Owner: With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. Surrender Value: The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge, the charge for any optional benefits. Unit: A measure used to calculate your Account Value in a Sub-account during the accumulation period. Valuation Day: Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. SUMMARY OF CONTRACT FEES AND CHARGES Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the Insurance Charge, which is the combination of a mortality and expense risk charge and a charge for administration of the Annuity, and the charge for any optional benefits you elect. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. Tax charges may vary by state and in certain states, a premium tax charge may be applicable. All of these fees and charges are described in more detail within this Prospectus. The following table provides a summary of the fees and charges you will incur if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus. - - ---------------------------------------------------------------------------------------------------------------------------------- YOUR TRANSACTION FEES AND CHARGES (assessed against the Annuity) - - ---------------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - - ---------------------------------------------------------------------------------------------------------------------------------- Contingent Deferred Sales Charge* 8.5% The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period is measured from the date each Purchase Payment is allocated. - - -------------------------- ------------------------------------------------------------------------------------------------------- Transfer Fee $10.00 (Deducted after the 20th transfer each Annuity Year) - - -------------------------- -------------------------------------------------------------------------------------------------------
* The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. - -------- ------ ------ ----- ------ ------ ----- ------ ------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+ - -------- ------ ------ ----- ------ ------ ----- ------ ------- - -------- ------ ------ ----- ------ ------ ----- ------ ------- 8.5% 8.5% 8.5% 8.5% 7.0% 6.0% 5.0% 4.0% 0.0% - -------- ------ ------ ----- ------ ------ ----- ------ ------- The following table provides a summary of the periodic fees and charges you will incur while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus. - - ---------------------------------------------------------------------------------------------------------------------------------- YOUR PERIODIC FEES AND CHARGES - - ---------------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINT THE ANNUITY - - ---------------------------------------------------------------------------------------------------------------------------------- - - --------------------------------------------------------------------- ------------------------------------------------------------ FEE/CHARGE Amount Deducted - - --------------------------------------------------------------------- ------------------------------------------------------------ - - --------------------------------------------------------------------- ------------------------------------------------------------ Annual Maintenance Fee Smaller of $35 or 2% of Account Value (Assessed annually on the Annuity's anniversary date or upon surrender) - - --------------------------------------------------------------------- ------------------------------------------------------------ - - ---------------------------------------------------------------------------------------------------------------------------------- ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS* (as a percentage of the average daily net assets of the Sub-accounts) - - --------------------------------------------------------------------- ------------------------------------------------------------ FEE/CHARGE Amount Deducted - - --------------------------------------------------------------------- ------------------------------------------------------------ Mortality & Expense Risk Charge 1.25% - - --------------------------------------------------------------------- ------------------------------------------------------------ Administration Charge 0.15% - - --------------------------------------------------------------------- ------------------------------------------------------------ - - --------------------------------------------------------------------- ------------------------------------------------------------ Total Annual Charges of the Sub-accounts** 1.40% per year of the value of each Sub-account - - --------------------------------------------------------------------- ------------------------------------------------------------
* These charges are deducted daily and apply to Variable Investment Options only. ** The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. The following table provides a summary of the fees and charges you will incur if you elect any of the following optional benefits. These fees and charges are described in more detail within this Prospectus. - - ---------------------------------------------------------------------------------------------------------------------------------- YOUR OPTIONAL BENEFIT FEES AND CHARGES - - ---------------------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------------------- --------------------- ---------------- Optional Benefit Optional Benefit Total Annual Fee/ Charge* Charge - - ------------------------------------------------------------------------------------------- --------------------- ---------------- - - ------------------------------------------------------------------------------------------- --------------------- ---------------- GUARANTEED RETURN OPTION 1.65% We offer a program that guarantees a "return of premium" at a future date, while 0.25% of average allowing you to allocate all or a portion of your Account Value to the Sub-accounts of daily net assets of your choice. the Sub-accounts - - ------------------------------------------------------------------------------------------- --------------------- ---------------- - - ------------------------------------------------------------------------------------------- --------------------- ---------------- ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT 1.65% We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing amounts in addition to the basic Death Benefit that daily net assets of can be used to offset federal and state taxes payable on any taxable gains in your the Sub-accounts Annuity at the time of your death. - - ------------------------------------------------------------------------------------------- --------------------- ---------------- - - ------------------------------------------------------------------------------------------- --------------------- ---------------- HIGHEST ANNIVERSARY VALUE DEATH BENEFIT We offer an Optional Death Benefit that provides an enhanced level of protection for 0.25% of average your beneficiary(ies) by providing a death benefit equal to the greater of the basic daily net assets of 1.65% Death Benefit or the Highest Anniversary Value. the Sub-accounts - - ------------------------------------------------------------------------------------------- --------------------- ----------------
- - ------------------------------------------------------------------------------ Please refer to the section of the Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. - - ------------------------------------------------------------------------------ * The Total Annual Charge includes the Insurance Charge assessed against the Annuity. If you elect more than one optional benefit, the Total Annual Charge includes the charge for each optional benefit. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2002. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. - - ---------------------------------------------------------------------------------------------------------------------------------- Total Annual Portfolio Operating Expenses - - ---------------------------------------------------------------------------------------------------------------------------------- - - ---------------------------------------------- -------------------------------------------- -------------------------------------- Minimum Maximum - - ---------------------------------------------- -------------------------------------------- -------------------------------------- - - ---------------------------------------------- -------------------------------------------- -------------------------------------- Total Portfolio Operating Expense 0.14% * 3.14% - - ---------------------------------------------- -------------------------------------------- --------------------------------------
* The minimum total annual portfolio operating expenses are those of a Portfolio that may invest in mutual funds, which also charge their own operating expenses. Thus, the total annual portfolio operating expenses may be higher than indicated. The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2002, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee is being waived and/or other expenses are being partially reimbursed. "N/A" indicates that no portion of the management fee and/or other expenses is being waived and/or reimbursed. The "Net Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees, net of any fee waivers and expense reimbursements. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530.
- - ---------------------------------------------------------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - - ---------------------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------- Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - -------------------------------------------------------------------------------------------------------------------------------- American Skandia Trust: /1/ AST Strong International Equity 0.88% 0.21% 0.12% 1.21% 0.00% 1.21% AST William Blair International Growth 1.00% 0.23% 0.10% 1.33% 0.10% 1.23% AST American Century International Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% AST DeAM International Equity 1.00% 0.44% 0.00% 1.44% 0.15% 1.29% AST MFS Global Equity 1.00% 0.41% 0.00% 1.41% 0.00% 1.41% AST PBHG Small-Cap Growth 0.90% 0.22% 0.11% 1.23% 0.00% 1.23% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% 0.15% 1.00% AST Federated Aggressive Growth 0.95% 0.43% 0.00% 1.38% 0.03% 1.35% AST Goldman Sachs Small-Cap Value 0.95% 0.21% 0.11% 1.27% 0.00% 1.27% AST Gabelli Small-Cap Value 0.90% 0.19% 0.01% 1.10% 0.00% 1.10% AST DeAM Small-Cap Value 0.95% 0.53% 0.00% 1.48% 0.33% 1.15% AST Goldman Sachs Mid-Cap Growth 1.00% 0.26% 0.07% 1.33% 0.10% 1.23% AST Neuberger Berman Mid-Cap Growth 0.90% 0.20% 0.06% 1.16% 0.00% 1.16% AST Neuberger Berman Mid-Cap Value 0.90% 0.17% 0.09% 1.16% 0.00% 1.16% AST Alger All-Cap Growth 0.95% 0.19% 0.15% 1.29% 0.00% 1.29% AST Gabelli All-Cap Value 0.95% 0.24% 0.00% 1.19% 0.00% 1.19% AST T. Rowe Price Natural Resources 0.90% 0.23% 0.03% 1.16% 0.00% 1.16% AST Alliance Growth 0.90% 0.20% 0.03% 1.13% 0.00% 1.13% AST MFS Growth 0.90% 0.18% 0.10% 1.18% 0.00% 1.18% AST Marsico Capital Growth 0.90% 0.16% 0.04% 1.10% 0.01% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.15% 0.04% 1.09% 0.06% 1.03% AST DeAM Large-Cap Growth 0.85% 0.23% 0.00% 1.08% 0.10% 0.98% AST DeAM Large-Cap Value 0.85% 0.24% 0.04% 1.13% 0.10% 1.03% AST Alliance/Bernstein Growth + Value 0.90% 0.23% 0.00% 1.13% 0.00% 1.13% AST Sanford Bernstein Core Value 0.75% 0.25% 0.00% 1.00% 0.00% 1.00% AST Cohen & Steers Realty 1.00% 0.23% 0.03% 1.26% 0.00% 1.26% AST Sanford Bernstein Managed Index 500 0.60% 0.16% 0.08% 0.84% 0.00% 0.84% AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% 0.00% 0.98% AST Alliance Growth and Income 0.75% 0.15% 0.08% 0.98% 0.02% 0.96% AST MFS Growth with Income 0.90% 0.28% 0.01% 1.19% 0.00% 1.19% AST INVESCO Capital Income 0.75% 0.17% 0.03% 0.95% 0.00% 0.95% AST DeAM Global Allocation 0.10% 0.04% 0.00% 0.14% 0.00% 0.14% AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% 0.00% 1.10% AST T. Rowe Price Asset Allocation 0.85% 0.26% 0.00% 1.11% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.26% 0.00% 1.06% 0.00% 1.06% AST Federated High Yield 0.75% 0.19% 0.00% 0.94% 0.00% 0.94% AST Lord Abbett Bond-Debenture 0.80% 0.24% 0.00% 1.04% 0.00% 1.04% AST DeAM Bond 0.85% 0.23% 0.00% 1.08% 0.15% 0.93% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% 0.02% 0.78% AST PIMCO Limited Maturity Bond 0.65% 0.18% 0.00% 0.83% 0.00% 0.83% AST Money Market 0.50% 0.13% 0.00% 0.63% 0.05% 0.58% Montgomery Variable Series: Emerging Markets 1.25% 0.43% 0.00% 1.68% 0.00% 1.68% Wells Fargo Variable Trust: Equity Income 0.55% 0.30% 0.25% 1.10% 0.10% 1.00% - - ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ --------
- - ---------------------------------------------------------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - - ---------------------------------------------------------------------------------------------------------------------------------- - - ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ -------- Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - -------------------------------------------------------------------------------------------------------------------------------- INVESCO Variable Investment Funds, Inc.: Dynamics 0.75% 0.37% 0.00% 1.12% 0.00% 1.12% Technology 0.75% 0.36% 0.00% 1.11% 0.00% 1.11% Health Sciences 0.75% 0.32% 0.00% 1.07% 0.00% 1.07% Financial Services 0.75% 0.34% 0.00% 1.09% 0.00% 1.09% Telecommunications 0.75% 0.47% 0.00% 1.22% 0.00% 1.22% Evergreen Variable Annuity Trust: Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% ProFund VP: Europe 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Asia 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Japan 0.75% 1.06% 0.25% 2.06% 0.08% 1.98% Banks 0.75% 1.11% 0.25% 2.11% 0.13% 1.98% Basic Materials 0.75% 1.21% 0.25% 2.21% 0.23% 1.98% Biotechnology 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Consumer Cyclical 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Consumer Non-Cyclical 0.75% 1.10% 0.25% 2.10% 0.12% 1.98% Energy 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Financial 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Healthcare 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Industrial 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Internet 0.75% 1.04% 0.25% 2.04% 0.06% 1.98% Pharmaceuticals 0.75% 1.12% 0.25% 2.12% 0.14% 1.98% Precious Metals 0.75% 0.98% 0.25% 1.98% N/A 1.98% Real Estate 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% Semiconductor 0.75% 1.33% 0.25% 2.33% 0.35% 1.98% Technology 0.75% 1.27% 0.25% 2.27% 0.29% 1.98% Telecommunications 0.75% 1.19% 0.25% 2.19% 0.21% 1.98% Utilities 0.75% 1.17% 0.25% 2.17% 0.19% 1.98% Bull 0.75% 0.91% 0.25% 1.91% N/A 1.91% Bear 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% UltraBull /2/ 0.75% 1.12% 0.25% 2.12% 0.27% 1.85% OTC 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Short OTC 0.75% 0.96% 0.25% 1.96% N/A 1.96% UltraOTC 0.75% 1.08% 0.25% 2.08% 0.13% 1.95% Mid-Cap Value 0.75% 1.25% 0.25% 2.25% 0.27% 1.98% Mid-Cap Growth 0.75% 1.22% 0.25% 2.22% 0.24% 1.98% UltraMid-Cap 0.75% 1.36% 0.25% 2.36% 0.38% 1.98% Small-Cap Value 0.75% 1.45% 0.25% 2.45% 0.47% 1.98% Small-Cap Growth 0.75% 1.20% 0.25% 2.20% 0.22% 1.98% UltraSmall-Cap 0.75% 1.15% 0.25% 2.15% 0.17% 1.98% U.S. Government Plus 0.50% 0.96% 0.25% 1.71% N/A 1.71% Rising Rates Opportunity 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% First Defined Portfolio Fund LLC: First Trust(R)10 Uncommon Values 0.60% 2.29% 0.25% 3.14% 1.95% 1.37% The Prudential Series Fund, Inc.: SP Jennison International Growth 0.85% 0.70% 0.25% 1.80% 0.16% 1.64% - - ------------------------------------------------- --------------- ------------- -------------- ------------- ------------ --------
/1/ The Investment Manager of American Skandia Trust (the "Trust") has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2004. The caption "Total Annual Portfolio Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements, while the caption "Net Annual Portfolio Operating Expenses" reflects the effect of such waivers and reimbursements. The Trust adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the sale of shares of such Portfolios. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission takes the position that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Distribution Fee estimates are derived and annualized from data regarding commission amounts directed under the Distribution Plan. Although there are no maximum amounts allowable, actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the last full fiscal year of the Plan's operations may differ from the amounts listed in the above chart. /2/ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. EXPENSE EXAMPLES These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges (when applicable), Annual Maintenance Fee (when applicable), Insurance Charge, and the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), as well as the charges for the optional benefits that are offered under the Annuity. The Securities and Exchange Commission ("SEC") requires these examples. Below are examples showing what you would pay in expenses at the end of the stated time periods for each Sub-account had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected all optional benefits available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.40% per year; (c) the Annual Maintenance Fee (when applicable) is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other transactions for which we charge a fee during the period shown; (f) no tax charge applies; (g) the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above) are reflected; (h) the charge for each optional benefit is reflected as an additional charge equal to 0.25% per year, respectively, for the Guaranteed Return Option, the Enhanced Beneficiary Protection, and the Highest Anniversary Value Death Benefit; and (i) the Credit applicable to your Annuity is 4% of Purchase Payments. Amounts shown in the examples are rounded to the nearest dollar. The Credit may be less when total Purchase Payments are less then $10,000 and may be more when total Purchase Payments are at least $5,000,000 (see "How do I Receive Credits?"). Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. 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 WILL BE LESS THAN THOSE SHOWN IF YOU DO NOT ELECT ALL OF THE OPTIONAL BENEFITS AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. If you surrender your contract at the end of the applicable time period:
- ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- - ----------------------------- --------------------------- --------------------------- -------------------------- 1426 2566 3542 5592 - ----------------------------- --------------------------- --------------------------- --------------------------
If you annuitize at the end of the applicable time period (you may not annuitize in the first (1st) Annuity Year):
- ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- N/A 1716 2842 5592 - ----------------------------- --------------------------- --------------------------- -------------------------- If you do not surrender your contract: - ----------------------------- --------------------------- --------------------------- -------------------------- 1 year 3 years 5 years 10 years - ----------------------------- --------------------------- --------------------------- -------------------------- 576 1716 2842 5592 - ----------------------------- --------------------------- --------------------------- --------------------------
INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information.) Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services, Incorporated, an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day investment decisions. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. ================================================================================ Effective close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value portfolio is no longer offered as a Sub-account under the Annuity, except as noted below. Annuity contracts with Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or before June 28, 2002 may continue to allocate Account Value and make transfers into the AST Goldman Sachs Small-Cap Value Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. Owners of Annuities issued after June 28, 2002 will not be allowed to allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-account. ================================================================================ ================================================================================ ================================================================================ ================================================================================ The AST Goldman Sachs Small-Cap Value Sub-account may be offered to new Owners at some future date; however, at the present time, American Skandia has no intention to do so. ================================================================================ Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts.
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL AST Strong International Equity: seeks long-term capital growth by investing in a diversified Strong Capital EQUITY portfolio of international equity securities the issuers of which are considered to have Management, strong earnings momentum. The Portfolio seeks to meet its objective by investing, under Inc. normal market conditions, at least 80% of its total assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The Sub-advisor intends to focus on companies with an above-average potential for long-term growth and attractive relative valuations. The Sub-advisor selects companies based on five key factors: growth, valuation, management, risk and sentiment. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL AST William Blair International Growth (f/k/a AST Janus Overseas Growth): seeks long-term William Blair & EQUITY growth of capital. The Portfolio pursues its objective primarily through investments in Company, L.L.C. equity securities of issuers located outside the United States. The Portfolio normally invests at least 80% of its total assets in securities of issuers from at least five different countries, excluding the United States. The Portfolio invests primarily in companies selected for their growth potential. Securities are generally selected without regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL AST American Century International Growth: seeks capital growth. The Portfolio will seek to American EQUITY achieve its investment objective by investing primarily in equity securities of international Century companies that the Sub-advisor believes will increase in value over time. Under normal Investment conditions, the Portfolio will invest at least 65% of its assets in equity securities of Management, issuers from at least three countries outside of the United States. The Sub-advisor uses a Inc. growth investment strategy it developed that looks for companies with earnings and revenue growth. The Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ AST DeAM International Equity: seeks capital growth. The Portfolio pursues its objective by Deutsche Asset INTER-NATIONAL investing at least 80% of the value of its assets in the equity securities of companies in Management, EQUITY developed non-U.S. countries that are represented in the MSCI EAFE(R)Index. The target of this Inc. Portfolio is to track the performance of the MSCI EAFE(R)Index within 4% with a standard deviation expected of +/- 4%. The Sub-advisor considers a number of factors in determining whether to invest in a stock, including earnings growth rate, analysts' estimates of future earnings and industry-relative price multiples. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ AST MFS Global Equity: seeks capital growth. Under normal circumstances the Portfolio invests at Massachusetts GLOBAL EQUITY least 80% of its assets in equity securities of U.S. and foreign issuers (including issuers in Company developing countries). The Portfolio generally seeks to purchase securities of companies Financial Services with relatively large market capitalizations relative to the market in which they are traded. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP GROWTH AST PBHG Small-Cap Growth: seeks capital growth. The Portfolio pursues its objective by Pilgrim Baxter primarily investing at least 80% of the value of its assets in the common stocks of & Associates, small-sized companies, whose market capitalizations are similar to market capitalizations of Ltd. the companies in the Russell 2000(R)Index at the time of the Portfolio's investment. The Sub-advisor expects to focus primarily on those securities whose market capitalizations or annual revenues are less than $1billion at the time of purchase. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP GROWTH AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital from a portfolio of Deutsche Asset growth stocks of smaller companies. The Portfolio pursues its objective, under normal Management, circumstances, by primarily investing at least 80% of its total assets in the equity Inc. securities of small-sized companies included in the Russell 2000 Growth(R)Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R)Index, but which attempts to outperform the Russell 2000 Growth(R)Index. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP AST Federated Aggressive Growth: seeks capital growth. The Portfolio pursues its investment Federated GROWTH objective by investing in the stocks of small companies that are traded on national security Investment exchanges, NASDAQ stock exchange and the over-the-counter-market. Small companies will be Counseling/ defined as companies with market capitalizations similar to companies in the Russell 2000 Federated Index or the Standard & Poor's Small Cap 600 Index. Up to 25% of the Portfolio's net assets Global may be invested in foreign securities, which are typically denominated in foreign currencies. Investment Management Corp. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP VALUE AST Goldman Sachs Small-Cap Value: seeks long-term capital appreciation. The Portfolio will Goldman Sachs seek its objective through investments primarily in equity securities that are believed to be Asset undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, Management based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $5 billion or less. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP VALUE AST Gabelli Small-Cap Value: seeks to provide long-term capital growth by investing primarily GAMCO in small-capitalization stocks that appear to be undervalued. The Portfolio will have a Investors, Inc. non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as those with a capitalization of $1.5 billion or less. 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. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP VALUE AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. The Portfolio pursues Deutsche Asset its objective, under normal market conditions, by primarily investing at least 80% of its Management, total assets in the equity securities of small-sized companies included in the Russell 2000(R) Inc. Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000(R)Value Index, but which attempts to outperform the Russell 2000(R)Value Index. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MID-CAP GROWTH AST Goldman Sachs Mid-Cap Growth (f/k/a AST Janus Mid-Cap Growth): seeks long-term capital Goldman Sachs growth. The Portfolio pursues its investment objective, by investing primarily in equity Asset securities selected for their growth potential, and normally invests at least 80% of the value Management of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MID-CAP GROWTH AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under normal market conditions, Neuberger the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Berman companies. For purposes of the Portfolio, companies with equity market capitalizations that Management Inc. fall within the range of the Russell Midcap(R)Index, at the time of investment, are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MID-CAP VALUE AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market conditions, the Neuberger Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Berman companies. For purposes of the Portfolio, companies with equity market capitalizations that Management Inc. fall within the range of the Russell Midcap(R)Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ ALL-CAP AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in Fred Alger GROWTH equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in Management, the over-the-counter market. The Portfolio may invest in the equity securities of companies Inc. of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ ALL-CAP AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its objective by GAMCO VALUE investing primarily in readily marketable equity securities including common stocks, preferred Investors, Inc. stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. The Portfolio focuses on companies that appear underpriced relative to their private market value ("PMV"). PMV is the value that the Portfolio's Sub-advisor believes informed investors would be willing to pay for a company. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR AST T. Rowe Price Natural Resources: seeks long-term capital growth primarily through the T. Rowe Price common stocks of companies that own or develop natural resources (such as energy products, Associates, precious metals and forest products) and other basic commodities. The Portfolio normally Inc. invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio looks for companies that have the ability to expand production, to maintain superior exploration programs and production facilities, and the potential to accumulate new resources. At least 50% of Portfolio assets will be invested in U.S. securities, up to 50% of total assets also may be invested in foreign securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP GROWTH AST Alliance Growth: seeks long-term capital growth. The Portfolio invests at least 80% of Alliance its total assets in the equity securities of a limited number of large, carefully selected, Capital high-quality U.S. companies that are judged likely to achieve superior earnings growth. Management, Normally, about 40-60 companies will be represented in the Portfolio, with the 25 companies L.P. most highly regarded by the Sub-advisor usually constituting approximately 70% of the Portfolio's net assets. An emphasis is placed on identifying companies whose substantially above average prospective earnings growth is not fully reflected in current market valuations. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP GROWTH AST MFS Growth: seeks long-term capital growth and future income. Under normal market Massachusetts conditions, the Portfolio invests at least 80% of its total assets in common stocks and Financial related securities, such as preferred stocks, convertible securities and depositary receipts, Services of companies that the Sub-advisor believes offer better than average prospects for long-term Company growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP GROWTH AST Marsico Capital Growth: seeks capital growth. Income realization is not an investment Marsico Capital objective and any income realized on the Portfolio's investments, therefore, will be Management, LLC incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, a "bottom up" stock selection. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP GROWTH AST Goldman Sachs Concentrated Growth (f/k/a AST JanCap Growth): seeks growth of capital in a Goldman Sachs manner consistent with the preservation of capital. Realization of income is not a Asset significant investment consideration and any income realized on the Portfolio's investments, Management therefore, will be incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30 - 45 companies that are considered by the Sub-advisor to be positioned for long-term growth. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP GROWTH AST DeAM Large-Cap Growth: seeks maximum growth of capital by investing primarily in the Deutsche Asset growth stocks of larger companies. The Portfolio pursues its objective, under normal market Management, conditions, by primarily investing at least 80% of its total assets in the equity securities Inc. of large-sized companies included in the Russell 1000(R)Growth Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Growth Index, but which attempts to outperform the Russell 1000(R)Growth Index through active stock selection. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP VALUE AST DeAM Large-Cap Value (f/k/a AST Janus Strategic Value): seeks maximum growth of capital by Deutsche Asset investing primarily in the value stocks of larger companies. The Portfolio pursues its Management, objective, under normal market conditions, by primarily investing at least 80% of the value of Inc. its assets in the equity securities of large-sized companies included in the Russell 1000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Value Index, but which attempts to outperform the Russell 1000(R)Value Index through active stock selection. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP AST Alliance/Bernstein Growth + Value: seeks capital growth by investing approximately 50% of Alliance BLEND its assets in growth stocks of large companies and approximately 50% of its assets in value Capital stocks of large companies. The Portfolio will invest primarily in commons tocks of large U.S. Management, companies included in the Russell 1000(R)Index (the "Russell 1000(R)"). The Russell 1000(R)is a L.P. market capitalization-weighted index that measures the performance of the 1,000 largest U.S. companies. Normally, about 60-85 companies will be represented in the Portfolio, with 25-35 companies primarily from the Russell 1000(R)Growth Index constituting approximately 50% of the Portfolio's net assets and 35-50 companies primarily from the Russell 1000(R)Value Index constituting the remainder of the Portfolio's net assets. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP VALUE AST Sanford Bernstein Core Value: seeks long-term capital growth by investing primarily in Sanford C. common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be Bernstein & invested in the common stocks of large companies that appear to be undervalued. Among other Co., LLC things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ REAL ESTATE AST Cohen & Steers Realty: seeks to maximize total return through investment in real estate Cohen & Steers (REIT) securities. The Portfolio pursues its investment objective by investing, under normal Capital circumstances, at least 80% of its net assets in securities of real estate issuers. Under Management, normal circumstances, the Portfolio will invest substantially all of its assets in the equity Inc. securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MANAGED INDEX AST Sanford Bernstein Managed Index 500: will invest, under normal circumstances, at least 80% Sanford C. of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Bernstein & Index (the "S&P(R)500 "). The Portfolio seeks to outperform the S&P 500 through stock Co., LLC selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest primarily in the common stocks of companies included in the S&P 500. 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 fundamental quantitative criteria that are designed to indicate whether a particular stock will predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether the Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the proportion of the S&P 500 that the stock represents. In addition, the Sub-advisor also may determine that based on the quantitative criteria, certain equity securities that are not included in the S&P 500 should be held by the Portfolio. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ GROWTH AST American Century Income & Growth: seeks capital growth with current income as a secondary American AND objective. The Portfolio invests primarily in common stocks that offer potential for capital Century INCOME growth, and may, consistent with its investment objective, invest in stocks that offer Investment potential for current income. The Sub-advisor utilizes a quantitative management technique Management, with a goal of building an equity portfolio that provides better returns than the S&P 500 Inc. Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ AST Alliance Growth and Income: seeks long-term growth of capital and income while attempting Alliance to avoid excessive fluctuations in market value. The Portfolio normally will invest in common Capital GROWTH stocks (and securities convertible into common stocks). The Sub-advisor will take a Management, AND value-oriented approach, in that it will try to keep the Portfolio's assets invested in L.P. INCOME securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ GROWTH AST MFS Growth with Income: seeks long term growth of capital with a secondary objective to Massachusetts AND seek reasonable current income. Under normal market conditions, the Portfolio invests at Financial INCOME least 65% of its net assets in common stocks and related securities, such as preferred stocks, Services convertible securities and depositary receipts. The stocks in which the Portfolio invests Company generally will pay dividends. While the Portfolio may invest in companies of any size, the Portfolio generally focuses on companies with larger market capitalizations that the Sub-advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The Portfolio may invest up to 20% of its net assets in foreign securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ EQUITY INCOME AST INVESCO Capital Income (f/k/a AST INVESCO Equity Income): seeks capital growth and current INVESCO Funds income while following sound investment practices. The Portfolio seeks to achieve its Group, Inc. objective by investing in securities that are expected to produce relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular dividends. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ BALANCED AST DeAM Global Allocation: seeks a high level of total return by investing primarily in a Deutsche Asset diversified portfolio of mutual funds. The Portfolio seeks to achieve its investment Management, objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Inc. Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. The Portfolio is expected to be invested in at least six such Underlying Portfolios at any time. It is expected that the investment objectives of such AST Portfolios will be diversified. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ AST American Century Strategic Balanced: seeks capital growth and current income. The American Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity Century securities and the remainder in bonds and other fixed income securities. Both the Portfolio's Investment BALANCED equity and fixed income investments will fluctuate in value. The equity securities will Management, fluctuate depending on the performance of the companies that issued them, general market and Inc. economic conditions, and investor confidence. The fixed income investments will be affected primarily by rising or falling interest rates and the credit quality of the issuers. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ ASSET ALLOCA-TION AST T. Rowe Price Asset Allocation: seeks a high level of total return by investing primarily T. Rowe Price in a diversified portfolio of fixed income and equity securities. The Portfolio normally Associates, invests approximately 60% of its total assets in equity securities and 40% in fixed income Inc. securities. The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small and medium-sized companies with good growth prospects. The fixed income portion of the Portfolio will be allocated among investment grade securities, high yield or "junk" bonds, foreign high quality debt securities and cash reserves. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ GLOBAL BOND AST T. Rowe Price Global Bond: seeks to provide high current income and capital growth by T. Rowe Price investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will International, invest at least 80% of its total assets in all types of high quality bonds including those Inc. issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ HIGH YIELD BOND AST Federated High Yield: seeks high current income by investing primarily in a diversified Federated portfolio of fixed income securities. The Portfolio will invest at least 80% of its assets in Investment fixed income securities rated BBB and below. These fixed income securities may include Counseling preferred stocks, convertible securities, bonds, debentures, notes, equipment lease certificates and equipment trust certificates. A fund that invests primarily in lower-rated fixed income securities will be subject to greater risk and share price fluctuation than a typical fixed income fund, and may be subject to an amount of risk that is comparable to or greater than many equity funds. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ BOND AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity for capital Lord, Abbett & appreciation to produce a high total return. To pursue its objective, the Portfolio will Co. LLC invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible in common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ BOND AST DeAM Bond: seeks a high level of income, consistent with the preservation of capital. Deutsche Asset Under normal circumstances, the Portfolio invests at least 80% of its total assets in Management, intermediate-term U.S. Treasury, corporate, mortgage-backed and asset-backed, taxable Inc. municipal and tax-exempt municipal bonds. The Portfolio invests primarily in investment grade fixed income securities rated within the top three rating categories of a nationally recognized rating organization. Fixed income securities may be issued by U.S. and foreign corporations or entities including banks and various government entities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ BOND AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of Pacific capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a three- to six-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ BOND AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation Pacific of capital and prudent investment management. The Portfolio will invest in a diversified Investment portfolio of fixed-income securities of varying maturities. The average portfolio duration of Management the Portfolio generally will vary within a one- to three-year time frame based on the Company LLC Sub-advisor's forecast for interest rates. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MONEY MARKET AST Money Market: seeks high current income and maintain high levels of liquidity. The Wells Capital Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average Management, maturity of not more than 90 days and by investing in securities which have effective Inc. maturities of not more than 397 days. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ EMERGING MARKETS Montgomery Variable Series - Emerging Markets: seeks long-term capital appreciation, under Gartmore Global normal conditions by investing at least 80% of its total assets in stocks of companies of any Asset size based in the world's developing economies. Under normal market conditions, investments Management are maintained in at least six countries at all times and no more than 35% of total assets in Trust/Gartmore any single one of them. Global Partners - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ EQUITY INCOME WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income. Wells Fargo The Portfolio pursues its objective primarily by investing in the common stocks of large, Funds domestic companies with above-average return potential based on current market valuations and Management, LLC above-average dividend income. Under normal market conditions, the Portfolio invests at least 80% of its total assets in income producing equity securities and in issues of companies with market capitalizations of $3 billion or more. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MID-CAP EQUITY INVESCO Variable Investment Funds - Dynamics: seek long-term capital growth. The Portfolio INVESCO Funds invests at least 65% of its assets in common stocks of mid-sized companies. INVESCO defines Group, Inc. mid-sized companies as companies that are included in the Russell Midcap Growth Index at the time of purchase, or if not included in that Index, have market capitalizations of between $2.5 billion and $15 billion at the time of purchase. The core of the Portfolio's investments are in securities of established companies that are leaders in attractive growth markets with a history of strong returns. The remainder of the Portfolio is invested in securities of companies that show accelerating growth, driven by product cycles, favorable industry or sector conditions, and other factors that INVESCO believes will lead to rapid sales or earnings growth. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR INVESCO Variable Investment Funds - Technology: seeks capital growth. The Portfolio normally INVESCO Funds invests 80% of its net assets in the equity securities and equity-related instruments of Group, Inc. companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. Many of these products and services are subject to rapid obsolescence, which may lower market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR INVESCO Variable Investment Funds - Health Sciences: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instrumentsof companies that develop, produce or distribute products or services related to health care. These companies include, but are not limited to, medical equipment or supplies, pharmaceuticals, biotechnology and healthcare providers and service companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR INVESCO Variable Investment Funds - Financial Services: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks (regional and money-centers), insurance companies (life, property and casualty, and multiline), investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies) and suppliers to financial services companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR INVESCO Variable Investment Funds - Telecommunications: seeks capital growth and current INVESCO Funds income. The Portfolio normally invests 80% of its net assets in the equity securities and Group, Inc. equity-related instruments of companies engaged in the design, development, manufacture, distribution, or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes, but is not limited to, companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. Many of these products and services are subject to rapid obsolescence, which may lower the market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ GLOBAL EQUITY Evergreen VA Global Leaders: seeks to provide investors with long-term capital growth. The Evergreen Portfolio normally invests as least 65% of its assets in a diversified portfolio of U.S. and Investment non-U.S. equity securities of companies located in the world's major industrialized Management countries. The Portfolio will invest in no less than three countries, which may include the Company, LLC U.S., but may invest more than 25% of its assets in one country. The Portfolio invests only in the best 100 companies, which are selected by the Portfolio's manager based on as high return on equity, consistent earnings growth, established market presence and industries or sectors with significant growth prospects. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SMALL CAP EQUITY Evergreen VA Special Equity: seeks capital growth. The Portfolio normally invests at least Evergreen 80% of its assets in common stocks of small U.S. companies (i.e., companies whose market Investment capitalizations fall within the range of the Russell 2000(R)Index, at the time of purchase). Management The remaining 20% of the Portfolio's assets may be represented by cash or invested in various Company, LLC cash equivalents. The Portfolio's manager selects stocks of companies which it believes have the potential for accelerated growth in earnings and price. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ MID-CAP EQUITY Evergreen VA Omega: seeks long-term capital growth. The Portfolio invests primarily in common Evergreen stocks and securities convertible into common stocks of U.S. companies across all market Investment capitalizations. The Portfolio's managers employ a growth style of equity management. Management "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated Company, LLC earnings ranging from steady to accelerated growth. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL ProFund VP Europe 30: seeks daily investment results, before fees and expenses, that ProFund EQUITY correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 Advisors LLC Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL ProFund VP Asia 30: seeks daily investment results, before fees and expenses, that correspond ProFund EQUITY to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created Advisors LLC by ProFund Advisors, is composed of 30 of the companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on the modified market capitalization method. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER-NATIONAL ProFund VP Japan: seeks daily investment results, before fees and expenses, that correspond to ProFund EQUITY the daily performance of the Nikkei 225 Stock Average. Since the Japanese markets are not Advisors LLC open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States. The Nikkei 225 Stock Average is a price-weighted index of 225 large, actively traded Japanese stocks traded on the Tokyo Stock Exchange. The Index is computed and distributed by the Nihon Keizai Shimbun. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Banks: seeks daily investment results, before fees and expenses, that correspond to ProFund the daily performance of the Dow Jones U.S. Banks Sector Index. The Dow Jones U.S. Banks Advisors LLC Index measures the performance of the banking industry of the U.S. equity market. Component companies include all regional and major U.S. domiciled international banks, savings and loans, savings banks, thrifts, building associations and societies. Investment and merchant banks are excluded. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Basic Materials: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The Advisors LLC Dow Jones U.S. Basic materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. Component companies are involved in the production of aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Biotechnology: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones Advisors LLC U.S. Biotechnology Index measures the performance of the biotechnology industry of the U.S. equity market. Component companies include those engaged in genetic research, and/or the marketing and development of recombinant DNA products. Makers of artificial blood and contract biotechnology researchers are also included in the Index. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Consumer Cyclical: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. The Advisors LLC Dow Jones U.S. Consumer Cyclical Sector Index measures the performance of the consumer cyclical economic sector of the U.S. equity market. Component companies include airlines, auto manufacturers, auto parts, tires, casinos, consumer electronics, recreational products and services, restaurants, lodging, toys, home construction, home furnishings and appliances, footwear, clothing and fabrics. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Consumer Non-Cyclical: seeks daily investment results, before fees and expenses, ProFund that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector Advisors LLC Index. The Dow Jones U.S. Consumer Non-Cyclical Sector Index measures the performance of the consumer non-cyclical economic sector of the U.S. equity market. Component companies include beverage companies, consumer service companies, durable and non-durable household product manufacturers, cosmetic companies, food products and agriculture and tobacco products. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Energy: seeks daily investment results, before fees and expenses, that correspond ProFund to the daily performance of the Dow Jones U.S. Energy Sector Index. The Dow Jones U.S. Energy Advisors LLC Sector Index measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Financial: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. The Dow Advisors LLC Jones U.S. Financial Sector Index measures the performance of the financial services economic sector of the U.S. equity market. Component companies include regional banks, major U.S. domiciled international banks, full line, life, and property and casualty insurance companies, companies that invest, directly or indirectly in real estate, diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders, investment advisers and securities broker-dealers, investment banks, merchant banks, online brokers, publicly traded stock exchanges. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Healthcare: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. The Down Advisors LLC Jones U.S. healthcare Sector Index measures the performance of the healthcare economic sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Industrial: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. The Dow Advisors LLC Jones U.S. Industrial Sector Index measures the performance of the industrial economic sector of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Internet: seeks daily investment results, before fees and expenses, that correspond ProFund to the daily performance of the Dow Jones U.S. Internet Index. The Dow Jones Composite Advisors LLC Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce - companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site; and Internet Services - companies that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Pharmaceuticals: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Sector Index. The Advisors LLC Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry of the U.S. equity market. Component companies include the makers of prescription and over-the-counter drugs, such as aspirin, cold remedies, birth control pills, and vaccines, as well as companies engaged in contract drug research.. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Precious Metals: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Philadelphia Stock Exchange Gold & Silver Sector Advisors LLC Index. The Philadelphia Stock Exchange Gold and Silver Sector Index measures the performance of the gold and silver mining industry of the global equity market. Component companies include companies involved in the mining and production of gold, silver, and other precious metals, precious stones and pearls. The Index does not include producers of commemorative medals and coins that are made of these metals. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Real Estate: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones Advisors LLC U.S. Real Estate Index measures the performance of the real estate industry of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings, housing developments and, real estate investment trusts ("REITs") that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Semiconductor: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones Advisors LLC U.S. Semiconductor Index measures the performance of the semiconductor industry of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as circuit boards and motherboards. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Technology: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow Advisors LLC Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and internet services. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Telecommunications: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The Advisors LLC Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed line communications and wireless communications companies. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ SECTOR ProFund VP Utilities: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow Advisors LLC Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ THE PROFUND VP PORTFOLIOS DESCRIBED BELOW ARE AVAILABLE AS SUB-ACCOUNTS TO ALL ANNUITY OWNERS. EACH PORTFOLIO PURSUES AN INVESTMENT STRATEGY THAT SEEKS TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH A WIDELY FOLLOWED INDEX, INCREASE BY A SPECIFIED FACTOR RELATIVE TO THE INDEX, MATCH THE INVERSE OF THE INDEX OR THE INVERSE OF THE INDEX MULTIPLIED BY A SPECIFIED FACTOR. THE INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH POSITIVELY AND NEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE APPLICABLE INDEX. IT IS RECOMMENDED THAT ONLY THOSE ANNUITY OWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSET ALLOCATION STRATEGY INVEST IN THESE PORTFOLIOS. WE HAVE ARRANGED THE PORTFOLIOS BASED ON THE INDEX ON WHICH IT'S INVESTMENT STRATEGY IS BASED. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ The S&P 500 Index(R)is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization financial viability and public float. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P 500 ProFund VP Bull: seeks daily investment results, before fees and expenses, that correspond to ProFund the daily performance of the S&P 500(R)Index. Advisors LLC - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P 500 ProFund VP Bear: seeks daily investment results, before fees and expenses, that correspond to ProFund the inverse (opposite) of the daily performance of the S&P 500(R)Index. If ProFund VP Bear is Advisors LLC successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the S&P 500(R)Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P 500 ProFund VP UltraBull (f/k/a ProFund VP Bull Plus): seeks daily investment results, before fees ProFund and expenses, that correspond to twice (200%) the daily performance of the S&P 500(R)Index. If Advisors LLC the ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(R)Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times the daily performance of the S&P 500(R)Index - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ The NASDAQ-100 Index(R)is a market capitalization weighted index that includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ NASDAQ 100 ProFund VP OTC: seeks daily investment results, before fees and expenses, that correspond to ProFund the daily performance of the NASDAQ-100 Index(R). "OTC" in the name of ProFund VP OTC reflers Advisors LLC to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ NASDAQ 100 ProFund VP Short OTC: seeks daily investment results, before fees and expenses, that ProFund correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index(R). If Advisors LLC ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index(R)when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ NASDAQ 100 ProFund VP UltraOTC: seeks daily investment results, before fees and expenses, that correspond ProFund to twice (200%) the daily performance of the NASDAQ-100 Index(R). If ProFund VP UltraOTC is Advisors LLC successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ The S&P MidCap 400 Index(R)is a widely used measure of mid-sized company U.S. stock market performance. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization, financial viability and public float. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P MIDCAP 400 ProFund VP Mid-Cap Value: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the S&P MidCap 400/Barra Value Index(R). The S&P Advisors LLC MidCap400/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ ProFund VP Mid-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the S&P MidCap 400/Barra Growth Index(R). The S&P MidCap Advisors LLC 400/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower S&P MIDCAP 400 growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year.. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ ProFund VP UltraMid-Cap: seeks daily investment results, before fees and expenses, that ProFund correspond to twice (200%) the daily performance of the S&P MidCap 400 Index(R). If ProFund VP Advisors LLC UltraMid-Cap is successful in meeting its objective, its net asset value should gain S&P MIDCAP 400 approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ The S&P SmallCap 600 Index(R)consists of 600 domestic stocks chosen for market size, liquidity, and industry group representation. The Index comprises stocks from the industrial, utility, financial, and transportation sectors. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P SMALLCAP 600 ProFund VP Small-Cap Value: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the S&P SmallCap 600/Barra Value Index(R). The S&P Advisors LLC SmallCap 600/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ S&P SMALLCAP 600 ProFund VP Small-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index(R). The S&P Advisors LLC SmallCap 600/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization-of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ The Russell 2000 Index(R)measures the performance of the 2,000 small companies in the Russell 3000 Index(R)representing approximately 8% of the total market capitalization of the Russell 3000 Index(R), which in turn represents approximately 98% of the investable U.S. equity market. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ RUSSELL 2000 ProFund VP UltraSmall-Cap: seeks daily investment results, before fees and expenses, that ProFund correspond to twice (200%) the daily performance of the Russell 2000(R)Index. If ProFund VP Advisors LLC UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ U.S. GOV'T BOND ProFund VP U.S. Government Plus: seeks daily investment results, before fees and expenses, ProFund that correspond to one and one-quarter times (125%) the daily price movement of the most Advisors LLC recently issued 30-year U.S. Treasury Bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ U.S. GOV'T BOND ProFund VP Rising Rates Opportunity: seeks daily investment results, before fees and expenses, ProFund that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price Advisors LLC movement of the most recently issued Long Bond. In accordance with its stated objective, the net asset value of ProFund VP rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ Each portfolio of the First Defined Portfolio Fund LLC invests in the securities of a relatively few number of issuers or in a particular sector of the economy. Since the assets of each portfolio are invested in a limited number of issuers or a limited sector of the economy, the net asset value of the portfolio may be more susceptible to a single adverse economic, political or regulatory occurrence. Certain of the portfolios may also be subject to additional market risk due to their policy of investing based on an investment strategy and generally not buying or selling securities in response to market fluctuations. Each portfolio's relative lack of diversity and limited ongoing management may subject Owners to greater market risk than other portfolios. The stock selection date for each of the strategy Portfolios of the First Defined Portfolio Fund LLC is on or about December 31st of each year. The holdings for each strategy Portfolio will be adjusted annually on or about December 31st in accordance with the Portfolio's investment strategy. At that time, the percentage relationship among the shares of each issuer held by the Portfolio is established. Through the next one-year period that percentage will be maintained as closely as practicable when the Portfolio makes subsequent purchases and sales of the securities. - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ LARGE CAP First Trust(R)10 Uncommon Values: seeks to provide above-average capital appreciation. The First Trust BLEND Portfolio seeks to achieve its objective by investing primarily in the ten common stocks Advisors L.P. selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
- - ------------------ -------------------------------------------------------------------------------------------------- ------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ------------------ -------------------------------------------------------------------------------------------------- ------------ - - ------------------ -------------------------------------------------------------------------------------------------- ------------ INTER- The Prudential Series Fund, Inc. - SP Jennison International Growth: seeks to provide Prudential NATIONAL EQUITY long-term growth of capital. The Portfolio pursues its objective by investing in Investments equity-related securities of foreign issuers that the Sub-advisor believes will increase in LLC/ value over a period of years. The Portfolio invests primarily in the common stock of large Jennison and medium-sized foreign companies. Under normal circumstances, the Portfolio invests at Associates LLC least 65% of its total assets in common stock of foreign companies operating or based in at least five different countries. The Portfolio looks primarily for stocks of companies whose earnings are growing at a faster rate than other companies and that have above-average growth in earnings and cash flow, improving profitability, strong balance sheets, management strength and strong market share for its products. The Portfolio also tries to buy such stocks at attractive prices in relation to their growth prospects. - - ------------------ -------------------------------------------------------------------------------------------------- ------------
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment Services, Incorporated. 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. The First Trust(R)10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(R)10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED INVESTMENT OPTIONS? We offer fixed investment options of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the rates that are currently being credited on Fixed Allocations. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-766-4530 to determine availability of Fixed Allocations in your state and for your annuity product. FEES AND CHARGES WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a Contingent Deferred Sales Charge or CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the date we receive a Purchase Payment as Year 1. The amount of the CDSC applicable to each Purchase Payment decreases over time, measured from the date the Purchase Payment is applied. The CDSC percentages are shown below. - ------------------ ----- ------ ----- ----- ----- ----- ----- ----- ----- YEARS 1 2 3 4 5 6 7 8 9+ - ------------------ ----- ------ ----- ----- ----- ----- ----- ----- ----- - ------------------ ----- ------ ----- ----- ----- ----- ----- ----- ----- CHARGE (%) 8.5 8.5 8.5 8.5 7.0 6.0 5.0 4.0 0.0 - ------------------ ----- ------ ----- ----- ----- ----- ----- ----- ----- Each Purchase Payment has its own CDSC period. When you make a withdrawal, we assume that the oldest Purchase Payment is being withdrawn first so that the lowest CDSC is deducted from the amount withdrawn. After eight (8) complete years from the date you make a Purchase Payment, no CDSC will be assessed if you withdraw or surrender that Purchase Payment. Under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. For purposes of calculating the CDSC on a surrender or a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party investment advisory service will be subject to the twenty-transfer limit. However, all transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: Several states and some municipalities charge premium taxes or similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2%. We generally will deduct the amount of tax payable at the time the tax is imposed, but may also decide to deduct tax charges from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily against the average daily assets allocated to the Sub-accounts. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (1.25%) and the Administration Charge (0.15%). The total charge is equal to 1.40% on an annual basis. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity and to offset a portion of the costs associated with offering Credits which are funded through American Skandia's general account. The Insurance Charge is deducted against your Annuity's Account Value, which includes the amount of any Credits we apply to your Purchase Payments and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts. Any profit that American Skandia may make on the Insurance Charge may include a profit on the portion of the Account Value that represents Credits applied to the Annuity, as well as profits based on market appreciation of the Sub-account values. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits: If you elect to purchase one or more optional benefits, we will deduct an additional charge on a daily basis from your Account Value allocated to the Sub-accounts. The charge for each optional benefit is deducted in addition to the Insurance Charge due to the increased insurance risk associated with the optional benefits. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. Please refer to the section entitled "Death Benefit" for a description of the charge for each Optional Death Benefit. Please refer to the section entitled "Managing Your Account Value - Do you offer programs designed to guarantee a "return of premium" at a future date?" for a description of the charge for the Guaranteed Return Option. WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS? We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. These fees are deducted daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by Underlying Funds". WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? In certain states a tax is due if and when you exercise your right to receive periodic annuity payments. The amount payable will depend on the applicable jurisdiction and on the annuity payment option you select. If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will continue to be subject to an insurance charge. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce the portion of the Insurance Charge attributed to the charge covering administrative costs. PURCHASING YOUR ANNUITY WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $1,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $1,000 in total Purchase Payments. Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 80 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 80 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 80 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 591/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. Additional Purchase Payments may be made at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the Annuity is entity owned) is not over age 80. Special Considerations for Purchasers of Bonus or Credit Products |X| This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an additional amount for the XTra CreditSM feature. However, if you make a withdrawal that exceeds the annual free withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher and is deducted for a longer period of time as compared to our other variable annuities. If you expect that you will need to access your Account Value during the CDSC period and the liquidity provisions are insufficient to satisfy that need, then this Annuity may be more expensive than other variable annuities. |X| The XTra CreditSM amount is included in your Account Value. However, American Skandia may take back the original XTra CreditSM amount applied to your Purchase Payment if you die, or elect to withdraw all or a portion of your Account Value under the medically-related waiver provision, within 12 months of having received an XTra CreditSM amount. In either situation, the value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra CreditSM amount will not be taken back. Additional conditions and restrictions apply. |X| We offer other annuities where we apply an XTra CreditSM to your annuity with each purchase payment you make. The XTra CreditSM amount we apply to purchase payments on those annuities is initially higher than on this Annuity but reduces over time and only applies during the first six annuity years. The total asset-based charges on those annuities are higher during the first 10 years but are lower than this Annuity after the 10th year. The CDSC is also higher and is deducted for a longer period of time than on this Annuity; however the CDSC on those annuities applies from the issue date of the annuity, not separately to each purchase payment. Owner, Annuitant and Beneficiary Designations: On your Application, we will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. |X| Owner: The Owner(s) holds all rights under the Annuity. You may name more than one Owner in which case all ownership rights are held jointly. However, this Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." |X| Annuitant: The Annuitant is the person we agree to make annuity payments to and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. |X| Beneficiary: The Beneficiary is the person(s) or entity you name to receive the death benefit. If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. MANAGING YOUR ANNUITY MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us 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: |X| 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; |X| a new Annuitant subsequent to the Annuity Date; |X| for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and |X| a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account Value to the AST Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to allow for delivery of your Annuity. If you return your Annuity, we will not return any Credits we applied to your Annuity based on your - Purchase Payments. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic purchase payment program. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment. Additional Purchase Payments may be paid at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the Annuity is entity owned) is not over age 80. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "American Skandia's Systematic Investment Plan." Purchase Payments made through bank drafting may only be allocated to the variable investment options when applied. Bank drafting allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $1,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $1,000. MANAGING YOUR ACCOUNT VALUE HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. In those states where we are required to return your Purchase Payment if you exercise your right to return the Annuity, we initially allocate all amounts that you choose to allocate to the variable investment options to the AST Money Market Sub-account. At the end of the right to cancel period we will reallocate your Account Value according to your most recent allocation instructions. Where permitted by law, we will allocate your Purchase Payments according to your initial instructions, without temporarily allocating to the AST Money Market Sub-account. To do this, we will ask that you execute our form called a "return waiver" that authorizes us to allocate your Purchase Payment to your chosen Sub-accounts immediately. If you submit the "return waiver" and then decide to return your Annuity during the right to cancel period, you will receive your current Account Value, minus the amount of any Credits, which may be more or less than your initial Purchase Payment (see "May I Return the Annuity if I Change my Mind?"). Subsequent Purchase Payments: We will allocate any additional Purchase Payments you make according to your current allocation instructions. If any rebalancing or asset allocation programs are in effect, the allocation should conform with such a program. We assume that your current allocation instructions are valid for subsequent Purchase Payments until you make a change to those allocations or request new allocations when you submit a new Purchase Payment. HOW DO I RECEIVE CREDITS? We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment. The amount of the Credit is payable from our general account. The amount of the Credit depends on the cumulative amount of Purchase Payments you have made to your Annuity, payable as a percentage of each specific Purchase Payment, according to the table below: - -------------------------------------------------------- ------------------- Cumulative Purchase Payments Credit - -------------------------------------------------------- ------------------- - -------------------------------------------------------- ------------------- Between $1,000 and $9,999 1.5% Between $10,000 and $4,999,999 4.0% Greater than $5,000,000 5.0% - -------------------------------------------------------- ------------------- Credits Applied to Purchase Payments for Designated Class of Annuity Owner Where allowed by state law, on Annuities owned by a member of the class defined below, the table of Credits we apply to Purchase Payments is deleted. The Credit applied to all Purchase Payments on such Annuities will be 8.5%. The designated class of Annuity Owners includes: (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) the child(ren) or other legal dependent under the age of 21 of any such person noted in (b) through (h) above; and (j) the siblings of any such persons noted in (b) through (h) above. All other terms and conditions of the Annuity apply to Owners in the designated class. You must notify us at the time you apply for an Annuity if you are a member of the designated class. American Skandia is not responsible for monitoring whether you qualify as a member of the designated class. Failure to inform us that you qualify as a member of the designated class may result in your Annuity receiving fewer Credits than would otherwise be applied to your Annuity. HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE? Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied. Examples of Applying Credits Initial Purchase Payment Assume you make an initial Purchase Payment of $2,500. We would apply a 1.5% Credit to your Purchase Payment and allocate the amount of the Credit ($37.50 = $2,500 X .015) to your Account Value in the proportion that your Account Value is allocated. Additional Purchase Payment (at same breakpoint) Assume that you make an additional Purchase Payment of $5,000. Because your cumulative Purchase Payments are less than the next breakpoint ($10,000), we would apply a 1.5% Credit to your Purchase Payment and allocate the amount of the Credit ($75.00 = $5,000 X ..015) to your Account Value. Additional Purchase Payment (at higher breakpoint) Assume that you make an additional Purchase Payment of $400,000. Because your cumulative Purchase Payments are now $407,500 (greater than the next breakpoint), we would apply a 4.0% Credit to your Purchase Payment and allocate the amount of the Credit ($16,000 = $400,000 X .04) to your Account Value. ================================================================================ This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an additional amount for the XTra CreditSM feature. However, the amount of any Credits applied to your Account Value can be recovered by American Skandia under certain circumstances: ================================================================================ |X| any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be recovered. ================================================================================ ================================================================================ |X| the amount available under the medically-related surrender portion of the Annuity will not include the amount of any Credits payable on Purchase Payments made within 12 months of the date the Annuitant first became eligible for the medically-related surrender. ================================================================================ ================================================================================ |X| if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits. ================================================================================ ================================================================================ ================================================================================ The value of the XTra CreditSM amount will be substantially reduced if American Skandia recovers the XTra CreditSM amount under these circumstances. However, any investment gain on the XTra CreditSM amount will not be taken back. We do not deduct a CDSC in any situation where we recover the XTra CreditSM amount. Examples of Recovering Credits The following are hypothetical examples of how Credits could be recovered by American Skandia. These examples do not cover every potential situation. Recovery from payment of Death Benefits 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If the Death Benefit becomes payable in the 9th month after the Issue Date, the amount of the Death Benefit would be reduced by the entire amount of the prior Credits ($2,400). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If death occurs in the 16th month after the Issue Date, the amount of the Death Benefit would be reduced but only in the amount of those Credits applied within the previous 12-months. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the date of death, the Death Benefit would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of death. Therefore, the amount of the Death Benefit would be reduced by the amount of the Credits payable on the additional Purchase Payment ($400). 3. NOTE: If the Death Benefit would otherwise have been equal to the Purchase Payments minus any proportional withdrawals due to poor investment performance, we will not reduce the amount of the Death Benefit by the amount of the Credits as shown in Example 2 above. Recovery from Medically-Related Surrenders 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You receive a Credit of $2,000 ($50,000 X .04). The Annuitant is diagnosed as terminally ill in the 6th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Assuming the Credits were applied within 12-months of the date of diagnosis of the terminal illness, the amount that would be payable under the medically-related surrender provision would be reduced by the entire amount of the Credits ($2,000). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. The Annuitant is diagnosed as terminally ill in the 16th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the diagnosis, the amount that would be payable upon the medically-related surrender provision would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of diagnosis. Therefore, the amount that would be payable under the medically-related surrender provision would be reduced by the amount of the Credits payable on the additional Purchase Payment ($400). Credits applied to estimated Purchase Payments Under certain circumstances, we may determine the amount of Credits payable on two or more separate Purchase Payments based on the Credit percentage that would have applied had all such Purchase Payments been made at the same time. To make use of this procedure, often referred to as a "letter of intent", you must provide evidence of your intention to submit the cumulative additional Purchase Payments within a 13-month period. A letter of intent must be provided to us prior to the Issue Date to be effective. Acceptance of a letter of intent is at our sole discretion and may be subject to restrictions as to the minimum initial Purchase Payment that must be submitted to receive the next higher breakpoint. Failure to inform us that you intend to submit two or more Purchase Payments within a 13-month period may result in your Annuity receiving fewer Credits than would otherwise be added to your Annuity. If you submit a letter of intent and receive Credits on Purchase Payments at a higher Credit percentage than would have applied BUT do not submit the required Purchase Payments during the 13-month period as required by your letter of intent, we may recover the "excess" Credits. "Excess" Credits are Credits in excess of the Credits that would have been payable without the letter of intent. If we determine that you have received "excess" Credits, any such amounts will be taken pro-rata from the investment options based on your Account Values as of the date we act to recover the excess. If the amount of the recovery exceeds your then current Surrender Value, we will recover all remaining Account Value and terminate your Annuity. General Information about Credits |X| We do not consider Credits to be "investment in the contract" for income tax purposes. |X| You may not withdraw the amount of any Credits under the Free Withdrawal provision. The Free Withdrawal provision only applies to withdrawals of Purchase Payments. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment restrictions. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year, including transfers made as part of any rebalancing, market timing, asset allocation or similar program which you have authorized. Transfers made as part of a dollar cost averaging program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. 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: (a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by one or more of the Portfolios that the purchase or redemption of shares must be restricted because of excessive trading or a specific transfer or group of transfers is deemed to have a detrimental effect on the share prices of affected Portfolios. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. Under such a circumstance, we will process transfers according to our rules then in effect and provide notice if the transfer request was denied. If a transfer request is denied, a new transfer request may be required. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount each month from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. Dollar Cost Averaging allows you to invest regularly each month, regardless of the current unit value (or price) of the Sub-account(s) you invest in. This enables you to purchase more units when the market price is low and fewer units when the market price is high. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. We do not deduct a charge for participating in a Dollar Cost Averaging program. You must have a minimum Account Value of at least $10,000 to enroll in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: |X| You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. |X| You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. |X| Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced quarterly, semi-annually, or annually. On the appropriate date, your variable investment options are rebalanced to the allocation percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. If you request a transfer from or into any variable investment option participating in the automatic rebalancing program, we will assume that you wish to change your rebalancing percentages as well, and will automatically adjust the rebalancing percentages in accordance with the transfer unless we receive alternate instructions from you. You must have a minimum Account Value of at least $10,000 to enroll in automatic rebalancing. All rebalancing transfers made on the same day as part of an automatic rebalancing program are considered as one transfer when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. DO YOU OFFER ANY ASSET ALLOCATION PROGRAMS? Yes. During the accumulation period, we offer two different asset allocation programs designed for American Skandia by Morningstar Associates, LLC. Each program is available to Annuity Owners at no additional charge. Each program is designed as a tool to enable you and your investment professional to develop an asset allocation program that is appropriate for you. Your investment professional will help you to complete an investor questionnaire that will help you and your investment professional to determine whether participating in a program is appropriate for you and to determine your investment style from which you can choose the available model portfolios. We offer one program where you and your investment professional choose from the available Sub-accounts for each asset class in the model portfolio you have chosen based on your answers to the questionnaire. You may change your selected Sub-accounts at any time. We offer a second program where the Sub-accounts for each asset class in each model portfolio are designated based on an objective evaluation of the available Sub-accounts. If you elect the second program, the selected Sub-accounts within a model portfolio may change periodically. Under both programs, assets allocated to the program are rebalanced on a periodic basis based on suggested changes to the allocation percentages for an asset class within a model portfolio or based on changes in the value of the Sub-accounts. Each asset allocation program is subject to additional limitations and restrictions which are more fully described in the enrollment form for the programs. Asset allocation is a sophisticated method of diversification which allocates assets among asset classes in order to manage investment risk and enhance returns over the long term. However, asset allocation does not guarantee a profit or protect against a loss. You are not obligated to participate or to invest according to the program recommendations. American Skandia does not intend to provide any personalized investment advice in connection with these programs and you should not rely on these programs as providing individualized investment recommendations to you. The asset allocation programs do not guarantee better investment results. We reserve the right to terminate or change the asset allocation programs at any time. You should consult with your investment professional before electing any asset allocation program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, at least as of a specific date in the future. You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 5.33%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.594948 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $59,495 will be allocated to the Fixed Allocation and the remaining Account Value ($41,505) will be allocated to the variable investment options. Assuming that you do not make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. Guaranteed Return Option (GRO)SM We also offer a seven-year program where we monitor your Account Value daily and systematically transfer amounts between Fixed Allocations and the variable investment options you choose. American Skandia guarantees that at the end of the seventh (7th) year from commencement of the program (or any program restart date), you will receive no less than your Account Value on the date you elected to participate in the program, including any Credits we applied to your Purchase Payments ("commencement value"). On the program maturity date, if your Account Value is below the commencement value, American Skandia will apply additional amounts to your Annuity so that it is equal to commencement value or your Account Value on the date you elect to restart the program duration. Any amounts added to your Annuity will be applied to the AST Money Market Sub-account, unless you provide us with alternative instructions. We will notify you of any amounts added to your Annuity under the program. We do not consider amounts added to your Annuity to be "investment in the contract" for income tax purposes. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts. With the Guaranteed Return Option, your Annuity is able to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. NOTE: If a significant amount of your Account Value is systematically transferred to Fixed Allocations during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the Sub-accounts if there is a subsequent market recovery. Each business day we monitor the performance of your Account Value to determine whether it is greater than, equal to or below our "reallocation trigger", described below. Based on the performance of the Sub-accounts in which you choose to allocate your Account Value relative to the reallocation trigger, we may transfer some or all of your Account Value to or from a Fixed Allocation. You have complete discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to restrict certain Portfolios if you participate in the program. |X| Account Value greater than or equal to reallocation trigger: Your Account Value in the variable investment options remains allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation, those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations. A Market Value Adjustment will apply. |X| Account Value below reallocation trigger: A portion of your Account Value in the variable investment options is transferred to a new Fixed Allocation. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation will have a Guarantee Period equal to the remaining duration in the Guaranteed Return Option. The Account Value applied to the new Fixed Allocation will be credited with the fixed interest rate then being applied to a new Fixed Allocation of the next higher yearly duration. The Account Value will remain invested in the Fixed Allocation until the maturity date of the program unless, at an earlier date, your Account Value is at or above the reallocation trigger and amounts can be transferred to the variable investment options (as described above) while maintaining the guarantee protection under the program. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Any change to the allocation mechanism and/or the reallocation trigger will only apply to programs that begin after the change is effective. Program Termination The Guaranteed Return Option will terminate on its maturity date. You can elect to participate in a new Guaranteed Return Option or re-allocate your Account Value at that time. Upon termination, any Account Value allocated to the Fixed Allocations will be transferred to the AST Money Market Sub-account, unless you provide us with alternative instructions. Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: |X| You may terminate the Guaranteed Return Option at any time. American Skandia does not provide any guarantees upon termination of the program. |X| Withdrawals from your Annuity while the program is in effect will reduce the guaranteed amount under the program in proportion to your Account Value at the time of the withdrawal. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. |X| Additional Purchase Payments applied to the Annuity while the program is in effect will only increase the amount guaranteed; however, all or a portion of any additional Purchase Payments may be allocated to the Fixed Allocations. |X| Annuity Owners cannot transfer Account Value to or from a Fixed Allocation while participating in the program and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| The Guaranteed Return Option will terminate: (a) upon the death of the Owner or the Annuitant (in an entity owned contract); and (b) as of the date Account Value is applied to begin annuity payments. |X| You can elect to restart the seven (7) year program duration on any anniversary of the Issue Date of the Annuity. The Account Value on the date the restart is effective will become the new commencement value. You can only elect the program once per Annuity Year. Charges under the Program We deduct a charge equal to 0.25% per year to participate in the Guaranteed Return Option. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date of the program is less than the amount guaranteed; and (b) administration of the program. - - ------------------------------------------------------------------------------ Effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between January 23, 2002 and November 15, 2002 and subsequent to November 19, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 18, 2002 will be subject to the charge method described above. - - ------------------------------------------------------------------------------ MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT? Yes. You may authorize your investment professional to direct the allocation of your Account Value and to request financial transactions between investment options while you are living, subject to our rules. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your investment professional if you fail to inform us that such person's authority has been revoked. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. These investment professionals may be firms or persons who also are appointed by us as authorized sellers of the Annuity. However, we do not offer advice about how to allocate your Account Value under any circumstance. Any investment professionals you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such investment professionals make, any market timing or asset allocation programs they choose to follow or any specific transfers they make on your behalf. We may require investment professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) on American Skandia. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED INVESTMENT OPTIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-766-4530. A Guarantee Period for a Fixed Allocation begins: |X| when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; |X| upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or |X| when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. |X| "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. |X| "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. |X| "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: |X| On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity Date is December 31, 2005). |X| The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the Option-adjusted Spread is 5.50% (I = 5.50%). |X| You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3) years, therefore 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. ACCESS TO ACCOUNT VALUE WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through Partial Withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. The CDSC will be assessed on the amount of Purchase Payments being withdrawn, not on the Account Value at the time of the withdrawal or surrender. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. |X| To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-8 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. |X| You can also make withdrawals in excess of the Free Withdrawal amount. We call this a "Partial Withdrawal." The amount that you may withdraw will depend on the Annuity's Surrender Value. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee, the Tax Charge, any charges for optional benefits and any Market Value Adjustment that may apply to any Fixed Allocations. After any Partial Withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal request as a request to fully surrender your Annuity. The minimum Partial Withdrawal you may request is $100. When we determine if a CDSC applies to Partial Withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial Withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Year 1-8 The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payment) is 10% of each Purchase Payment that has been invested in the Annuity for eight years or less. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. The 10% Free Withdrawal amount is not cumulative. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Year 9+ After Annuity Year 8, the maximum Free Withdrawal amount is the sum of: |X| 10% of any Purchase Payments applied to your Annuity after the Issue Date to which a CDSC would apply upon a partial withdrawal or surrender. |X| 100% of your initial Purchase Payment or all Purchase Payments not previously withdrawn to which a CDSC would not apply upon a partial withdrawal or surrender. |X| 100% of any "growth" in the Annuity. "Growth" equals the current Account Value minus all Purchase Payments that have not previously been withdrawn. For purposes of this provision, any XTra Credit amount we applied to your Purchase Payments are not considered "growth" and are not available as a Free Withdrawal. After the 8th Annuity Year, a CDSC will only apply to withdrawals of Purchase Payments applied to the Annuity after Annuity Year 1 and, for those Purchase Payments, the CDSC will only apply until the end of the applicable CDSC period. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first eight (8) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. The minimum Free Withdrawal you may request is $100. We may reduce or eliminate the amount available as a Free Withdrawal if your Annuity is used in connection with certain plans that receive special tax treatment under the Code. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first eight Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $15,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 through 8 would be 10% of $25,000, or $2,500. In Annuity Year 9, the maximum Free Withdrawal amount would be 10% of the $15,000 Purchase Payment applied in Annuity Year 2 ($1,500) plus 100% of the initial Purchase Payment ($10,000) and any "growth" under the Annuity. 3. Assume you make an initial Purchase Payment of $10,000 and take a Free Withdrawal of $500 in Annuity Year 2 and $1,000 in Annuity Year 3. If you surrender your Annuity in Annuity Year 5, the CDSC will be assessed against the initial Purchase Payment amount ($10,000), not the amount of Purchase Payments reduced by the amounts that were withdrawn under the Free Withdrawal provision. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a Partial Withdrawal during the accumulation period. Whether a CDSC applies and the amount to be charged depends on whether the Partial Withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Purchase Payment being withdrawn has been invested in the Annuity. 1. If you request a Partial Withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount: |X| First, we withdraw the amount from Purchase Payments that have been invested for longer than the CDSC period, if any (with your Annuity, eight (8) years); |X| Second, we withdraw the remaining amount from the Purchase Payments that are still subject to a CDSC. We withdraw the "oldest" of your Purchase Payments first so that the lowest CDSC will apply to the amount withdrawn. The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 is 10% of all Purchase Payments. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. If, during Annuity Years 1 through 8, all Purchase Payments are withdrawn subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity, which may include Credits. For purposes of calculating the CDSC on a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. 3. If the amount requested exceeds the amounts available under Item #2 above, we withdraw the remaining amount from any other Account Value (including Account Value due to Credits). CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100, we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 1/2if you elect to receive distributions as a series of "substantially equal periodic payments". Distributions received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum that applies to Systematic Withdrawals does not apply to Minimum Distributions. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value minus: (a) the amount of any Credits applied within 12 months of the applicable "Contingency Event" as defined below; and (b) the amount of any Credits added in conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (i.e. Purchase Payments received at such time pursuant to a salary reduction program. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: |X| the Annuitant must be named or any change of Annuitant must be accepted by us, prior to the "Contingency Event" described below; |X| the Annuitant must be alive as of the date we pay the proceeds of such surrender request; |X| if the Owner is one or more natural persons, all such Owners must also be alive at such time; |X| we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and |X| this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. A "Contingency Event" occurs if the Annuitant is: |X| first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or |X| first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. You may not annuitize and receive annuity payments within the first Annuity Year. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 - - -------- Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 - - -------- 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 - - -------- Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 - - -------- Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 - - -------- Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 6 - - -------- Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, making a purchase payment within eight years of the Annuity Date limits your annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. If you have not provided us with your Annuity Date or annuity payment option in writing, then: |X| the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and |X| the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments We offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. |X| Variable Payments (Options 1-3) ----------------- We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. |X| Stabilized Variable Payments (Option 5) ---------------------------- This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. |X| Stabilized Variable Payments with a Guaranteed Minimum (Option 6) ------------------------------------------------------ This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. DEATH BENEFIT WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." Basic Death Benefit The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers two different optional Death Benefits. Either benefit can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. Under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. (see "How are Credits Applied to My Account Value") The basic Death Benefit is the greater of: |X| The sum of all Purchase Payments less the sum of all proportional withdrawals. |X| The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, less the amount of any Credits applied within 12-months prior to the date of death. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS Two optional Death Benefits are offered for purchase with your Annuity to provide an enhanced level of protection for your beneficiaries. - - ------------------------------------------------------------------------------ Currently, these benefits are only offered and must be elected at the time that you purchase your Annuity. We may, at a later date, allow existing Annuity Owners to purchase either of the optional Death Benefits subject to our rules and any changes or restrictions in the benefits. Certain terms and conditions may differ if you purchase your Annuity as part of an exchange, replacement or transfer, in whole or in part, from any other Annuity we issue. - - ------------------------------------------------------------------------------ Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above; PLUS 2. 40% of your "Growth" under the Annuity, as defined below. The amount calculated in Items 1 & 2 above may be reduced by any Credits under certain circumstances. "Growth" means the sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, minus the total of all Purchase Payments reduced by the sum of all proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. - ------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 100% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - - ------------------------------------------------------------------------------ - - ------------------------------------------------------------------------------ The Enhanced Beneficiary Protection Optional Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix F for a description of the Enhanced Beneficiary Protection Optional Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - - ------------------------------------------------------------------------------ See Appendix C for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Highest Anniversary Value Death Benefit If the Annuity has one Owner, the Owner must be age 79 or less at the time Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 79 or less. If the Annuity is owned by an entity, the Annuitant must be age 79 or less. Certain of the Portfolios offered as Sub-accounts under the Annuity are not available if you elect the Highest Anniversary Value Death Benefit. Key Terms Used with the Highest Anniversary Value Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Value" less proportional withdrawals since such anniversary and plus any Purchase Payments since such anniversary. |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date of the Annuity. The Anniversary Value on the Issue Date is equal to your Purchase Payment. |X| Proportional withdrawals result in a reduction to the Highest Anniversary Value by reducing such value in the same proportion as the Account Value was reduced by the withdrawal as of the date the withdrawal occurred. For example, if your Highest Anniversary Value is $125,000 and you subsequently withdraw $10,000 at a time when your Account Value is equal to $100,000 (a 10% reduction), when calculating the optional Death Benefit we will reduce your Highest Anniversary Value ($125,000) by 10% or $12,500. Calculation of Highest Anniversary Value Death Benefit The Highest Anniversary Value Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value as of the Owner's date of death. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the basic Death Benefit described above; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all proportional withdrawals since the Death Benefit Target Date. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any proportional withdrawals since such date. The amount calculated in Items 1 & 2 above (both before, and on or after the Death Benefit Target Date) may be reduced by any Credits under certain circumstances. - - ------------------------------------------------------------------------------ The Highest Anniversary Value Death Benefit described above is currently being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please see Appendix F for a description of the Guaranteed Minimum Death Benefit offered before November 18, 2002 in those jurisdictions where we received regulatory approval. - - ------------------------------------------------------------------------------ See Appendix C for examples of how the Highest Anniversary Value Death Benefit is calculated. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and Highest Anniversary Value Optional Death Benefit at any time. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge equal to 0.25% per year, respectively, if you elect the Highest Anniversary Value Optional Death Benefit or the Enhanced Beneficiary Protection Optional Death Benefit. If you elect both optional Death Benefits, the total charge is equal to 0.50% per year. We deduct the charge to compensate American Skandia for providing increased insurance protection under the optional Death Benefit. The additional annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS What is the Annuity Rewards benefit? The Annuity Rewards benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than the Annuity's value as of the date the Owner elects the benefit. Under the Annuity Rewards benefit, American Skandia guarantees that the Death Benefit will not be less than: your Account Value in the variable investment options plus the Interim Value in any Fixed Allocations as of the effective date of the Owner's election MINUS any proportional withdrawals* following the date of election PLUS any additional Purchase Payments applied to the Annuity following the date of election. * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. The Annuity Rewards Death Benefit enhancement does not affect the basic Death Benefit calculation or any Optional Death Benefits available under the Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. Who is eligible for the Annuity Rewards benefit? Owners can elect the Annuity Rewards Death Benefit enhancement following the eighth (8th) anniversary of the Annuity's Issue Date. However, the election is subject to the requirement that their Account Value on the election date is greater than the amount that would be payable to their Beneficiary under the Death Benefit provided under the Annuity as of the election date (including any amounts payable under the Highest Anniversary Value Death Benefit). If an Owner is ineligible when he or she applies for the optional benefit, the Owner can elect the Annuity Rewards Death Benefit enhancement on any subsequent date if they otherwise qualify. The election must occur before annuity payments begin. An Owner can only elect the Annuity Rewards Death Benefit enhancement once. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed: |X| as a lump sum amount at any time within five (5) years of the date of death; or |X| as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary - Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. IRA Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. |X| If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. |X| If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2." Upon election of this IRA Beneficiary Continuation option: |X| the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. |X| the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. |X| the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner. NOTE: The Sub-accounts offered under the IRA Beneficiary Continuation option may be limited. |X| no additional Purchase Payments can be applied to the Annuity. |X| the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. |X| the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. |X| upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. |X| all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the IRA Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including either optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. VALUING YOUR INVESTMENT HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. The Account Value includes any Credits we applied to your Purchase Payments that we are entitled to recover under certain circumstances. When determining the Account Value on any day other than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee and the charge for any optional benefits. The Surrender Value will also include any Market Value Adjustment that may apply. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day other than its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next business day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: |X| trading on the NYSE is restricted; |X| an emergency exists making redemption or valuation of securities held in the separate account impractical; or |X| the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) days after we receive all of our requirements to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) days, we are required to return the Purchase Payment at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment with satisfactory allocation instructions. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on Valuation Day prior to the scheduled transaction date. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). You cannot request a transaction involving the purchase, redemption or transfer of Units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefits: If you terminate the Guaranteed Return Option program or either Optional Death Benefit, we will no longer deduct the charge we apply to purchase the optional benefit. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge and any optional benefit or program still elected, but not the charge for the optional benefit or program that you terminated. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge and any other optional benefits that you have elected. TAX CONSIDERATIONS WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY? Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a professional tax advisor for tax advice as to your particular situation. HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED? The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I, subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the Separate Accounts with respect to the Annuities. IN GENERAL, HOW ARE ANNUITIES TAXED? Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on: 1. whether the Annuity is used by: |X| a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment under the Code (for purposes of this discussion, a "Qualified Contract"); or |X| an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and 2. whether the Owner is: |X| an individual person or persons; or |X| an entity including a corporation, trust or partnership. Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation. Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity for Federal tax purposes may not be subject to income tax as a result of this provision. HOW ARE DISTRIBUTIONS TAXED? Distributions from an Annuity are taxed as ordinary income and not as capital gains. Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross income. |X| "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate value of all "related contracts" (discussed below). |X| "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous distributions or portions of such distributions from such "related contracts" that were 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, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the contract" for a Qualified Contract will be considered zero for tax reporting purposes. Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable annuity payments. When 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 may be allowed as a deduction on the decedent's final income tax return. Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract (Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This penalty does not apply to certain distributions, including: |X| Distributions made on or after the taxpayer has attained age 591/2; |X| Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant; |X| Distributions attributable to the taxpayer's becoming disabled within the meaning of Code section 72(m)(7); |X| Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and the taxpayer's designated beneficiary; |X| Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982; |X| Payments under an immediate annuity as defined in the Code; |X| Distributions under a qualified funding asset under Code Section 130(d); or |X| 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. Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the contracts will be added together to determine the proper taxation of a distribution from any one contract described under the section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your own tax advisor on this matter. Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or disability. American Skandia does not currently support a section 72(q) program. Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the 10% penalty described above under "Penalty Tax on Distributions" 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 a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed more than one year prior to the annuity starting date 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. Special rules in relation to tax-free exchanges under Section 1035: 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 purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity payments will be considered to come: |X| First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity; |X| Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including income on such original purchase payments after the exchange); |X| Then, from any remaining "income on the contract"; and |X| Lastly, from the amount of any "investment in the contract" made after August 13, 1982. Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14, 1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such an exchange. Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible for non-recognition treatment under Section 1035 of the Code. We will continue to report a partial surrender of a life insurance policy as subject to current taxation to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such a transaction on the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified endowment contract. Special Considerations for Purchasers of the Enhanced Beneficiary Protection Optional Death Benefit: As of the date of this Prospectus, it is our understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected to report them as such. WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries below of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of tax-qualified retirement plans. Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Certain states do not conform to the pension provisions included in EGTRRA. We recommend that you consult with your tax advisor to determine the status of your state's statutes as they relate to EGTRRA and your tax qualified retirement plan. Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations on the amount that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific organizations specified in Section 501(c)(3) for the benefit of their employees. 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 also apply. 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. Individual Retirement Arrangements or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified retirement plans and maintain the tax-deferred status of these amounts. Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However, distributions from a Roth IRA are free from Federal income taxes and are not subject to 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 1/2or 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 Federal income and penalty taxes. 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 or another qualified plan, 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. SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be deductible to the employer. HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED? Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does not apply when the distribution: |X| is part of a properly executed transfer to another IRA or another eligible qualified account; |X| 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); |X| is part of a series 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; |X| is subsequent to a separation from service after the taxpayer attains age 55*; |X| does not exceed the employee's allowable deduction in that tax year for medical care; |X| is made to an alternate payee pursuant to a qualified domestic relations order*; |X| is made pursuant to an IRS levy; |X| is made to pay qualified acquisition costs for a first time home purchase (IRA only); |X| is made to pay qualified higher education expenses (IRA only); and |X| is not more than the cost of your medical insurance (IRA only). The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available. Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of: |X| the calendar year in which the individual attains age 70 1/2; or |X| the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement option is not available to IRAs. The IRS has released Treasury regulations containing new Minimum Distribution rules. For Minimum Distributions required in 2003 and later, individuals are required to use the rules under the 2002 Final Regulations. The 2002 Final Regulations contain a provision which could increase the amount of minimum distributions required for certain individuals. Under the 2002 Final Regulations, individuals are required to include in their annuity contract value the actuarial value of any other benefits that will be provided under the annuity. We and other annuity providers are currently seeking clarification of this new rule. You should consult your tax adviser to determine the impact of this rule on your Minimum Distributions. Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to utilize the actual life expectancies of the participant and the spouse. In most cases, the beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the designated Beneficiary may generally take Minimum Distributions over his/her life expectancy or in a lump sum. If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on the amount that was not properly distributed. Because of the many recent changes to the Minimum Distribution rules, we strongly encourage you to consult with your tax advisor for more detailed information. GENERAL TAX CONSIDERATIONS 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). If the diversification requirements under the Code are not met and the annuity is not treated as an annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations prescribe the diversification requirements for variable annuity contracts. We expect the underlying mutual fund portfolios to comply with the terms of these regulations. 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. 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, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20% withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20% withholding: |X| any portion of a distribution paid as a Minimum Distribution; |X| direct transfers to the trustee of another retirement plan; |X| distributions from an individual retirement account or individual retirement annuity; |X| 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; |X| distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code; and |X| certain other distributions where automatic 20% withholding may not apply. 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 is treated as a distribution subject to taxation under the distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and 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 as Qualified Contracts, 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 someone other than the spouse of the owner (or former spouse incident to a divorce) is treated, for income tax purposes, as a distribution. 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 $1.1 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. We will deduct from your Annuity or from any applicable payment treated as a direct skip any amount of tax we are required to pay. Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. GENERAL INFORMATION HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. Any errors or corrections on transactions for your Annuity must be reported to us at our Office as soon as possible 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 30 days from the date you receive the confirmation. For transactions that are first confirmed on the quarterly statement, we assume all transactions are accurate unless you notify us within 30 days from the date you receive the quarterly statement. All transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 30-day period. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) both fixed and variable immediate adjustable annuities; and (d) a single premium variable life insurance policy that is registered with the SEC. On December 20, 2002, Skandia Insurance Company Ltd. (publ), an insurance company organized under the laws of the Kingdom of Sweden ("Skandia"), and on that date, the ultimate parent company of American Skandia, announced that it and Skandia U.S. Inc. had entered into a definitive Stock Purchase Agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"). Under the terms of the Stock Purchase Agreement, Prudential Financial will acquire Skandia U.S. Inc., a Delaware corporation, from Skandia. Skandia U.S. Inc. is the sole shareholder of ASI, which is the parent company of American Skandia. The transaction is expected to close during the second quarter of 2003. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, following the closing of the acquisition, Prudential Financial will exercise significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B will be consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which will subsequently be renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B will have multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B will have no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with independent broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration. Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Compensation is paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of the firm. Compensation is generally based on a percentage of Purchase Payments made, up to a maximum of 7.0%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. No compensation is payable on Annuities purchased by a member of the designated class of Owners (see "Credits Applied to Purchase Payments for Designated Class of Annuity Owner"). In addition, firms may receive separate compensation or reimbursement for, among other things, training of sales personnel, marketing or other services they provide to us or our affiliates. We or ASM may enter into compensation arrangements with certain firms. These arrangements will not be offered to all firms and the terms of such arrangements may differ between firms. Any such compensation will be paid by us or ASM and will not result in any additional charge to you. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or other compensation. Advertising: We may advertise certain information regarding the performance of the investment options. Details on how we calculate performance for the Sub-accounts are found in the Statement of Additional Information, including how we account for Credits in these performance measures. This 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 receive the beneficial tax treatment given to annuities under the Code. We may advertise the performance of the Portfolios in the form of "Standard" and "Non-standard" Total Returns calculated for each Sub-account. "Standard Total Return" figures assume a hypothetical initial investment of $1,000 allocated to a Sub-account during the most recent one, five and ten year periods (or since the inception date that the Portfolio has been offered as a Sub-account, if less). "Standard Total Return" figures assume that the applicable Insurance Charge and the Annual Maintenance Fee are deducted and that the Annuity is surrendered at the end of the applicable period, meaning that any Contingent Deferred Sales Charge that would apply upon surrender is also deducted. "Standard Total Return" figures do not take into consideration any Credits. "Non-standard Total Return" figures include any performance figures that do not meet the SEC's rules for Standard Total Returns. Non-standard Total Returns are calculated in the same manner as standardized returns except that the figures may not reflect all fees and charges. In particular, they may assume no surrender at the end of the applicable period so that the CDSC does not apply. "Non-standard Total Return" figures may assume Credits of 1.5%, 4.0% or 5.0%, respectively, depending on the cumulative amount of Purchase Payments being illustrated. The amount of credits illustrated may be more or less than the Credits applicable to your Annuity (see "How do I Receive Credits?"). Standard and Non-standard Total Returns will not reflect the additional asset-based charges that are deducted when you elect any optional benefits. The additional cost associated with any optional benefits you elected will reduce your performance. Non-standard Total Returns must be accompanied by Standard Total Returns. Some of the underlying 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 Portfolios have been in existence, but the Sub-accounts have not. Such hypothetical historical performance is calculated using the same assumptions employed in calculating actual performance since inception of the Sub-accounts. Hypothetical historical performance of the underlying Portfolios prior to the existence of the Sub-accounts may only be presented as Non-standard Total Returns. We may advertise the performance of money market-type Sub-accounts using a measure of the "current and effective yield". The current yield of a money market-type Sub-account is calculated based upon the previous seven-day period ending on the date of calculation. The effective yield of a money market-type Sub-account reflects the reinvestment of net income earned daily on the assets of such a Sub-account. The current and effective yields reflect the Insurance Charge and the charge for any optional benefits (if applicable) deducted against the Sub-account. In a low interest rate environment, yields for money market-type Sub-accounts, after deduction of the Insurance Charge, and the charge for any optional benefits (if applicable) may be negative even though the yield (before deducting for such charges) is positive. Current and effective yield information will fluctuate. This information may not provide a basis for comparisons with deposits in banks or other institutions which pay a fixed yield over a stated period of time, or with investment companies which do not serve as underlying mutual funds for variable annuities and/or do not have additional asset-based charges deducted for the insurance protection provided by the Annuity. Performance information on the Sub-accounts is based on past performance only and is not an indication or representation of future performance. Performance of the Sub-accounts is not fixed. Actual performance will depend on the type, quality and, for some of the Sub-accounts, the maturities of the investments held by the underlying mutual funds or portfolios and upon prevailing market conditions and the response of the underlying mutual funds to such conditions. Actual performance will also depend on changes in the expenses of the underlying mutual funds or portfolios. Such changes are reflected, in turn, in the Sub-accounts which invest in such underlying mutual fund or portfolio. In addition, the total amount of asset-based charges assessed against each Sub-account will affect performance. The information we may advertise regarding the Fixed Allocations may include the then current interest rates we are crediting to new Fixed Allocations. Information on current rates will be as of the date specified in such advertisement. Rates will be included in advertisements to the extent permitted by law. Given that the actual rates applicable to any Fixed Allocation are as of the date of any such Fixed Allocation's Guarantee Period begins, the rate credited to a Fixed Allocation may be more or less than those quoted in an advertisement. 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 NASDAQ 100, 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. AVAILABLE INFORMATION A Statement of Additional Information is available from us without charge upon your request. This Prospectus is part of the registration statement we filed with the 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 exhibits thereto at the SEC's public reference facilities at the above address, Room 1024, and at the SEC's Regional Offices, The Woolworth Building, 233 Broadway, New York, NY and 175 W. Jackson Boulevard, Suite 900, Chicago, IL. These documents, as well as documents incorporated by reference, may also be obtained through the SEC's Internet Website (http://www.sec.gov) for this registration statement as well as for other registrants that file electronically with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2002 previously filed by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus. We will 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 will do so upon receipt of your written or oral request. HOW TO CONTACT US You can contact us by: |X| calling Skandia's Telephone Automated Response System (STARS) at 1-800-766-4530. |X| writing to us via regular mail at American Skandia - Variable Annuities, P.O. Box 7040, Bridgeport, Connecticut 06601-7040 OR for express mail American Skandia - Variable Annuities, One Corporate Drive, Shelton, Connecticut 06484. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. |X| sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. |X| accessing information about your Annuity through our Internet Website at www.americanskandia.com. You can obtain account information through Skandia's Telephone Automated Response System (STARS) and at www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or an investment professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN through STARS and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia |X| American Skandia Life Assurance Corporation |X| American Skandia Life Assurance Corporation Variable Account B |X| American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor - American Skandia Marketing, Incorporated How Performance Data is Calculated |X| Current and Effective Yield |X| Total Return How the Unit Price is Determined Additional Information on Fixed Allocations |X| How We Calculate the Market Value Adjustment General Information |X| Voting Rights |X| Modification |X| Deferral of Transactions |X| Misstatement of Age or Sex |X| Ending the Offer Annuitization Independent Auditors Legal Experts Financial Statements |X| Appendix A - American Skandia Life Assurance Corporation Variable Account B APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA SELECTED FINANCIAL DATA (dollars in thousands) The following table summarizes information with respect to the operations of the Company:
For the Year Ended December 31, 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- STATEMENTS OF INCOME DATA Revenues: Annuity and life insurance $ 370,004 $ 388,696 $ 424,578 $ 289,989 $ 186,211 charges and fees (a) (b) Fee income (b) 97,650 111,196 130,610 83,243 50,839 Net investment income 19,632 20,126 18,595 11,477 11,130 Net realized capital (losses) gains and other revenues (e) (7,438) 2,698 4,195 3,688 1,360 ------------- ------------ ------------ ------------ ------------ Total revenues $ 479,848 $ 522,716 $ 577,978 $ 388,397 $ 249,540 ============ ============ ============ ============ ============ Benefits and Expenses: Annuity and life insurance $ 3,391 $ 1,955 $ 751 $ 612 $ 558 benefits Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 (671) 1,053 (c) Guaranteed minimum death benefit claims, net of 23,256 20,370 2,618 4,785 - hedge (b) Return credited to contract 5,196 5,796 8,463 (1,639) (8,930) owners Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 125,434 86,306 Amortization of deferred acquisition costs (b) (d) 510,059 224,047 184,616 83,861 86,628 Interest expense 14,544 73,424 85,998 69,502 41,004 ------------ ------------ ------------ ------------ ------------ Total benefits and expenses $ 747,915 $ 482,449 $ 482,382 $ 281,884 $ 206,619 ============ ============ ============ ============ ============ Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 $ 30,344 $ 8,154 ============ ============ ============ ============ ============ Net (loss) income $ (165,257) $ 33,099 $ 64,817 $ 76,169 $ 34,767 ============ ============ ============ ============ ============ STATEMENTS OF FINANCIAL CONDITION DATA Total assets (b) $ 23,708,585 $ 28,009,782 $ 31,702,705 $ 30,881,579 $ 18,848,273 ============ ============ ============ ============ ============ Future fees payable to parent $ 708,249 $ 799,472 $ 934,410 $ 576,034 $ 368,978 ============ ============ ============ ============ ============ Surplus notes $ 110,000 $ 144,000 $ 159,000 $ 179,000 $ 193,000 ============ ============ ============ ============ ============ Shareholder's equity $ 683,061 $ 577,668 $ 496,911 $ 359,434 $ 250,417 ============ ============ ============ ============ ============
a. On annuity and life insurance sales of $3,472,044, $3,834,167, $8,216,167, $6,862,968, and $4,159,662, during the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively, with contract owner assets under management of $21,894,636, $26,017,847, $29,751,822, $29,396,693, and $17,854,761, as of December 31, 2002, 2001, 2000, 1999, and 1998, respectively. b. These items are significantly impacted by equity market volatility. c. For the year ended December 31, 2000, change in annuity and life insurance policy reserves reflected increases to those reserves for guaranteed minimum death benefit ("GMDB") exposure. For the year ended December 31, 2001, the Company changed certain of its assumptions related to its GMDB exposure resulting in a benefit to operations. See Results of Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for a further discussion. d. During the year ended December 31, 2002, the Company recorded an acceleration of amortization of $206,000 against the deferred acquisition cost asset. See the MD&A for a further discussion. e. Net realized capital (losses) gains and other revenues include $5,845 of net realized capital losses on sales of securities during 2002 and an other than temporary impairment charge of $3,769 recorded during 2002 on the Company's equity securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands) Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data. Results of Operations - --------------------- Annuity and life insurance sales were $3,472,044, $3,834,167 and $8,216,167, in 2002, 2001 and 2000, respectively. The decrease in sales in 2002 and 2001 was primarily the result of the general decline in sales in the industry, attributed in large part to the continued uncertainty in the equity markets. In addition, the Company believes uncertainty regarding its future ownership has adversely impacted sales, primarily in the latter part of 2002. The Company announced, in the first quarter of 2002, its intention to focus on the growth of its core variable annuity business. Average assets under management totaled $23,637,559 in 2002, $26,792,877 in 2001 and $31,581,902 in 2000, representing a decrease of 12% and 15% in 2002 and 2001, respectively, due primarily to weak equity markets. The decrease in annuity and life insurance charges and fees and fee income before surrender charge income and reinsurance was consistent with the decline in assets under management. Surrender charge income increased in 2002 as compared to 2001. This was caused by higher lapses when compared to the applicable prior year periods, and was primarily attributable, the Company believes, to concerns by contract holders, rating agencies and the Company's distribution channels, surrounding the uncertainty in the equity markets and its impact on variable annuity companies generally and, prior to the announcement of the Acquisition, uncertainty concerning the Company's future (See Liquidity and Capital Resources for rating agency actions). Net realized capital losses in 2002 were primarily from $9,593 of losses on sales and $3,769 of other-than-temporary impairments of mutual fund investments that are held in support of a deferred compensation program for certain of the Company's employees. The deferred compensation program losses were offset by net gains of $3,746 during 2002 on sales of fixed maturities. Included in those net gains on sales of fixed maturities for 2002, was a realized loss of approximately $1,236 on the sale of a WorldCom, Inc. bond. The net capital gains in 2001 related primarily to sales of fixed maturity investments, were partially offset by losses on securities in the fixed maturity portfolio. The most significant loss was $2,636 related to Enron securities. In addition net realized capital losses of $3,534 in 2001 were incurred due to sales of mutual fund holdings in support of the Company's non-qualified deferred compensation program. The change in annuity and life insurance policy reserves includes changes in reserves related to annuity contracts with mortality risks. During 2001, the Company's Guaranteed Minimum Death Benefit ("GMDB") reserve decreased $43,984, as the result of an update of certain reserve assumptions as to risks inherent in the benefit. Previous assumptions had been based on statutory valuation principles as an approximation for U.S. GAAP. In addition, future mortality rates were lowered in 2001 to reflect favorable past experience. However, offsetting the resulting increase in earnings and equity as a result of changes in the GMDB liability in 2001, assumptions related to GMDB claim costs were also updated in the calculation of the deferred acquisition cost asset, resulting in additional amortization of this asset. The Company uses derivative instruments, which consist of equity option contracts for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. GMDB claims, net of hedge, consist of GMDB claims offset by the mark to market and realized capital gain/loss results of the Company's option contracts. During 2002 and 2001, the fluctuations in GMDB claims, net of hedge, were driven by an increase in hedge related benefits of $19,776 and $14,646, respectively. Hedge related benefits were partially offset by increases in GMDB claims of $22,662 and $32,398 during 2002 and 2001, respectively. Return credited to contract owners consists primarily of net investment results from the Company's fixed, market value adjusted, separate account investment option and changes in the Company's experience rated reinsurance receivables. The decrease in 2002 was primarily due to increased net investment results on the Company's fixed, market value adjusted, separate account investment option. As the equity markets decline, movement from variable investment options to fixed investment options, primarily due to one of the Company's product features, has increased the assets invested in the fixed separate account investment option. Included in 2002 net investment results is $9,849 of realized and unrealized losses on certain securities, of which $5,427 related to WorldCom, Inc. bonds. The increase in net investment results was partially offset by a decrease in experience rated reinsurance receivables in 2002 due to unfavorable experience on certain blocks of variable annuity business. In 2001, return credited to contract owners decreased primarily due to favorable experience on certain blocks of variable annuity contracts increasing the experience rated reinsurance receivable. Partially offsetting the 2001 decrease is net investment losses of $1,662 related to Enron securities. Underwriting, acquisition and other insurance expenses for 2002, 2001 and 2000 were as follows:
2002 2001 2000 ---- ---- ---- Commissions and purchase credits $ 287,612 $ 248,187 $ 430,743 General operating expenses 145,438 157,704 214,957 Acquisition costs deferred (244,322) (209,136) (495,103) ----------- ----------- ----------- Underwriting, acquisition and other insurance expenses $ 188,728 $ 196,755 $ 150,597 =========== =========== ===========
New products launched, as well as a larger proportion of sales of products with higher commissions as compared to 2001 led to an increase in commissions and purchase credits during 2002. Lower sales and asset levels led to a decrease in commissions and purchase credits during 2001. Partially offsetting this decline in 2001, the company launched a commission promotion program that increased commissions as a percentage of new sales. Commission promotions in 2002 were approximately equivalent as compared to 2001. General operating expenses decreased during 2002 and 2001 as a result of lower sales-based compensation, as well as expense reduction programs implemented during 2001 and continued strong expense management in 2002. Variable compensation and long-term incentive plan expenses have decreased due to the slowdown in sales and the decline in the equity markets. Amortization of deferred acquisition costs increased over the past two years, in general, due to the further depressed equity markets in 2002 and 2001, thereby decreasing expectations of future gross profits and actual gross profits from asset based fees and increased expected and actual claim costs associated with minimum death benefit guarantees. During 2002, the Company also performed a recoverability study and an analysis of its short-term assumptions of future gross profits and determined those assumptions of future profits to be excessive. This analysis resulted in a current year acceleration of amortization of $206,000. During 2002 and 2001, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization. See Note 2 of Notes to Consolidated Financial Statements for a further discussion on amortization of deferred acquisition costs. Interest expense decreased during 2002 primarily due to lower interest expense related to the future fees payable to ASI liability (See Note 8). Interest expense on these obligations is driven by the cash flows from the underlying annuity contracts acting as collateral. Due to the depressed asset values of those annuity contracts driven by the decline in the equity markets, the cash flows, and therefore the interest expense, decreased from prior year levels. Interest expense decreased in 2001 as a result of a reduction in borrowing. The Company's income tax (benefit) expense varies directly with increases or decreases in (loss) income from operations. The effective income tax rate varied from the corporate rate of 35% due primarily to the deduction for dividends received. Total assets and liabilities decreased $4,301,197 and $4,406,590, respectively, from December 31, 2001. This change resulted primarily from the declining equity markets. Significant Accounting Policies - ------------------------------- Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. If the Company's long-term fund growth rate assumption was 7% instead of 8%, the Company's deferred acquisition cost asset at December 31, 2002 would be reduced by $26,273. Future Fees Payable to ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, historical mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability. The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management, that the present value of future payments to ASI would be $429,773. Deferred Taxes The Company evaluates the necessity of recording a valuation allowance against its deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, Income Taxes ("SFAS 109"). In performing this evaluation, the Company considers all available evidence in making the determination as to whether it is more likely than not that deferred tax assets are not realizable. For the Company, that evidence includes: cumulative U.S. GAAP pre-tax income in recent years past, whether or not operating losses have expired unused in the past, the length of remaining carryback or carryforward periods, and net taxable income or loss expectations in early future years. The net taxable income or loss projections are based on profit assumptions consistent with those used to amortize deferred acquisition costs (see above discussion on deferred acquisition costs). As of December 31, 2002, the Company has approximately $361,000 gross deferred tax assets related principally to net operating loss carryforwards that expire in 2016 and 2017 and insurance reserve differences. After considering the impact of gross reversing temporary liabilities of $323,000, the Company estimates that the Company will generate sufficient taxable income to fully utilize gross deferred tax assets within 2 years (prior to the expiration of the net operating losses). Liquidity and Capital Resources - ------------------------------- The Company's liquidity requirements have generally been met by cash from insurance operations, investment activities, borrowings from ASI, reinsurance, capital contributions and securitization transactions with ASI (see Note 8). The Company's cash from insurance operations is primarily comprised of fees generated off of assets under management, less commission expense on sales, sales and marketing expenses and other operating expenses. Fund performance driven by the equity markets directly impact assets under management and therefore, the fees the Company can generate off of those assets. During 2002 and 2001, assets under management declined consistent with the equity market declines resulting in reductions in fee revenues. In addition, the equity markets impact sales of variable annuities. As sales have declined in a declining equity market, non-promotional commission expense declined, however, in order to boost sales levels, the Company has offered various sales promotions increasing the use of cash for commission expense. In order to fund the cash strain generated from acquisition costs on current sales, the Company has relied on cash generated from its direct insurance operations as well as reinsurance and securitization transactions. The Company has used modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving , the future fees generated from that book of business. These reinsurance agreements also mitigate the recoverability risk associated with the payment of up-front commissions and other acquisition costs. Similarly, the Company has entered into securitization transactions whereby the Company issues to ASI, in exchange for cash, the right to receive future fees generated off of a specific book of business. On April 12, 2002, the Company entered into a new securitization transaction with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was approximately $101,713. As of December 31, 2002, 2001 and 2000, the Company had short-term borrowings of $10,000, $10,000 and $10,000, respectively, and had long-term surplus notes liabilities of $110,000, $144,000 and $159,000, respectively. During 2002, the Company borrowed $263,091 and paid back $263,091 related to short-term borrowing. During 2002 and 2001, the Company received permission from the State of Connecticut Insurance Department to pay down surplus notes in the amount of $34,000 and $15,000, respectively. See Notes 14 and 15 of Notes to Consolidated Financial Statements for more information on surplus notes and short-term borrowing, respectively. As of December 31, 2002, 2001 and 2000, shareholder's equity totaled $683,061, $577,668 and $496,911, respectively. The Company received capital contributions of $259,720 and $48,000 from ASI during 2002 and 2001, respectively. Of this, $4,520 and $2,500, respectively, was used to support its investment in Skandia Vida. Net (loss) income of ($165,257) and $33,099, for the years ended December 31, 2002 and 2001, respectively, contributed to the respective changes in shareholder's equity in 2002 and 2001. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies that may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest rate risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. During 2002, all of the major rating agencies reviewed the U.S. life insurance sector, including the Company. Based on these reviews the rating agencies have evolving concerns surrounding the risk profile of variable annuity companies due to their significant exposure to equity market performance. This exposure has resulted, and may continue to result, in earnings volatility. Based on the reviews made during 2002, the following ratings actions took place: On May 8, 2002, Fitch Ratings downgraded the Company's "insurer financial strength" rating to A+ from AA- with a "stable" outlook. On September 19, 2002, Fitch Ratings lowered the Company's "insurer financial strength" rating to A- from A+ with an "evolving" outlook. On September 27, 2002, A.M. Best Co. lowered the Company's "financial strength" rating to A- from A with negative implications. On October 16, 2002, Standard and Poor's lowered the Company's "counter party credit" and "financial strength" ratings to A- from A+ with a negative outlook and removed the Company from Credit Watch. Subsequent to the announcement of the Acquisition, Standard and Poor's placed the Company on CreditWatch with positive implications. Effects of Inflation - -------------------- The rate of inflation has not had a significant effect on the Company's financial statements. Outlook - ------- The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in order to gain market share and improve profitability in an increasingly competitive market. The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks, securities firms and insurance companies. This legislative change has created opportunities for continued consolidation in the financial services industry and increased competition as large companies offer a wide array of financial products and services. Various other legislative initiatives could impact the Company such as pension reform and capital gains and estate tax changes. These include the proposed exclusion from tax for corporate dividends, potential changes to the deductibility of dividends received from the Company's separate accounts and newly proposed tax-advantaged savings programs. Additional pension reform may change current tax deferral rules and allow increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less attractive to consumers, which could adversely impact the Company. In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts. Forward Looking Information - --------------------------- The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements, so long as those statements are identified as forward-looking, and the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions. Certain information contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations is forward-looking within the meaning of the 1995 Act or Securities and Exchange Commission rules. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of significant uncertainties and results may differ materially from these statements. You should not put undue reliance on these forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and describes strategies used to manage these risks, and includes "forward-looking statements" that involve risk and uncertainties. The discussion is limited to financial instruments subject to market risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed. Interest Rate Risk - ------------------ Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2002, 91% of assets held under management by the Company are in non-guaranteed Separate Accounts for which the Company's interest rate and equity market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 9% of assets, the interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. At December 31, 2002, the Company held fixed maturity investments in its general account that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities, fixed supplementary contracts, the fixed investment option offered in its variable life insurance contracts, and in support of the Company's target solvency capital. The Company has a conservative investment philosophy with regard to these investments. All investments are investment grade corporate securities, government agency or U.S. government securities. The Company's deferred annuity products offer a fixed investment option which subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract owner. Guarantee period options available range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the guarantee period subjects the contract owner to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of failing to maintain the asset/liability matching program with respect to duration and convexity. Liabilities held in the Company's guaranteed separate account as of December 31, 2002 totaled $1,828,048. Assets, primarily fixed income investments, supporting those liabilities had a fair value of $1,828,048. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2002. The analysis showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities and the corresponding assets of approximately $69,150 and $68,500, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2001, showed a net increase in interest-sensitive liabilities and the corresponding assets of approximately $39,800 and $39,900, respectively. Equity Market Exposure - ---------------------- The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by the Company. Various fees and charges earned are substantially derived as a percentage of the market value of assets under management. In a market decline, this income will be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 2002, sustained throughout 2003, would result in an approximate drop in related mortality and expense charges and annual fee income of $36,350. Another equity market risk exposure of the Company relates to guaranteed minimum death benefit payments. Declines in equity markets and, correspondingly, the performance of the funds underlying the Company's products, increase exposure to guaranteed minimum death benefit payments. As discussed in Note 2D of the consolidated financial statements, the Company uses derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the implementation of this program, the Company used reinsurance to mitigate this risk. The Company has a portfolio of equity investments consisting of mutual funds, which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline; however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the equity markets and consumer behavior, actual results may vary from those predicted by the Company's models. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Report of Independent Auditors To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. /s/ Ernst & Young LLP Hartford, Connecticut February 3, 2003 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Financial Condition (in thousands, except share data)
As of December 31, 2002 2001 --------------- --------------- ASSETS - ------ Investments: Fixed maturities - at fair value (amortized cost of $379,422 and $356,882, respectively) $ 398,601 $ 362,831 Equity securities - at fair value (amortized cost of $52,017 and $49,886, respectively) 51,769 45,083 Derivative instruments - at fair value 10,370 5,525 Policy loans 7,559 6,559 --------------- --------------- Total investments 468,299 419,998 --------------- --------------- Cash and cash equivalents 51,339 - Accrued investment income 4,196 4,737 Deferred acquisition costs 1,117,544 1,383,281 Reinsurance receivable 5,447 7,733 Receivable from affiliates 3,961 3,283 Income tax receivable - 30,537 Deferred income taxes 38,206 - Fixed assets, at depreciated cost (accumulated depreciation of $7,555 and $4,266, respectively) 12,132 17,752 Other assets 101,848 103,912 Separate account assets 21,905,613 26,038,549 --------------- --------------- Total assets $ 23,708,585 $ 28,009,782 =============== =============== LIABILITIES AND SHAREHOLDER'S EQUITY - ------------------------------------ Liabilities: Reserves for future policy and contract benefits $ 149,349 $ 91,126 Accounts payable and accrued expenses 133,543 192,952 Income tax payable 6,547 - Deferred income taxes - 54,980 Payable to affiliates 2,223 101,035 Future fees payable to American Skandia, Inc. ("ASI") 708,249 799,472 Short-term borrowing 10,000 10,000 Surplus notes 110,000 144,000 Separate account liabilities 21,905,613 26,038,549 --------------- --------------- Total liabilities 23,025,524 27,432,114 --------------- --------------- Commitments and contingent liabilities (Note 18) Shareholder's equity: Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional paid-in capital 595,049 335,329 Retained earnings 73,821 239,078 Accumulated other comprehensive income 11,691 761 --------------- --------------- Total shareholder's equity 683,061 577,668 --------------- --------------- Total liabilities and shareholder's equity $ 23,708,585 $ 28,009,782 =============== ===============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Income (in thousands)
For the Years Ended December 31, 2002 2001 2000 ------------ ------------ ------------ REVENUES - -------- Annuity and life insurance charges and fees $ 370,004 $ 388,696 $ 424,578 Fee income 97,650 111,196 130,610 Net investment income 19,632 20,126 18,595 Net realized capital (losses) gains (9,614) 928 (688) Other 2,176 1,770 4,883 ------------ ------------ ------------ Total revenues 479,848 522,716 577,978 ------------ ------------ ------------ EXPENSES - -------- Benefits: Annuity and life insurance benefits 3,391 1,955 751 Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 Guaranteed minimum death benefit claims, net of hedge 23,256 20,370 2,618 Return credited to contract owners 5,196 5,796 8,463 ------------ ------------ ------------ Total benefits 34,584 (11,777) 61,171 Other: Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 Amortization of deferred acquisition costs 510,059 224,047 184,616 Interest expense 14,544 73,424 85,998 ------------ ------------ ------------ 713,331 494,226 421,211 ------------ ------------ ------------ Total benefits and expenses 747,915 482,449 482,382 ------------ ------------ ------------ (Loss) income from operations before income tax (benefit) expense (268,067) 40,267 95,596 Income tax (benefit) expense (102,810) 7,168 30,779 ------------ ------------ ------------ Net (loss) income $ (165,257) $ 33,099 $ 64,817 ============ ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Shareholder's Equity (in thousands)
Accumulated Other Comprehensive Income -------------------------------------------------------------------------- Additional Foreign Unrealized Common Paid in Retained Currency Gains Stock Capital Earnings Translation (Losses) Total ----------- ------------ ----------- -------------- ------------- ------------ As of December 31, 1999 $2,500 $215,879 $141,162 $148 $(255) $359,434 Net income 64,817 64,817 Other comprehensive income: Unrealized capital gains 843 843 Reclassification adjustment for realized losses included in net realized capital (losses) gains 433 433 Foreign currency translation (66) (66) ------------ Other comprehensive income 1,210 ------------ Comprehensive income 66,027 Capital contributions 71,450 71,450 ----------- ------------ ----------- -------------- ------------- ------------ As of December 31, 2000 2,500 287,329 205,979 82 1,021 496,911 Net income 33,099 33,099 Other comprehensive loss: Unrealized capital losses (261) (261) Reclassification adjustment for realized gains included in net realized capital (losses) gains (14) (14) Foreign currency translation (67) (67) ------------ Other comprehensive loss (342) ------------ Comprehensive income 32,757 Capital contributions 48,000 48,000 ----------- ------------ ----------- -------------- ------------- ------------ As of December 31, 2001 2,500 335,329 239,078 15 746 577,668 Net loss (165,257) (165,257) Other comprehensive income: Unrealized capital gains 10,434 10,434 Reclassification adjustment for realized losses included in net realized capital (losses) gains 1,126 1,126 Foreign currency translation (630) (630) ------------ Other comprehensive income 10,930 ------------ Comprehensive loss (154,327) Capital contributions 259,720 259,720 ----------- ------------ ----------- -------------- ------------- ------------ As of December 31, 2002 $2,500 $595,049 $73,821 $(615) $12,306 $683,061 ----------- ------------ ----------- -------------- ------------- ------------
Unrealized capital gains (losses) is shown net of tax expense (benefit) of $5,618, ($140) and $454 for 2002, 2001 and 2000, respectively. Reclassification adjustment for realized losses (gains) included in net realized capital (losses) gains is shown net of tax expense (benefit) of $606, ($8) and $233 for 2002, 2001 and 2000, respectively. Foreign currency translation is shown net of tax benefit of $339, $36 and $36 for 2002, 2001 and 2000, respectively. See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Cash Flows (in thousands)
For the Years Ended December 31, 2002 2001 2000 ---------- ---------- ---------- Cash flow from operating activities: Net (loss) income $ (165,257) $ 33,099 $ 64,817 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Amortization and depreciation 21,649 13,374 5,758 Deferral of acquisition costs (244,322) (209,136) (495,103) Amortization of deferred acquisition costs 510,059 224,047 184,616 Deferred tax (benefit) expense (99,071) 46,215 60,023 Change in unrealized (gains) losses on derivatives (5,149) 2,902 (2,936) Increase (decrease) in policy reserves 3,293 (38,742) 50,892 (Decrease) increase in net receivable/payable to affiliates (99,490) 103,496 (72,063) Change in net income tax receivable/payable 37,084 4,083 (58,888) Increase in other assets (9,546) (12,105) (65,119) Decrease (increase) in accrued investment income 541 472 (1,155) Decrease (increase) in reinsurance receivable 2,286 (1,849) 420 (Decrease) increase in accounts payable and accrued expenses (59,409) 55,912 (21,550) Net realized capital (gains) losses on derivatives (26,654) (14,929) 5,554 Net realized capital losses (gains) on investments 9,616 (928) 688 ---------- ---------- ---------- Net cash (used in) provided by operating activities (124,370) 205,911 (344,046) ---------- ---------- ---------- Cash flow from investing activities: Purchase of fixed maturity investments (388,053) (462,820) (380,737) Proceeds from sale and maturity of fixed maturity investments 367,263 390,816 303,736 Purchase of derivatives (61,998) (103,533) (14,781) Proceeds from exercise or sale of derivative instruments 88,956 113,051 5,936 Purchase of shares in equity securities and dividend reinvestments (49,713) (55,430) (18,136) Proceeds from sale of shares in equity securities 34,220 25,228 8,345 Purchase of fixed assets (2,423) (10,773) (7,348) Increase in policy loans (1,000) (2,813) (2,476) ---------- ---------- ---------- Net cash used in investing activities (12,748) (106,274) (105,461) ---------- ---------- ---------- Cash flow from financing activities: Capital contribution 259,720 48,000 71,450 Pay down of surplus notes (34,000) (15,000) (20,000) (Decrease) increase in future fees payable to ASI, net (91,223) (137,355) 358,376 Deposits to contract owner accounts 808,209 59,681 172,441 Withdrawals from contract owner accounts (164,964) (130,476) (102,603) Change in contract owner accounts, net of investment earnings (588,315) 62,875 (55,468) ---------- ---------- ---------- Net cash provided by (used in) financing activities 189,427 (112,275) 424,196 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 52,309 (12,638) (25,311) Change in foreign currency translation (970) (103) (101) Cash and cash equivalents at beginning of period - 12,741 38,153 Cash and cash equivalents at end of period $ 51,339 $ - $ 12,741 ========== ========== ========== Income taxes (received) paid $ (40,823) $ (43,130) $ 29,644 ========== ========== ========== Interest paid $ 23,967 $ 56,831 $ 114,394 ========== ========== ==========
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 2002 (dollars in thousands) 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation ("ASLAC" or the "Company"), with its principal offices in Shelton, Connecticut, is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). On December 19, 2002, Skandia Insurance Company Ltd. (publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company, entered into a definitive purchase agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"), whereby Prudential Financial will acquire the Company and certain of its affiliates (the "Acquisition"). Consummation of the transaction is subject to various closing conditions, including regulatory approvals and approval of certain matters by the board of directors and shareholders of the mutual funds advised by American Skandia Investment Services, Inc. ("ASISI"), a subsidiary of ASI. The transaction is expected to close during the second quarter of 2003. The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues term and variable universal life insurance and variable deferred and immediate annuities for individuals and groups in the United States of America and its territories. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida"), which is a life insurance company domiciled in Mexico. Skandia Vida had total shareholder's equity of $5,023 and $4,179 as of December 31, 2002, and 2001, respectively. Skandia Vida has generated net losses of $2,706, $2,619 and $2,540 in 2002, 2001 and 2000, respectively. As part of the Acquisition, it is expected that the Company will sell its ownership interest in Skandia Vida to SICL. The Company has filed for required regulatory approvals from the State of Connecticut and Mexico related to the sale of Skandia Vida. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting ------------------ The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Skandia Vida has been consolidated in these financial statements. Intercompany transactions and balances between the Company and Skandia Vida have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Standard ----------------------- Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"). Derivative instruments held by the Company consist of equity put option contracts utilized to AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) manage the economic risks associated with guaranteed minimum death benefits ("GMDB"). These derivative instruments are carried at fair value. Realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements. Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption of EITF Issue 99-20 did not have a significant effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards. No. 142 "Accounting for Goodwill and Intangible Assets" ("SFAS 142"). Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The adoption of SFAS 142 did not have a significant impact on the Company's financial statements. C. Investments ----------- The Company has classified its fixed maturity investments as available-for-sale and, as such, they are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. The Company has classified its equity securities held in support of a deferred compensation plan (see Note 12) as available-for-sale. Such investments are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized capital gains and losses on disposal of investments are determined by the specific identification method. Other than temporary impairment charges are determined based on an analysis that is performed on a security by security basis and includes quantitative and qualitative factors. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Derivative Instruments ---------------------- The Company uses derivative instruments, which consist of equity put option contracts, for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases. Conversely, as the equity markets increase the Company's exposure to future GMDB claims decreases. The claims exposure is reduced by the market value effect of the option contracts purchased. Based on criteria described in SFAS 133, the Company's fair value hedges do not qualify as "effective" hedges and, therefore, hedge accounting may not be applied. Accordingly, the derivative investments are carried at fair value with changes in unrealized gains and losses being recorded in income as those changes occur. As such, both realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. As of December 31, 2002 and 2001, the accumulated difference between cost and market value on the Company's derivatives was an unrealized gain of $1,434 and an unrealized loss of $3,715, respectively. The amount of realized and unrealized gains (losses) on the Company's derivatives recorded during the years ended December 31, 2002, 2001 and 2000 was $31,803, $12,027 and ($2,619), respectively. E. Cash Equivalents ---------------- The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity date, at acquisition, of three months or less to be cash equivalents. As of December 31, 2002, $50 of cash reflected on the Company's financial statements was restricted in compliance with regulatory requirements. F. State Insurance Licenses ------------------------ Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000 less accumulated amortization of $2,038 at December 31, 2002. Due to the adoption of SFAS 142, the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of December 31, 2002, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore, no impairment charge was required. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. Income Taxes ------------ The Company is included in the consolidated federal income tax return filed by Skandia U.S. Inc. and its U.S. subsidiaries. In accordance with the tax sharing agreement, the federal income tax provision is computed on a separate return basis as adjusted for consolidated items. Pursuant to the terms of this agreement, the Company has the right to recover the value of losses utilized by the consolidated group in the year of utilization. To the extent the Company generates income in future years, the Company is entitled to offset future taxes on that income through the application of its loss carry forward generated in the current year. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. H. Recognition of Revenue and Contract Benefits -------------------------------------------- Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance fees are earned ratably throughout the year. Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Fee income from mutual fund organizations is recognized when assessed against assets under management. Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income reduced by amounts credited to the contract holder for interest. This net spread is included in return credited to contract owners on the consolidated statements of income. Benefit reserves for these contracts represent the account value of the contracts plus a AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) market value adjustment, and are included in the general account reserve for future policy and contract benefits to the extent in excess of the separate account assets, typically for the market value adjustment at the reporting date. Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income, reported as a component of return credited to contract owners. Revenues for fixed 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 applicable actuarial standards with assumed interest rates that vary by issue year and are included in the general account reserve for future policy and contract benefits. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 2002 and 2001. Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs -------------------------- The costs of acquiring new business, which vary with and are primarily related to new business generated, are being deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits, from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Details of deferred acquisition costs and related amortization for the years ended December 31, are as follows:
2002 2001 2000 ------------- ------------- ------------- Balance at beginning of year $ 1,383,281 $ 1,398,192 $ 1,087,705 Acquisition costs deferred during the year 244,322 209,136 495,103 Acquisition costs amortized during the year (510,059) (224,047) (184,616) ------------- ------------- ------------- Balance at end of year $ 1,117,544 $ 1,383,281 $ 1,398,192 ============= ============= =============
As asset growth rates, during 2002 and 2001, have been far below the Company's long-term assumption, the adjustment to the short-term asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study, management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206,000. Throughout the year, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72,000. J. Reinsurance ----------- The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. At December 31, 2002 and 2001, in accordance with the provisions of the modified coinsurance agreements, the Company accrued approximately $5,447 and $7,733, respectively, for amounts receivable from favorable reinsurance experience on certain blocks of variable annuity business. K. Translation of Foreign Currency ------------------------------- The financial position and results of operations of Skandia Vida are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at each year-end. Statements of income and changes in 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 reported as a component of other comprehensive income. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) L. Separate Accounts ----------------- Assets and liabilities in separate accounts are included as separate captions in the consolidated statements of financial condition. Separate account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through ASISI, utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contract holder has the option of directing funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of a contract is borne by the contract holder. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated with the investments that support these fixed options. Included in Separate Account liabilities are reserves of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, relating to deferred annuity investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the Commissioners Annuity Reserve Valuation Method. Separate Account assets of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, consisting of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment income, accrued liabilities and amounts due to/from the General Account are held in support of these annuity obligations, pursuant to state regulation. Included in the general account, within Reserves for Future Policy and Contract Benefits, is the market value adjustment associated with the guaranteed, fixed rate investment options, assuming the market value adjustment at the reporting date. Net investment income (including net realized capital gains and losses) and interest credited to contract holders on separate account assets are not separately reflected in the Consolidated Statements of Income. M. Unearned Performance Credits ---------------------------- The Company defers certain bonus credits applied to contract holder deposits. The credit is reported as a contract holder liability within separate account liabilities and the deferred expense is reported as a component of other assets. As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortizes the deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit is amortized in proportion to expected surrenders and mortality. As of December 31, 2002 and 2001, the unearned performance credit asset was $83,288 and $89,234, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Estimates --------- The preparation of financial statements in conformity with U.S. GAAP 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 estimates of future policy lapses, investment returns and maintenance expenses. Actual results could differ from those estimates. 3. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of fixed maturities and investments in equity securities as of December 31, 2002 and 2001 are shown below. All securities held at December 31, 2002 and 2001 were publicly traded. Investments in fixed maturities as of December 31, 2002 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------ ----------- -------- ------------ U.S. Government obligations $ 270,969 $ 15,658 $ (78) $ 286,549 Obligations of state and political subdivisions 253 9 (1) 261 Corporate securities 108,200 3,631 (40) 111,791 ------------ ----------- -------- ------------ Totals $ 379,422 $ 19,298 $ (119) $ 398,601 ============ =========== ======== ============
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2002 are shown below. Actual maturities may differ from contractual maturities due to call or prepayment provisions. Amortized Cost Fair Value ----------- ----------- Due in one year or less $ 12,793 $ 12,884 Due after one through five years 165,574 171,830 Due after five through ten years 186,609 198,913 Due after ten years 14,446 14,974 ----------- ----------- Total $ 379,422 $ 398,601 =========== =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) Investments in fixed maturities as of December 31, 2001 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------ ----------- -------- ------------ U.S. Government obligations $ 198,136 $ 2,869 $ (413) $ 200,592 Obligations of state and political subdivisions 252 8 - 260 Corporate securities 158,494 4,051 (566) 161,979 ------------ ----------- -------- ------------ Totals $ 356,882 $ 6,928 $ (979) $ 362,831 ============ =========== ======== ============
Proceeds from sales of fixed maturities during 2002, 2001 and 2000 were $367,213, $386,816 and $302,632, respectively. Proceeds from maturities during 2002, 2001 and 2000 were $50, $4,000 and $1,104, respectively. The cost, gross unrealized gains/losses and fair value of investments in equity securities at December 31 are shown below:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ------------ ----------- -------- ------------ 2002 $ 52,017 $ 136 $ (384) $ 51,769 2001 $ 49,886 $ 122 $ (4,925) $ 45,083
Net realized investment gains (losses), determined on a specific identification basis, were as follows for the years ended December 31: 2002 2001 2000 ------------ ----------- -------- Fixed maturities: Gross gains $ 8,213 $ 8,849 $ 1,002 Gross losses (4,468) (4,387) (3,450) Investment in equity securities: Gross gains 90 658 1,913 Gross losses (13,451) (4,192) (153) ------------ ----------- -------- Totals $ (9,616) $ 928 $ (688) ============ =========== ======== During 2002, the Company determined that certain amounts of its investment in equity securities were other than temporarily impaired and, accordingly, recorded a loss of $3,769. As of December 31, 2002, the Company did not own any investments in fixed maturity securities whose carrying value exceeded 10% of the Company's equity. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) As of December 31, 2002, the following fixed maturities were restricted in compliance with regulatory requirements: Security Fair Value - -------- ---------- U.S. Treasury Note, 6.25%, February 2003 $4,345 U.S. Treasury Note, 3.00%, November 2003 183 Puerto Rico Commonwealth, 4.60%, July 2004 210 Puerto Rico Commonwealth, 4.875%, July 2023 52 4. 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 equity securities are based on quoted market prices. The fair value of derivative instruments is determined based on the current value of the underlying index. The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term nature of these investments. The carrying value of policy loans approximates fair value. Fair value of future fees payable to ASI are determined on a discounted cash flow basis, using best estimate assumptions of lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management. The carrying value of short-term borrowings (cost) approximates fair value due to the short-term nature of these liabilities. Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all accrued interest at the maturity date (see Note 14 for payment restrictions). AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 4. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The fair values and carrying values of financial instruments at December 31, 2002 and 2001 are as follows:
December 31, 2002 December 31, 2001 --------------------------------- -------------------------------- Fair Value Carrying Value Fair Value Carrying Value -------------- ------------------ ------------- ------------------ Assets - ------ Fixed Maturities $398,601 $398,601 $362,831 $362,831 Equity Securities 51,769 51,769 45,083 45,083 Derivative Instruments 10,370 10,370 5,525 5,525 Policy Loans 7,559 7,559 6,559 6,559 Liabilities - ----------- Future Fees Payable to ASI 429,773 708,249 546,357 799,472 Short-term Borrowing 10,000 10,000 10,000 10,000 Surplus Notes and accrued interest of $29,230 and $25,829 in 2002 and 2001, respectively 140,777 139,230 174,454 169,829
5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31 were as follows: 2002 2001 2000 ---------- ---------- ---------- Fixed maturities $ 18,015 $ 18,788 $ 13,502 Cash and cash equivalents 1,116 909 5,209 Equity securities 809 622 99 Policy loans 403 244 97 ---------- ---------- ---------- Total investment income 20,343 20,563 18,907 Investment expenses (711) (437) (312) ---------- ---------- ---------- Net investment income $ 19,632 $ 20,126 $ 18,595 ========== ========== ========== 6. INCOME TAXES The significant components of income tax expense for the years ended December 31 were as follows:
2002 2001 2000 ----------- ---------- ----------- Current tax benefit $ (3,739) $ (39,047) $ (29,244) Deferred tax expense, excluding operating loss carryforwards 35,915 60,587 60,023 Deferred tax benefit for operating and capital loss carryforwards (134,986) (14,372) - ----------- ---------- ----------- Total income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 =========== ========== ===========
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (continued) Deferred tax assets (liabilities) include the following at December 31: 2002 2001 ----------- ----------- Deferred tax assets: GAAP to tax reserve differences $ 165,348 $ 241,503 Future fees payable to ASI 21,475 63,240 Deferred compensation 20,603 20,520 Net operating loss carry forward 147,360 14,372 Other 6,530 17,276 ----------- ----------- Total deferred tax assets 361,316 356,911 ----------- ----------- Deferred tax liabilities: Deferred acquisition costs, net (312,933) (404,758) Net unrealized gains on fixed maturity securities (6,713) (2,082) Other (3,464) (5,051) ----------- ----------- Total deferred tax liabilities (323,110) (411,891) ----------- ----------- Net deferred tax asset (liability) $ 38,206 $ (54,980) =========== =========== In accordance with SFAS 109, the Company has performed an analysis of its deferred tax assets to assess recoverability. Looking at a variety of items, most notably, the timing of the reversal of temporary items and future taxable income projections, the Company determined that no valuation allowance is needed. The income tax (benefit) 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:
2002 2001 2000 ------------ ---------- ---------- (Loss) income before taxes Domestic $ (265,361) $ 42,886 $ 98,136 Foreign (2,706) (2,619) (2,540) ------------ ---------- ---------- Total (268,067) 40,267 95,596 Income tax rate 35% 35% 35% ------------ ---------- ---------- Tax (benefit) expense at federal statutory income tax rate (93,823) 14,093 33,459 Tax effect of: Dividend received deduction (12,250) (8,400) (7,350) Losses of foreign subsidiary 947 917 889 Meals and entertainment 603 603 841 State income taxes - (62) (524) Federal provision to return differences 709 (177) 3,235 Other 1,004 194 229 ------------ ---------- ---------- Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ============ ========== ==========
The Company's net operating loss carry forwards, totaling approximately $421,029 (pre-tax) at December 31, 2002, will expire in 2016 and 2017. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. COST ALLOCATION AGREEMENTS WITH AFFILIATES Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company. ASLAC signed a written service agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice. The Company has also paid and charged operating costs to several of its affiliates. The total cost to the Company for these items was $8,177, $6,179 and $13,974 in 2002, 2001 and 2000, respectively. Income received for these items was approximately $13,052, $13,166 and $11,186 in 2002, 2001 and 2000, respectively. Allocated depreciation expense was $7,440, $8,764 and $9,073 in 2002, 2001 and 2000, respectively. Allocated lease expense was $5,808, $6,517 and $5,606 in 2002, 2001 and 2000, respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense, was $738, $30 and $0 in 2002, 2001 and 2000, respectively. Assuming that the written service agreement between ASLAC and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ----------- ----------- 2003 $ 4,847 $ 1,616 2004 5,275 1,773 2005 5,351 1,864 2006 5,328 1,940 2007 5,215 1,788 2008 and thereafter 19,629 7,380 ----------- ----------- Total $ 45,645 $ 16,361 =========== =========== Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this agreement, the expenses reimbursed were $8,255, $6,610 and $6,064 in 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, amounts receivable under this agreement were approximately $458 and $639, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, current mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability (see Note 4). On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was $101,713. Payments, representing fees and charges in the aggregate amount, of $186,810, $207,731 and $219,523 were made by the Company to ASI in 2002, 2001 and 2000, respectively. Related interest expense of $828, $59,873 and $70,667 has been included in the consolidated statements of income for 2002, 2001 and 2000, respectively. The Commissioner of the State of Connecticut has approved the transfer 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 restrict the payments due to ASI, into a restricted account, under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI (continued) The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present Transaction Date Date Period Rate Value - ----------- ---- ---- ------ ---- ----- 1996-1 12/17/96 9/1/96 1/1/94 - 6/30/96 7.5% $50,221 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128 1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632 1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078 2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459 2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399 2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291 2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139 2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
Payments of future fees payable to ASI, according to original amortization schedules, as of December 31, 2002 are as follows: Year Amount - ---- ------ 2003 $ 186,854 2004 171,093 2005 147,902 2006 117,761 2007 66,270 2008 18,369 ----------- Total $ 708,249 =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company entered into an eleven year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for 2002 and 2001 was $2,583 and $1,602, respectively. Sub-lease rental income was $227 in 2002 and $0 in 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ---------- ---------- 2003 $ 1,913 $ 426 2004 1,982 455 2005 2,050 500 2006 2,050 533 2007 2,050 222 2008 and thereafter 8,789 0 ---------- ---------- Total $ 18,834 $ 2,136 ========== ========== 10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $279,957 and $226,780 at December 31, 2002 and 2001, respectively. The Company incurred statutory basis net losses in 2002 of $192,474 due primarily to significant declines in the equity markets, increasing GMDB reserves calculated on a statutory basis. Statutory basis net losses for 2001 were $121,957, as compared to income of $11,550 in 2000. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. For 2003, no amounts may be distributed without prior approval. 11. STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory basis financial statements in accordance with accounting practices prescribed by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. The NAIC adopted the Codification of Statutory Accounting Principles (Codification) in March 1998. The effective date for codification was January 1, 2001. The Company's state of domicile, Connecticut, has adopted codification and the Company has made the necessary changes in its statutory accounting and reporting required for implementation. The overall impact of adopting codification in 2001 was a one-time, cumulative change in accounting benefit recorded directly in statutory surplus of $12,047. In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its statutory method of accounting for its AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 11. STATUTORY ACCOUNTING PRACTICES (continued) liability associated with securitized variable annuity fees. Under the new method of accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being equal to the Commissioners Annuity Reserve Valuation Method (CARVM) offset related to the securitized contracts. The impact of this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of approximately $20,215. In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40,511. Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5,935 of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus. Amortization expense for the year ended December 31, 2002 was $757. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of its affiliates. Expenses related to this program in 2002, 2001 and 2000 were $719, $2,738 and $3,734, respectively. Company contributions to this plan on behalf of the participants were $921, $2,549 and $4,255 in 2002, 2001 and 2000, respectively. The Company has a deferred compensation plan, which is available to the field marketing staff and certain other employees. Expenses related to this program in 2002, 2001 and 2000 were $3,522, $1,615 and $1,030, respectively. Company contributions to this plan on behalf of the participants were $5,271, $1,678 and $2,134 in 2002, 2001 and 2000, respectively. The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive officers and other personnel. The Company and certain affiliates also have a profit sharing program, which benefits all employees AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 12. EMPLOYEE BENEFITS (continued) below the officer level. These programs consist of multiple plans with new plans 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 programs. The accrued liability representing the value of these units was $7,083 and $13,645 as of December 31, 2002 and 2001, respectively. Expenses (income) related to these programs in 2002, 2001 and 2000, were $1,471, ($9,842) and $2,692, respectively. Payments under these programs were $8,033, $8,377 and $13,697 in 2002, 2001 and 2000, respectively. 13. FINANCIAL REINSURANCE The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, the future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating the financial condition and credit worthiness of reinsurers. The effect of reinsurance for the 2002, 2001 and 2000 was as follows:
2002 Gross Ceded Net - ---- ----- ----- --- Annuity and life insurance charges and fees $ 406,272 $ (36,268) $ 370,004 Return credited to contract owners $ 5,221 $ (25) $ 5,196 Underwriting, acquisition and other insurance expenses (deferal of acquisition costs) $ 154,588 $ 34,140 $ 188,728 Amortization of deferred acquisition costs $ 542,945 $ (32,886) $ 510,059 2001 - ---- Annuity and life insurance charges and fees $ 430,914 $ (42,218) $ 388,696 Return credited to contract owners $ 5,704 $ 92 $ 5,796 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 163,677 $ 33,078 $ 196,755 Amortization of deferred acquisition costs $ 231,290 $ (7,243) $ 224,047 2000 - ---- Annuity and life insurance charges and fees $ 473,318 $ (48,740) $ 424,578 Return credited to contract owners $ 8,540 $ (77) $ 8,463 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 108,399 $ 42,198 $ 150,597 Amortization of deferred acquisition costs $ 205,174 $ (20,558) $ 184,616
In December 2000, the Company entered into a modified coinsurance agreement with SICL covering certain contracts issued since January 1996. The impact of this treaty to the AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 13. FINANCIAL REINSURANCE (continued) Company was pre-tax (loss) income of ($4,137), $8,394 and $23,341 in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, $675 and $1,137, respectively, was receivable from SICL under this agreement. 14. SURPLUS NOTES The Company has issued surplus notes to ASI in exchange for cash. Surplus notes outstanding as of December 31, 2002 and 2001, and interest expense for 2002, 2001 and 2000 were as follows:
Liability as of December 31, Interest Expense Interest ------------------------ For the Years Note Issue Date Rate 2002 2001 2002 2001 2000 - ---------------------- --------- ---------- ---------- --------- --------- --------- February 18, 1994 7.28% - - - - 732 March 28, 1994 7.90% - - - - 794 September 30, 1994 9.13% - - - 1,282 1,392 December 19, 1995 7.52% - 10,000 520 763 765 December 20, 1995 7.49% - 15,000 777 1,139 1,142 December 22, 1995 7.47% - 9,000 465 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,420 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 5,715 ---------- ---------- --------- --------- --------- Total $110,000 $144,000 $10,872 $12,976 $14,644 ========== ========== ========= ========= =========
On September 6, 2002, surplus notes for $10,000, dated December 19, 1995, $15,000, dated December 20, 1995, and $9,000, dated December 22, 1995, were repaid. On December 3, 2001, a surplus note, dated September 30, 1994, for $15,000 was repaid. On December 27, 2000, surplus notes for $10,000, dated February 18, 1994, and $10,000, dated March 28, 1994, were repaid. All surplus notes mature seven 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, 2002 and 2001, $29,230 and $25,829, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10,000 short-term loan payable to ASI at December 31, 2002 and 2001 as part of a revolving loan agreement. The loan had an interest rate of 1.97% and matured on January 13, 2003. The loan was subsequently rolled over with a new interest rate of 1.82% and a new maturity date of March 13, 2003. The loan was further extended to April 30, 2003 and a new interest rate of 1.71%. The total related interest expense to the Company was $271, $522 and $687 in 2002, 2001 and 2000, respectively. Accrued interest payable was $10 and $113 as of December 31, 2002 and 2001, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 15. SHORT-TERM BORROWING (continued) On January 3, 2002, the Company entered into a $150,000 credit facility with ASI. This credit facility terminates on December 31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant interest period. Interest expense related to these borrowings was $2,243 for the year ended December 31, 2002. As of December 31, 2002, no amount was outstanding under this credit facility. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners at market value or with market value adjustment. Separate account assets, which are carried at fair value, are adequate to pay such withdrawals, which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. 17. RESTRUCTURING CHARGES On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax severance benefits of $8,500 have been charged against 2001 operations related to these reductions. These charges have been reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of December 31, 2002 and 2001, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $12 and $4,104, respectively. 18. COMMITMENTS AND CONTINGENT LIABILITIES In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable annuities as funding vehicles for tax- qualified retirement accounts. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Southern District of New York on December 12, 2002, by Diane C. Donovan against the Company and certain of its affiliates (the "Donovan Complaint"). The Donovan Complaint seeks unspecified compensatory damages and injunctive relief from the Company and certain of its affiliates. The Donovan Complaint claims that the Company and certain of its affiliates violated federal securities laws in marketing variable annuities. This litigation is in the preliminary stages. The Company believes this action is without merit, and intends to vigorously defend against this action. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. COMMITMENTS AND CONTINGENT LIABILITIES (continued) As discussed previously, on December 19, 2002, SICL entered into a definitive purchase agreement (the "Purchase Agreement") to sell its ownership interest in the Company and certain affiliates to Prudential Financial for approximately $1.265 billion. The closing of this transaction, which is conditioned upon certain customary regulatory and other approvals and conditions, is expected in the second quarter of 2003. The purchase price that was agreed to between SICL and Prudential Financial was based on a September 30, 2002 valuation of the Company and certain affiliates. As a result, assuming the transaction closes, the economics of the Company's business from September 30, 2002 forward will inure to the benefit or detriment of Prudential Financial. Included in the Purchase Agreement, SICL has agreed to indemnify Prudential Financial for certain liabilities that may arise relating to periods prior to September 30, 2002. These liabilities generally include market conduct activities, as well as contract and regulatory compliance (referred to as "Covered Liabilities"). Related to the indemnification provisions contained in the Purchase Agreement, SICL has signed, for the benefit of the Company, an indemnity letter, effective December 19, 2002, to make the Company whole for certain Covered Liabilities that come to fruition during the period beginning December 19, 2002 and ending with the close of the transaction. This indemnification effectively transfers the risk associated with those Covered Liabilities from the Company to SICL concurrent with the signing of the definitive purchase agreement rather than waiting until the transaction closes. 19. SEGMENT REPORTING Assets under management and sales for products other than variable annuities have not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and the Company does not anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity business. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
Three Months Ended -------------------------------------------------------- 2002 March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------ ------------ Premiums and other insurance revenues* $ 118,797 $ 126,614 $ 115,931 $ 108,488 Net investment income 4,965 4,714 5,128 4,825 Net realized capital losses (1,840) (1,584) (2,327) (3,863) ----------- ------------ ------------ ------------ Total revenues 121,922 129,744 118,732 109,450 Benefits and expenses* 112,759 160,721 323,529 150,906 ----------- ------------ ------------ ------------ Pre-tax net income (loss) 9,163 (30,977) (204,797) (41,456) Income tax expense (benefit) 1,703 (11,746) (72,754) (20,013) ----------- ------------ ------------ ------------ Net income (loss) $ 7,460 $ (19,231) $ (132,043) $ (21,443) =========== ============ ============ ============
* For the quarters ended March 31, 2002 and June 30, 2002, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact.
Three Months Ended -------------------------------------------------------- 2001 March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------- ------------ Premiums and other insurance revenues*** $ 130,885 $ 128,465 $ 122,708 $ 119,604 Net investment income** 5,381 4,997 5,006 4,742 Net realized capital gains (losses) 1,902 373 376 (1,723) ----------- ------------ ------------ ------------ Total revenues 138,168 133,835 128,090 122,623 Benefits and expenses** *** 122,729 110,444 123,307 125,969 ----------- ------------ ------------ ------------ Pre-tax net income (loss) 15,439 23,391 4,783 (3,346) Income tax expense (benefit) 4,034 7,451 (480) (3,837) ----------- ------------ ------------- ------------ Net income $ 11,405 $ 15,940 $ 5,263 $ 491 =========== ============ ============ ============
** For the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. *** For the quarters ended September 30, 2001 and December 31, 2001, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (continued)
Three Months Ended -------------------------------------------------------- 2000 March 31 June 30 Sept. 30 Dec. 31 ----------- ------------ ------------- ------------ Premiums and other insurance revenues $ 137,040 $ 139,346 $ 147,819 $ 135,866 Net investment income**** 4,343 4,625 4,619 5,008 Net realized capital gains (losses) 729 (1,436) (858) 877 Total revenues 142,112 142,535 151,580 141,751 Benefits and expenses**** 107,893 122,382 137,843 114,264 Pre-tax net income 34,219 20,153 13,737 27,487 Income tax expense 10,038 5,225 3,167 12,349 Net income $ 24,181 $ 14,928 $ 10,570 $ 15,138 ============ ============ =========== ============
**** For the quarters ended March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding for each such Sub-account as of the dates shown. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. 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. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2003. Beginning November 18, 2002, multiple Unit Prices will be calculated for each Sub-account of Separate Account B to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under this Annuity. The Unit Prices below reflect the daily charges for each optional benefit offered between November 18, 2002 and December 31, 2002 only.
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price $19.53 24.28 31.88 43.99 27.18 Number of Units 14,140,023 17,388,860 19,112,622 16,903,883 17,748,560 With One Optional Benefit Unit Price $8.56 - - - - Number of Units 2,569,506 - - - - With Any Two Optional Benefits Unit Value $9.95 - - - - Number of Units 90,759 - - - - With All Optional Benefits Unit Price $9.95 - - - - Number of Units 6,047 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST William Blair International Growth /2/ (1997) With No Optional Benefits Unit Price $9.92 13.54 17.96 24.16 13.41 Number of Units 29,062,215 40,507,419 57,327,711 61,117,418 43,711,763 With One Optional Benefit Unit Price $9.72 - - - - Number of Units 835,523 - - - - With Any Two Optional Benefits Unit Price $9.72 - - - - Number of Units 78,368 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 5,178 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price 22.95 19.70 18.23 16.80 16.60 Number of Units 17,534,233 17,220,688 14,393,137 14,043,215 9,063,464 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Value - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST William Blair International Growth /2/ (1997) With No Optional Benefits Unit Price 11.70 - - - - Number of Units 21,405,891 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price $10.20 12.85 17.92 21.66 13.30 Number of Units 31,813,722 37,487,425 17,007,352 6,855,601 5,670,336 With One Optional Benefit Unit Price $8.52 - - - - Number of Units 2,252,674 - - - - With Any Two Optional Benefits Unit Price $9.69 - - - - Number of Units 116,123 - - - - With All Optional Benefits Unit Price $9.69 - - - - Number of Units 1,896 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price $8.81 10.77 16.12 23.45 12.54 Number of Units 10,185,535 13,627,264 16,245,805 8,818,599 9,207,623 With One Optional Benefit Unit Price $8.19 - - - - Number of Units 269,995 - - - - With Any Two Optional Benefits Unit Price $9.79 - - - - Number of Units 22,770 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Global Equity (1999) With No Optional Benefits Unit Price $7.74 8.94 10.08 11.01 - Number of Units 5,878,055 5,806,567 2,803,013 116,756 - With One Optional Benefit Unit Price $9.04 - - - - Number of Units 969,509 - - - - With Any Two Optional Benefits Unit Price $9.87 - - - - Number of Units 32,306 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price 11.35 - - - - Number of Units 2,857,188 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price 11.46 11.39 10.23 - - Number of Units 9,988,104 9,922,698 2,601,283 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PBHG Small-Cap Growth /5/ (1994) With No Optional Benefits Unit Price $12.83 19.84 21.51 42.08 17.64 Number of Units 17,093,250 23,048,821 25,535,093 32,134,969 15,003,001 With One Optional Benefit Unit Price $6.92 - - - - Number of Units 1,970,250 - - - - With Any Two Optional Benefits Unit Price $9.48 - - - - Number of Units 47,261 - - - - With All Optional Benefits Unit Price $9.47 - - - - Number of Units 6,595 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Small-Cap Growth /6/ (1999) With No Optional Benefits Unit Price $6.13 8.46 11.98 15.37 - Number of Units 44,042,514 60,703,791 63,621,279 53,349,003 - With One Optional Benefit Unit Price $7.67 - - - - Number of Units 639,695 - - - - With Any Two Optional Benefits Unit Price $9.71 - - - - Number of Units 12,122 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 1,728 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $4.96 7.10 9.08 - - Number of Units 5,188,521 6,499,066 196,575 - - With One Optional Benefit Unit Price $7.64 - - - - Number of Units 1,255,415 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 63,097 - - - - With All Optional Benefits Unit Price $9.86 - - - - Number of Units 4,107 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PBHG Small-Cap Growth /5/ (1994) With No Optional Benefits Unit Price 17.28 16.54 13.97 10.69 - Number of Units 14,662,728 12,282,211 6,076,373 2,575,105 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Small-Cap Growth /6/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Small-Cap Value /7/ (1998) With No Optional Benefits Unit Price $13.72 15.12 13.95 10.57 9.85 Number of Units 20,004,839 26,220,860 15,193,053 6,597,544 4,081,870 With One Optional Benefit Unit Price $9.26 - - - - Number of Units 1,492,775 - - - - With Any Two Optional Benefits Unit Price $10.09 - - - - Number of Units 624 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Gabelli Small-Cap Value /8/ (1997) With No Optional Benefits Unit Price $12.58 14.08 13.35 11.11 11.20 Number of Units 32,549,396 35,483,530 23,298,524 21,340,168 24,700,211 With One Optional Benefit Unit Price $9.30 - - - - Number of Units 6,141,523 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 209,790 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 17,411 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 581,833 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 423,387 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 11,686 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 5,211 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Small-Cap Value /7/ (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Gabelli Small-Cap Value /8/ (1997) With No Optional Benefits Unit Price 12.70 - - - - Number of Units 14,612,510 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price $2.78 3.88 6.58 - - Number of Units 16,748,577 17,045,776 9,426,102 - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 1,273,118 - - - - With Any Two Optional Benefits Unit Price $9.87 - - - - Number of Units 66,279 - - - - With All Optional Benefits Unit Price $9.87 - - - - Number of Units 2,488 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price $12.86 18.95 25.90 28.58 19.15 Number of Units 19,674,777 25,717,164 26,517,850 13,460,525 13,389,289 With One Optional Benefit Unit Price $7.41 - - - - Number of Units 2,175,250 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 44,760 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 1,311 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price $17.78 20.16 21.09 16.78 16.10 Number of Units 37,524,187 47,298,313 44,558,699 37,864,586 16,410,121 With One Optional Benefit Unit Price $8.96 - - - - Number of Units 5,118,558 - - - - With Any Two Optional Benefits Unit Price $9.98 - - - - Number of Units 163,415 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 10,745 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price 16.10 13.99 12.20 9.94 - Number of Units 11,293,799 9,563,858 3,658,836 301,267 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price 16.72 13.41 12.20 9.81 10.69 Number of Units 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $3.51 5.54 6.74 - - Number of Units 85,441,507 125,442,916 28,229,631 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 658,419 - - - - With Any Two Optional Benefits Unit Price $9.36 - - - - Number of Units 6,409 - - - - With All Optional Benefits Unit Price $9.36 - - - - Number of Units 3,466 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $7.59 9.71 10.06 - - Number of Units 11,924,124 14,934,570 1,273,094 - - With One Optional Benefit Unit Price $8.17 - - - - Number of Units 1,200,225 - - - - With Any Two Optional Benefits Unit Price $10.04 - - - - Number of Units 28,449 - - - - With All Optional Benefits Unit Price $10.04 - - - - Number of Units 88 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $18.36 19.71 19.86 15.88 12.57 Number of Units 5,891,582 6,565,088 6,520,983 6,201,327 5,697,453 With One Optional Benefit Unit Price $9.59 - - - - Number of Units 724,670 - - - - With Any Two Optional Benefits Unit Price $10.44 - - - - Number of Units 7,378 - - - - With All Optional Benefits Unit Price $10.44 - - - - Number of Units 5,472 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price 14.46 14.19 11.01 - - Number of Units 7,550,076 6,061,852 808,605 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance Growth /13/ (1996) With No Optional Benefits Unit Price $9.94 14.61 17.38 20.44 15.48 Number of Units 21,295,907 29,478,257 25,796,792 17,059,819 19,009,242 With One Optional Benefit Unit Price $7.46 - - - - Number of Units 1,869,353 - - - - With Any Two Optional Benefits Unit Price $9.34 - - - - Number of Units 31,105 - - - - With All Optional Benefits Unit Price $9.34 - - - - Number of Units 3,975 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST MFS Growth (1999) With No Optional Benefits Unit Price $5.68 8.02 10.38 11.27 - Number of Units 85,193,279 117,716,242 7,515,486 409,467 - With One Optional Benefit Unit Price $7.58 - - - - Number of Units 2,930,432 - - - - With Any Two Optional Benefits Unit Price $9.47 - - - - Number of Units 134,574 - - - - With All Optional Benefits Unit Price $9.46 - - - - Number of Units 2,437 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $11.44 13.74 17.81 21.06 14.00 Number of Units 81,046,482 85,895,802 94,627,691 78,684,943 40,757,449 With One Optional Benefit Unit Price $8.32 - - - - Number of Units 10,144,317 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 457,013 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 30,465 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alliance Growth /13/ (1996) With No Optional Benefits Unit Price 12.33 10.89 - - - Number of Units 18,736,994 4,324,161 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price 10.03 - - - - Number of Units 714,309 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Goldman Sachs Concentrated Growth /14/ (1992) With No Optional Benefits Unit Price $19.17 27.71 41.14 60.44 39.54 Number of Units 56,016,467 84,116,221 99,250,773 94,850,623 80,631,598 With One Optional Benefit Unit Price $7.67 - - - - Number of Units 1,349,939 - - - - With Any Two Optional Benefits Unit Price $9.46 - - - - Number of Units 41,632 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAm Large-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.67 - - - - Number of Units 986,566 - - - - With One Optional Benefit Unit Price $7.65 - - - - Number of Units 207,816 - - - - With Any Two Optional Benefits Unit Price $9.64 - - - - Number of Units 9,837 - - - - With All Optional Benefits Unit Price $9.64 - - - - Number of Units 3,697 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAm Large-Cap Value /15/ (2000) With No Optional Benefits Unit Price $7.64 9.15 9.82 - - Number of Units 4,621,831 4,575,558 586,058 - - With One Optional Benefit Unit Price $8.66 - - - - Number of Units 664,649 - - - - With Any Two Optional Benefits Unit Price $9.98 - - - - Number of Units 18,250 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 4,906 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST Goldman Sachs Concentrated Growth /14/ (1992) With No Optional Benefits Unit Price 23.83 18.79 14.85 10.91 11.59 Number of Units 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST DeAm Large-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST DeAm Large-Cap Value /15/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price $7.12 9.63 - - - Number of Units 3,031,899 3,351,836 - - - With One Optional Benefit Unit Price $7.99 - - - - Number of Units 965,912 - - - - With Any Two Optional Benefits Unit Price $9.79 - - - - Number of Units 11,345 - - - - With All Optional Benefits Unit Price $9.79 - - - - Number of Units 704 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price $8.59 10.04 - - - Number of Units 15,239,844 4,207,869 - - - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 6,005,922 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 386,259 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 30,510 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $10.67 10.54 10.39 8.35 8.28 Number of Units 14,017,528 12,268,426 11,891,188 6,224,365 3,771,461 With One Optional Benefit Unit Price $10.08 - - - - Number of Units 1,563,486 - - - - With Any Two Optional Benefits Unit Price $10.33 - - - - Number of Units 41,098 - - - - With All Optional Benefits Unit Price $10.32 - - - - Number of Units 6,429 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- - - -------------------------------------------------------------- ------------ ------------ ----------- ----------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------------------- ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Sanford Bernstein Managed Index 500 /16/ (1998) With No Optional Benefits Unit Price $9.41 12.03 13.55 15.08 12.61 Number of Units 39,938,791 48,018,721 48,835,089 39,825,951 22,421,754 With One Optional Benefit Unit Price $8.17 - - - - Number of Units 3,662,406 - - - - With Any Two Optional Benefits Unit Price $9.81 - - - - Number of Units 79,915 - - - - With All Optional Benefits Unit Price $9.81 - - - - Number of Units 383 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century Income & Growth /17/ (1997) With No Optional Benefits Unit Price $10.16 12.86 14.24 16.19 13.35 Number of Units 22,410,834 27,386,278 32,388,202 21,361,995 13,845,190 With One Optional Benefit Unit Price $8.25 - - - - Number of Units 1,751,136 - - - - With Any Two Optional Benefits Unit Price $9.89 - - - - Number of Units 36,829 - - - - With All Optional Benefits Unit Price $9.89 - - - - Number of Units 8,874 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Alliance Growth and Income /18/ (1992) With No Optional Benefits Unit Price $21.31 28.18 28.72 27.60 24.11 Number of Units 49,030,576 63,123,316 53,536,296 52,766,579 47,979,349 With One Optional Benefit Unit Price $8.06 - - - - Number of Units 6,667,373 - - - - With Any Two Optional Benefits Unit Price $9.83 - - - - Number of Units 165,588 - - - - With All Optional Benefits Unit Price $9.83 - - - - Number of Units 6,100 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Sanford Bernstein Managed Index 500 /16/ (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century Income & Growth /17/ (1997) With No Optional Benefits Unit Price 12.06 - - - - Number of Units 9,523,815 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Alliance Growth and Income /18/ (1992) With No Optional Benefits Unit Price 21.74 17.79 15.22 11.98 11.88 Number of Units 42,197,002 28,937,085 18,411,759 7,479,449 4,058,228 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price $6.68 8.64 10.36 10.49 - Number of Units 11,173,177 11,896,688 6,937,627 741,323 - With One Optional Benefit Unit Price $8.09 - - - - Number of Units 1,053,007 - - - - With Any Two Optional Benefits Unit Price $9.71 - - - - Number of Units 17,242 - - - - With All Optional Benefits Unit Price $9.71 - - - - Number of Units 538 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- AST INVESCO Capital Income /19/ (1994) With No Optional Benefits Unit Price $16.14 19.84 22.01 21.31 19.34 Number of Units 37,055,825 48,595,962 50,171,495 46,660,160 40,994,187 With One Optional Benefit Unit Price $8.34 - - - - Number of Units 2,110,071 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 30,714 - - - - With All Optional Benefits Unit Price $9.90 - - - - Number of Units 5,934 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- AST DeAM Global Allocation /20/ (1993) With No Optional Benefits Unit Price $14.50 17.39 19.98 21.19 17.78 Number of Units 18,212,529 26,641,422 30,290,413 23,102,272 22,634,344 With One Optional Benefit Unit Price $8.71 - - - - Number of Units 847,517 - - - - With Any Two Optional Benefits Unit Price $9.94 - - - - Number of Units 3,088 - - - - With All Optional Benefits Unit Price $9.93 - - - - Number of Units 94 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ---------------- Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST INVESCO Capital Income /19/ (1994) With No Optional Benefits Unit Price 17.31 14.23 12.33 9.61 - Number of Units 33,420,274 23,592,226 13,883,712 6,633,333 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Global Allocation /20/ (1993) With No Optional Benefits Unit Price 15.98 13.70 12.49 10.34 10.47 Number of Units 22,109,373 20,691,852 20,163,848 13,986,604 8,743,758 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $12.01 13.50 14.23 14.90 13.37 Number of Units 12,683,097 14,369,895 14,498,180 13,944,535 6,714,065 With One Optional Benefit Unit Price $9.14 - - - - Number of Units 1,126,058 - - - - With Any Two Optional Benefits Unit Price $9.97 - - - - Number of Units 15,835 - - - - With All Optional Benefits Unit Price $9.97 - - - - Number of Units 2,760 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $16.13 18.15 19.33 19.70 18.12 Number of Units 15,466,227 17,579,107 19,704,198 22,002,028 18,469,315 With One Optional Benefit Unit Price $9.09 - - - - Number of Units 921,329 - - - - With Any Two Optional Benefits Unit Price $9.96 - - - - Number of Units 21,928 - - - - With All Optional Benefits Unit Price $9.96 - - - - Number of Units 150 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST T. Rowe Price Global Bond /21/ (1994) With No Optional Benefits Unit Price $12.04 10.62 10.49 10.69 11.82 Number of Units 14,576,376 9,668,062 11,219,503 12,533,037 12,007,692 With One Optional Benefit Unit Price $11.34 - - - - Number of Units 1,739,313 - - - - With Any Two Optional Benefits Unit Price $10.31 - - - - Number of Units 36,822 - - - - With All Optional Benefits Unit Price $10.31 - - - - Number of Units 3,700 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price 11.18 - - - - Number of Units 2,560,866 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price 15.53 13.30 11.92 9.80 - Number of Units 13,524,781 8,863,840 4,868,956 2,320,063 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST T. Rowe Price Global Bond /21/ (1994) With No Optional Benefits Unit Price 10.45 10.98 10.51 9.59 - Number of Units 12,089,872 8,667,712 4,186,695 1,562,364 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Federated High Yield (1994) With No Optional Benefits Unit Price $12.47 12.64 12.80 14.38 14.30 Number of Units 38,477,793 39,130,467 36,914,825 41,588,401 40,170,144 With One Optional Benefit Unit Price $9.71 - - - - Number of Units 5,592,940 - - - - With Any Two Optional Benefits Unit Price $10.26 - - - - Number of Units 74,022 - - - - With All Optional Benefits Unit Price $10.26 - - - - Number of Units 6,524 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $10.18 10.28 10.12 - - Number of Units 10,468,962 5,506,982 650,253 - - With One Optional Benefit Unit Price $9.94 - - - - Number of Units 4,146,530 - - - - With Any Two Optional Benefits Unit Price $10.23 - - - - Number of Units 162,571 - - - - With All Optional Benefits Unit Price $10.23 - - - - Number of Units 7,474 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST DeAM Bond /9/ (2002) With No Optional Benefits Unit Price $10.67 - - - - Number of Units 1,487,730 - - - - With One Optional Benefit Unit Price $10.65 - - - - Number of Units 561,446 - - - - With Any Two Optional Benefits Unit Price $10.16 - - - - Number of Units 12,055 - - - - With All Optional Benefits Unit Price $10.15 - - - - Number of Units 595 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Federated High Yield (1994) With No Optional Benefits Unit Price 14.13 12.62 11.27 9.56 - Number of Units 29,663,242 15,460,522 6,915,158 2,106,791 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST DeAM Bond /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $16.65 15.46 14.40 13.09 13.43 Number of Units 113,007,310 99,028,465 82,545,240 73,530,507 64,224,618 With One Optional Benefit Unit Price $10.57 - - - - Number of Units 20,544,075 - - - - With Any Two Optional Benefits Unit Price $10.17 - - - - Number of Units 604,147 - - - - With All Optional Benefits Unit Price $10.17 - - - - Number of Units 36,236 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $14.26 13.61 12.79 11.96 11.73 Number of Units 61,707,894 42,410,807 31,046,956 32,560,943 28,863,932 With One Optional Benefit Unit Price $10.34 - - - - Number of Units 11,274,642 - - - - With Any Two Optional Benefits Unit Price $10.08 - - - - Number of Units 215,314 - - - - With All Optional Benefits Unit Price $10.08 - - - - Number of Units 80,547 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ AST Money Market (1992) With No Optional Benefits Unit Price $13.23 13.24 12.94 12.38 12.00 Number of Units 163,759,511 184,612,059 172,493,206 187,609,708 75,855,442 With One Optional Benefit Unit Price $9.96 - - - - Number of Units 36,255,772 - - - - With Any Two Optional Benefits Unit Price $9.99 - - - - Number of Units 999,737 - - - - With All Optional Benefits Unit Price $9.99 - - - - Number of Units 70,899 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price 12.44 11.48 11.26 9.61 - Number of Units 44,098,036 29,921,643 19,061,840 4,577,708 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price 11.26 10.62 10.37 - - Number of Units 25,008,310 18,894,375 15,058,644 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- AST Money Market (1992) With No Optional Benefits Unit Price 11.57 11.16 10.77 10.35 10.12 Number of Units 66,869,998 42,435,169 30,564,442 27,491,389 11,422,783 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price $5.79 6.50 7.09 10.06 6.19 Number of Units 10,957,884 14,095,135 12,899,472 12,060,036 10,534,383 With One Optional Benefit Unit Price $8.66 - - - - Number of Units 283,466 - - - - With Any Two Optional Benefits Unit Price $9.93 - - - - Number of Units 21,816 - - - - With All Optional Benefits Unit Price $9.93 - - - - Number of Units 442 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price $7.46 9.37 10.05 9.96 - Number of Units 1,361,988 1,019,937 502,986 136,006 - With One Optional Benefit Unit Price $8.25 - - - - Number of Units 196,720 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 10,707 - - - - With All Optional Benefits Unit Price $9.90 - - - - Number of Units 91 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - Nova (1999) With No Optional Benefits Unit Price $4.06 6.41 8.50 10.82 - Number of Units 2,629,551 3,990,618 14,799,352 5,474,129 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price 10.05 10.25 - - - Number of Units 10,371,104 2,360,940 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - Nova (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - Ursa (1999) With No Optional Benefits Unit Price $14.45 12.05 10.62 9.28 - Number of Units 234,642 351,487 2,269,599 1,803,669 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Rydex Variable Trust - OTC (1999) With No Optional Benefits Unit Price $4.01 6.65 10.40 17.07 - Number of Units 10,686,757 15,866,046 32,179,793 18,520,440 - With One Optional Benefit Unit Price $9.36 - - - - Number of Units 186 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price $6.03 8.98 13.23 13.91 - Number of Units 9,117,894 13,391,660 11,409,827 2,022,585 - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 543,762 - - - - With Any Two Optional Benefits Unit Price $9.70 - - - - Number of Units 32,635 - - - - With All Optional Benefits Unit Price $9.70 - - - - Number of Units 576 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - Ursa (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Rydex Variable Trust - OTC (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price $3.49 6.66 12.48 16.52 - Number of Units 18,830,138 26,652,622 29,491,113 4,622,242 - With One Optional Benefit Unit Price $5.50 - - - - Number of Units 293,307 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price $9.37 12.58 14.59 11.34 - Number of Units 11,475,199 17,419,141 19,381,405 786,518 - With One Optional Benefit Unit Price $8.00 - - - - Number of Units 475,873 - - - - With Any Two Optional Benefits Unit Price $9.51 - - - - Number of Units 5,444 - - - - With All Optional Benefits Unit Price $9.51 - - - - Number of Units 140 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price $10.47 12.48 14.04 11.41 - Number of Units 7,556,596 11,612,048 14,091,636 759,104 - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 366,258 - - - - With Any Two Optional Benefits Unit Price $9.92 - - - - Number of Units 1,897 - - - - With All Optional Benefits Unit Price $9.92 - - - - Number of Units 141 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price $2.43 5.01 11.05 15.17 - Number of Units 9,354,303 13,553,158 17,856,118 4,184,526 - With One Optional Benefit Unit Price $5.78 - - - - Number of Units 94,004 - - - - With Any Two Optional Benefits Unit Price $9.43 - - - - Number of Units 770 - - - - With All Optional Benefits Unit Price $9.42 - - - - Number of Units 454 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price $7.08 9.00 10.55 11.72 - Number of Units 1,442,329 1,520,376 887,758 23,101 - With One Optional Benefit Unit Price $8.15 - - - - Number of Units 113,389 - - - - With Any Two Optional Benefits Unit Price $9.67 - - - - Number of Units 3,669 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price $7.16 9.98 11.01 12.19 - Number of Units 2,205,267 2,540,062 1,731,145 152,342 - With One Optional Benefit Unit Price $7.44 - - - - Number of Units 127,728 - - - - With Any Two Optional Benefits Unit Price $9.85 - - - - Number of Units 12,520 - - - - With All Optional Benefits Unit Price $9.85 - - - - Number of Units 533 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Evergreen VA - Omega (2000) With No Optional Benefits Unit Price $4.93 6.71 7.98 - - Number of Units 2,594,817 2,585,848 1,637,475 - - With One Optional Benefit Unit Price $7.78 - - - - Number of Units 39,943 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Omega (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Europe /30/ (1999) With No Optional Benefits Unit Price $5.76 7.87 10.52 12.24 - Number of Units 2,550,567 5,711,763 2,327,562 273,963 - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 292,396 - - - - With Any Two Optional Benefits Unit Price $9.70 - - - - Number of Units 2,625 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Asia 30 /9/ (2002) With No Optional Benefits Unit Price $7.76 - - - - Number of Units 2,060,741 - - - - With One Optional Benefit Unit Price $7.75 - - - - Number of Units 281,993 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 6,995 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Japan /9/ (2002) With No Optional Benefits Unit Price $7.25 - - - - Number of Units 338,472 - - - - With One Optional Benefit Unit Price $7.24 - - - - Number of Units 65,845 - - - - With Any Two Optional Benefits Unit Price $10.21 - - - - Number of Units 351 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Banks /9/ (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 555,999 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 101,136 - - - - With Any Two Optional Benefits Unit Price $10.13 - - - - Number of Units 3,422 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Europe /30/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Asia 30 /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Japan /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Banks /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price $8.47 - - - - Number of Units 361,568 - - - - With One Optional Benefit Unit Price $8.46 - - - - Number of Units 76,331 - - - - With Any Two Optional Benefits Unit Price $10.34 - - - - Number of Units 12 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Biotechnology (2001) With No Optional Benefits Unit Price $5.16 8.37 - - - Number of Units 2,412,670 5,093,235 - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 130,082 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price $7.26 - - - - Number of Units 319,201 - - - - With One Optional Benefit Unit Price $7.25 - - - - Number of Units 128,022 - - - - With Any Two Optional Benefits Unit Price $9.37 - - - - Number of Units 2,426 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price $8.29 - - - - Number of Units 406,966 - - - - With One Optional Benefit Unit Price $8.28 - - - - Number of Units 148,446 - - - - With Any Two Optional Benefits Unit Price $9.90 - - - - Number of Units 2,303 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Biotechnology (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Energy (2001) With No Optional Benefits Unit Price $7.51 9.19 - - - Number of Units 1,985,954 2,299,149 - - - With One Optional Benefit Unit Price $8.71 - - - - Number of Units 299,833 - - - - With Any Two Optional Benefits Unit Price $10.12 - - - - Number of Units 1,660 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Financial (2001) With No Optional Benefits Unit Price $7.74 9.22 - - - Number of Units 1,086,464 2,154,106 - - - With One Optional Benefit Unit Price $8.85 - - - - Number of Units 221,377 - - - - With Any Two Optional Benefits Unit Price $9.84 - - - - Number of Units 2,066 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Healthcare (2001) With No Optional Benefits Unit Price $7.13 9.35 - - - Number of Units 1,313,814 3,489,097 - - - With One Optional Benefit Unit Price $7.94 - - - - Number of Units 388,508 - - - - With Any Two Optional Benefits Unit Price $9.59 - - - - Number of Units 6,831 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Energy (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Financial (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Healthcare (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Industrial /9/ (2002) With No Optional Benefits Unit Price $7.94 - - - - Number of Units 126,611 - - - - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 12,642 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Internet /9/ (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 2,982,656 - - - - With One Optional Benefit Unit Price $8.57 - - - - Number of Units 306,572 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Pharmaceuticals /9/ (2002) With No Optional Benefits Unit Price $8.57 - - - - Number of Units 241,916 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 136,599 - - - - With Any Two Optional Benefits Unit Price $9.63 - - - - Number of Units 2,545 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Industrial /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Internet /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Pharmaceuticals /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Precious Metals /9/ (2002) With No Optional Benefits Unit Price $9.72 - - - - Number of Units 3,992,389 - - - - With One Optional Benefit Unit Price $9.70 - - - - Number of Units 1,175,651 - - - - With Any Two Optional Benefits Unit Price $11.30 - - - - Number of Units 19,964 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price $10.61 10.76 - - - Number of Units 1,489,153 3,592,834 - - - With One Optional Benefit Unit Price $9.86 - - - - Number of Units 441,318 - - - - With Any Two Optional Benefits Unit Price $10.20 - - - - Number of Units 12,789 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP -Semiconductor /9/ (2002) With No Optional Benefits Unit Price $5.14 - - - - Number of Units 608,142 - - - - With One Optional Benefit Unit Price $5.14 - - - - Number of Units 93,241 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Precious Metals /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP -Semiconductor /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Technology (2001) With No Optional Benefits Unit Price $3.46 5.91 - - - Number of Units 3,290,202 2,524,295 - - - With One Optional Benefit Unit Price $6.03 - - - - Number of Units 254,131 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price $4.35 7.10 - - - Number of Units 3,082,428 583,065 - - - With One Optional Benefit Unit Price $7.15 - - - - Number of Units 272,408 - - - - With Any Two Optional Benefits Unit Price $10.03 - - - - Number of Units 3,642 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Utilities (2001) With No Optional Benefits Unit Price $6.09 8.12 - - - Number of Units 3,391,766 1,589,344 - - - With One Optional Benefit Unit Price $7.83 - - - - Number of Units 521,419 - - - - With Any Two Optional Benefits Unit Price $10.61 - - - - Number of Units 8,871 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bull /9/ (2002) With No Optional Benefits Unit Price $7.98 - - - - Number of Units 6,296,621 - - - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 954,792 - - - - With Any Two Optional Benefits Unit Price $9.75 - - - - Number of Units 10,297 - - - - With All Optional Benefits Unit Price $9.75 - - - - Number of Units 400 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Technology (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Utilities (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bull /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bear (2001) With No Optional Benefits Unit Price $13.74 11.54 - - - Number of Units 4,011,499 3,059,897 - - - With One Optional Benefit Unit Price $11.38 - - - - Number of Units 1,532,543 - - - - With Any Two Optional Benefits Unit Price $10.13 - - - - Number of Units 28,618 - - - - With All Optional Benefits Unit Price $10.13 - - - - Number of Units 1,514 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraBull /22/ (2001) With No Optional Benefits Unit Price $4.71 7.47 - - - Number of Units 6,435,217 7,628,819 - - - With One Optional Benefit Unit Price $6.78 - - - - Number of Units 297,435 - - - - With Any Two Optional Benefits Unit Price $9.61 - - - - Number of Units 245 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - OTC (2001) With No Optional Benefits Unit Price $3.49 $5.77 - - - Number of Units 18,242,013 11,681,189 - - - With One Optional Benefit Unit Price $6.45 - - - - Number of Units 1,346,852 - - - - With Any Two Optional Benefits Unit Price $9.36 - - - - Number of Units 13,113 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Short OTC /9/ (2002) With No Optional Benefits Unit Price $11.02 - - - - Number of Units 682,058 - - - - With One Optional Benefit Unit Price $11.00 - - - - Number of Units 433,181 - - - - With Any Two Optional Benefits Unit Price $10.43 - - - - Number of Units 15,308 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bear (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraBull /22/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - OTC (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Short OTC /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price $0.58 1.91 6.19 23.58 - Number of Units 70,200,723 50,124,696 17,597,528 2,906,024 - With One Optional Benefit Unit Price $3.53 - - - - Number of Units 1,003,123 - - - - With Any Two Optional Benefits Unit Price $8.70 - - - - Number of Units 233 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 1,089,843 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 438,387 - - - - With Any Two Optional Benefits Unit Price $10.06 - - - - Number of Units 4,777 - - - - With All Optional Benefits Unit Price $10.06 - - - - Number of Units 4,799 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 1,444,783 - - - - With One Optional Benefit Unit Price $7.70 - - - - Number of Units 439,054 - - - - With Any Two Optional Benefits Unit Price $9.82 - - - - Number of Units 1,587 - - - - With All Optional Benefits Unit Price $9.81 - - - - Number of Units 1,583 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price $5.72 - - - - Number of Units 2,276,660 - - - - With One Optional Benefit Unit Price $5.71 - - - - Number of Units 477,953 - - - - With Any Two Optional Benefits Unit Price $9.86 - - - - Number of Units 1,673 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.10 - - - - Number of Units 2,908,617 - - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 994,778 - - - - With Any Two Optional Benefits Unit Price $10.15 - - - - Number of Units 19,019 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 2,138,861 - - - - With One Optional Benefit Unit Price $7.69 - - - - Number of Units 772,260 - - - - With Any Two Optional Benefits Unit Price $9.91 - - - - Number of Units 10,572 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraSmall-Cap /23/ (1999) With No Optional Benefits Unit Price $4.73 8.37 9.18 11.96 - Number of Units 5,664,617 10,010,482 3,258,574 813,904 - With One Optional Benefit Unit Price $6.14 - - - - Number of Units 212,085 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price $11.58 - - - - Number of Units 7,945,270 - - - - With One Optional Benefit Unit Price $11.56 - - - - Number of Units 2,486,854 - - - - With Any Two Optional Benefits Unit Price $10.19 - - - - Number of Units 22,148 - - - - With All Optional Benefits Unit Price $10.19 - - - - Number of Units 609 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraSmall-Cap /23/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price $8.03 - - - - Number of Units 583,657 - - - - With One Optional Benefit Unit Price $8.02 - - - - Number of Units 165,792 - - - - With Any Two Optional Benefits Unit Price $9.69 - - - - Number of Units 9,028 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ First Trust(R)/10/ Uncommon Values (2000) With No Optional Benefits Unit Price $2.94 4.72 7.43 - - Number of Units 1,716,102 2,255,266 2,690,435 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 19,826 - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price $5.62 7.39 - - - Number of Units 550,334 273,843 - - - With One Optional Benefit Unit Price $8.01 - - - - Number of Units 89,806 - - - - With Any Two Optional Benefits Unit Price $9.59 - - - - Number of Units 5,196 - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- First Trust(R)/10/ Uncommon Values (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - With Any Two Optional Benefits Unit Price - - - - - Number of Units - - - - - With All Optional Benefits Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
1. Effective December 10, 2001, Strong Capital Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM International Equity." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam International Equity." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Equity Portfolio." 2. Effective November 11, 2002, William Blair & Company, L.L.C. became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Overseas Growth." 3. This Portfolio reflects the addition of the net assets of the AST American Century International Growth Portfolio II ("Portfolio II") as a result of the merger between the Portfolio and Portfolio II. 4. Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Founders Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Founders Passport." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap Portfolio." 5. Effective September 17, 2001, Pilgrim Baxter & Associates, Ltd. became Sub-advisor of the Portfolio. Prior to September 17, 2001, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Small-Cap Growth." Prior to December 31, 1998, Founders Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio." 6. Effective December 10, 2001, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, Zurich Scudder Investments, Inc. served as Sub-advisor of the Portfolio, then named "AST Scudder Small-Cap Growth Portfolio". Prior to May 1, 2001, the Portfolio was named "AST Kemper Small-Cap Growth Portfolio." 7. Effective May 1, 2001, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to May 1, 2001, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Small Cap Value." 8. Effective October 23, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio." 9. These portfolios were first offered as Sub-accounts on May 1, 2002. 10. Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Mid-Cap Growth." 11. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor of the Portfolio, then named "Berger Capital Growth Portfolio." 12. Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor of the Portfolio, then named "Federated Utility Income Portfolio." 13. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May 1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of the Portfolio, then named "Robertson Stephens Value + Growth Portfolio." 14. Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST JanCap Growth." 15. Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Strategic Value." 16. Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio." 17. Effective May 3, 1999, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Value Growth & Income." 18. Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio." 19. Effective July 1, 2002, the AST INVESCO Equity Income portfolio changed its name to AST INVESCO Capital Income. 20. Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM Balanced." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Balanced." Prior to October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced Asset Portfolio." 21. Effective August 8, 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the Portfolio, then named "AST Scudder International Bond Portfolio." 22. Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. 23. Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that corresponded to the performance of the Russell 2000(R)Index. APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. The formula for determining the Enhanced Beneficiary Protection Optional Death Benefit is as follows: Growth = Account Value of variable minus Purchase Payments - proportional investment options plus Interim withdrawals Value of Fixed Allocations (no MVA applies)
NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase Assume that the Owner has made no withdrawals and that the Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the "Growth" under the Annuity. Growth = $75,000 - [$50,000 - $0] = $25,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $25,000 * 0.40 = $10,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $85,000 Examples with market decline Assume that the Owner has made no withdrawals and that the Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS the "Growth" under the Annuity. Growth = $45,000 - [$50,000 - $0] = $-5,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth NO BENEFIT IS PAYABLE Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Example with market increase and withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $90,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12 months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the Annuity. Growth = $90,000 - [$50,000 - ($50,000 * $15,000/$75,000)] = $90,000 - [$50,000 - $10,000] = $90,000 - $40,000 = $50,000 Benefit Payable under Enhanced Beneficiary Protection Optional Death Benefit = 40% of Growth = $50,000 * 0.40 = $20,000 Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary Protection Optional Death Benefit = $110,000 Examples of Highest Anniversary Value Death Benefit Calculation The following are examples of how the Highest Anniversary Value Death Benefit is calculated. Each example assumes an initial Purchase Payment of $50,000. Each example assumes that there is one Owner who is age 70 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase and death before Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals have been made. On the date we receive due proof of death, the Account Value is $75,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. The Death Benefit would be the Highest Anniversary Value ($90,000) because it is greater than the amount that would have been payable under the basic Death Benefit ($75,000). Example with withdrawals Assume that the Account Value has been increasing due to positive market performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when the Account Value was $75,000. On the date we receive due proof of death, the Account Value is $80,000; however, the Anniversary Value on the 5th anniversary of the Issue Date was $90,000. Assume as well that the Owner has died before the Death Benefit Target Date. The Death Benefit is equal to the greater of the Highest Anniversary Value or the basic Death Benefit. Highest Anniversary Value = $90,000 - [$90,000 * $15,000/$75,000] = $90,000 - $18,000 = $72,000 Basic Death Benefit = $80,000 - [$80,000 * $15,000/$75,000] = $80,000 - $16,000 = $64,000 Example with death after Death Benefit Target Date Assume that the Owner's Account Value has generally been increasing due to positive market performance and that no withdrawals had been made prior to the Death Benefit Target Date. Further assume that the Owner dies after the Death Benefit Target Date, when the Account Value is $75,000. The Highest Anniversary Value on the Death Benefit Target Date was $80,000; however, following the Death Benefit Target Date, the Owner made a Purchase Payment of $15,000 and had taken a withdrawal of $5,000 when the Account Value was $70,000. The Death Benefit is equal to the greater of the Highest Anniversary Value plus Purchase Payments minus proportional withdrawals after the Death Benefit Target Date or the basic Death Benefit. Highest Anniversary Value = $80,000 + $15,000 - [$80,000 * $5,000/$70,000] = $80,000 + $15,000 - $5,714 = $100,714 Basic Death Benefit = $75,000 APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER ================================================================================ American Skandia's Plus40(TM)Optional Life Insurance Rider was offered, in those states where approved, between January 23, 2002 and May 1, 2003. The description below of the Plus40(TM)benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40(TM)benefit. ================================================================================ - -------------------------------------------------------------------------------- The life insurance coverage provided under the Plus40(TM)Optional Life Insurance Rider ("Plus40(TM)rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40(TM)rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. - -------------------------------------------------------------------------------- The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40(TM)rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40(TM)rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable - - the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40(TM)rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40(TM)rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS |X| If you die during the first 24 months following the effective date of the Plus40(TM)rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40(TM)rider if you die within 24 months of its effective date. |X| If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. |X| If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40(TM)rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. |X| If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40(TM)rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. |X| If charges for the Plus40(TM)rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). |X| If the age of any person covered under the Plus40(TM)rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. |X| On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95th birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40(TM)rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40(TM) rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40(TM)rider or similar life insurance coverage. |X| The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. |X| The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40(TM)riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40(TM)rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40(TM)rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40(TM)rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40(TM)rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40(TM)RIDER The Plus40(TM)rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40(TM)rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. Percentage of Attained Age Account Value - ------------------------------ ---------------------------- Age 40-75 .80% - ------------------------------ ---------------------------- Age 76-80 1.60% - ------------------------------ ---------------------------- Age 81-85 3.20% - ------------------------------ ---------------------------- Age 86-90 4.80% - ------------------------------ ---------------------------- Age 91 6.50% - ------------------------------ ---------------------------- Age 92 7.50% - ------------------------------ ---------------------------- Age 93 8.50% - ------------------------------ ---------------------------- Age 94 9.50% - ------------------------------ ---------------------------- Age 95 10.50% - ------------------------------ ---------------------------- The charge for the Plus40(TM)rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. |X| If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. |X| If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40(TM)rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40(TM)rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40(TM)rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40(TM)rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40(TM) rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40(TM)rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40(TM) rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40(TM)rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40(TM)rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40(TM)rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. APPENDIX E - SALE OF THE CONTRACTS TO RESIDENTS OF THE STATE OF NEW YORK Some of the provisions of the Annuity are different for contracts offered to residents of the State of New York. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $1,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $1,000. If the Annuity is owned by an individual or individuals, the oldest of those persons must be age 80 or under and no additional Purchase Payments will be accepted after age 80. If the Annuity is owned by an entity, the annuitant must be age 85 or under. GLOSSARY OF TERMS MVA: The definition for MVA is not applicable. INVESTMENT OPTIONS WHAT ARE THE FIXED INVESTMENT OPTIONS? Fixed investment options are not available to residents of the State of New York. All references to Fixed Allocations throughout the Prospectus are not applicable. FEES AND CHARGES Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee for residents of the State of New York is $30.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: For New York contracts a charge for taxes may also be assessed against the Sub-accounts. PURCHASING YOUR ANNUITY Owner, Annuitant and Beneficiary Designations: For contracts issued in the State of New York, the designation of contingent Owner is not allowed. MANAGING YOUR ANNUITY Age Restrictions: The Owner must be age 80 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 80 or under on the Issue Date and no additional Purchase Payments will be accepted after age 80. If the Annuity is owned by an entity, the Annuitant must be age 85 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY 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. For New York contracts, 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 prior to the Annuity Date if the Annuity is owned by an entity; and (c) a change in the Beneficiary if the Owner had previously made the designation irrevocable. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? For New York contracts you may exercise your right to return the Annuity within 21 days of receipt of the Annuity. The amount to be refunded for New York contracts is the Account Value as of the date we receive your request to cancel the Annuity. Notice received by mail is effective as of the date of the postmark. If the Annuity is returned to the agent, the effective date is the date the Annuity is received by the agent. MANAGING YOUR ACCOUNT VALUE Credits Applied to Purchase Payments for Designated Class of Annuity Owner This section does not apply to contracts purchased by residents of the State of New York. ================================================================================ This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an additional amount for the XTra CreditSM feature. However, the amount of any Credits applied to your Account Value can be recovered by American Skandia under the following circumstance: ================================================================================ |X| if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits. ================================================================================ The value of the XTra CreditSM amount will be substantially reduced if American Skandia recovers the XTra CreditSM amount under this circumstance. However, any investment gain on the XTra CreditSM amount will not be taken back. We do not deduct a CDSC in any situation where we recover the XTra CreditSM amount. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? For New York contracts we require a minimum amount of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. Your transfer request must be In Writing. For New York contracts, a specific authorization form MUST be completed which authorizes us to accept transfers via phone or through means such as electronic mail. Guaranteed Return Option (GRO)SM This benefit is not available to residents of the State of New York. ACCESS TO ACCOUNT VALUE HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? The Annuity Date must be the first or the fifteenth day of a calendar month. However, for New York contracts, if the contract's accumulated value, at the time of annuitization, is less than $2,000, or would provide an income, the initial amount of which is less than $20 per month, in lieu of commencing the annuity payments, we reserve the right to cancel the Annuity and pay you the total of the Account Value. For New York contracts the Annuity Date may not exceed the first day of the calendar month following the Annuitant's 90th birthday. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? This benefit is not available to residents of the State of New York. DEATH BENEFIT Under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. Basic Death Benefit: The basic Death Benefit is the greater of: |X| The sum of all Purchase Payments less the sum of all proportional withdrawals. |X| Your Account Value. Optional Death Benefits ================================================================================ The Enhanced Beneficiary Protection Death Benefit and the Guaranteed Minimum Death Benefit described in the Prospectus are not offered to residents of the State of New York. However, the Highest Anniversary Value Optional Death Benefit described below is available to purchasers of the Annuity who are residents of the State of New York. ================================================================================ If the Annuity has one Owner, the Owner must be age 80 or less at the time the Highest Anniversary Value Optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Highest Anniversary Value Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". |X| The Anniversary Value is the Account Value as each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. The Anniversary Value on the Issue Date is equal to your Purchase Payment. |X| A Proportional Reduction is a reduction to the value being measured caused by a withdrawal, equaling the percentage of the withdrawal as compared to the Account Value as of the date of the withdrawal. For example, if your Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will reduce both your Anniversary Value and the amount determined by Purchase Payments increasing at the appropriate interest rate by 20%. Calculation of Highest Anniversary Value Death Benefit The Highest Anniversary Value Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts as of the date we receive in writing "due proof of death"; and 2. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death"; and 2. the Highest Anniversary Value on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. Charges for Highest Anniversary Value Death Benefit If you purchase the Highest Anniversary Value Optional Death Benefit, an annual charge of 0.15% is deducted from your Annuity's Account Value. The charge will be based on the current Death Benefit under the Highest Anniversary Value Optional Death Benefit as of the date the charge is deducted. The charge is deducted in addition to the Insurance Charge. The charge is deducted in arrears on each anniversary of the Issue Date of the Annuity or, if you terminate the Optional Death Benefit or surrender your Annuity, on the date the termination or surrender is effective. Plus40(TM)OPTIONAL LIFE INSURANCE RIDER This benefit was never available to residents of the State of New York. TAX CONSIDERATIONS HOW ARE DISTRIBUTIONS FROM TAX-QUALIFIED RETIREMENT PLANS TAXED? Minimum Distributions after age 70 1/2: For New York contracts the Minimum Distribution provision is only available for annuities issued under Section 403(b) of the IRS Code or for IRA's where Minimum Distributions are required. Minimum Distributions are not available for any other contracts. Modification: In addition to obtaining prior approval from the insurance department of our state of domicile before making such a combination, substitution, deletion or addition, we will also obtain prior approval from the Superintendent of Insurance for New York. 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; (b) any overpayments by us will be charged against future amounts payable by us under your Annuity; and (c) as to any annuity payments, we shall credit or charge interest using our then current crediting rate for this purpose, which is not greater than 6% interest per year, calculated from the date of any underpayment or overpayment to the date actual payment is made. APPENDIX F - DESCRIPTION AND CALCULATION OF THE ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT AND THE GUARANTEED MINIMUM DEATH BENEFIT If you purchased your Annuity before November 18, 2002 and were not a resident of the State of New York, the following optional death benefits were offered: Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. The amount calculated in Items 1 & 2 above may be reduced by any Credits under certain circumstances. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - -------------------------------------------------------------------------------- NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Guaranteed Minimum Death Benefit |X| The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. |X| The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". |X| The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. |X| A Proportional Reduction is a reduction to the value being measured caused by a withdrawal, equaling the percentage of the withdrawal as compared to the Account Value as of the date of the withdrawal. For example, if your Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will reduce both your Anniversary Value and the amount determined by Purchase Payments increasing at the appropriate interest rate by 20%. Calculation of Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. The amount calculated in Items 1 & 3 above may be reduced by any Credits under certain circumstances. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. The amount calculated in Item 1 above may be reduced by any Credits under certain circumstances. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only) If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. ADDITIONAL CALCULATIONS - ----------------------- Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12-months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $75,000 Basic Death Benefit = $75,000 Death Benefit Amount = $75,000 - $50,000 = $25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $75,000 + $12,500 = $87,500 Examples with market decline Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value less the amount of any Credits applied within 12-months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $40,000 Basic Death Benefit = $50,000 Death Benefit Amount = $50,000 - $50,000 = $0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $50,000 + $0 = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Examples of Guaranteed Minimum Death Benefit Calculation The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS ASXT II FOUR-PROS (05/2003). - -------------------------------------------------------------------------------- ------------------------------------------------------- (print your name) ------------------------------------------------------- (address) ------------------------------------------------------- (city/state/zip code) THIS PAGE IS INTENTIONALLY LEFT BLANK. Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-766-4530 Telephone: 203-926-1888 http://www.americanskandia.com http://www.americanskandia.com MAILING ADDRESSES: AMERICAN SKANDIA - VARIABLE ANNUITIES P.O. Box 7040 Bridgeport, CT 06601-7040 EXPRESS MAIL: AMERICAN SKANDIA - VARIABLE ANNUITIES One Corporate Drive Shelton, CT 06484 NOTES NOTES NOTES Supplement to Prospectus Dated May 1, 2003 Supplement dated June 13, 2003 This Supplement should be retained with the current Prospectus for your variable annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. PORTFOLIO/SUB-ACCOUNT NAME CHANGE Evergreen VA International Growth Portfolio/Sub-account Effective June 13, 2003, the Evergreen VA International Growth portfolio will change its name to Evergreen VA International Equity. All references in the Prospectus to Evergreen VA International Growth are deleted and replaced with Evergreen VA International Equity. FUSI AS2/ FUSI XT/ FUSI XT-FOUR FSII/ FSXT/FSASL/ FSASL2/ FSXT4 FUSI ASL/ FUSI ASL II - SUPP (06/13/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated June 20, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. Montgomery Variable Series - Emerging Markets Portfolio reorganization into the Gartmore GVIT Developing Markets Portfolio American Skandia anticipates that shareholders will approve the Plan of Reorganization of the Montgomery Variable Series - Emerging Markets Portfolio and the Gartmore GVIT Developing Markets Portfolio and that the reorganization will take place on June 20, 2003. Upon completion of the reorganization, the Montgomery Variable Series - Emerging Markets Portfolio will cease to exist and Annuity Owners will have an equivalent Account Value in the Gartmore GVIT Developing Markets Portfolio. The principal investment objective and policies of the Portfolio will be unchanged as a result of this reorganization. UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Gartmore Variable Investment Trust: GVIT Developing Markets 1.15% 0.24% 0.25% 1.64% N/A 1.64%
ASAP/ ASAP2/ FUSI AS2/ ASAP III/ APEX/ ASXT/ FUSI XT/Wells XTVA/ VIA-SUPP (06/20/2003) ASXT-FOUR/ FUSI XT-FOUR/ ASL/ FUSI ASL/ Wells ASL/ ASPro/92001E0603 Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/ ASL II/ FUSI ASL II/ ASXT-SIX/ VIAS/ VIAT/ VIAG -SUPP (06/20/2003)
Supplement to Prospectus Dated May 1, 2003 Supplement dated October 13, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. WHO IS AMERICAN SKANDIA? The following paragraph is added to this section of the prospectus: Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. GUARANTEED RETURN OPTION PlusSM (GRO PlusSM) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is being offered as of October 13, 2003 in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program, the Guaranteed Minimum Withdrawal Benefit rider or the Guaranteed Minimum Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that seven-year period as the "maturity date") and on each anniversary of the maturity date thereafter, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate seven-year period following election of the enhanced guarantee and on each anniversary thereafter, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market increases. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between variable investment options and Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. KEY FEATURE - Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. |X| Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. |X| Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of the seven year period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically increase your base guarantee (or enhanced guarantee, if previously elected) on each anniversary of the program (and create a new, seven year maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the existing base guarantee (or enhanced guarantee, if previously elected) by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity will be applied, if necessary, to any Fixed Allocations needed to support the applicable guarantee amount as of the maturity date or any anniversary of the maturity date. Any remaining amounts will be allocated pro-rata to your Account Value based on your current Sub-account allocations. We will notify you of any amounts added to your Annuity under the program. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM)Optional Life Insurance Rider will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO PlusSM program are October 13, 2003; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2003 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2003 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. The base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: .. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). .. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x ( 1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2004 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE - Allocation of Account Value In general, you have discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to prohibit investment in certain Portfolios if you participate in the program. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. This permits your Annuity to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. We monitor fluctuations in your Account Value each business day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). |X| If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. |X| If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred to a new Fixed Allocation(s) to support the applicable guaranteed amount. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). ================================================================================ If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the variable investment options if there is a subsequent market recovery. During the period prior to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is extremely low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s). ================================================================================ Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value are transferred to the variable investment options while Fixed Allocations in support of an Enhanced Protected Principal Value are not transferred because they must remain invested in the Fixed Allocation in support of the higher enhanced guarantee. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any business day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the business day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated (including the guaranteed amount(s)) and the Guaranteed Return Option Plus program will be added to your Annuity based on the current Account Value. This election of GRO PlusSM may result in a market value adjustment, which could increase or decrease your Account Value. Termination of the Program The Annuity Owner can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. The Annuity Owner also can terminate the Guaranteed Return Option Plus program entirely. An Annuity Owner who terminates the program entirely can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, an Annuity Owner could, for example, terminate the program on a given business day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program prior to the applicable maturity date, the Guaranteed Return Option Plus will no longer provide a guarantee of your Account Value. The surviving spouse may elect the benefit at any time after the death of the Annuity Owner. The surviving spouse's election will be effective on the business day that we receive the required documentation in good order at our home office, and the Account Value on that business day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: |X| Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. |X| Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program, and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Additional Purchase Payments (including any credits associated with such Purchase Payments) applied to the Annuity while the program is in effect will increase the applicable guarantee amount by the actual amount of the Purchase Payment; however, all or a portion of any additional Purchase Payments (including any credits associated with such Purchase Payments) may be allocated by us to Fixed Allocations to support the additional amount guaranteed. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. Charges under the Program We deduct a charge equal to 0.25% of Account Value per year to participate in the Guaranteed Return Option Plus program. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. ASAP2 / FUSI AS2 / EVA / ASAP III / APEX / FUSI XT /EVA XT / WELLS XT / FUSI ASXT-4 / ASL / FUSI ASL / WELLS ASL / WELLS APEX / AS PRO / WELLS VA+ / IMPACT / FT PORTFOLIOS / GAL 3 / ASL II /FUSI ASL II / APEX II - SUPP. (GRO Only) - (10/13/2003) 92001b0903
Supplement to Prospectus Dated May 1, 2003 Supplement dated December 5, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. As described in more detail below, one of the Evergreen portfolios formerly offered as an investment option for your annuity was merged into another Evergreen portfolio. MERGER Evergreen VA Global Leaders Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Global Leaders portfolio merged into the Evergreen VA International Equity portfolio. As a result of the merger, the Evergreen VA Global Leaders portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA International Equity portfolio, the successor portfolio. The following annual expenses for the successor portfolio are estimates of what the expenses of the portfolio will be as a result of the merger: UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- ------------ Evergreen Variable Annuity Trust: International Equity /1/ 0.66% 0.39% 0.00% 1.05% 0.00% 1.05% - - ----------------------------------------------------------------------------------------------------------------------------------
/1/ The annual expenses of the Evergreen VA International Equity portfolio prior to the Merger were as follows: Management Fee: 0.66%; 12b-1 Fee: 0.00%; Other Expenses: 0.73%; Total Annual Portfolio Operating Expenses: 1.39%; Fee Waiver and Expense Reimbursement: 0.39%; Net Annual Portfolio Operating Expenses: 1.00%. The following descriptions of the investment objectives are effective as of December 5, 2003. INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ INTER-NATIONAL Evergreen VA International Equity (acquired Evergreen VA Global Leaders) (f/k/a Evergreen VA Evergreen International Growth): seeks long-term capital growth and, secondarily, modest income. The Investment Portfolio invests primarily in equity securities issued by established, quality, non-U.S. Management Company, companies located in countries with developed markets, but may purchase across all market LLC EQUITY capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.), but may invest more than 25% of its assets in one country. The Portfolio also invests in emerging markets. - - ---------------- --------------------------------------------------------------------------------------------- ------------------
ASAP / ASAP 2 / ASAP III / APEX / ACII/APEX2/ASAPII/ASAP 3/ASL2/ASXT4/ASXT6 ASXT / ASXT-Four / ASL / AS Pro / EVERSUPP1203 Choice 2 / AS Impact / APEX II /ASL II / ASXT-Six / VIA-S / VIA-T /VIA-G - SUPP. (12/05/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated January 29, 2004 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. AST Strong International Equity portfolio Pursuant to the exemptive authority granted to American Skandia Trust, its investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC have changed sub-advisors for the AST Strong International Equity Portfolio ("International Equity Portfolio"). Effective February 23, 2004, J.P. Morgan Investment Management Inc. will become the sub-advisor for the International Equity Portfolio. Accordingly, effective February 23, 2004, all references in the Prospectus and the SAI to the AST Strong International Equity Portfolio are replaced by references to the AST JPMorgan International Equity Portfolio and references to Strong Capital Management, Inc. are replaced by references to J.P. Morgan Investment Management Inc. The investment objective of the International Equity Portfolio is unchanged. ASAP/ ASAP2/ EVA/ FUSI AS2/ ASAP III/ Wells ASAP III/ APEX/VA/ VIA-SUPP (01/2004) ASXT/ EVAXT/ FUSI XT/Wells XT/ASXT-FOUR/ FUSI XT-FOUR/ ASL/92001a0304 FUSI ASL/ Wells ASL/ ASPro/ Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/Wells APEX II/ ASL II/ FUSI ASL II/ASXT-SIX/ Wells XT-SIX/ VIAS/ VIAT/ VIAG -SUPP (01/2004)
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION One Corporate Drive, Shelton, Connecticut 06484 This Prospectus describes American Skandia XTra CreditSM FOUR Premier, a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us"). The Annuity may be offered as an individual annuity contract or as an interest in a group annuity. This Prospectus describes the important features of the Annuity and what you should consider before purchasing the Annuity. We have also filed a Statement of Additional Information that is available from us, without charge, upon your request. The contents of the Statement of Additional Information are described on page 65. The Annuity or certain of its investment options and/or features may not be available in all states. Various rights and benefits may differ between states to meet applicable laws and/or regulations. Certain terms are capitalized in this Prospectus. Those terms are either defined in the Glossary of Terms or in the context of the particular section. ================================================================================ American Skandia offers several different annuities which your investment professional may be authorized to offer to you. Each annuity has different features and benefits that may be appropriate for you based on your financial situation, your age and how you intend to use the annuity. The different features and benefits include variations in death benefit protection, the ability to access your annuity's account value and the charges that you will be subject to if you choose to surrender the annuity. The fees and charges may also be different between each annuity. ================================================================================ If you are purchasing the Annuity as a replacement for existing variable annuity or variable life coverage, you should consider any surrender or penalty charges you may incur when replacing your existing coverage and that this Annuity may be subject to a contingent deferred sales charge if you elect to surrender the Annuity or take a partial withdrawal. You should consider your need to access the Annuity's Account Value and whether the annuity's liquidity features will satisfy that need. WHY WOULD I CHOOSE TO PURCHASE THIS ANNUITY? This Annuity is frequently used for retirement planning because it allows you to accumulate retirement savings and also offers annuity payment options when you are ready to begin receiving income. The Annuity also offers one or more death benefits that can protect your retirement savings if you die during a period of declining markets. It may be used as an investment vehicle for "qualified" investments, including an IRA, SEP-IRA, Roth IRA or Tax Sheltered Annuity (or 403(b)). It may also be used as an investment vehicle for "non-qualified" investments. The Annuity allows you to invest your money in a number of variable investment options as well as in one or more fixed investment options. When an Annuity is purchased as a "non-qualified" investment, you generally are not taxed on any investment gains the Annuity earns until you make a withdrawal or begin to receive annuity payments. This feature, referred to as "tax-deferral", can be beneficial to the growth of your Account Value because money that would otherwise be needed to pay taxes on investment gains each year remains invested and can earn additional money. However, because the Annuity is designed for long-term retirement savings, a 10% penalty tax may be applied on withdrawals you make before you reach age 59 1/2. Annuities purchased as a non-qualified investment are not subject to the maximum contribution limits that may apply to a qualified investment, and are not subject to required minimum distributions after age 701/2. When an Annuity is purchased as a "qualified" investment, you should consider that the Annuity does not provide any tax advantages in addition to the preferential treatment already available through your retirement plan under the Internal Revenue Code. An Annuity may offer features and benefits in addition to providing tax deferral that other investment vehicles may not offer, including death benefit protection for your beneficiaries, lifetime income options, and the ability to make transfers between numerous variable investment options offered under the Annuity. You should consult with your investment professional as to whether the overall benefits and costs of the Annuity are appropriate considering your overall financial plan. - -------------------------------------------------------------------------------- These annuities are NOT deposits or obligations of, or issued, guaranteed or endorsed by, any bank, are NOT insured or guaranteed by the U.S. government, the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other agency. An investment in this annuity involves investment risks, including possible loss of value. - -------------------------------------------------------------------------------- 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 THE CURRENT PROSPECTUS FOR THE UNDERLYING MUTUAL FUNDS. KEEP THEM FOR FUTURE REFERENCE. FOR FURTHER INFORMATION CALL 1-800-766-4530 Prospectus Dated: May 1, 2003 Statement of Additional Information FUSI ASXT II Four -PROS- (05/2003) Dated: May 1, 2003 FUSI ASXT II FourPROS PLEASE SEE OUR PRIVACY POLICY ATTACHED TO THE BACK COVER OF THIS PROSPECTUS. - -------------------------------------------------------------------------------- If you purchase this Annuity, we apply an additional amount (an XTra CreditSM) to your account value with each purchase payment you make, including your initial purchase payment and any additional purchase payments. ================================================================================ This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities. However, if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher and is deducted for a longer period of time as compared to our other variable annuities. As with any annuity that features a CDSC, you should consider your need to access your account value during the CDSC period and whether the liquidity provision under the Annuity will satisfy that need. The CDSC is only deducted if you make a withdrawal that exceeds the free withdrawal amount or choose to surrender your Annuity. If you make a withdrawal or surrender your Annuity which is subject to a CDSC, we do not recover the XTra CreditSM amount. ================================================================================ The XTra CreditSM amount is included in your account value. However, American Skandia may take back the original XTra CreditSM amount applied to your purchase payment if you die, or elect to withdraw all or a portion of your account value under the medically-related surrender provision, within 12 months of having received an XTra CreditSM amount. In either situation, the value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra CreditSM amount will not be taken back. Additional conditions and restrictions apply. We do not deduct a CDSC in any situation where we take back the XTra CreditSM amount. ================================================================================ ================================================================================ We offer other annuities where we apply an XTra CreditSM to your annuity with each purchase payment you make. The XTra CreditSM amount we apply to purchase payments on those annuities is initially higher than on this Annuity but reduces over time and only applies during the first six annuity years. The total asset-based charges on those annuities are higher during the first 10 years but are lower than this Annuity after the 10th year. The CDSC is also higher and is deducted for a longer period of time than on this Annuity; however the CDSC on those annuities applies from the issue date of the annuity, not separately to each purchase payment. ================================================================================ WHAT ARE SOME OF THE KEY FEATURES OF THIS ANNUITY? [X] This Annuity is a "flexible premium deferred annuity." It is called "flexible premium" because you have considerable flexibility in the timing and amount of premium payments. Generally, investors "defer" receiving annuity payments until after an accumulation period. [X] This Annuity offers both variable and fixed investment options. If you allocate your Account Value to variable investment options, the value of your Annuity will vary daily to reflect the investment performance of the underlying investment options. Fixed investment options of different durations are offered that are guaranteed by us, but may have a Market Value Adjustment if you withdraw or transfer your Account Value before the Maturity Date. [X] The Annuity features two distinct phases - the accumulation period and the payout period. During the accumulation period your Account Value is allocated to one or more investment options. The variable investment options, each a Sub-account of American Skandia Life Assurance Corporation Variable Account B, invest in an underlying mutual fund portfolio. Currently, portfolios of the following underlying mutual funds are being offered: American Skandia Trust, Montgomery Variable Series, Wells Fargo Variable Trust, INVESCO Variable Investment Funds, Inc., Evergreen Variable Annuity Trust, ProFunds VP, First Defined Portfolio Fund LLC and The Prudential Series Fund, Inc. [X] During the payout period, commonly called "annuitization," you can elect to receive annuity payments (1) for life; (2) for life with a guaranteed minimum number of payments; (3) based on joint lives; or (4) for a guaranteed number of payments. We currently make annuity payments available on a fixed or variable basis. [X] This Annuity offers a Credit which we add to your Annuity with each Purchase Payment we receive. [X] This Annuity offers a basic Death Benefit. [X] You are allowed to withdraw a limited amount of money from your Annuity on an annual basis without any charges. Other product features allow you to access your Account Value as necessary, although a charge may apply. [X] Transfers between investment options are tax-free. Currently, you may make twenty transfers each year free of charge. We also offer several programs that enable you to manage your Account Value as your financial needs and investment performance change. HOW DO I PURCHASE THIS ANNUITY? We sell the Annuity through licensed, registered investment professionals. You must complete an application and submit a minimum initial purchase payment of $1,000. We may allow you to make a lower initial purchase payment provided you establish a bank drafting program under which purchase payments received in the first Annuity Year total at least $1,000. If the Annuity is owned by an individual or individuals, the oldest of those persons must be age 80 or under. If the Annuity is owned by an entity, the annuitant must be age 80 or under. TABLE OF CONTENTS GLOSSARY OF TERMS..............................................................5 SUMMARY OF CONTRACT FEES AND CHARGES...........................................6 EXPENSE EXAMPLES..............................................................10 INVESTMENT OPTIONS............................................................11 WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS?............11 WHAT ARE THE FIXED INVESTMENT OPTIONS?........................................27 FEES AND CHARGES..............................................................28 WHAT ARE THE CONTRACT FEES AND CHARGES?.......................................28 WHAT CHARGES APPLY SOLELY TO VARIABLE INVESTMENT OPTIONS?.....................29 WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS?..................................29 WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?..................................29 WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?.....................29 EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES.....................................30 PURCHASING YOUR ANNUITY.......................................................30 WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY?.........................30 MANAGING YOUR ANNUITY.........................................................31 MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?...............31 MAY I RETURN THE ANNUITY IF I CHANGE MY MIND?.................................31 MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?......................................32 MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?..................32 MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?..............32 MANAGING YOUR ACCOUNT VALUE...................................................32 HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?..................................32 HOW DO I RECEIVE CREDITS?.....................................................32 HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE?..................................33 ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?.....................................................................35 DO YOU OFFER DOLLAR COST AVERAGING?...........................................35 DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?..............................36 DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?............................................................36 MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT?..............38 HOW DO THE FIXED INVESTMENT OPTIONS WORK?.....................................38 HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?.............................39 HOW DOES THE MARKET VALUE ADJUSTMENT WORK?....................................39 WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?................................40 ACCESS TO ACCOUNT VALUE.......................................................40 WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?..............................40 ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?.................................41 CAN I WITHDRAW A PORTION OF MY ANNUITY?.......................................41 HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?.................................41 IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL?...................................42 CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD?.........................................................43 DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(T) OF THE INTERNAL REVENUE CODE?.......................................................43 WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?............43 CAN I SURRENDER MY ANNUITY FOR ITS VALUE?.....................................43 WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?...................44 WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?..................................44 HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?..........................45 HOW ARE ANNUITY PAYMENTS CALCULATED?..........................................45 DEATH BENEFIT.................................................................47 WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?.................................47 BASIC DEATH BENEFIT...........................................................47 OPTIONAL DEATH BENEFITS.......................................................47 AMERICAN SKANDIA'S ANNUITY REWARDS............................................49 PAYMENT OF DEATH BENEFITS.....................................................50 VALUING YOUR INVESTMENT.......................................................52 HOW IS MY ACCOUNT VALUE DETERMINED?...........................................52 WHAT IS THE SURRENDER VALUE OF MY ANNUITY?....................................52 HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?...................................52 HOW DO YOU VALUE FIXED ALLOCATIONS?...........................................52 WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?...................................52 WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?.....................................................................53 TAX CONSIDERATIONS............................................................53 WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY?..............53 HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED?.....................54 IN GENERAL, HOW ARE ANNUITIES TAXED?..........................................54 HOW ARE DISTRIBUTIONS TAXED?..................................................54 WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS?....................................................................56 HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED?.........................57 GENERAL TAX CONSIDERATIONS....................................................58 GENERAL INFORMATION...........................................................59 HOW WILL I RECEIVE STATEMENTS AND REPORTS?....................................59 WHO IS AMERICAN SKANDIA?......................................................59 WHAT ARE SEPARATE ACCOUNTS?...................................................59 WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?..........................61 WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?........................61 AVAILABLE INFORMATION.........................................................63 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...............................63 HOW TO CONTACT US.............................................................63 INDEMNIFICATION...............................................................64 LEGAL PROCEEDINGS.............................................................64 CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION...........................65 APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA......................1 AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION........................................................11 APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B..........1 APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS............................1 APPENDIX D - PLUS40(TM)OPTIONAL LIFE INSURANCE RIDER...........................1 GLOSSARY OF TERMS Many terms used within this Prospectus are described within the text where they appear. The description of those terms are not repeated in this Glossary of Terms. Account Value: 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. The Account Value is calculated before we assess any applicable Contingent Deferred Sales Charge ("CDSC") and/or any Annual Maintenance Fee. The Account Value includes any Credits we applied to your Purchase Payments that we are entitled to recover under certain circumstances. The Account Value is determined separately for each Sub-account and for each Fixed Allocation, and then totaled to determine the Account Value for your entire Annuity. The Account Value of each Fixed Allocation on other than its Maturity Date may be calculated using a market value adjustment. Annuitization: The application of Account Value to one of the available annuity options for the Annuitant to begin receiving periodic payments for life, for a guaranteed minimum number of payments or for life with a guaranteed minimum number of payments. Annuity Date: The date you choose for annuity payments to commence. A maximum Annuity Date may apply. Annuity Year: A 12-month period commencing on the Issue Date of the Annuity and each successive 12-month period thereafter. Code: The Internal Revenue Code of 1986, as amended from time to time. Fixed Allocation: An allocation of Account Value that is to be credited a fixed rate of interest for a specified Guarantee Period during the accumulation period. Guarantee Period: A period of time during the accumulation period where we credit a fixed rate of interest on a Fixed Allocation. Interim Value: The value of a Fixed Allocation on any date other than the Maturity Date. The Interim Value is equal to the initial value allocated to the Fixed Allocation plus all interest credited to the Fixed Allocation as of the date calculated, less any transfers or withdrawals from the Fixed Allocation. Issue Date: The effective date of your Annuity. MVA: A market value adjustment used in the determination of Account Value of each Fixed Allocation on any day other than the Maturity Date of such Fixed Allocation. Owner: With an Annuity issued as an individual annuity contract, the Owner is either an eligible entity or person named as having ownership rights in relation to the Annuity. With an Annuity issued as a certificate under a group annuity contract, the "Owner" refers to the person or entity who has the rights and benefits designated as to the "Participant" in the certificate. Surrender Value: The value of your Annuity available upon surrender prior to the Annuity Date. It equals the Account Value as of the date we price the surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge, the charge for any optional benefits. Unit: A measure used to calculate your Account Value in a Sub-account during the accumulation period. Valuation Day: Every day the New York Stock Exchange is open for trading or any other day the Securities and Exchange Commission requires mutual funds or unit investment trusts to be valued. SUMMARY OF CONTRACT FEES AND CHARGES Below is a summary of the fees and charges for the Annuity. Some fees and charges are assessed against your Annuity while others are assessed against assets allocated to the variable investment options. The fees and charges that are assessed against the Annuity include the Contingent Deferred Sales Charge, Transfer Fee and Annual Maintenance Fee. The charges that are assessed against the variable investment options are the Insurance Charge, which is the combination of a mortality and expense risk charge, a charge for administration of the Annuity, and any charge for the Guaranteed Return Option if elected. Each underlying mutual fund portfolio assesses a charge for investment management, other expenses and with some mutual funds, a 12b-1 charge. The prospectus for each underlying mutual fund provides more detailed information about the expenses for the underlying mutual funds. Tax charges may vary by state and in certain states a premium tax charge may be applicable. All of these fees and charges are described in more detail within this Prospectus. The following table provides a summary of the fees and charges you will incur if you surrender the Annuity or transfer Account Value among investment options. These fees and charges are described in more detail within this Prospectus. - -------------------------------------------------------------------------------- YOUR TRANSACTION FEES AND CHARGES (assessed against the Annuity) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------------------------------------------------- Contingent Deferred Sales 8.5% Charge* The charge is a percentage of each applicable Purchase Payment deducted upon surrender or withdrawal. The period is measured from the date each Purchase Payment is allocated. - -------------------------------------------------------------------------------- Transfer Fee $10.00 (Deducted after the 20th transfer each Annuity Year) - -------------------------------------------------------------------------------- * The following are the Contingent Deferred Sales Charges (as a percentage of each applicable Purchase Payment) upon surrender or withdrawal. - ------ ------- ------- ------- ------- ------- ------- ------- --------- Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+ - ------ ------- ------- ------- ------- ------- ------- ------- --------- - ------ ------- ------- ------- ------- ------- ------- ------- --------- 8.5% 8.5% 8.5% 8.5% 7.0% 6.0% 5.0% 4.0% 0.0% - ------ ------- ------- ------- ------- ------- ------- ------- --------- The following table provides a summary of the periodic fees and charges you will incur while you own the Annuity, excluding the underlying mutual fund Portfolio annual expenses. These fees and charges are described in more detail within this Prospectus. - -------------------------------------------------------------------------------- YOUR PERIODIC FEES AND CHARGES - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ANNUAL FEES/CHARGES ASSESSED AGAINT THE ANNUITY - -------------------------------------------------------------------------------- - -------------------------------------- ----------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------- ----------------------------------------- Annual Maintenance Fee Smaller of $35 or 2% of Account Value (Assessed annually on the Annuity's anniversary date or upon surrender) ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS* (as a percentage of the average daily net assets of the Sub-accounts) - -------------------------------------- ----------------------------------------- FEE/CHARGE Amount Deducted - -------------------------------------- ----------------------------------------- Mortality & Expense Risk Charge 1.25% Administration Charge 0.15% - -------------------------------------- ----------------------------------------- - -------------------------------------- ----------------------------------------- Total Annual Charges of the 1.40% per year of the value of each Sub-accounts** Sub-account - -------------------------------------- ----------------------------------------- * These charges are deducted daily and apply to Variable Investment Options only. ** The combination of the Mortality and Expense Risk Charges and Administration Charge is referred to as the "Insurance Charge" elsewhere in this Prospectus. The following table provides a summary of the fees and charges you will incur if you elect the following optional benefit. These fees and charges are described in more detail within this Prospectus. - -------------------------------------------------------------------------------- YOUR OPTIONAL BENEFIT FEES AND CHARGES Optional Benefit Optional Benefit Fee/ Total Annual Charge* Charge - - ------------------------------------------------------------------------------------------ ---------------------- ---------------- - - ------------------------------------------------------------------------------------------ ---------------------- ---------------- GUARANTEED RETURN OPTION 1.65% We offer a program that guarantees a "return of premium" at a future date, while 0.25% of average allowing you to allocate all or a portion of your Account Value to the Sub-accounts of daily net assets of your choice. the Sub-accounts - - ------------------------------------------------------------------------------------------ ---------------------- ---------------- - - ------------------------------------------------------------------------------------------ ---------------------- ----------------
Please refer to the section of the Prospectus that describes each optional benefit for a complete description of the benefit, including any restrictions or limitations that may apply. * The Total Annual Charge includes the Insurance Charge assessed against the Annuity. The following table provides the range (minimum and maximum) of the total annual expenses for the underlying mutual funds ("Portfolios") as of December 31, 2002. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. - -------------------------------------------------------------------------------- Total Annual Portfolio Operating Expenses - -------------------------------------------------------------------------------- Minimum Maximum - - ---------------------------------------------------- ------------ ------------ Total Portfolio Operating Expense 0.14% * 3.14% - - ---------------------------------------------------- ------------ ------------ * The minimum total annual portfolio operating expenses are those of a Portfolio that may invest in mutual funds, which also charge their own operating expenses. Thus, the total annual portfolio operating expenses may be higher than indicated. The following are the investment management fees, other expenses, 12b-1 fees (if applicable), and the total annual expenses for each underlying mutual fund ("Portfolio") as of December 31, 2002, except as noted. Each figure is stated as a percentage of the underlying Portfolio's average daily net assets. For certain of the underlying Portfolios, a portion of the management fee is being waived and/or other expenses are being partially reimbursed. "N/A" indicates that no portion of the management fee and/or other expenses is being waived and/or reimbursed. The "Net Annual Portfolio Operating Expenses" reflect the combination of the underlying Portfolio's investment management fee, other expenses and any 12b-1 fees, net of any fee waivers and expense reimbursements. The following expenses are deducted by the underlying Portfolio before it provides American Skandia with the daily net asset value. Any footnotes about expenses appear after the list of all the Portfolios. The underlying Portfolio information was provided by the underlying mutual funds and has not been independently verified by us. See the prospectuses or statements of additional information of the underlying Portfolios for further details. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. - -------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------
Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - ------------------------------------------------------------------------------------------------------------------------------------ American Skandia Trust: 1 AST Strong International Equity 0.88% 0.21% 0.12% 1.21% 0.00% 1.21% AST William Blair International Growth 1.00% 0.23% 0.10% 1.33% 0.10% 1.23% AST American Century International Growth 1.00% 0.25% 0.00% 1.25% 0.00% 1.25% AST DeAM International Equity 1.00% 0.44% 0.00% 1.44% 0.15% 1.29% AST MFS Global Equity 1.00% 0.41% 0.00% 1.41% 0.00% 1.41% AST PBHG Small-Cap Growth 0.90% 0.22% 0.11% 1.23% 0.00% 1.23% AST DeAM Small-Cap Growth 0.95% 0.20% 0.00% 1.15% 0.15% 1.00% AST Federated Aggressive Growth 0.95% 0.43% 0.00% 1.38% 0.03% 1.35% AST Goldman Sachs Small-Cap Value 0.95% 0.21% 0.11% 1.27% 0.00% 1.27% AST Gabelli Small-Cap Value 0.90% 0.19% 0.01% 1.10% 0.00% 1.10% AST DeAM Small-Cap Value 0.95% 0.53% 0.00% 1.48% 0.33% 1.15% AST Goldman Sachs Mid-Cap Growth 1.00% 0.26% 0.07% 1.33% 0.10% 1.23% AST Neuberger Berman Mid-Cap Growth 0.90% 0.20% 0.06% 1.16% 0.00% 1.16% AST Neuberger Berman Mid-Cap Value 0.90% 0.17% 0.09% 1.16% 0.00% 1.16% AST Alger All-Cap Growth 0.95% 0.19% 0.15% 1.29% 0.00% 1.29% AST Gabelli All-Cap Value 0.95% 0.24% 0.00% 1.19% 0.00% 1.19% AST T. Rowe Price Natural Resources 0.90% 0.23% 0.03% 1.16% 0.00% 1.16% AST Alliance Growth 0.90% 0.20% 0.03% 1.13% 0.00% 1.13% AST MFS Growth 0.90% 0.18% 0.10% 1.18% 0.00% 1.18% AST Marsico Capital Growth 0.90% 0.16% 0.04% 1.10% 0.01% 1.09% AST Goldman Sachs Concentrated Growth 0.90% 0.15% 0.04% 1.09% 0.06% 1.03% AST DeAM Large-Cap Growth 0.85% 0.23% 0.00% 1.08% 0.10% 0.98% AST DeAM Large-Cap Value 0.85% 0.24% 0.04% 1.13% 0.10% 1.03% AST Alliance/Bernstein Growth + Value 0.90% 0.23% 0.00% 1.13% 0.00% 1.13% AST Sanford Bernstein Core Value 0.75% 0.25% 0.00% 1.00% 0.00% 1.00% AST Cohen & Steers Realty 1.00% 0.23% 0.03% 1.26% 0.00% 1.26% AST Sanford Bernstein Managed Index 500 0.60% 0.16% 0.08% 0.84% 0.00% 0.84% AST American Century Income & Growth 0.75% 0.23% 0.00% 0.98% 0.00% 0.98% AST Alliance Growth and Income 0.75% 0.15% 0.08% 0.98% 0.02% 0.96% AST MFS Growth with Income 0.90% 0.28% 0.01% 1.19% 0.00% 1.19% AST INVESCO Capital Income 0.75% 0.17% 0.03% 0.95% 0.00% 0.95% AST DeAM Global Allocation 0.10% 0.04% 0.00% 0.14% 0.00% 0.14% AST American Century Strategic Balanced 0.85% 0.25% 0.00% 1.10% 0.00% 1.10% AST T. Rowe Price Asset Allocation 0.85% 0.26% 0.00% 1.11% 0.00% 1.11% AST T. Rowe Price Global Bond 0.80% 0.26% 0.00% 1.06% 0.00% 1.06% AST Federated High Yield 0.75% 0.19% 0.00% 0.94% 0.00% 0.94% AST Lord Abbett Bond-Debenture 0.80% 0.24% 0.00% 1.04% 0.00% 1.04% AST DeAM Bond 0.85% 0.23% 0.00% 1.08% 0.15% 0.93% AST PIMCO Total Return Bond 0.65% 0.15% 0.00% 0.80% 0.02% 0.78% AST PIMCO Limited Maturity Bond 0.65% 0.18% 0.00% 0.83% 0.00% 0.83% AST Money Market 0.50% 0.13% 0.00% 0.63% 0.05% 0.58% Montgomery Variable Series: Emerging Markets 1.25% 0.43% 0.00% 1.68% 0.00% 1.68% Wells Fargo Variable Trust: Equity Income 0.55% 0.30% 0.25% 1.10% 0.10% 1.00%
- -------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------
Total Annual Net Annual Portfolio Fee Waivers Portfolio Management Other Operating and Expense Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Reimbursement Expenses - ------------------------------------------------------------------------------------------------------------------------------------ INVESCO Variable Investment Funds, Inc.: Dynamics 0.75% 0.37% 0.00% 1.12% 0.00% 1.12% Technology 0.75% 0.36% 0.00% 1.11% 0.00% 1.11% Health Sciences 0.75% 0.32% 0.00% 1.07% 0.00% 1.07% Financial Services 0.75% 0.34% 0.00% 1.09% 0.00% 1.09% Telecommunications 0.75% 0.47% 0.00% 1.22% 0.00% 1.22% Evergreen Variable Annuity Trust: Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% Evergreen Variable Annuity Trust: International Growth 0.66% 0.73% 0.00% 1.39% 0.39% 1.00% Global Leaders 0.87% 0.31% 0.00% 1.18% 0.18% 1.00% Special Equity 0.92% 0.26% 0.00% 1.18% 0.15% 1.03% Omega 0.52% 0.18% 0.00% 0.70% 0.00% 0.70% Capital Growth 0.80% 0.22% 0.00% 1.02% 0.00% 1.02% Blue Chip 0.61% 0.61% 0.00% 1.22% 0.24% 0.98% Equity Index 0.32% 0.35% 0.00% 0.67% 0.37% 0.30% Foundation 0.75% 0.16% 0.00% 0.91% 0.00% 0.91% ProFund VP: Europe 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Asia 30 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Japan 0.75% 1.06% 0.25% 2.06% 0.08% 1.98% Banks 0.75% 1.11% 0.25% 2.11% 0.13% 1.98% Basic Materials 0.75% 1.21% 0.25% 2.21% 0.23% 1.98% Biotechnology 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Consumer Cyclical 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Consumer Non-Cyclical 0.75% 1.10% 0.25% 2.10% 0.12% 1.98% Energy 0.75% 1.16% 0.25% 2.16% 0.18% 1.98% Financial 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Healthcare 0.75% 1.14% 0.25% 2.14% 0.16% 1.98% Industrial 0.75% 1.65% 0.25% 2.65% 0.67% 1.98% Internet 0.75% 1.04% 0.25% 2.04% 0.06% 1.98% Pharmaceuticals 0.75% 1.12% 0.25% 2.12% 0.14% 1.98% Precious Metals 0.75% 0.98% 0.25% 1.98% N/A 1.98% Real Estate 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% Semiconductor 0.75% 1.33% 0.25% 2.33% 0.35% 1.98% Technology 0.75% 1.27% 0.25% 2.27% 0.29% 1.98% Telecommunications 0.75% 1.19% 0.25% 2.19% 0.21% 1.98% Utilities 0.75% 1.17% 0.25% 2.17% 0.19% 1.98% Bull 0.75% 0.91% 0.25% 1.91% N/A 1.91% Bear 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% UltraBull 2 0.75% 1.12% 0.25% 2.12% 0.27% 1.85% OTC 0.75% 1.03% 0.25% 2.03% 0.05% 1.98% Short OTC 0.75% 0.96% 0.25% 1.96% N/A 1.96% UltraOTC 0.75% 1.08% 0.25% 2.08% 0.13% 1.95% Mid-Cap Value 0.75% 1.25% 0.25% 2.25% 0.27% 1.98% Mid-Cap Growth 0.75% 1.22% 0.25% 2.22% 0.24% 1.98% UltraMid-Cap 0.75% 1.36% 0.25% 2.36% 0.38% 1.98% Small-Cap Value 0.75% 1.45% 0.25% 2.45% 0.47% 1.98% Small-Cap Growth 0.75% 1.20% 0.25% 2.20% 0.22% 1.98%
- -------------------------------------------------------------------------------- UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) - --------------------------------------------------------------------------------
UltraSmall-Cap 0.75% 1.15% 0.25% 2.15% 0.17% 1.98% U.S. Government Plus 0.50% 0.96% 0.25% 1.71% N/A 1.71% Rising Rates Opportunity 0.75% 1.13% 0.25% 2.13% 0.15% 1.98% First Defined Portfolio Fund LLC: First Trust(R)10 Uncommon Values 0.60% 2.29% 0.25% 3.14% 1.95% 1.37% The Prudential Series Fund, Inc.: SP Jennison International Growth 0.85% 0.70% 0.25% 1.80% 0.16% 1.64%
1 The Investment Manager of American Skandia Trust (the "Trust") has agreed to reimburse and/or waive fees for certain Portfolios until at least April 30, 2004. The caption "Total Annual Portfolio Operating Expenses" reflects the Portfolios' fees and expenses before such waivers and reimbursements, while the caption "Net Annual Portfolio Operating Expenses" reflects the effect of such waivers and reimbursements. The Trust adopted a Distribution Plan (the "Distribution Plan") under Rule 12b-1 of the Investment Company Act of 1940 to permit an affiliate of the Trust's Investment Manager to receive brokerage commissions in connection with purchases and sales of securities held by Portfolios of the Trust, and to use these commissions to promote the sale of shares of such Portfolios. While the brokerage commission rates and amounts paid by the various Portfolios are not expected to increase as a result of the Distribution Plan, the staff of the Securities and Exchange Commission takes the position that commission amounts received under the Distribution Plan should be reflected as distribution expenses of the Portfolios. The Distribution Fee estimates are derived and annualized from data regarding commission amounts directed under the Distribution Plan. Although there are no maximum amounts allowable, actual commission amounts directed under the Distribution Plan will vary and the amounts directed during the last full fiscal year of the Plan's operations may differ from the amounts listed in the above chart. 2 Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. EXPENSE EXAMPLES These examples are designed to assist you in understanding the various expenses you may incur with the Annuity over certain periods of time based on specific assumptions. The examples reflect the Contingent Deferred Sales Charges (when applicable), Annual Maintenance Fee (when applicable), Insurance Charge, and the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), as well as the charges for the optional benefits that are offered under the Annuity. The Securities and Exchange Commission ("SEC") requires these examples. Below are examples showing what you would pay in expenses at the end of the stated time periods for each Sub-account had you invested $10,000 in the Annuity and received a 5% annual return on assets, and elected the optional benefit available. The examples shown assume that: (a) you only allocate Account Value to the Sub-account with the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above), not to a Fixed Allocation; (b) the Insurance Charge is assessed as 1.40% per year; (c) the Annual Maintenance Fee (when applicable) is reflected as an asset-based charge based on an assumed average contract size; (d) you make no withdrawals of Account Value during the period shown; (e) you make no transfers, withdrawals, surrender or other transactions for which we charge a fee during the period shown; (f) no tax charge applies; (g) the maximum total annual portfolio operating expenses for the underlying Portfolio (shown above) are reflected; (h) the charge for the optional benefit is reflected as a charge equal to 0.25% for the Guaranteed Return Option; and (i) the Credit applicable to your Annuity is 4% of Purchase Payments. Amounts shown in the examples are rounded to the nearest dollar. The Credit may be less when total Purchase Payments are less then $10,000 and may be more when total Purchase Payments are at least $5,000,000 (see "How do I Receive Credits?"). Expense Examples are provided as follows: 1.) if you surrender the Annuity at the end of the stated time period; 2.) if you annuitize at the end of the stated time period; and 3.) if you do not surrender your Annuity. 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 WILL BE LESS THAN THOSE SHOWN IF YOU DO NOT ELECT THE OPTIONAL BENEFIT AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. If you surrender your contract at the end of the applicable time period: 1 year 3 years 5 years 10 years - ------------------------------------------------------------------- 1370 2407 3292 5169 - ------------------------------------------------------------------- If you annuitize at the end of the applicable time period(you may not annuitize in the first (1st) Annuity Year): 1 year 3 years 5 years 10 years - ------------------------------------------------------------------- 5N/A 1557 2592 5169 If you do not surrender your contract: 1 year 3 years 5 years 10 years - ------------------------------------------------------------------- 520 1557 2592 5169 INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? Each variable investment option is a Sub-account of American Skandia Life Assurance Corporation Variable Account B (see "What are Separate Accounts" for more detailed information.) Each Sub-account invests exclusively in one Portfolio. You should carefully read the prospectus for any Portfolio in which you are interested. The following chart classifies each of the Portfolios based on our assessment of their investment style (as of the date of this Prospectus). The chart also provides a description of each Portfolio's investment objective (in italics) and a short, summary description of their key policies to assist you in determining which Portfolios may be of interest to you. There is no guarantee that any underlying Portfolio will meet its investment objective. The name of the advisor/sub-advisor for each Portfolio appears next to the description. Those Portfolios whose name includes the prefix "AST" are Portfolios of American Skandia Trust. The investment manager for AST is American Skandia Investment Services, Incorporated, an affiliated company of American Skandia. However, a sub-advisor, as noted below, is engaged to conduct day-to-day investment decisions. The Portfolios are not publicly traded mutual funds. They are only available as investment options in variable annuity contracts and variable life insurance policies issued by insurance companies, or in some cases, to participants in certain qualified retirement plans. However, some of the Portfolios available as Sub-accounts under the Annuity are managed by the same portfolio advisor or sub-advisor as a retail mutual fund of the same or similar name that the Portfolio may have been modeled after at its inception. Certain retail mutual funds may also have been modeled after a Portfolio. While the investment objective and policies of the retail mutual funds and the Portfolios may be substantially similar, the actual investments will differ to varying degrees. Differences in the performance of the funds can be expected, and in some cases could be substantial. You should not compare the performance of a publicly traded mutual fund with the performance of any similarly named Portfolio offered as a Sub-account. Details about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses for the underlying mutual funds. The current prospectus and statement of additional information for the underlying Portfolios can be obtained by calling 1-800-766-4530. ================================================================================ Effective close of business June 28, 2002, the AST Goldman Sachs Small-Cap Value portfolio is no longer offered as a Sub-account under the Annuity, except as noted below. Annuity contracts with Account Value allocated to the AST Goldman Sachs Small-Cap Value Sub-account on or before June 28, 2002 may continue to allocate Account Value and make transfers into the AST Goldman Sachs Small-Cap Value Sub-account, including any bank drafting, dollar cost averaging, asset allocation and rebalancing programs. Owners of Annuities issued after June 28, 2002 will not be allowed to allocate Account Value to the AST Goldman Sachs Small-Cap Value Sub-account. ================================================================================ ================================================================================ The AST Goldman Sachs Small-Cap Value Sub-account may be offered to new Owners at some future date; however, at the present time, American Skandia has no intention to do so. ================================================================================ Please refer to Appendix B for certain required financial information related to the historical performance of the Sub-accounts.
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST Strong International Equity: seeks long-term capital growth by investing in a diversified Strong Capital EQUITY portfolio of international equity securities the issuers of which are considered to have Management, Inc. strong earnings momentum. The Portfolio seeks to meet its objective by investing, under normal market conditions, at least 80% of its total assets in a diversified portfolio of equity securities of companies located or operating in developed non-U.S. countries and emerging markets of the world. The Sub-advisor intends to focus on companies with an above-average potential for long-term growth and attractive relative valuations. The Sub-advisor selects companies based on five key factors: growth, valuation, management, risk and sentiment. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST William Blair International Growth (f/k/a AST Janus Overseas Growth): seeks long-term William Blair & EQUITY growth of capital. The Portfolio pursues its objective primarily through investments in Company, L.L.C. equity securities of issuers located outside the United States. The Portfolio normally invests at least 80% of its total assets in securities of issuers from at least five different countries, excluding the United States. The Portfolio invests primarily in companies selected for their growth potential. Securities are generally selected without regard to any defined allocation among countries, geographic regions or industry sectors, or other similar selection procedure. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST American Century International Growth: seeks capital growth. The Portfolio will seek to American Century EQUITY achieve its investment objective by investing primarily in equity securities of international Investment companies that the Sub-advisor believes will increase in value over time. Under normal Management, Inc. conditions, the Portfolio will invest at least 65% of its assets in equity securities of issuers from at least three countries outside of the United States. The Sub-advisor uses a growth investment strategy it developed that looks for companies with earnings and revenue growth. The Sub-advisor will consider a number of other factors in making investment selections, including the prospects for relative economic growth among countries or regions, economic and political conditions, expected inflation rates, currency exchange fluctuations and tax considerations. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL AST DeAM International Equity: seeks capital growth. The Portfolio pursues its objective by Deutsche Asset EQUITY investing at least 80% of the value of its assets in the equity securities of companies in Management, Inc. developed non-U.S. countries that are represented in the MSCI EAFE(R)Index. The target of this Portfolio is to track the performance of the MSCI EAFE(R)Index within 4% with a standard deviation expected of +/- 4%. The Sub-advisor considers a number of factors in determining whether to invest in a stock, including earnings growth rate, analysts' estimates of future earnings and industry-relative price multiples. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL EQUITY AST MFS Global Equity: seeks capital growth. Under normal circumstances the Portfolio invests Massachusetts at least 80% of its assets in equity securities of U.S. and foreign issuers (including issuers Financial Services in developing countries). The Portfolio generally seeks to purchase securities of companies Company with relatively large market capitalizations relative to the market in which they are traded. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST PBHG Small-Cap Growth: seeks capital growth. The Portfolio pursues its objective by Pilgrim Baxter & GROWTH primarily investing at least 80% of the value of its assets in the common stocks of Associates, Ltd. small-sized companies, whose market capitalizations are similar to market capitalizations of the companies in the Russell 2000(R)Index at the time of the Portfolio's investment. The Sub-advisor expects to focus primarily on those securities whose market capitalizations or annual revenues are less than $1billion at the time of purchase. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST DeAM Small-Cap Growth: seeks maximum growth of investors' capital from a portfolio of Deutsche Asset GROWTH growth stocks of smaller companies. The Portfolio pursues its objective, under normal Management, Inc. circumstances, by primarily investing at least 80% of its total assets in the equity securities of small-sized companies included in the Russell 2000 Growth(R)Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000 Growth(R)Index, but which attempts to outperform the Russell 2000 Growth(R)Index. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP AST Federated Aggressive Growth: seeks capital growth. The Portfolio pursues its investment Federated GROWTH objective by investing in the stocks of small companies that are traded on national security Investment exchanges, NASDAQ stock exchange and the over-the-counter-market. Small companies will be Counseling/ defined as companies with market capitalizations similar to companies in the Russell 2000 Federated Index or the Standard & Poor's Small Cap 600 Index. Up to 25% of the Portfolio's net assets Global Investment may be invested in foreign securities, which are typically denominated in foreign currencies. Management Corp. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP VALUE AST Goldman Sachs Small-Cap Value: seeks long-term capital appreciation. The Portfolio will Goldman Sachs Asset seek its objective through investments primarily in equity securities that are believed to be Management undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock. The Portfolio will have a non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as companies with a capitalization of $5 billion or less. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP VALUE AST Gabelli Small-Cap Value: seeks to provide long-term capital growth by investing primarily GAMCO in small-capitalization stocks that appear to be undervalued. The Portfolio will have a Investors, Inc. non-fundamental policy to invest, under normal circumstances, at least 80% of the value of its assets in small capitalization companies. The 80% investment requirement applies at the time the Portfolio invests its assets. The Portfolio generally defines small capitalization companies as those with a capitalization of $1.5 billion or less. 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. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP VALUE AST DeAM Small-Cap Value: seeks maximum growth of investors' capital. The Portfolio pursues Deutsche Asset its objective, under normal market conditions, by primarily investing at least 80% of its Management, Inc. total assets in the equity securities of small-sized companies included in the Russell 2000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 2000(R)Value Index, but which attempts to outperform the Russell 2000(R)Value Index. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP GROWTH AST Goldman Sachs Mid-Cap Growth (f/k/a AST Janus Mid-Cap Growth): seeks long-term capital Goldman Sachs Asset growth. The Portfolio pursues its investment objective, by investing primarily in equity Management securities selected for their growth potential, and normally invests at least 80% of the value of its assets in medium capitalization companies. For purposes of the Portfolio, medium-sized companies are those whose market capitalizations (measured at the time of investment) fall within the range of companies in the Standard & Poor's MidCap 400 Index. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP GROWTH AST Neuberger Berman Mid-Cap Growth: seeks capital growth. Under normal market conditions, Neuberger Berman the Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index, at the time of investment, are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. The Sub-advisor looks for fast-growing companies that are in new or rapidly evolving industries. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP VALUE AST Neuberger Berman Mid-Cap Value: seeks capital growth. Under normal market conditions, the Neuberger Berman Portfolio primarily invests at least 80% of its net assets in the common stocks of mid-cap Management Inc. companies. For purposes of the Portfolio, companies with equity market capitalizations that fall within the range of the Russell Midcap(R)Index at the time of investment are considered mid-cap companies. Some of the Portfolio's assets may be invested in the securities of large-cap companies as well as in small-cap companies. Under the Portfolio's value-oriented investment approach, the Sub-advisor looks for well-managed companies whose stock prices are undervalued and that may rise in price before other investors realize their worth. - ------------------------------------------------------------------------------------------------------------------------------------ ALL-CAP AST Alger All-Cap Growth: seeks long-term capital growth. The Portfolio invests primarily in Fred Alger GROWTH equity securities, such as common or preferred stocks, that are listed on U.S. exchanges or in Management, Inc. the over-the-counter market. The Portfolio may invest in the equity securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. - ------------------------------------------------------------------------------------------------------------------------------------ ALL-CAP AST Gabelli All-Cap Value: seeks capital growth. The Portfolio pursues its objective by GAMCO Investors, VALUE investing primarily in readily marketable equity securities including common stocks, preferred Inc. stocks and securities that may be converted at a later time into common stock. The Portfolio may invest in the securities of companies of all sizes, and may emphasize either larger or smaller companies at a given time based on the Sub-advisor's assessment of particular companies and market conditions. The Portfolio focuses on companies that appear underpriced relative to their private market value ("PMV"). PMV is the value that the Portfolio's Sub-advisor believes informed investors would be willing to pay for a company. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR AST T. Rowe Price Natural Resources: seeks long-term capital growth primarily through the T. Rowe Price common stocks of companies that own or develop natural resources (such as energy products, Associates, Inc. precious metals and forest products) and other basic commodities. The Portfolio normally invests primarily (at least 80% of its total assets) in the common stocks of natural resource companies whose earnings and tangible assets could benefit from accelerating inflation. The Portfolio looks for companies that have the ability to expand production, to maintain superior exploration programs and production facilities, and the potential to accumulate new resources. At least 50% of Portfolio assets will be invested in U.S. securities, up to 50% of total assets also may be invested in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Alliance Growth: seeks long-term capital growth. The Portfolio invests at least 80% of Alliance Capital GROWTH its total assets in the equity securities of a limited number of large, carefully selected, Management, L.P. high-quality U.S. companies that are judged likely to achieve superior earnings growth. Normally, about 40-60 companies will be represented in the Portfolio, with the 25 companies most highly regarded by the Sub-advisor usually constituting approximately 70% of the Portfolio's net assets. An emphasis is placed on identifying companies whose substantially above average prospective earnings growth is not fully reflected in current market valuations. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST MFS Growth: seeks long-term capital growth and future income. Under normal market Massachusetts GROWTH conditions, the Portfolio invests at least 80% of its total assets in common stocks and Financial Services related securities, such as preferred stocks, convertible securities and depositary receipts, Company of companies that the Sub-advisor believes offer better than average prospects for long-term growth. The Sub-advisor seeks to purchase securities of companies that it considers well-run and poised for growth. The Portfolio may invest up to 35% of its net assets in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Marsico Capital Growth: seeks capital growth. Income realization is not an investment Marsico Capital GROWTH objective and any income realized on the Portfolio's investments, therefore, will be Management, LLC incidental to the Portfolio's objective. The Portfolio will pursue its objective by investing primarily in common stocks of larger, more established companies. In selecting investments for the Portfolio, the Sub-advisor uses an approach that combines "top down" economic analysis with "bottom up" stock selection. The "top down" approach identifies sectors, industries and companies that should benefit from the trends the Sub-advisor has observed. The Sub-advisor then looks for individual companies with earnings growth potential that may not be recognized by the market at large, a "bottom up" stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Goldman Sachs Concentrated Growth (f/k/a AST JanCap Growth): seeks growth of capital in a Goldman Sachs GROWTH manner consistent with the preservation of capital. Realization of income is not a Asset Management significant investment consideration 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 equity securities of companies that the Sub-advisor believes have potential to achieve capital appreciation over the long-term. The Portfolio seeks to achieve its investment objective by investing, under normal circumstances, in approximately 30 - 45 companies that are considered by the Sub-advisor to be positioned for long-term growth. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST DeAM Large-Cap Growth: seeks maximum growth of capital by investing primarily in the Deutsche Asset GROWTH growth stocks of larger companies. The Portfolio pursues its objective, under normal market Management, Inc. conditions, by primarily investing at least 80% of its total assets in the equity securities of large-sized companies included in the Russell 1000(R)Growth Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Growth Index, but which attempts to outperform the Russell 1000(R)Growth Index through active stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP VALUE AST DeAM Large-Cap Value (f/k/a AST Janus Strategic Value): seeks maximum growth of capital by Deutsche Asset investing primarily in the value stocks of larger companies. The Portfolio pursues its Management, Inc. objective, under normal market conditions, by primarily investing at least 80% of the value of its assets in the equity securities of large-sized companies included in the Russell 1000(R) Value Index. The Sub-advisor employs an investment strategy designed to maintain a portfolio of equity securities which approximates the market risk of those stocks included in the Russell 1000(R)Value Index, but which attempts to outperform the Russell 1000(R)Value Index through active stock selection. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP AST Alliance/Bernstein Growth + Value: seeks capital growth by investing approximately 50% of Alliance Capital BLEND its assets in growth stocks of large companies and approximately 50% of its assets in value Management, L.P. stocks of large companies. The Portfolio will invest primarily in commons tocks of large U.S. companies included in the Russell 1000(R)Index (the "Russell 1000(R)"). The Russell 1000(R)is a market capitalization-weighted index that measures the performance of the 1,000 largest U.S. companies. Normally, about 60-85 companies will be represented in the Portfolio, with 25-35 companies primarily from the Russell 1000(R)Growth Index constituting approximately 50% of the Portfolio's net assets and 35-50 companies primarily from the Russell 1000(R)Value Index constituting the remainder of the Portfolio's net assets. There will be a periodic rebalancing of each segment's assets to take account of market fluctuations in order to maintain the approximately equal allocation. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP VALUE AST Sanford Bernstein Core Value: seeks long-term capital growth by investing primarily in Sanford C. common stocks. The Sub-advisor expects that the majority of the Portfolio's assets will be Bernstein invested in the common stocks of large companies that appear to be undervalued. Among other & Co., LLC things, the Portfolio seeks to identify compelling buying opportunities created when companies are undervalued on the basis of investor reactions to near-term problems or circumstances even though their long-term prospects remain sound. The Sub-advisor seeks to identify individual companies with earnings growth potential that may not be recognized by the market at large. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ REAL ESTATE AST Cohen & Steers Realty: seeks to maximize total return through investment in real estate Cohen & Steers (REIT) securities. The Portfolio pursues its investment objective by investing, under normal Capital Management, circumstances, at least 80% of its net assets in securities of real estate issuers. Under Inc. normal circumstances, the Portfolio will invest substantially all of its assets in the equity securities of real estate companies, i.e., a company that derives at least 50% of its revenues from the ownership, construction, financing, management or sale of real estate or that has at least 50% of its assets in real estate. Real estate companies may include real estate investment trusts or REITs. - ------------------------------------------------------------------------------------------------------------------------------------ MANAGED INDEX AST Sanford Bernstein Managed Index 500: will invest, under normal circumstances, at least 80% Sanford C. of its net assets in securities included in the Standard & Poor's 500 Composite Stock Price Bernstein Index (the "S&P(R)500 "). The Portfolio seeks to outperform the S&P 500 through stock & Co., LLC selection resulting in different weightings of common stocks relative to the index. The Portfolio will invest primarily in the common stocks of companies included in the S&P 500. 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 fundamental quantitative criteria that are designed to indicate whether a particular stock will predictably perform better or worse than the S&P 500. Based on these criteria, the Sub-advisor determines whether the Portfolio should over-weight, under-weight or hold a neutral position in the stock relative to the proportion of the S&P 500 that the stock represents. In addition, the Sub-advisor also may determine that based on the quantitative criteria, certain equity securities that are not included in the S&P 500 should be held by the Portfolio. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST American Century Income & Growth: seeks capital growth with current income as a secondary American Century AND objective. The Portfolio invests primarily in common stocks that offer potential for capital Investment INCOME growth, and may, consistent with its investment objective, invest in stocks that offer Management, Inc. potential for current income. The Sub-advisor utilizes a quantitative management technique with a goal of building an equity portfolio that provides better returns than the S&P 500 Index without taking on significant additional risk and while attempting to create a dividend yield that will be greater than the S&P 500 Index. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST Alliance Growth and Income: seeks long-term growth of capital and income while attempting Alliance Capital AND to avoid excessive fluctuations in market value. The Portfolio normally will invest in common Management, L.P. INCOME stocks (and securities convertible into common stocks). The Sub-advisor will take a value-oriented approach, in that it will try to keep the Portfolio's assets invested in securities that are selling at reasonable valuations in relation to their fundamental business prospects. The stocks that the Portfolio will normally invest in are those of seasoned companies. - ------------------------------------------------------------------------------------------------------------------------------------ GROWTH AST MFS Growth with Income: seeks long term growth of capital with a secondary objective to Massachusetts AND seek reasonable current income. Under normal market conditions, the Portfolio invests at Financial Services INCOME least 65% of its net assets in common stocks and related securities, such as preferred stocks, Company convertible securities and depositary receipts. The stocks in which the Portfolio invests generally will pay dividends. While the Portfolio may invest in companies of any size, the Portfolio generally focuses on companies with larger market capitalizations that the Sub-advisor believes have sustainable growth prospects and attractive valuations based on current and expected earnings or cash flow. The Portfolio may invest up to 20% of its net assets in foreign securities. - ------------------------------------------------------------------------------------------------------------------------------------ EQUITY INCOME AST INVESCO Capital Income (f/k/a AST INVESCO Equity Income): seeks capital growth and current INVESCO Funds income while following sound investment practices. The Portfolio seeks to achieve its Group, Inc. objective by investing in securities that are expected to produce relatively high levels of income and consistent, stable returns. The Portfolio normally will invest at least 65% of its assets in dividend-paying common and preferred stocks of domestic and foreign issuers. Up to 30% of the Portfolio's assets may be invested in equity securities that do not pay regular dividends. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED AST DeAM Global Allocation: seeks a high level of total return by investing primarily in a Deutsche Asset diversified portfolio of mutual funds. The Portfolio seeks to achieve its investment Management, Inc. objective by investing in several other AST Portfolios ("Underlying Portfolios"). The Portfolio intends its strategy of investing in combinations of Underlying Portfolios to result in investment diversification that an investor could otherwise achieve only by holding numerous investments. The Portfolio is expected to be invested in at least six such Underlying Portfolios at any time. It is expected that the investment objectives of such AST Portfolios will be diversified. - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED AST American Century Strategic Balanced: seeks capital growth and current income. The American Century Sub-advisor intends to maintain approximately 60% of the Portfolio's assets in equity Investment securities and the remainder in bonds and other fixed income securities. Both the Portfolio's Management, Inc. equity and fixed income investments will fluctuate in value. The equity securities will fluctuate depending on the performance of the companies that issued them, general market and economic conditions, and investor confidence. The fixed income investments will be affected primarily by rising or falling interest rates and the credit quality of the issuers. - ------------------------------------------------------------------------------------------------------------------------------------ ASSET AST T. Rowe Price Asset Allocation: seeks a high level of total return by investing primarily T. Rowe Price ALLOCA-TION in a diversified portfolio of fixed income and equity securities. The Portfolio normally Associates, Inc. invests approximately 60% of its total assets in equity securities and 40% in fixed income securities. The Sub-advisor concentrates common stock investments in larger, more established companies, but the Portfolio may include small and medium-sized companies with good growth prospects. The fixed income portion of the Portfolio will be allocated among investment grade securities, high yield or "junk" bonds, foreign high quality debt securities and cash reserves. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL BOND AST T. Rowe Price Global Bond: seeks to provide high current income and capital growth by T. Rowe Price investing in high-quality foreign and U.S. dollar-denominated bonds. The Portfolio will International, Inc. invest at least 80% of its total assets in all types of high quality bonds including those issued or guaranteed by U.S. or foreign governments or their agencies and by foreign authorities, provinces and municipalities as well as investment grade corporate bonds and mortgage and asset-backed securities of U.S. and foreign issuers. The Portfolio generally invests in countries where the combination of fixed-income returns and currency exchange rates appears attractive, or, if the currency trend is unfavorable, where the Sub-advisor believes that the currency risk can be minimized through hedging. The Portfolio may also invest up to 20% of its assets in the aggregate in below investment-grade, high-risk bonds ("junk bonds"). In addition, the Portfolio may invest up to 30% of its assets in mortgage-backed (including derivatives, such as collateralized mortgage obligations and stripped mortgage securities) and asset-backed securities. - ------------------------------------------------------------------------------------------------------------------------------------ HIGH YIELD BOND AST Federated High Yield: seeks high current income by investing primarily in a diversified Federated portfolio of fixed income securities. The Portfolio will invest at least 80% of its assets in Investment fixed income securities rated BBB and below. These fixed income securities may include Counseling preferred stocks, convertible securities, bonds, debentures, notes, equipment lease certificates and equipment trust certificates. A fund that invests primarily in lower-rated fixed income securities will be subject to greater risk and share price fluctuation than a typical fixed income fund, and may be subject to an amount of risk that is comparable to or greater than many equity funds. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST Lord Abbett Bond-Debenture: seeks high current income and the opportunity for capital Lord, Abbett & Co. appreciation to produce a high total return. To pursue its objective, the Portfolio will LLC invest, under normal circumstances, at least 80% of the value of its assets in fixed income securities and normally invests primarily in high yield and investment grade debt securities, securities convertible in common stock and preferred stocks. The Portfolio may find good value in high yield securities, sometimes called "lower-rated bonds" or "junk bonds," and frequently may have more than half of its assets invested in those securities. At least 20% of the Portfolio's assets must be invested in any combination of investment grade debt securities, U.S. Government securities and cash equivalents. The Portfolio may also make significant investments in mortgage-backed securities. Although the Portfolio expects to maintain a weighted average maturity in the range of five to twelve years, there are no restrictions on the overall Portfolio or on individual securities. The Portfolio may invest up to 20% of its net assets in equity securities. - ------------------------------------------------------------------------------------------------------------------------------------ AST DeAM Bond: seeks a high level of income, consistent with the preservation of capital. Deutsche Asset BOND Under normal circumstances, the Portfolio invests at least 80% of its total assets in Management, Inc. intermediate-term U.S. Treasury, corporate, mortgage-backed and asset-backed, taxable municipal and tax-exempt municipal bonds. The Portfolio invests primarily in investment grade fixed income securities rated within the top three rating categories of a nationally recognized rating organization. Fixed income securities may be issued by U.S. and foreign corporations or entities including banks and various government entities. - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST PIMCO Total Return Bond: seeks to maximize total return consistent with preservation of Pacific Investment capital and prudent investment management. The Portfolio will invest in a diversified Management Company portfolio of fixed-income securities of varying maturities. The average portfolio duration of LLC the Portfolio generally will vary within a three- to six-year time frame based on the Sub-advisor's forecast for interest rates. - ------------------------------------------------------------------------------------------------------------------------------------ BOND AST PIMCO Limited Maturity Bond: seeks to maximize total return consistent with preservation Pacific Investment of capital and prudent investment management. The Portfolio will invest in a diversified Management Company portfolio of fixed-income securities of varying maturities. The average portfolio duration of LLC the Portfolio generally will vary within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. - ------------------------------------------------------------------------------------------------------------------------------------ MONEY MARKET AST Money Market: seeks high current income and maintain high levels of liquidity. The Wells Capital Portfolio attempts to accomplish its objective by maintaining a dollar-weighted average Management, Inc. maturity of not more than 90 days and by investing in securities which have effective maturities of not more than 397 days. - ------------------------------------------------------------------------------------------------------------------------------------ EMERGING Montgomery Variable Series - Emerging Markets: seeks long-term capital appreciation, under Gartmore Global MARKETS normal conditions by investing at least 80% of its total assets in stocks of companies of any Asset Management size based in the world's developing economies. Under normal market conditions, investments Trust/Gartmore are maintained in at least six countries at all times and no more than 35% of total assets in Global Partners any single one of them. - ------------------------------------------------------------------------------------------------------------------------------------ EQUITY INCOME WFVT Equity Income: seeks long-term capital appreciation and above-average dividend income. Wells Fargo Funds The Portfolio pursues its objective primarily by investing in the common stocks of large, Management, LLC domestic companies with above-average return potential based on current market valuations and above-average dividend income. Under normal market conditions, the Portfolio invests at least 80% of its total assets in income producing equity securities and in issues of companies with market capitalizations of $3 billion or more. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ STRATEGIC OR Rydex Variable Trust - Nova: seeks to provide investment results that match the performance of Rydex Global TACTICAL a specific benchmark on a daily basis. The Portfolio's current benchmark is 150% of the Advisors ALLOCATION performance of the S&P 500(R)Index (the "underlying index"). If the Portfolio meets its (f/k/a PADCO objective, the value of the Portfolio's shares will tend to increase on a daily basis by 150% Advisors II, Inc.) of the value of any increase in the underlying index. When the value of the underlying index declines, the value of the Portfolio's shares should also decrease on a daily basis by 150% of the value of any decrease in the underlying index (e.g., if the underlying index goes down by 5%, the value of the Portfolio's shares should go down by 7.5% on that day). Unlike a traditional index fund, as its primary investment strategy, the Portfolio invests to a significant extent in leveraged instruments, such as swap agreements, futures contracts and options on securities, futures contracts, and stock indices, as well as equity securities. - ------------------------------------------------------------------------------------------------------------------------------------ STRATEGIC OR Rydex Variable Trust - Ursa: seeks to provide investment results that will inversely correlate Rydex Global TACTICAL to the performance of the S&P 500(R)Index (the "underlying index"). If the Portfolio meets its Advisors ALLOCATION objective, the value of the Portfolio's shares will tend to increase during times when the (f/k/a PADCO value of the underlying index is decreasing. When the value of the underlying index is Advisors II, Inc.) increasing, however, the value of the Portfolio's shares should decrease on a daily basis by an inversely proportionate amount (e.g., if the underlying index goes up by 5%, the value of the Portfolio's shares should go down by 5% on that day). Unlike a traditional index fund, the Portfolio's benchmark is to perform exactly opposite the underlying index, and the Ursa Fund will not own the securities included in the underlying index. Instead, as its primary investment strategy, the Portfolio invests to a significant extent in short sales of securities or futures contracts and in options on securities, futures contracts, and stock indices. - ------------------------------------------------------------------------------------------------------------------------------------ STRATEGIC OR Rydex Variable Trust - OTC: seeks to provide investment results that correspond to a benchmark Rydex Global TACTICAL for over-the-counter securities. The Portfolio's current benchmark is the NASDAQ 100 Index(R) Advisors ALLOCATION (the "underlying index"). If the Portfolio meets its objective, the value of the Portfolio's (f/k/a PADCO shares should increase on a daily basis by the amount of any increase in the value of the Advisors II, Inc.) underlying index. However, when the value of the underlying index declines, the value of the Portfolio's shares should also decrease on a daily basis by the amount of the decrease in value of the underlying index. The Portfolio invests principally in securities of companies included in the underlying index. It also may invest in other instruments whose performance is expected to correspond to that of the underlying index, and may engage in futures and options transactions and enter into swap agreements. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY INVESCO Variable Investment Funds - Dynamics: seek long-term capital growth. The Portfolio INVESCO Funds invests at least 65% of its assets in common stocks of mid-sized companies. INVESCO defines Group, Inc. mid-sized companies as companies that are included in the Russell Midcap Growth Index at the time of purchase, or if not included in that Index, have market capitalizations of between $2.5 billion and $15 billion at the time of purchase. The core of the Portfolio's investments are in securities of established companies that are leaders in attractive growth markets with a history of strong returns. The remainder of the Portfolio is invested in securities of companies that show accelerating growth, driven by product cycles, favorable industry or sector conditions, and other factors that INVESCO believes will lead to rapid sales or earnings growth. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR INVESCO Variable Investment Funds - Technology: seeks capital growth. The Portfolio normally INVESCO Funds invests 80% of its net assets in the equity securities and equity-related instruments of Group, Inc. companies engaged in technology-related industries. These include, but are not limited to, various applied technologies, hardware, software, semiconductors, telecommunications equipment and services and service-related companies in information technology. Many of these products and services are subject to rapid obsolescence, which may lower market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR INVESCO Variable Investment Funds - Health Sciences: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instrumentsof companies that develop, produce or distribute products or services related to health care. These companies include, but are not limited to, medical equipment or supplies, pharmaceuticals, biotechnology and healthcare providers and service companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR INVESCO Variable Investment Funds - Financial Services: seeks capital growth. The Portfolio INVESCO Funds normally invests at least 80% of its net assets in the equity securities and equity-related Group, Inc. instruments of companies involved in the financial services sector. These companies include, but are not limited to, banks (regional and money-centers), insurance companies (life, property and casualty, and multiline), investment and miscellaneous industries (asset managers, brokerage firms, and government-sponsored agencies) and suppliers to financial services companies. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR INVESCO Variable Investment Funds - Telecommunications: seeks capital growth and current INVESCO Funds income. The Portfolio normally invests 80% of its net assets in the equity securities and Group, Inc. equity-related instruments of companies engaged in the design, development, manufacture, distribution, or sale of communications services and equipment, and companies that are involved in supplying equipment or services to such companies. The telecommunications sector includes, but is not limited to, companies that offer telephone services, wireless communications, satellite communications, television and movie programming, broadcasting and Internet access. Many of these products and services are subject to rapid obsolescence, which may lower the market value of the securities of the companies in this sector. At any given time, 20% of the Portfolio's assets is not required to be invested in the sector. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL Evergreen VA International Growth: seeks long-term capital growth and, secondarily, modest Evergreen EQUITY income. The Portfolio invests primarily in equity securities issued by established, quality, Investment non-U.S. companies located in countries with developed markets, but may purchase across all Management Company, market capitalizations. The Portfolio normally invests at least 65% of its assets in LLC securities of companies in at least three different countries (other than the U.S.) and may invest in emerging markets and in securities of companies in the formerly communist countries of Eastern Europe. The Portfolio invests in companies that are both growth opportunities and value opportunities. - ------------------------------------------------------------------------------------------------------------------------------------ GLOBAL EQUITY Evergreen VA Global Leaders: seeks to provide investors with long-term capital growth. The Evergreen Portfolio normally invests as least 65% of its assets in a diversified portfolio of U.S. and Investment non-U.S. equity securities of companies located in the world's major industrialized Management Company, countries. The Portfolio will invest in no less than three countries, which may include the LLC U.S., but may invest more than 25% of its assets in one country. The Portfolio invests only in the best 100 companies, which are selected by the Portfolio's manager based on as high return on equity, consistent earnings growth, established market presence and industries or sectors with significant growth prospects. - ------------------------------------------------------------------------------------------------------------------------------------ SMALL CAP Evergreen VA Special Equity: seeks capital growth. The Portfolio normally invests at least Evergreen EQUITY 80% of its assets in common stocks of small U.S. companies (i.e., companies whose market Investment capitalizations fall within the range of the Russell 2000(R)Index, at the time of purchase). Management Company, The remaining 20% of the Portfolio's assets may be represented by cash or invested in various LLC cash equivalents. The Portfolio's manager selects stocks of companies which it believes have the potential for accelerated growth in earnings and price. - ------------------------------------------------------------------------------------------------------------------------------------ MID-CAP EQUITY Evergreen VA Omega: seeks long-term capital growth. The Portfolio invests primarily in common Evergreen stocks and securities convertible into common stocks of U.S. companies across all market Investment capitalizations. The Portfolio's managers employ a growth style of equity management. Management Company, "Growth" stocks are stocks of companies that the Portfolio's managers believe have anticipated LLC earnings ranging from steady to accelerated growth. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP Evergreen VA Capital Growth: seeks to provide long-term capital growth. The Portfolio invests Evergreen EQUITY primarily in common stocks. The Portfolio may also invest in preferred stocks, convertible Investment preferred stocks, convertible debentures, and any other class or type of security which the Management Company, portfolio manager believes offers the potential for capital growth. In selecting investments, LLC/ Pilgrim Baxter the investment adviser attempts to identify securities it believes will provide capital growth & Associates, Ltd. over the intermediate and long-term due to changes in the financial condition of issuers, changes in financial conditions generally, or other factors. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP Evergreen VA Blue Chip: seeks capital growth with the potential for income. The Portfolio Evergreen EQUITY normally invests at least 80% of its assets in "blue chip" stocks. Blue chip stocks are the Investment common stocks of well-established, large U.S. companies with a long history of performance, Management Company, typically recognizable names representing a broad range of industries. The market LLC capitalization of the stocks selected will be within the range tracked by the S&P 500 Index, at the time of purchase. The remaining 20% of the Portfolio's assets may be represented by cash or invested in other types of equity securities, various cash equivalents or represented by cash. The Portfolio's stock selection is based on a diversified style of equity management that allows it to invest in both growth- and value-oriented securities. - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 INDEX Evergreen VA Equity Index: seeks investment results that achieve price and yield performance Evergreen similar to the Standards and Poor's 500 Composite Price Index ("S&P 500 Index")*. The Investment Portfolio invests substantially all of its total assets in equity securities that represent a Management Company, composite of the S&P 500 Index. The S&P 500 is an unmanaged index of 500 common stocks chosen LLC to reflect the industries of the U.S. economy and is often considered a proxy for the stock market in general. *"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by Evergreen Investment Management Company, LLC. 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. - ------------------------------------------------------------------------------------------------------------------------------------ BALANCED Evergreen VA Foundation: seeks capital growth and current income. The Portfolio invests in a Evergreen combination of common stocks, preferred stocks and securities convertible or exchangeable for Investment common stocks of large U.S. companies (i.e., companies whose market capitalization falls Management Company, within the range tracked by the Russell 1000(R)Index, at the time of purchase). Under normal LLC circumstances, the Portfolio will invest at least 25% of its assets in debt securities and the remainder in equity securities. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Europe 30: seeks daily investment results, before fees and expenses, that ProFund Advisors EQUITY correspond to the daily performance of the ProFunds Europe 30 Index. The ProFunds Europe 30 LLC Index, created by ProFund Advisors, is composed of 30 companies whose principal offices are located in Europe and whose securities are traded on U.S. exchanges or on the NASDAQ as depositary receipts or ordinary shares. The component companies in the ProFunds Europe 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on a modified market capitalization method. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Asia 30: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors EQUITY to the daily performance of the ProFunds Asia 30 Index. The ProFunds Asia 30 Index, created LLC by ProFund Advisors, is composed of 30 of the companies whose principal offices are located in the Asia/Pacific region, excluding Japan, and whose securities are traded on U.S. exchanges or on the NASDAQ as depository receipts or ordinary shares. The component companies in the ProFunds Asia 30 Index are determined annually based upon their U.S. dollar-traded volume. Their relative weights are determined based on the modified market capitalization method. - ------------------------------------------------------------------------------------------------------------------------------------ INTER-NATIONAL ProFund VP Japan: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors EQUITY the daily performance of the Nikkei 225 Stock Average. Since the Japanese markets are not LLC open when ProFund VP Japan values its shares, ProFund VP Japan determines its success in meeting this investment objective by comparing its daily return on a given day with the daily performance of related futures contracts traded in the United States. The Nikkei 225 Stock Average is a price-weighted index of 225 large, actively traded Japanese stocks traded on the Tokyo Stock Exchange. The Index is computed and distributed by the Nihon Keizai Shimbun. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Banks: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the Dow Jones U.S. Banks Sector Index. The Dow Jones U.S. Banks LLC Index measures the performance of the banking industry of the U.S. equity market. Component companies include all regional and major U.S. domiciled international banks, savings and loans, savings banks, thrifts, building associations and societies. Investment and merchant banks are excluded. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Basic Materials: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Basic Materials Sector Index. The LLC Dow Jones U.S. Basic materials Sector Index measures the performance of the basic materials economic sector of the U.S. equity market. Component companies are involved in the production of aluminum, commodity chemicals, specialty chemicals, forest products, non-ferrous metals, paper products, precious metals and steel. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Biotechnology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Biotechnology Index. The Dow Jones LLC U.S. Biotechnology Index measures the performance of the biotechnology industry of the U.S. equity market. Component companies include those engaged in genetic research, and/or the marketing and development of recombinant DNA products. Makers of artificial blood and contract biotechnology researchers are also included in the Index. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Consumer Cyclical: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Consumer Cyclical Sector Index. The LLC Dow Jones U.S. Consumer Cyclical Sector Index measures the performance of the consumer cyclical economic sector of the U.S. equity market. Component companies include airlines, auto manufacturers, auto parts, tires, casinos, consumer electronics, recreational products and services, restaurants, lodging, toys, home construction, home furnishings and appliances, footwear, clothing and fabrics. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Consumer Non-Cyclical: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones U.S. Consumer Non-Cyclical Sector LLC Index. The Dow Jones U.S. Consumer Non-Cyclical Sector Index measures the performance of the consumer non-cyclical economic sector of the U.S. equity market. Component companies include beverage companies, consumer service companies, durable and non-durable household product manufacturers, cosmetic companies, food products and agriculture and tobacco products. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Energy: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Energy Sector Index. The Dow Jones U.S. Energy LLC Sector Index measures the performance of the energy sector of the U.S. equity market. Component companies include oil drilling equipment and services, coal, oil companies-major, oil companies-secondary, pipelines, liquid, solid or gaseous fossil fuel producers and service companies. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Financial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Financial Sector Index. The Dow LLC Jones U.S. Financial Sector Index measures the performance of the financial services economic sector of the U.S. equity market. Component companies include regional banks, major U.S. domiciled international banks, full line, life, and property and casualty insurance companies, companies that invest, directly or indirectly in real estate, diversified financial companies such as Fannie Mae, credit card insurers, check cashing companies, mortgage lenders, investment advisers and securities broker-dealers, investment banks, merchant banks, online brokers, publicly traded stock exchanges. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Healthcare: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Healthcare Sector Index. The Down LLC Jones U.S. healthcare Sector Index measures the performance of the healthcare economic sector of the U.S. equity market. Component companies include health care providers, biotechnology companies, medical supplies, advanced medical devices and pharmaceuticals. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Industrial: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Industrial Sector Index. The Dow LLC Jones U.S. Industrial Sector Index measures the performance of the industrial economic sector of the U.S. equity market. Component companies include building materials, heavy construction, factory equipment, heavy machinery, industrial services, pollution control, containers and packaging, industrial diversified, air freight, marine transportation, railroads, trucking, land-transportation equipment, shipbuilding, transportation services, advanced industrial equipment, electric components and equipment, and aerospace. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Internet: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to the daily performance of the Dow Jones U.S. Internet Index. The Dow Jones Composite LLC Internet Index measures the performance of stocks in the U.S. equity markets that generate the majority of their revenues from the Internet. The Index is composed of two sub-groups: Internet Commerce - companies that derive the majority of their revenues from providing goods and/or services through an open network, such as a web site; and Internet Services - companies that derive the majority of their revenues from providing access to the Internet or providing services to people using the Internet. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Pharmaceuticals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Pharmaceuticals Sector Index. The LLC Dow Jones U.S. Pharmaceuticals Index measures the performance of the pharmaceuticals industry of the U.S. equity market. Component companies include the makers of prescription and over-the-counter drugs, such as aspirin, cold remedies, birth control pills, and vaccines, as well as companies engaged in contract drug research.. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Precious Metals: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Philadelphia Stock Exchange Gold & Silver Sector LLC Index. The Philadelphia Stock Exchange Gold and Silver Sector Index measures the performance of the gold and silver mining industry of the global equity market. Component companies include companies involved in the mining and production of gold, silver, and other precious metals, precious stones and pearls. The Index does not include producers of commemorative medals and coins that are made of these metals. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Real Estate: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Real Estate Index. The Dow Jones LLC U.S. Real Estate Index measures the performance of the real estate industry of the U.S. equity market. Component companies include those that invest directly or indirectly through development, management or ownership of shopping malls, apartment buildings, housing developments and, real estate investment trusts ("REITs") that invest in apartments, office and retail properties. REITs are passive investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Semiconductor: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Semiconductor Index. The Dow Jones LLC U.S. Semiconductor Index measures the performance of the semiconductor industry of the U.S. equity market. Component companies are engaged in the production of semiconductors and other integrated chips, as well as other related products such as circuit boards and motherboards. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Technology: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Technology Sector Index. The Dow LLC Jones U.S. Technology Sector Index measures the performance of the technology sector of the U.S. equity market. Component companies include those involved in computers and office equipment, software, communications technology, semiconductors, diversified technology services and internet services. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Telecommunications: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Telecommunications Sector Index. The LLC Dow Jones U.S. Telecommunications Sector Index measures the performance of the telecommunications economic sector of the U.S. equity market. Component companies include fixed line communications and wireless communications companies. - ------------------------------------------------------------------------------------------------------------------------------------ SECTOR ProFund VP Utilities: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the Dow Jones U.S. Utilities Sector Index. The Dow LLC Jones U.S. Utilities Sector Index measures the performance of the utilities economic sector of the U.S. equity market. Component companies include electric utilities, gas utilities and water utilities. - ------------------------------------------------------------------------------------------------------------------------------------
THE PROFUND VP PORTFOLIOS DESCRIBED BELOW ARE AVAILABLE AS SUB-ACCOUNTS TO ALL ANNUITY OWNERS. EACH PORTFOLIO PURSUES AN INVESTMENT STRATEGY THAT SEEKS TO PROVIDE DAILY INVESTMENT RESULTS, BEFORE FEES AND EXPENSES, THAT MATCH A WIDELY FOLLOWED INDEX, INCREASE BY A SPECIFIED FACTOR RELATIVE TO THE INDEX, MATCH THE INVERSE OF THE INDEX OR THE INVERSE OF THE INDEX MULTIPLIED BY A SPECIFIED FACTOR. THE INVESTMENT STRATEGY OF SOME OF THE PORTFOLIOS MAY MAGNIFY (BOTH POSITIVELY AND NEGATIVELY) THE DAILY INVESTMENT RESULTS OF THE APPLICABLE INDEX. IT IS RECOMMENDED THAT ONLY THOSE ANNUITY OWNERS WHO ENGAGE A FINANCIAL ADVISOR TO ALLOCATE THEIR ACCOUNT VALUE USING A STRATEGIC OR TACTICAL ASSET ALLOCATION STRATEGY INVEST IN THESE PORTFOLIOS. WE HAVE ARRANGED THE PORTFOLIOS BASED ON THE INDEX ON WHICH IT'S INVESTMENT STRATEGY IS BASED. - -------------------------------------------------------------------------------- The S&P 500 Index(R)is a widely used measure of large-cap U.S. stock market performance. It includes a representative sample of leading companies in leading industries. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization financial viability and public float.
- ------------------------------------------------------------------------------------------------------------------------------------ ProFund VP Bull: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors S&P 500 the daily performance of the S&P 500(R)Index. LLC - ------------------------------------------------------------------------------------------------------------------------------------ ProFund VP Bear: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the inverse (opposite) of the daily performance of the S&P 500(R)Index. If ProFund VP Bear is LLC successful in meeting its objective, its net asset value should gain approximately the same, S&P 500 on a percentage basis, as any decrease in the S&P 500(R)Index when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ S&P 500 ProFund VP UltraBull (f/k/a ProFund VP Bull Plus): seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of the S&P 500(R)Index. If LLC the ProFund VP UltraBull is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P 500(R)Index when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. Prior to May 1, 2003, ProFund VP UltraBull was named "ProFund VP Bull Plus" and sought daily investment results that corresponded to one and one-half times the daily performance of the S&P 500(R)Index - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ The NASDAQ-100 Index(R)is a market capitalization weighted index that includes 100 of the largest domestic and international non-financial companies listed on The NASDAQ Stock Market. - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP OTC: seeks daily investment results, before fees and expenses, that correspond to ProFund Advisors the daily performance of the NASDAQ-100 Index(R). "OTC" in the name of ProFund VP OTC reflers LLC to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP Short OTC: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the inverse (opposite) of the daily performance of the NASDAQ-100 Index(R). If LLC ProFund VP Short OTC is successful in meeting its objective, its net asset value should gain approximately the same, on a percentage basis, as any decrease in the NASDAQ-100 Index(R)when the Index declines on a given day. Conversely, its net asset value should lose approximately the same, on a percentage basis, as any increase in the Index when the Index rises on a given day. "OTC" in the name of ProFund VP Short OTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------ NASDAQ 100 ProFund VP UltraOTC: seeks daily investment results, before fees and expenses, that correspond ProFund Advisors to twice (200%) the daily performance of the NASDAQ-100 Index(R). If ProFund VP UltraOTC is LLC successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the NASDAQ-100 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. "OTC" in the name of ProFund VP UltraOTC refers to securities that do not trade on a U.S. securities exchange, as registered under the Securities Exchange Act of 1934. - ------------------------------------------------------------------------------------------------------------------------------------ The S&P MidCap 400 Index(R)is a widely used measure of mid-sized company U.S. stock market performance. Companies are selected for inclusion in the Index by Standard & Poor's(R)for being U.S. companies with adequate liquidity, appropriate market capitalization, financial viability and public float. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP Mid-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Value Index(R). The S&P LLC MidCap400/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP Mid-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the daily performance of the S&P MidCap 400/Barra Growth Index(R). The S&P MidCap LLC 400/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P MidCap 400 Index(R) is divided equally between growth and value. The Index is rebalanced twice per year.. - ------------------------------------------------------------------------------------------------------------------------------------ S&P MIDCAP 400 ProFund VP UltraMid-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the S&P MidCap 400 Index(R). If ProFund VP LLC UltraMid-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the S&P MidCap 400 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE INVESTMENT OBJECTIVES/POLICIES ADVISOR/SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------------------ The S&P SmallCap 600 Index(R)consists of 600 domestic stocks chosen for market size, liquidity, and industry group representation. The Index comprises stocks from the industrial, utility, financial, and transportation sectors. - ------------------------------------------------------------------------------------------------------------------------------------ S&P ProFund VP Small-Cap Value: seeks daily investment results, before fees and expenses, that ProFund Advisors SMALLCAP 600 correspond to the daily performance of the S&P SmallCap 600/Barra Value Index(R). The S&P LLC SmallCap 600/Barra Value Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------ S&P ProFund VP Small-Cap Growth: seeks daily investment results, before fees and expenses, that ProFund Advisors SMALLCAP 600 correspond to the daily performance of the S&P SmallCap 600/Barra Growth Index(R). The S&P LLC SmallCap 600/Barra Growth Index(R)is designed to differentiate between fast growing companies and slower growing or undervalued companies. Standard & Poor's and Barra cooperate to employ a price-to-book value calculation whereby the market capitalization-of the S&P SmallCap 600 Index(R)is divided equally between growth and value. The Index is rebalanced twice per year. - ------------------------------------------------------------------------------------------------------------------------------------ The Russell 2000 Index(R)measures the performance of the 2,000 small companies in the Russell 3000 Index(R)representing approximately 8% of the total market capitalization of the Russell 3000 Index(R), which in turn represents approximately 98% of the investable U.S. equity market. - ------------------------------------------------------------------------------------------------------------------------------------ RUSSELL 2000 ProFund VP UltraSmall-Cap: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to twice (200%) the daily performance of the Russell 2000(R)Index. If ProFund VP LLC UltraSmall-Cap is successful in meeting its objective, its net asset value should gain approximately twice as much, on a percentage basis, as the Russell 2000 Index(R)when the Index rises on a given day. Conversely, its net asset value should lose approximately twice as much, on a percentage basis, as the Index when the Index declines on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOV'T BOND ProFund VP U.S. Government Plus: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to one and one-quarter times (125%) the daily price movement of the most LLC recently issued 30-year U.S. Treasury Bond ("Long Bond"). In accordance with its stated objective, the net asset value of ProFund VP U.S. Government Plus generally should decrease as interest rates rise. If ProFund VP U.S. Government Plus is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. - ------------------------------------------------------------------------------------------------------------------------------------ U.S. GOV'T BOND ProFund VP Rising Rates Opportunity: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to one and one-quarter times (125%) the inverse (opposite) of the daily price LLC movement of the most recently issued Long Bond. In accordance with its stated objective, the net asset value of ProFund VP rising Rates Opportunity generally should decrease as interest rates fall. If ProFund VP Rising Rates Opportunity is successful in meeting its objective, its net asset value should gain approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily decrease in the Long Bond on a given day. Conversely, its net asset value should lose approximately one and one-quarter times (125%) as much, on a percentage basis, as any daily increase in the Long Bond on a given day. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STYLE/ PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR INVESTMENT OBJECTIVES/POLICIES - ------------------------------------------------------------------------------------------------------------------------------------ Each portfolio of the First Defined Portfolio Fund LLC invests in the securities of a relatively few number of issuers or in a particular sector of the economy. Since the assets of each portfolio are invested in a limited number of issuers or a limited sector of the economy, the net asset value of the portfolio may be more susceptible to a single adverse economic, political or regulatory occurrence. Certain of the portfolios may also be subject to additional market risk due to their policy of investing based on an investment strategy and generally not buying or selling securities in response to market fluctuations. Each portfolio's relative lack of diversity and limited ongoing management may subject Owners to greater market risk than other portfolios. The stock selection date for each of the strategy Portfolios of the First Defined Portfolio Fund LLC is on or about December 31st of each year. The holdings for each strategy Portfolio will be adjusted annually on or about December 31st in accordance with the Portfolio's investment strategy. At that time, the percentage relationship among the shares of each issuer held by the Portfolio is established. Through the next one-year period that percentage will be maintained as closely as practicable when the Portfolio makes subsequent purchases and sales of the securities. - ------------------------------------------------------------------------------------------------------------------------------------ LARGE CAP First Trust(R)10 Uncommon Values: seeks to provide above-average capital appreciation. The First Trust BLEND Portfolio seeks to achieve its objective by investing primarily in the ten common stocks Advisors L.P. selected by the Investment Policy Committee of Lehman Brothers Inc. ("Lehman Brothers") with the assistance of the Research Department of Lehman Brothers which, in their opinion have the greatest potential for capital appreciation during the next year. The stocks included in the Portfolio are adjusted annually on or about July 1st in accordance with the selections of Lehman Brothers. - ------------------------------------------------------------------------------------------------------------------------------------ INTER- The Prudential Series Fund, Inc. - SP Jennison International Growth: seeks to provide Prudential NATIONAL EQUITY long-term growth of capital. The Portfolio pursues its objective by investing in Investments LLC/ equity-related securities of foreign issuers that the Sub-advisor believes will increase in Jennison Associates value over a period of years. The Portfolio invests primarily in the common stock of large LLC and medium-sized foreign companies. Under normal circumstances, the Portfolio invests at least 65% of its total assets in common stock of foreign companies operating or based in at least five different countries. The Portfolio looks primarily for stocks of companies whose earnings are growing at a faster rate than other companies and that have above-average growth in earnings and cash flow, improving profitability, strong balance sheets, management strength and strong market share for its products. The Portfolio also tries to buy such stocks at attractive prices in relation to their growth prospects. - ------------------------------------------------------------------------------------------------------------------------------------
"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and "500" are trademarks of the McGraw-Hill Companies, Inc. and have been licensed for use by American Skandia Investment Services, Incorporated. 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. The First Trust(R)10 Uncommon Values portfolio is not sponsored or created by Lehman Brothers, Inc. ("Lehman Brothers"). Lehman Brothers' only relationship to First Trust is the licensing of certain trademarks and trade names of Lehman Brothers and of the "10 Uncommon Values" which is determined, composed and calculated by Lehman Brothers without regard to First Trust or the First Trust(R)10 Uncommon Values portfolio. Dow Jones has no relationship to the ProFunds VP, other than the licensing of the Dow Jones sector indices and its service marks for use in connection with the ProFunds VP. The ProFunds VP are not sponsored, endorsed, sold, or promoted by Standard & Poor's or NASDAQ, and neither Standard & Poor's nor NASDAQ makes any representations regarding the advisability of investing in the ProFunds VP. WHAT ARE THE FIXED INVESTMENT OPTIONS? We offer fixed investment options of different durations during the accumulation period. These "Fixed Allocations" earn a guaranteed fixed rate of interest for a specified period of time, called the "Guarantee Period." In most states, we offer Fixed Allocations with Guarantee Periods from 1 to 10 years. We may also offer special purpose Fixed Allocations for use with certain optional investment programs. We guarantee the fixed rate for the entire Guarantee Period. However, if you withdraw or transfer Account Value before the end of the Guarantee Period, we will adjust the value of your withdrawal or transfer based on a formula, called a "Market Value Adjustment." The Market Value Adjustment can either be positive or negative, depending on the rates that are currently being credited on Fixed Allocations. Please refer to the section entitled "How does the Market Value Adjustment Work?" for a description of the formula along with examples of how it is calculated. You may allocate Account Value to more than one Fixed Allocation at a time. Fixed Allocations may not be available in all states. Availability of Fixed Allocations is subject to change and may differ by state and by the annuity product you purchase. Please call American Skandia at 1-800-766-4530 to determine availability of Fixed Allocations in your state and for your annuity product. FEES AND CHARGES WHAT ARE THE CONTRACT FEES AND CHARGES? Contingent Deferred Sales Charge: We do not deduct a sales charge from Purchase Payments you make to your Annuity. However, we may deduct a Contingent Deferred Sales Charge or CDSC if you surrender your Annuity or when you make a partial withdrawal. The CDSC reimburses us for expenses related to sales and distribution of the Annuity, including commissions, marketing materials and other promotional expenses. The CDSC is calculated as a percentage of your Purchase Payment being surrendered or withdrawn during the applicable Annuity Year. For purposes of calculating the CDSC, we consider the year following the date we receive a Purchase Payment as Year 1. The amount of the CDSC applicable to each Purchase Payment decreases over time, measured from the date the Purchase Payment is applied. The CDSC percentages are shown below. YEARS 1 2 3 4 5 6 7 8 9+ - ----------------------------------------------------------------------- CHARGE (%) 8.5 8.5 8.5 8.5 7.0 6.0 5.0 4.0 0.0 Each Purchase Payment has its own CDSC period. When you make a withdrawal, we assume that the oldest Purchase Payment is being withdrawn first so that the lowest CDSC is deducted from the amount withdrawn. After eight (8) complete years from the date you make a Purchase Payment, no CDSC will be assessed if you withdraw or surrender that Purchase Payment. Under certain circumstances you can withdraw a limited amount of Account Value without paying a CDSC. This is referred to as a "Free Withdrawal." Free Withdrawals are not treated as a withdrawal of Purchase Payments for purposes of calculating the CDSC on a subsequent withdrawal or surrender. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. For purposes of calculating the CDSC on a surrender or a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may waive the CDSC under certain medically-related circumstances or when taking a Minimum Distribution from an Annuity purchased as a "qualified" investment. Free Withdrawals, Medically-Related Surrenders and Minimum Distributions are each explained more fully in the section entitled "Access to Your Account Value". Transfer Fee: Currently, you may make twenty (20) free transfers between investment options each Annuity Year. We will charge $10.00 for each transfer after the twentieth in each Annuity Year. We do not consider transfers made as part of a dollar cost averaging program when we count the twenty free transfers. Transfers made as part of a rebalancing, market timing or third party investment advisory service will be subject to the twenty-transfer limit. However, all transfers made on the same day will be treated as one (1) transfer. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the Transfer Fee and are not counted toward the twenty free transfers. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. Annual Maintenance Fee: During the accumulation period we deduct an Annual Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account Value invested in the variable investment options, whichever is less. This fee will be deducted annually on the anniversary of the Issue Date of your Annuity or, if you surrender your Annuity during the Annuity Year, the fee is deducted at the time of surrender. We may increase the Annual Maintenance Fee. However, any increase will only apply to Annuities issued after the date of the increase. Tax Charges: Several states and some municipalities charge premium taxes or similar taxes. The amount of tax will vary from jurisdiction to jurisdiction and is subject to change. The tax charge currently ranges up to 3 1/2%. We generally will deduct the amount of tax payable at the time the tax is imposed, but may also decide to deduct tax charges from each Purchase Payment at the time of a withdrawal or surrender of your Annuity or at the time you elect to begin receiving annuity payments. We may assess a charge against the Sub-accounts and the Fixed Allocations equal to any taxes which may be imposed upon the separate accounts. WHAT CHARGES APPLY SOLELY TO THE VARIABLE INVESTMENT OPTIONS? Insurance Charge: We deduct an Insurance Charge daily against the average daily assets allocated to the Sub-accounts. The Insurance Charge is the combination of the Mortality & Expense Risk Charge (1.25%) and the Administration Charge (0.15%). The total charge is equal to 1.40% on an annual basis. The Insurance Charge is intended to compensate American Skandia for providing the insurance benefits under the Annuity, including the Annuity's basic death benefit that provides guaranteed benefits to your beneficiaries even if the market declines and the risk that persons we guarantee annuity payments to will live longer than our assumptions. The charge also covers administrative costs associated with providing the Annuity benefits, including preparation of the contract, confirmation statements, annual account statements and annual reports, legal and accounting fees as well as various related expenses. Finally, the charge covers the risk that our assumptions about the mortality risks and expenses under this Annuity are incorrect and that we have agreed not to increase these charges over time despite our actual costs. We may increase the portion of the total Insurance Charge that is deducted for administrative costs; however, any increase will only apply to Annuities issued after the date of the increase. American Skandia may make a profit on the Insurance Charge if, over time, the actual cost of providing the guaranteed insurance obligations under the Annuity are less than the amount we deduct for the Insurance Charge. To the extent we make a profit on the Insurance Charge, such profit may be used for any other corporate purpose, including payment of other expenses that American Skandia incurs in promoting, distributing, issuing and administering the Annuity and to offset a portion of the costs associated with offering Credits which are funded through American Skandia's general account. The Insurance Charge is deducted against your Annuity's Account Value, which includes the amount of any Credits we apply to your Purchase Payments and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts. Any profit that American Skandia may make on the Insurance Charge may include a profit on the portion of the Account Value that represents Credits applied to the Annuity, as well as profits based on market appreciation of the Sub-account values. The Insurance Charge is not deducted against assets allocated to a Fixed Allocation. However, the amount we credit to Fixed Allocations may also reflect similar assumptions about the insurance guarantees provided under the Annuity. Optional Benefits: If you elect to purchase the Guaranteed Return Option, we will deduct an additional charge on a daily basis from your Account Value allocated to the Sub-accounts. The additional charge is included in the daily calculation of the Unit Price for each Sub-account. If you elect to purchase one or more optional death benefits, we will deduct the annual charge from your Account Value on the anniversary of your Annuity's Issue Date. Under certain circumstances, we may deduct a pro-rata portion of the annual charge for any optional benefit. The charge for each optional benefit is deducted in addition to the Insurance Charge due to the increased insurance risk associated with the optional benefits. Please refer to the section entitled "Death Benefit" for a description of the charge for the Optional Death Benefit. Please refer to the section entitled "Managing Your Account Value - Do you offer programs designed to guarantee a "return of premium" at a future date?" for a description of the charge for the Guaranteed Return Option. WHAT CHARGES ARE ASSESSED BY THE PORTFOLIOS? We do not assess any charges directly against the Portfolios. However, each Portfolio charges a total annual fee comprised of an investment management fee, operating expenses and any distribution and service (12b-1) fees that may apply. These fees are deducted daily by each Portfolio before it provides American Skandia with the net asset value as of the close of business each day. More detailed information about fees and charges can be found in the prospectuses for the Portfolios. Please also see "Service Fees Payable by Underlying Funds". WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS? No specific fee or expenses are deducted when determining the rate we credit to a Fixed Allocation. However, for some of the same reasons that we deduct the Insurance Charge against Account Value allocated to the Sub-accounts, we also take into consideration mortality, expense, administration, profit and other factors in determining the interest rates we credit to Fixed Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the variable investment options or the Fixed Allocations. A Market Value Adjustment may also apply to transfers, certain withdrawals, surrender or annuitization from a Fixed Allocation. WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION? In certain states a tax is due if and when you exercise your right to receive periodic annuity payments. The amount payable will depend on the applicable jurisdiction and on the annuity payment option you select. If you select a fixed payment option, the amount of each fixed payment will depend on the Account Value of your Annuity when you elected to annuitize. There is no specific charge deducted from these payments; however, the amount of each annuity payment reflects assumptions about our insurance expenses. If you select a variable payment option that we may offer, then the amount of your benefits will reflect changes in the value of your Annuity and will continue to be subject to an insurance charge. EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES We may reduce or eliminate certain fees and charges or alter the manner in which the particular fee or charge is deducted. For example, we may reduce the amount of the CDSC or the length of time it applies, reduce or eliminate the amount of the Annual Maintenance Fee or reduce the portion of the total Insurance Charge that is deducted as an Administration Charge. Generally, these types of changes will be based on a reduction to our sales, maintenance or administrative expenses due to the nature of the individual or group purchasing the Annuity. Some of the factors we might consider in making such a decision are: (a) the size and type of group; (b) the number of Annuities purchased by an Owner; (c) the amount of Purchase Payments or likelihood of additional Purchase Payments; and/or (d) other transactions where sales, maintenance or administrative expenses are likely to be reduced. We will not discriminate unfairly between Annuity purchasers if and when we reduce the portion of the Insurance Charge attributed to the charge covering administrative costs. PURCHASING YOUR ANNUITY WHAT ARE OUR REQUIREMENTS FOR PURCHASING THE ANNUITY? Initial Purchase Payment: You must make a minimum initial Purchase Payment of $1,000. However, if you decide to make payments under a systematic investment or "bank drafting" program, we will accept a lower initial Purchase Payment provided that, within the first Annuity Year, you make at least $1,000 in total Purchase Payments. Where allowed by law, initial Purchase Payments in excess of $1,000,000 require our approval prior to acceptance. We may apply certain limitations and/or restrictions on the Annuity as a condition of our acceptance, including limiting the liquidity features or the Death Benefit protection provided under the Annuity, limiting the right to make additional Purchase Payments, changing the number of transfers allowable under the Annuity or restricting the Sub-accounts that are available. Other limitations and/or restrictions may apply. Except as noted below, Purchase Payments must be submitted by check drawn on a U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase Payments may also be submitted via 1035 exchange or direct transfer of funds. Under certain circumstances, Purchase Payments may be transmitted to American Skandia via wiring funds through your investment professional's broker-dealer firm. Additional Purchase Payments may also be applied to your Annuity under an arrangement called "bank drafting" where you authorize us to deduct money directly from your bank account. We may reject any payment if it is received in an unacceptable form. Our acceptance of a check is subject to our ability to collect funds. Age Restrictions: The Owner must be age 80 or under as of the Issue Date of the Annuity. If the Annuity is owned jointly, the oldest of the Owners must be age 80 or under on the Issue Date. If the Annuity is owned by an entity, the Annuitant must be age 80 or under as of the Issue Date. You should consider your need to access your Account Value and whether the Annuity's liquidity features will satisfy that need. If you take a distribution prior to age 591/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. The availability of certain optional benefits may vary based on the age of the Owner on the Issue Date of the Annuity. Additional Purchase Payments may be made at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the Annuity is entity owned) is not over age 80. Special Considerations for Purchasers of Bonus or Credit Products [X] This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an additional amount for the XTra CreditSM feature. However, if you make a withdrawal that exceeds the annual free withdrawal amount or choose to surrender your Annuity, the contingent deferred sales charge (CDSC) on this Annuity is higher and is deducted for a longer period of time as compared to our other variable annuities. If you expect that you will need to access your Account Value during the CDSC period and the liquidity provisions are insufficient to satisfy that need, then this Annuity may be more expensive than other variable annuities. [X] The XTra CreditSM amount is included in your Account Value. However, American Skandia may take back the original XTra CreditSM amount applied to your Purchase Payment if you die, or elect to withdraw all or a portion of your Account Value under the medically-related waiver provision, within 12 months of having received an XTra CreditSM amount. In either situation, the value of the XTra CreditSM amount could be substantially reduced. However, any investment gain on the XTra CreditSM amount will not be taken back. Additional conditions and restrictions apply. [X] We offer other annuities where we apply an XTra CreditSM to your annuity with each purchase payment you make. The XTra CreditSM amount we apply to purchase payments on those annuities is initially higher than on this Annuity but reduces over time and only applies during the first six annuity years. The total asset-based charges on those annuities are higher during the first 10 years but are lower than this Annuity after the 10th year. The CDSC is also higher and is deducted for a longer period of time than on this Annuity; however the CDSC on those annuities applies from the issue date of the annuity, not separately to each purchase payment. Owner, Annuitant and Beneficiary Designations: On your Application, we will ask you to name the Owner(s), Annuitant and one or more Beneficiaries for your Annuity. [X] Owner: The Owner(s) holds all rights under the Annuity. You may name more ----- than one Owner in which case all ownership rights are held jointly. However, this Annuity does not provide a right of survivorship. Refer to the Glossary of Terms for a complete description of the term "Owner." [X] Annuitant: The Annuitant is the person we agree to make annuity payments to --------- and upon whose life we continue to make such payments. You must name an Annuitant who is a natural person. We do not accept a designation of joint Annuitants during the accumulation period. Where allowed by law, you may name one or more Contingent Annuitants. A Contingent Annuitant will become the Annuitant if the Annuitant dies before the Annuity Date. Please refer to the discussion of "Considerations for Contingent Annuitants" in the Tax Considerations section of the Prospectus. [X] Beneficiary: The Beneficiary is the person(s) or entity you name to receive ----------- the death benefit. If no beneficiary is named the death benefit will be paid to you or your estate. Your right to make certain designations may be limited if your Annuity is to be used as an IRA or other "qualified" investment that is given beneficial tax treatment under the Code. You should seek competent tax advice on the income, estate and gift tax implications of your designations. MANAGING YOUR ANNUITY MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS? You may change the Owner, Annuitant and Beneficiary designations by sending us 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: [X] 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; [X] a new Annuitant subsequent to the Annuity Date; [X] for "non-qualified" investments, a new Annuitant prior to the Annuity Date if the Annuity is owned by an entity; and [X] a change in Beneficiary if the Owner had previously made the designation irrevocable. Spousal Owners/Spousal Beneficiaries If an Annuity is co-owned by spouses, we will assume that the sole primary Beneficiary is the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, upon the death of either spousal Owner, the surviving spouse may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. The Death Benefit that would have been payable will be the new Account Value of the Annuity as of the date of due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the beneficiary of the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including the CDSC when applicable. Spousal Contingent Annuitant If the Annuity is owned by an entity and the surviving spouse is named as a Contingent Annuitant, upon the death of the Annuitant, the surviving spouse will become the Annuitant. No Death Benefit is payable upon the death of the Annuitant. However, the Account Value of the Annuity as of the date of due proof of death of the Annuitant (and any required proof of the spousal relationship) will reflect the amount that would have been payable had a Death Benefit been paid. MAY I RETURN THE ANNUITY IF I CHANGE MY MIND? If after purchasing your Annuity you change your mind and decide that you do not want it, you may return it to us within a certain period of time known as a right to cancel period. This is often referred to as a "free-look." Depending on the state in which you purchased your Annuity and, in some states, if you purchased the Annuity as a replacement for a prior contract, the right to cancel period may be ten (10) days, twenty-one (21) days or longer, measured from the time that you received your Annuity. If you return your Annuity during the applicable period, we will refund your current Account Value plus any tax charge deducted. This amount may be higher or lower than your original Purchase Payment. Where required by law, we will return your current Account Value or the amount of your initial Purchase Payment, whichever is greater. The same rules may apply to an Annuity that is purchased as an IRA. In any situation where we are required to return the greater of your Purchase Payment or Account Value, we may allocate your Account Value to the AST Money Market Sub-account during the right to cancel period and for a reasonable additional amount of time to allow for delivery of your Annuity. If you return your Annuity, we will not return any Credits we applied to your Annuity based on your - Purchase Payments. MAY I MAKE ADDITIONAL PURCHASE PAYMENTS? The minimum amount that we accept as an additional Purchase Payment is $100 unless you participate in American Skandia's Systematic Investment Plan or a periodic purchase payment program. We will allocate any additional Purchase Payments you make according to your most recent allocation instructions, unless you request new allocations when you submit a new Purchase Payment. Additional Purchase Payments may be paid at any time before the Annuity Date as long as the oldest Owner or Annuitant (if the Annuity is entity owned) is not over age 80. MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT? You can make additional Purchase Payments to your Annuity by authorizing us to deduct money directly from your bank account and applying it to your Annuity. This type of program is often called "bank drafting". We call our bank drafting program "American Skandia's Systematic Investment Plan." Purchase Payments made through bank drafting may only be allocated to the variable investment options when applied. Bank drafting allows you to invest in your Annuity with a lower initial Purchase Payment, as long as you authorize payments that will equal at least $1,000 during the first 12 months of your Annuity. We may 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. MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM? These types of programs are only available with certain types of qualified investments. If your employer sponsors such a program, we may agree to accept periodic Purchase Payments through a salary reduction program as long as the allocations are made only to variable investment options and the periodic Purchase Payments received in the first year total at least $1,000. MANAGING YOUR ACCOUNT VALUE HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED? (See "Valuing Your Investment" for a description of our procedure for pricing initial and subsequent Purchase Payments.) Initial Purchase Payment: Once we accept your application, we invest your net Purchase Payment in the Annuity. The net Purchase Payment is your initial Purchase Payment minus any tax charges that may apply. On your application we ask you to provide us with instructions for allocating your Account Value. You can allocate Account Value to one or more variable investment options or Fixed Allocations. In those states where we are required to return your Purchase Payment if you exercise your right to return the Annuity, we initially allocate all amounts that you choose to allocate to the variable investment options to the AST Money Market Sub-account. At the end of the right to cancel period we will reallocate your Account Value according to your most recent allocation instructions. Where permitted by law, we will allocate your Purchase Payments according to your initial instructions, without temporarily allocating to the AST Money Market Sub-account. To do this, we will ask that you execute our form called a "return waiver" that authorizes us to allocate your Purchase Payment to your chosen Sub-accounts immediately. If you submit the "return waiver" and then decide to return your Annuity during the right to cancel period, you will receive your current Account Value, minus the amount of any Credits, which may be more or less than your initial Purchase Payment (see "May I Return the Annuity if I Change my Mind?"). Subsequent Purchase Payments: We will allocate any additional Purchase Payments you make according to your current allocation instructions. If any rebalancing or asset allocation programs are in effect, the allocation should conform with such a program. We assume that your current allocation instructions are valid for subsequent Purchase Payments until you make a change to those allocations or request new allocations when you submit a new Purchase Payment. HOW DO I RECEIVE CREDITS? We apply a "Credit" to your Annuity's Account Value each time you make a Purchase Payment. The amount of the Credit is payable from our general account. The amount of the Credit depends on the cumulative amount of Purchase Payments you have made to your Annuity, payable as a percentage of each specific Purchase Payment, according to the table below: Cumulative Purchase Payments Credit - --------------------------------------------------------------------- Between $1,000 and $9,999 1.5% Between $10,000 and $4,999,999 4.0% Greater than $5,000,000 5.0% Credits Applied to Purchase Payments for Designated Class of Annuity Owner Where allowed by state law, on Annuities owned by a member of the class defined below, the table of Credits we apply to Purchase Payments is deleted. The Credit applied to all Purchase Payments on such Annuities will be 8.5%. The designated class of Annuity Owners includes: (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) the child(ren) or other legal dependent under the age of 21 of any such person noted in (b) through (h) above; and (j) the siblings of any such persons noted in (b) through (h) above. All other terms and conditions of the Annuity apply to Owners in the designated class. You must notify us at the time you apply for an Annuity if you are a member of the designated class. American Skandia is not responsible for monitoring whether you qualify as a member of the designated class. Failure to inform us that you qualify as a member of the designated class may result in your Annuity receiving fewer Credits than would otherwise be applied to your Annuity. HOW ARE CREDITS APPLIED TO MY ACCOUNT VALUE? Each Credit is allocated to your Account Value at the time the Purchase Payment is applied to your Account Value. The amount of the Credit is allocated to the investment options in the same ratio as the applicable Purchase Payment is applied. Examples of Applying Credits Initial Purchase Payment Assume you make an initial Purchase Payment of $2,500. We would apply a 1.5% Credit to your Purchase Payment and allocate the amount of the Credit ($37.50 = $2,500 X .015) to your Account Value in the proportion that your Account Value is allocated. Additional Purchase Payment (at same breakpoint) Assume that you make an additional Purchase Payment of $5,000. Because your cumulative Purchase Payments are less than the next breakpoint ($10,000), we would apply a 1.5% Credit to your Purchase Payment and allocate the amount of the Credit ($75.00 = $5,000 X ..015) to your Account Value. Additional Purchase Payment (at higher breakpoint) Assume that you make an additional Purchase Payment of $400,000. Because your cumulative Purchase Payments are now $407,500 (greater than the next breakpoint), we would apply a 4.0% Credit to your Purchase Payment and allocate the amount of the Credit ($16,000 = $400,000 X .04) to your Account Value. This Annuity features the same Insurance Charge as many of American Skandia's other variable annuities and does not charge an additional amount for the XTra CreditSM feature. However, the amount of any Credits applied to your Account Value can be recovered by American Skandia under certain circumstances: [X] any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be recovered. [X] the amount available under the medically-related surrender portion of the Annuity will not include the amount of any Credits payable on Purchase Payments made within 12 months of the date the Annuitant first became eligible for the medically-related surrender. [X] if you elect to "free-look" your Annuity, the amount returned to you will not include the amount of any Credits. The value of the XTra CreditSM amount will be substantially reduced if American Skandia recovers the XTra CreditSM amount under these circumstances. However, any investment gain on the XTra CreditSM amount will not be taken back. We do not deduct a CDSC in any situation where we recover the XTra CreditSM amount. Examples of Recovering Credits The following are hypothetical examples of how Credits could be recovered by American Skandia. These examples do not cover every potential situation. Recovery from payment of Death Benefits 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If the Death Benefit becomes payable in the 9th month after the Issue Date, the amount of the Death Benefit would be reduced by the entire amount of the prior Credits ($2,400). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. If death occurs in the 16th month after the Issue Date, the amount of the Death Benefit would be reduced but only in the amount of those Credits applied within the previous 12-months. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the date of death, the Death Benefit would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of death. Therefore, the amount of the Death Benefit would be reduced by the amount of the Credits payable on the additional Purchase Payment ($400). 3. NOTE: If the Death Benefit would otherwise have been equal to the Purchase Payments minus any proportional withdrawals due to poor investment performance, we will not reduce the amount of the Death Benefit by the amount of the Credits as shown in Example 2 above. Recovery from Medically-Related Surrenders 1. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You receive a Credit of $2,000 ($50,000 X .04). The Annuitant is diagnosed as terminally ill in the 6th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Assuming the Credits were applied within 12-months of the date of diagnosis of the terminal illness, the amount that would be payable under the medically-related surrender provision would be reduced by the entire amount of the Credits ($2,000). 2. Assume you purchase your Annuity with an initial Purchase Payment of $50,000. You make an additional Purchase of $10,000 in the 6th month after the Issue Date. Both of the Purchase Payments received a 4.0% Credit, for a total of $2,400. The Annuitant is diagnosed as terminally ill in the 16th month after the Issue Date and we grant your request to surrender your Annuity under the medically-related surrender provision. Since the initial Purchase Payment (and the Credits that were applied) occurred more than 12-months before the diagnosis, the amount that would be payable upon the medically-related surrender provision would not be reduced by the amount of the Credits applied to the initial Purchase Payment. However, the $10,000 additional Purchase Payment was made within 12-months of the date of diagnosis. Therefore, the amount that would be payable under the medically-related surrender provision would be reduced by the amount of the Credits payable on the additional Purchase Payment ($400). Credits applied to estimated Purchase Payments Under certain circumstances, we may determine the amount of Credits payable on two or more separate Purchase Payments based on the Credit percentage that would have applied had all such Purchase Payments been made at the same time. To make use of this procedure, often referred to as a "letter of intent", you must provide evidence of your intention to submit the cumulative additional Purchase Payments within a 13-month period. A letter of intent must be provided to us prior to the Issue Date to be effective. Acceptance of a letter of intent is at our sole discretion and may be subject to restrictions as to the minimum initial Purchase Payment that must be submitted to receive the next higher breakpoint. Failure to inform us that you intend to submit two or more Purchase Payments within a 13-month period may result in your Annuity receiving fewer Credits than would otherwise be added to your Annuity. If you submit a letter of intent and receive Credits on Purchase Payments at a higher Credit percentage than would have applied BUT do not submit the required Purchase Payments during the 13-month period as required by your letter of intent, we may recover the "excess" Credits. "Excess" Credits are Credits in excess of the Credits that would have been payable without the letter of intent. If we determine that you have received "excess" Credits, any such amounts will be taken pro-rata from the investment options based on your Account Values as of the date we act to recover the excess. If the amount of the recovery exceeds your then current Surrender Value, we will recover all remaining Account Value and terminate your Annuity. General Information about Credits [X] We do not consider Credits to be "investment in the contract" for income tax purposes. [X] You may not withdraw the amount of any Credits under the Free Withdrawal provision. The Free Withdrawal provision only applies to withdrawals of Purchase Payments. ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS? During the accumulation period you may transfer Account Value between investment options. Transfers are not subject to taxation on any gain. We currently limit the number of Sub-accounts you can invest in at any one time to twenty (20). However, you can invest in an unlimited number of Fixed Allocations. We may require a minimum of $500 in each Sub-account you allocate Account Value to at the time of any allocation or transfer. If you request a transfer and, as a result of the transfer, there would be less than $500 in the Sub-account, we may transfer the remaining Account Value in the Sub-account pro rata to the other investment options to which you transferred. We may impose specific restrictions on financial transactions for certain Portfolios based on the Portfolio's investment restrictions. Currently, any purchase, redemption or transfer involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). Currently, we charge $10.00 for each transfer after the twentieth (20th) in each Annuity Year, including transfers made as part of any rebalancing, market timing, asset allocation or similar program which you have authorized. Transfers made as part of a dollar cost averaging program do not count toward the twenty free transfer limit. Renewals or transfers of Account Value from a Fixed Allocation at the end of its Guarantee Period are not subject to the transfer charge. We may reduce the number of free transfers allowable each Annuity Year (subject to a minimum of eight) without charging a Transfer Fee unless you make use of electronic means to transmit your transfer requests. We may eliminate the Transfer Fee for transfer requests transmitted electronically or through other means that reduce our processing costs. 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: (a) we believe that excessive trading or a specific transfer request or group of transfer requests may have a detrimental effect on Unit Values or the share prices of the Portfolios; or (b) we are informed by one or more of the Portfolios that the purchase or redemption of shares must be restricted because of excessive trading or a specific transfer or group of transfers is deemed to have a detrimental effect on the share prices of affected Portfolios. Without limiting the above, the most likely scenario where either of the above could occur would be if the aggregate amount of a trade or trades represented a relatively large proportion of the total assets of a particular Portfolio. Under such a circumstance, we will process transfers according to our rules then in effect and provide notice if the transfer request was denied. If a transfer request is denied, a new transfer request may be required. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically transfer an amount each month from one investment option to one or more other investment options. You can choose to transfer earnings only, principal plus earnings or a flat dollar amount. Dollar Cost Averaging allows you to invest regularly each month, regardless of the current unit value (or price) of the Sub-account(s) you invest in. This enables you to purchase more units when the market price is low and fewer units when the market price is high. This may result in a lower average cost of units over time. However, there is no guarantee that Dollar Cost Averaging will result in a profit or protect against a loss in a declining market. We do not deduct a charge for participating in a Dollar Cost Averaging program. You must have a minimum Account Value of at least $10,000 to enroll in a Dollar Cost Averaging program. You can Dollar Cost Average from variable investment options or Fixed Allocations. Dollar Cost Averaging from Fixed Allocations is subject to a number of rules that include, but are not limited to the following: [X] You may only use Fixed Allocations with Guarantee Periods of 1, 2 or 3 years. [X] You may only Dollar Cost Average earnings or principal plus earnings. If transferring principal plus earnings, the program must be designed to last the entire Guarantee Period for the Fixed Allocation. [X] Dollar Cost Averaging transfers from Fixed Allocations are not subject to a Market Value Adjustment. NOTE: When a Dollar Cost Averaging program is established from a Fixed Allocation, the fixed rate of interest we credit to your Account Value is applied to a declining balance due to the transfers of Account Value to the Sub-accounts during the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS? Yes. During the accumulation period, we offer automatic rebalancing among the variable investment options you choose. You can choose to have your Account Value rebalanced quarterly, semi-annually, or annually. On the appropriate date, your variable investment options are rebalanced to the allocation percentages you request. For example, over time the performance of the variable investment options will differ, causing your percentage allocations to shift. With automatic rebalancing, we transfer the appropriate amount from the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return your allocations to the percentages you request. If you request a transfer from or into any variable investment option participating in the automatic rebalancing program, we will assume that you wish to change your rebalancing percentages as well, and will automatically adjust the rebalancing percentages in accordance with the transfer unless we receive alternate instructions from you. You must have a minimum Account Value of at least $10,000 to enroll in automatic rebalancing. All rebalancing transfers made on the same day as part of an automatic rebalancing program are considered as one transfer when counting the number of transfers each year toward the maximum number of free transfers. We do not deduct a charge for participating in an automatic rebalancing program. DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE? Yes. We offer two different programs for investors who wish to invest in the variable investment options but also wish to protect their principal, at least as of a specific date in the future. You may not want to use either of these programs if you expect to begin taking annuity payments before the program would be completed. Balanced Investment Program We offer a balanced investment program where a portion of your Account Value is allocated to a Fixed Allocation and the remaining Account Value is allocated to the variable investment options that you select. When you enroll in the Balanced Investment Program, you choose the duration that you wish the program to last. This determines the duration of the Guarantee Period for the Fixed Allocation. Based on the fixed rate for the Guarantee Period chosen, we calculate the portion of your Account Value that must be allocated to the Fixed Allocation to grow to a specific "principal amount" (such as your initial Purchase Payment). We determine the amount based on the rates then in effect for the Guarantee Period you choose. If you continue the program until the end of the Guarantee Period and make no withdrawals or transfers, at the end of the Guarantee Period, the Fixed Allocation will have grown to equal the "principal amount". Withdrawals or transfers from the Fixed Allocation before the end of the Guarantee Period will terminate the program and may be subject to a Market Value Adjustment. You can transfer the Account Value that is not allocated to the Fixed Allocation between any of the Sub-accounts available under the Annuity. Account Value you allocate to the variable investment options is subject to market fluctuations and may increase or decrease in value. We do not deduct a charge for participating in the Balanced Investment Program. Example Assume you invest $100,000. You choose a 10-year program and allocate a portion of your Account Value to a Fixed Allocation with a 10-year Guarantee Period. The rate for the 10-year Guarantee Period is 5.33%*. Based on the fixed interest rate for the Guarantee Period chosen, the factor is 0.594948 for determining how much of your Account Value will be allocated to the Fixed Allocation. That means that $59,495 will be allocated to the Fixed Allocation and the remaining Account Value ($41,505) will be allocated to the variable investment options. Assuming that you do not make any withdrawals from the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee Period. Of course we cannot predict the value of the remaining Account Value that was allocated to the variable investment options. * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. Guaranteed Return Option (GRO)SM We also offer a seven-year program where we monitor your Account Value daily and systematically transfer amounts between Fixed Allocations and the variable investment options you choose. American Skandia guarantees that at the end of the seventh (7th) year from commencement of the program (or any program restart date), you will receive no less than your Account Value on the date you elected to participate in the program, including any Credits we applied to your Purchase Payments ("commencement value"). On the program maturity date, if your Account Value is below the commencement value, American Skandia will apply additional amounts to your Annuity so that it is equal to commencement value or your Account Value on the date you elect to restart the program duration. Any amounts added to your Annuity will be applied to the AST Money Market Sub-account, unless you provide us with alternative instructions. We will notify you of any amounts added to your Annuity under the program. We do not consider amounts added to your Annuity to be "investment in the contract" for income tax purposes. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee under the program. This differs from the Balanced Investment Program where a set amount is allocated to a Fixed Allocation regardless of the performance of the underlying Sub-accounts. With the Guaranteed Return Option, your Annuity is able to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. NOTE: If a significant amount of your Account Value is systematically transferred to Fixed Allocations during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the Sub-accounts if there is a subsequent market recovery. Each business day we monitor the performance of your Account Value to determine whether it is greater than, equal to or below our "reallocation trigger", described below. Based on the performance of the Sub-accounts in which you choose to allocate your Account Value relative to the reallocation trigger, we may transfer some or all of your Account Value to or from a Fixed Allocation. You have complete discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to restrict certain Portfolios if you participate in the program. [X] Account Value greater than or equal to reallocation trigger: Your Account Value in the variable investment options remains allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation, those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations. A Market Value Adjustment will apply. [X] Account Value below reallocation trigger: A portion of your Account Value in the variable investment options is transferred to a new Fixed Allocation. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation will have a Guarantee Period equal to the remaining duration in the Guaranteed Return Option. The Account Value applied to the new Fixed Allocation will be credited with the fixed interest rate then being applied to a new Fixed Allocation of the next higher yearly duration. The Account Value will remain invested in the Fixed Allocation until the maturity date of the program unless, at an earlier date, your Account Value is at or above the reallocation trigger and amounts can be transferred to the variable investment options (as described above) while maintaining the guarantee protection under the program. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Any change to the allocation mechanism and/or the reallocation trigger will only apply to programs that begin after the change is effective. Program Termination The Guaranteed Return Option will terminate on its maturity date. You can elect to participate in a new Guaranteed Return Option or re-allocate your Account Value at that time. Upon termination, any Account Value allocated to the Fixed Allocations will be transferred to the AST Money Market Sub-account, unless you provide us with alternative instructions. Special Considerations under the Guaranteed Return Option This program is subject to certain rules and restrictions, including, but not limited to the following: [X] You may terminate the Guaranteed Return Option at any time. American Skandia does not provide any guarantees upon termination of the program. [X] Withdrawals from your Annuity while the program is in effect will reduce the guaranteed amount under the program in proportion to your Account Value at the time of the withdrawal. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. [X] Additional Purchase Payments applied to the Annuity while the program is in effect will only increase the amount guaranteed; however, all or a portion of any additional Purchase Payments may be allocated to the Fixed Allocations. [X] Annuity Owners cannot transfer Account Value to or from a Fixed Allocation while participating in the program and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. [X] Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. [X] Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. [X] The Guaranteed Return Option will terminate: (a) upon the death of the Owner or the Annuitant (in an entity owned contract); and (b) as of the date Account Value is applied to begin annuity payments. [X] You can elect to restart the seven (7) year program duration on any anniversary of the Issue Date of the Annuity. The Account Value on the date the restart is effective will become the new commencement value. You can only elect the program once per Annuity Year. Charges under the Program We deduct a charge equal to 0.25% per year to participate in the Guaranteed Return Option. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date of the program is less than the amount guaranteed; and (b) administration of the program. - -------------------------------------------------------------------------------- Effective November 18, 2002, American Skandia changed the manner in which the annual charge for the Guaranteed Return Option is deducted to the method described above. The annual charge for the Guaranteed Return Option for Owners who elected the benefit between January 23, 2002 and November 15, 2002 and subsequent to November 19, 2002 in those states where the daily deduction of the charge has not been approved, is deducted annually, in arrears, according to the prospectus in effect as of the date the program was elected. Owners who terminate and then re-elect the Guaranteed Return Option or elect to restart the Guaranteed Return Option at any time after November 18, 2002 will be subject to the charge method described above. - -------------------------------------------------------------------------------- MAY I AUTHORIZE MY INVESTMENT PROFESSIONAL TO MANAGE MY ACCOUNT? Yes. You may authorize your investment professional to direct the allocation of your Account Value and to request financial transactions between investment options while you are living, subject to our rules. You must contact us immediately if and when you revoke such authority. We will not be responsible for acting on instructions from your investment professional if you fail to inform us that such person's authority has been revoked. We may also suspend, cancel or limit these privileges at any time. We will notify you if we do. We or an affiliate of ours may provide administrative support to licensed, registered investment professionals or investment advisors who you authorize to make financial transactions on your behalf. These investment professionals may be firms or persons who also are appointed by us as authorized sellers of the Annuity. However, we do not offer advice about how to allocate your Account Value under any circumstance. Any investment professionals you engage to provide advice and/or make transfers for you is not acting on our behalf. We are not responsible for any recommendations such investment professionals make, any market timing or asset allocation programs they choose to follow or any specific transfers they make on your behalf. We may require investment professionals or investment advisors, who are authorized by multiple contract owners to make financial transactions, to enter into an administrative agreement with American Skandia as a condition of our accepting transactions on your behalf. The administrative agreement may impose limitations on the investment professional's or investment advisor's ability to request financial transactions on your behalf. These limitations are intended to minimize the detrimental impact of an investment professional who is in a position to transfer large amounts of money for multiple clients in a particular Portfolio or type of portfolio or to comply with specific restrictions or limitations imposed by a Portfolio(s) on American Skandia. The administrative agreement may limit the available investment options, require advance notice of large transactions, or impose other trading limitations on your investment professional. Your investment professional will be informed of all such restrictions on an ongoing basis. We may also require that your investment professional transmit all financial transactions using the electronic trading functionality available through our Internet website (www.americanskandia.com). Limitations that we may impose on your investment professional or investment advisor under the terms of the administrative agreement do not apply to financial transactions requested by an Owner on their own behalf, except as otherwise described in this Prospectus. HOW DO THE FIXED INVESTMENT OPTIONS WORK? We credit the fixed interest rate to the Fixed Allocation throughout a set period of time called a "Guarantee Period." Fixed Allocations currently are offered with Guarantee Periods from 1 to 10 years. We may make Fixed Allocations of different durations available in the future, including Fixed Allocations offered exclusively for use with certain optional investment programs. Fixed Allocations may not be available in all states and may not always be available for all Guarantee Periods depending on market factors and other considerations. The interest rate credited to a Fixed Allocation is the rate in effect when the Guarantee Period begins and does not change during the Guarantee Period. The rates are an effective annual rate of interest. We determine the interest rates for the various Guarantee Periods. At the time that we confirm your Fixed Allocation, we will advise you of the interest rate in effect and the date your Fixed Allocation matures. We may change the rates we credit new Fixed Allocations at any time. Any change in interest rate does not affect Fixed Allocations that were in effect before the date of the change. To inquire as to the current rates for Fixed Allocations, please call 1-800-766-4530. A Guarantee Period for a Fixed Allocation begins: [X] when all or part of a net Purchase Payment is allocated to that particular Guarantee Period; [X] upon transfer of any of your Account Value to a Fixed Allocation for that particular Guarantee Period; or [X] when you "renew" a Fixed Allocation by electing a new Guarantee Period. To the extent permitted by law, we may establish different interest rates for Fixed Allocations offered to a class of Owners who choose to participate in various optional investment programs we make available. This may include, but is not limited to, Owners who elect to use Fixed Allocations under a dollar cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a balanced investment program (see "Do you offer programs designed to guarantee a "Return of Premium" at a future date?"). The interest rate credited to Fixed Allocations offered to this class of purchasers may be different than those offered to other purchasers who choose the same Guarantee Period but who do not participate in an optional investment program. Any such program is at our sole discretion. HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS? We do not have a specific formula for determining the fixed interest rates for Fixed Allocations. Generally the interest rates we offer for Fixed Allocations will reflect the investment returns available on the types of investments we make to support our fixed rate guarantees. These investment types may include cash, debt securities guaranteed by the United States government and its agencies and instrumentalities, money market instruments, corporate debt obligations of different durations, private placements, asset-backed obligations and municipal bonds. In determining rates we also consider factors such as the length of the Guarantee Period for the Fixed Allocation, regulatory and tax requirements, liquidity of the markets for the type of investments we make, commissions, administrative and investment expenses, our insurance risks in relation to the Fixed Allocations, general economic trends and competition. Some of these considerations are similar to those we consider in determining the Insurance Charge that we deduct from Account Value allocated to the Sub-accounts. We will credit interest on a new Fixed Allocation in an existing Annuity 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 rate we credit for a Fixed Allocation is subject to a minimum. Please refer to the Statement of Additional Information. In certain states the interest rate may be subject to a minimum under state law or regulation. HOW DOES THE MARKET VALUE ADJUSTMENT WORK? If you transfer or withdraw Account Value from a Fixed Allocation more than 30 days before the end of its Guarantee Period, we will adjust the value of your investment based on a formula, called a "Market Value Adjustment" or "MVA". The amount of any Market Value Adjustment can be either positive or negative, depending on the movement of a combination of Strip Yields on Strips and an Option-adjusted Spread (each as defined below) between the time that you purchase the Fixed Allocation and the time you make a transfer or withdrawal. The Market Value Adjustment formula compares the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the Guarantee Period began with the combination of Strip Yields for Strips and the Option-adjusted Spreads as of the date the MVA is being calculated. In certain states the amount of any Market Value Adjustment may be limited under state law or regulation. If your Annuity is governed by the laws of that state, any Market Value Adjustment that applies will be subject to our rules for complying with such law or regulation. [X] "Strips" are a form of security where ownership of the interest portion of United States Treasury securities are separated from ownership of the underlying principal amount or corpus. [X] "Strip Yields" are the yields payable on coupon Strips of United States Treasury securities. [X] "Option-adjusted Spread" is the difference between the yields on corporate debt securities (adjusted to disregard options on such securities) and government debt securities of comparable duration. We currently use the Merrill Lynch 1 to 10 year Investment Grade Corporate Bond Index of Option-adjusted Spreads. MVA Formula The MVA formula is applied separately to each Fixed Allocation to determine the Account Value of the Fixed Allocation on a particular date. The formula is as follows: [(1+I) / (1+J+0.0010)]N/365 where: I is the Strip Yield as of the start date of the Guarantee Period for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. J is the Strip Yield as of the date the MVA formula is being applied for coupon Strips maturing at the end of the applicable Guarantee Period plus the Option-adjusted Spread. If there are no Strips maturing at that time, we will use the Strip Yield for the Strips maturing as soon as possible after the Guarantee Period ends. N is the number of days remaining in the original Guarantee Period. If you surrender your Annuity under the right to cancel provision, the MVA formula is [(1 + I)/(1 + J)]N/365. MVA Examples The following hypothetical examples show the effect of the MVA in determining Account Value. Assume the following: [X] On December 31, 2000, you allocate $50,000 into a Fixed Allocation with a Guarantee Period of 5 years (e.g. the Maturity Date is December 31, 2005). [X] The Strip Yields for coupon Strips beginning on December 31, 2000 and maturing on December 31, 2005 plus the Option-adjusted Spread is 5.50% (I = 5.50%). [X] You make no withdrawals or transfers until you decided to withdraw the entire Fixed Allocation after exactly three (3) years, therefore 730 days remain before the Maturity Date (N = 730). Example of Positive MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 4.00% (J = 4.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.041]2 = 1.027078 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $59,448.56 Example of Negative MVA Assume that at the time you request the withdrawal, the Strip Yields for Strips maturing on December 31, 2005 plus the Option-adjusted Spread is 7.00% (J = 7.00%). Based on these assumptions, the MVA would be calculated as follows: MVA Factor = [(1+I)/(1+J+0.0010)]N/365 = [1.055/1.071)]2 = 0.970345 Interim Value = $57,881.25 Account Value after MVA = Interim Value X MVA Factor = $56,164.78. WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES? The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee Period. Before the Maturity Date, you may choose to renew the Fixed Allocation for a new Guarantee Period of the same or different length or you may transfer all or part of that Fixed Allocation's Account Value to another Fixed Allocation or to one or more Sub-accounts. We will notify you before the end of the Guarantee Period about the fixed interest rates that we are currently crediting to all Fixed Allocations that are being offered. The rates being credited to Fixed Allocations may change before the Maturity Date. We will not charge a MVA if you choose to renew a Fixed Allocation on its Maturity Date or transfer the Account Value to one or more variable investment options. If you do not specify how you want a Fixed Allocation to be allocated on its Maturity Date, we will then transfer the Account Value of the Fixed Allocation to the AST Money Market Sub-account. You can then elect to allocate the Account Value to any of the Sub-accounts or to a new Fixed Allocation. ACCESS TO ACCOUNT VALUE WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME? During the accumulation period you can access your Account Value through Partial Withdrawals, Systematic Withdrawals, and where required for tax purposes, Minimum Distributions. You can also surrender your Annuity at any time. We may deduct a portion of the Account Value being withdrawn or surrendered as a CDSC. The CDSC will be assessed on the amount of Purchase Payments being withdrawn, not on the Account Value at the time of the withdrawal or surrender. If you surrender your Annuity, in addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge that applies and the charge for any optional benefits. We may also apply a Market Value Adjustment to any Fixed Allocations. Certain amounts may be available to you each Annuity Year that are not subject to a CDSC. These are called "Free Withdrawals." In addition, under certain circumstances, we may waive the CDSC for surrenders made for qualified medical reasons or for withdrawals made to satisfy Minimum Distribution requirements. Unless you notify us differently, withdrawals are taken pro-rata based on the Account Value in the investment options at the time we receive your withdrawal request. Each of these types of distributions is described more fully below. ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS? (For more information, see "Tax Considerations") During the Accumulation Period A distribution during the accumulation period is deemed to come first from any "gain" in your Annuity and second as a return of your "tax basis", if any. Distributions from your Annuity are generally subject to ordinary income taxation on the amount of any investment gain unless the distribution qualifies as a non-taxable exchange or transfer. If you take a distribution prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in addition to ordinary income taxes on any gain. You may wish to consult a professional tax advisor for advice before requesting a distribution. During the Annuitization Period During the annuitization period, a portion of each annuity payment is taxed as ordinary income at the tax rate you are subject to at the time of the payment. The Code and regulations have "exclusionary rules" that we use to determine what portion of each annuity payment should be treated as a return of any tax basis you have in the Annuity. Once the tax basis in the Annuity has been distributed, the remaining annuity payments are taxable as ordinary income. The tax basis in the Annuity may be based on the tax-basis from a prior contract in the case of a 1035 exchange or other qualifying transfer. CAN I WITHDRAW A PORTION OF MY ANNUITY? Yes, you can make a withdrawal during the accumulation period. [X] To meet liquidity needs, you can withdraw a limited amount from your Annuity during each of Annuity Years 1-8 without a CDSC being applied. We call this the "Free Withdrawal" amount. The Free Withdrawal amount is not available if you choose to surrender your Annuity. Amounts withdrawn as a Free Withdrawal do not reduce the amount of CDSC that may apply upon a subsequent withdrawal or surrender of the Annuity. The minimum Free Withdrawal you may request is $100. [X] You can also make withdrawals in excess of the Free Withdrawal amount. We call this a "Partial Withdrawal." The amount that you may withdraw will depend on the Annuity's Surrender Value. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee, the Tax Charge, any charges for optional benefits and any Market Value Adjustment that may apply to any Fixed Allocations. After any Partial Withdrawal, your Annuity must have a Surrender Value of at least $1,000, or we may treat the Partial Withdrawal request as a request to fully surrender your Annuity. The minimum Partial Withdrawal you may request is $100. When we determine if a CDSC applies to Partial Withdrawals and Systematic Withdrawals, we will first determine what, if any, amounts qualify as a Free Withdrawal. Those amounts are not subject to the CDSC. Partial Withdrawals or Systematic Withdrawals of amounts greater than the maximum Free Withdrawal amount will be subject to a CDSC. You may request a withdrawal for an exact dollar amount after deduction of any CDSC that applies (called a "net withdrawal") or request a gross withdrawal from which we will deduct any CDSC that applies, resulting in less money being payable to you than the amount you requested. If you request a net withdrawal, the amount deducted from your Account Value to pay the CDSC may also be subject to a CDSC. Partial Withdrawals may also be available following annuitization but only if you choose certain annuity payment options. To request the forms necessary to make a withdrawal from your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL? Annuity Year 1-8 The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 (when a CDSC would otherwise apply to a partial withdrawal or surrender of your initial Purchase Payment) is 10% of each Purchase Payment that has been invested in the Annuity for eight years or less. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. The 10% Free Withdrawal amount is not cumulative. If you do not make a Free Withdrawal during an Annuity Year, you are not allowed to carry over the Free Withdrawal amount to the next Annuity Year. Annuity Year 9+ After Annuity Year 8, the maximum Free Withdrawal amount is the sum of: [X] 10% of any Purchase Payments applied to your Annuity after the Issue Date to which a CDSC would apply upon a partial withdrawal or surrender. [X] 100% of your initial Purchase Payment or all Purchase Payments not previously withdrawn to which a CDSC would not apply upon a partial withdrawal or surrender. [X] 100% of any "growth" in the Annuity. "Growth" equals the current Account Value minus all Purchase Payments that have not previously been withdrawn. For purposes of this provision, any XTra Credit amount we applied to your Purchase Payments are not considered "growth" and are not available as a Free Withdrawal. After the 8th Annuity Year, a CDSC will only apply to withdrawals of Purchase Payments applied to the Annuity after Annuity Year 1 and, for those Purchase Payments, the CDSC will only apply until the end of the applicable CDSC period. NOTE: Amounts that you have withdrawn as a Free Withdrawal will not reduce the amount of any CDSC that we deduct if, during the first eight (8) Annuity Years, you make a partial withdrawal or choose to surrender the Annuity. The minimum Free Withdrawal you may request is $100. We may reduce or eliminate the amount available as a Free Withdrawal if your Annuity is used in connection with certain plans that receive special tax treatment under the Code. Examples 1. Assume you make an initial Purchase Payment of $10,000 and make no additional Purchase Payments. The maximum Free Withdrawal amount during each of the first eight Annuity Years would be 10% of $10,000, or $1,000. 2. Assume you make an initial Purchase Payment of $10,000 and make an additional Purchase Payment of $15,000 in Annuity Year 2. The maximum Free Withdrawal amount during Annuity Year 3 through 8 would be 10% of $25,000, or $2,500. In Annuity Year 9, the maximum Free Withdrawal amount would be 10% of the $15,000 Purchase Payment applied in Annuity Year 2 ($1,500) plus 100% of the initial Purchase Payment ($10,000) and any "growth" under the Annuity. 3. Assume you make an initial Purchase Payment of $10,000 and take a Free Withdrawal of $500 in Annuity Year 2 and $1,000 in Annuity Year 3. If you surrender your Annuity in Annuity Year 5, the CDSC will be assessed against the initial Purchase Payment amount ($10,000), not the amount of Purchase Payments reduced by the amounts that were withdrawn under the Free Withdrawal provision. IS THERE A CHARGE FOR A PARTIAL WITHDRAWAL? A CDSC may be assessed against a Partial Withdrawal during the accumulation period. Whether a CDSC applies and the amount to be charged depends on whether the Partial Withdrawal exceeds any Free Withdrawal amount and, if so, the number of years that have elapsed since the Purchase Payment being withdrawn has been invested in the Annuity. 1. If you request a Partial Withdrawal, we determine if the amount you requested is available as a Free Withdrawal (in which case it would not be subject to a CDSC); 2. If the amount requested exceeds the available Free Withdrawal amount: [X] First, we withdraw the amount from Purchase Payments that have been invested for longer than the CDSC period, if any (with your Annuity, eight (8) years); [X] Second, we withdraw the remaining amount from the Purchase Payments that are still subject to a CDSC. We withdraw the "oldest" of your Purchase Payments first so that the lowest CDSC will apply to the amount withdrawn. The maximum Free Withdrawal amount during each of Annuity Years 1 through 8 is 10% of all Purchase Payments. Withdrawals of amounts greater than the maximum Free Withdrawal amount are treated as a withdrawal of Purchase Payments and will be assessed a CDSC. If, during Annuity Years 1 through 8, all Purchase Payments are withdrawn subject to a CDSC, then any subsequent withdrawals will be withdrawn from any gain in the Annuity, which may include Credits. For purposes of calculating the CDSC on a partial withdrawal, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. 3. If the amount requested exceeds the amounts available under Item #2 above, we withdraw the remaining amount from any other Account Value (including Account Value due to Credits). CAN I MAKE PERIODIC WITHDRAWALS FROM THE ANNUITY DURING THE ACCUMULATION PERIOD? Yes. We call these "Systematic Withdrawals." You can receive Systematic Withdrawals of earnings only, principal plus earnings or a flat dollar amount. Systematic Withdrawals may be subject to a CDSC. We will determine whether a CDSC applies and the amount in the same way as we would for a Partial Withdrawal. Systematic Withdrawals can be made from Account Value allocated to the variable investment options or Fixed Allocations. 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. Systematic Withdrawals are available on a monthly, quarterly, semi-annual or annual basis. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program of Systematic Withdrawals. The minimum amount for each Systematic Withdrawal is $100. If any scheduled Systematic Withdrawal is for less than $100, we may postpone the withdrawal and add the expected amount to the amount that is to be withdrawn on the next scheduled Systematic Withdrawal. DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTION 72(t) OF THE INTERNAL REVENUE CODE? Yes. If your Annuity is used as a funding vehicle for certain retirement plans that receive special tax treatment under Sections 401, 403(b) or 408 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 1/2if you elect to receive distributions as a series of "substantially equal periodic payments". Distributions received under this provision in any Annuity Year that exceed the maximum amount available as a free withdrawal will be subject to a CDSC. We may apply a Market Value Adjustment to any Fixed Allocations. To request a program that complies with Section 72(t), you must provide us with certain required information in writing on a form acceptable to us. We may require advance notice to allow us to calculate the amount of 72(t) withdrawals. The Surrender Value of your Annuity must be at least $20,000 before we will allow you to begin a program for withdrawals under Section 72(t). The minimum amount for any such withdrawal is $100. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments before age 59 1/2that are not subject to the 10% penalty. WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM? (See "Tax Considerations" for a further discussion of Minimum Distributions.) Minimum Distributions are a type of Systematic Withdrawal we allow to meet distribution requirements under Sections 401, 403(b) or 408 of the Code. Under the Code, you may be required to begin receiving periodic amounts from your Annuity. In such case, we will allow you to make Systematic Withdrawals in amounts that satisfy the minimum distribution rules under the Code. We do not assess a CDSC on Minimum Distributions from your Annuity if you are required by law to take such Minimum Distributions from your Annuity at the time it is taken. However, a CDSC may be assessed on that portion of a Systematic Withdrawal that is taken to satisfy the minimum distribution requirements in relation to other savings or investment plans under other qualified retirement plans not maintained with American Skandia. The amount of the required Minimum Distribution for your particular situation may depend on other annuities, savings or investments. We will only calculate the amount of your required Minimum Distribution based on the value of your Annuity. We require three (3) days advance written notice to calculate and process the amount of your payments. You may elect to have Minimum Distributions paid out monthly, quarterly, semi-annually or annually. The $100 minimum that applies to Systematic Withdrawals does not apply to Minimum Distributions. You may also annuitize your contract and begin receiving payments for the remainder of your life (or life expectancy) as a means of receiving income payments and satisfying the Minimum Distribution requirements under the Code. CAN I SURRENDER MY ANNUITY FOR ITS VALUE? Yes. During the accumulation period you can surrender your Annuity at any time. Upon surrender, you will receive the Surrender Value. Upon surrender of your Annuity, you will no longer have any rights under the Annuity. For purposes of calculating the CDSC on surrender, the Purchase Payments being withdrawn may be greater than your remaining Account Value or the amount of your withdrawal request. This is most likely to occur if you have made prior withdrawals under the Free Withdrawal provision or if your Account Value has declined in value due to negative market performance. We may apply a Market Value Adjustment to any Fixed Allocations. Under certain annuity payment options, you may be allowed to surrender your Annuity for its then current value. To request the forms necessary to surrender your Annuity, call 1-800-766-4530 or visit our Internet Website at www.americanskandia.com. WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY? Where permitted by law, you may request to surrender your Annuity prior to the Annuity Date without application of any CDSC upon occurrence of a medically-related "Contingency Event". We may apply a Market Value Adjustment to any Fixed Allocations. The amount payable will be your Account Value minus: (a) the amount of any Credits applied within 12 months of the applicable "Contingency Event" as defined below; and (b) the amount of any Credits added in conjunction with any Purchase Payments received after our receipt of your request for a medically-related surrender (i.e. Purchase Payments received at such time pursuant to a salary reduction program. This waiver of any applicable CDSC is subject to our rules, including but not limited to the following: [X] the Annuitant must be named or any change of Annuitant must be accepted by us, prior to the "Contingency Event" described below; [X] the Annuitant must be alive as of the date we pay the proceeds of such surrender request; [X] if the Owner is one or more natural persons, all such Owners must also be alive at such time; [X] we must receive satisfactory proof of the Annuitant's confinement in a Medical Care Facility or Fatal Illness in writing on a form satisfactory to us; and [X] this benefit is not available if the total Purchase Payments received exceed $500,000 for all annuities issued by us with this benefit where the same person is named as Annuitant. A "Contingency Event" occurs if the Annuitant is: [X] first confined in a "Medical Care Facility" while your Annuity is in force and remains confined for at least 90 days in a row; or [X] first diagnosed as having a "Fatal Illness" while your Annuity is in force. The definitions of "Medical Care Facility" and "Fatal Illness," as well as additional terms and conditions, are provided in your Annuity. Specific details and definitions in relation to this benefit may differ in certain jurisdictions. WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE? We currently make annuity options available that provide fixed annuity payments, variable payments or adjustable payments. Fixed options provide the same amount with each payment. Variable options generally provide a payment which may increase or decrease depending on the investment performance of the Sub-accounts. However, currently, we also make a variable payment option that has a guarantee feature. Adjustable options provide a fixed payment that is periodically adjusted based on current interest rates. We do not guarantee to make any annuity payment options available in the future. For additional information on annuity payment options you may request a Statement of Additional Information. When you purchase an Annuity, or at a later date, you may choose an Annuity Date, an annuity option and the frequency of annuity payments. You may change your choices before the Annuity Date under the terms of your contract. A maximum Annuity Date may be required by law. The Annuity Date may depend on the annuity option you choose. Certain annuity options may not be available depending on the age of the Annuitant. You may not annuitize and receive annuity payments within the first Annuity Year. Certain of these annuity options may be available to Beneficiaries who choose to receive the Death Benefit proceeds as a series of payments instead of a lump sum payment. Option 1 - --------- Payments for Life: Under this option, income is payable periodically until the death of the "key life". The "key life" (as used in this section) is the person or persons upon whose life annuity payments are based. No additional annuity payments are made after the death of the key life. Since no minimum number of payments is guaranteed, this option offers the largest amount 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. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 2 - --------- 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 or death benefits would be payable. This Option is currently available on a fixed or variable basis. Under this option, you cannot make a partial or full surrender of the annuity. Option 3 - --------- Payments for Life with a Certain Period: Under this option, income is payable until the death of the key life. However, if the key life dies before the end of the period selected (5, 10 or 15 years), the remaining payments are paid to the Beneficiary until the end of such period. This Option is currently available on a fixed or variable basis. If you elect to receive payments on a variable basis under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 4 - --------- Fixed Payments for a Certain Period: Under this option, income is payable periodically for a specified number of years. If the payee dies before the end of the specified number of years, the remaining payments are paid to the Beneficiary until the end of such period. Note that under this option, payments are not based on any assumptions of life expectancy. Therefore, that portion of the Insurance Charge assessed to cover the risk that key lives outlive our expectations provides no benefit to an Owner selecting this option. Under this option, you cannot make a partial or full surrender of the annuity. Option 5 - --------- Variable Payments for Life with a Cash Value: Under this option, benefits are payable periodically until the death of the key life. Benefits may increase or decrease depending on the investment performance of the Sub-accounts. This option has a cash value that also varies with the investment performance of the Sub-account. The cash value provides a "cushion" from volatile investment performance so that negative investment performance does not automatically result in a decrease in the annuity payment each month, and positive investment performance does not automatically result in an increase in the annuity payment each month. The cushion generally "stabilizes" monthly annuity payments. Any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. Option 6 - --------- Variable Payments for Life with a Cash Value and Guarantee: Under this option, benefits are payable as described in Option 5; except that, while the key life is alive, the annuity payment will not be less than a guaranteed amount, which generally is equal to the first annuity payment. We charge an additional amount for this guarantee. Under this option, any cash value remaining on the death of the key life is paid to the Beneficiary in a lump sum or as periodic payments. Under this option, you can request partial or full surrender of the annuity and receive its then current cash value (if any) subject to our rules. We may make additional annuity payment options available in the future. HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION? Unless prohibited by law, we require that you elect either a life annuity or an annuity with a certain period of at least 5 years if any CDSC would apply were you to surrender your Annuity on the Annuity Date. Therefore, making a purchase payment within eight years of the Annuity Date limits your annuity payment options. Certain annuity payment options may not be available if your Annuity Date occurs during the period that a CDSC would apply. If you have not provided us with your Annuity Date or annuity payment option in writing, then: [X] the Annuity Date will be the first day of the calendar month following the later of the Annuitant's 85th birthday or the fifth anniversary of our receipt of your request to purchase an Annuity; and [X] the annuity payments, where allowed by law, will be calculated on a fixed basis under Option 3, Payments for Life with 10 years certain. HOW ARE ANNUITY PAYMENTS CALCULATED? Fixed Annuity Payments (Options 1-4) If you choose to receive fixed annuity payments, you will receive equal fixed-dollar payments throughout the period you select. The amount of the fixed payment will vary depending on the annuity payment option and payment frequency you select. Generally, the first annuity payment is determined by multiplying the Account Value, minus any state premium taxes that may apply, by the factor determined from our table of annuity rates. The table of annuity rates differs based on the type of annuity chosen and the frequency of payment selected. Our rates will not be less than our guaranteed minimum rates. These guaranteed minimum rates are derived from the a2000 Individual Annuity Mortality Table 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. Variable Annuity Payments We offer three different types of variable annuity payment options. The first annuity payment will be calculated based upon the assumed investment return ("AIR"). You select the AIR before we start to make annuity payments. You will not receive annuity payments until you choose an AIR. The remaining annuity payments will fluctuate based on the performance of the Sub-accounts relative to the AIR, as well as, other factors described below. The greater the AIR, the greater the first annuity payment. A higher AIR may result in smaller potential growth in the annuity payments. A lower AIR results in a lower initial annuity payment. Within payment options 1-3, if the Sub-accounts you choose perform exactly the same as the AIR, then subsequent annuity payments will be the same as the first annuity payment. If the Sub-accounts you choose perform better than the AIR, then subsequent annuity payments will be higher than the first annuity payment. If the Sub-accounts you choose perform worse than the AIR, then subsequent annuity payments will be lower than the first. Within payment options 5 and 6, the cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive are adjusted based on the performance of the Sub-accounts relative to the AIR; however, subsequent annuity payments do not always increase or decrease based on the performance of the Sub-accounts relative to the AIR. [X] Variable Payments (Options 1-3) We calculate each annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units for each Sub-account by the Unit Value of each Sub-account on the annuity payment date. We determine the schedule of units based on your Account Value (minus any premium tax that applies) at the time you elect to begin receiving annuity payments. The schedule of units will vary based on the annuity payment option selected, the length of any certain period (if applicable), the Annuitant's age and gender (if annuity payments are due for the life of the Annuitant) and the Unit Value of the Sub-accounts you initially selected on the Issue Date. The calculation is performed for each Sub-account, and the sum of the Sub-account calculations equals the amount of your annuity payment. Other than to fund annuity payments, the number of units allocated to each Sub-account will not change unless you transfer among the Sub-accounts or make a withdrawal (if allowed). You can select one of three AIRs for these options: 3%, 5% or 7%. [X] Stabilized Variable Payments (Option 5) This option provides guaranteed payments for life, a cash value for the Annuitant (while alive) and a variable period of time during which annuity payments will be made whether or not the Annuitant is still alive. We calculate the initial annuity payment amount by multiplying the number of units scheduled to be redeemed under a schedule of units by the Unit Values determined on the annuitization date. The schedule of units is established for each Sub-account you choose on the annuitization date based on the applicable benchmark rate, meaning the AIR, and the annuity factors. The annuity factors reflect our assumptions regarding the costs we expect to bear in guaranteeing payments for the lives of the Annuitant and will depend on the benchmark rate, the annuitant's attained age and gender (where permitted). Unlike variable payments (described above) where each payment can vary based on Sub-account performance, this payment option cushions the immediate impact of Sub-account performance by adjusting the length of the time during which annuity payments will be made whether or not the Annuitant is alive while generally maintaining a level annuity payment amount. Sub-account performance that exceeds a benchmark rate will generally extend this time period, while Sub-account performance that is less than a benchmark rate will generally shorten the period. If the period reaches zero and the Annuitant is still alive, Annuity Payments continue, however, the annuity payment amount will vary depending on Sub-account performance, similar to conventional variable payments. The AIR for this option is 4%. [X] Stabilized Variable Payments with a Guaranteed Minimum (Option 6) This option provides guaranteed payments for life in the same manner as Stabilized Variable Payments (described above). In addition to the stabilization feature, this option also guarantees that variable annuity payments will not be less than the initial annuity payment amount regardless of Sub-account performance. The AIR for this option is 3%. The variable annuity payment options are described in greater detail in a separate prospectus which will be provided to you at the time you elect one of the variable annuity payment options. Adjustable Annuity Payments We may make an adjustable annuity payment option available. Adjustable annuity payments are calculated similarly to fixed annuity payments except that on every fifth (5th) anniversary of receiving annuity payments, the annuity payment amount is adjusted upward or downward depending on the rate we are currently crediting to annuity payments. The adjustment in the annuity payment amount does not affect the duration of remaining annuity payments, only the amount of each payment. DEATH BENEFIT WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT? The Annuity provides a Death Benefit during its accumulation period. If the Annuity is owned by one or more natural persons, the Death Benefit is payable upon the first death of an Owner. 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, then the Contingent Annuitant becomes the Annuitant and a Death Benefit will not be paid at that time. The person upon whose death the Death Benefit is paid is referred to below as the "decedent." BASIC DEATH BENEFIT The Annuity provides a basic Death Benefit at no additional charge. The Insurance Charge we deduct daily from your Account Value allocated to the Sub-accounts is used, in part, to pay us for the risk we assume in providing the basic Death Benefit guarantee under the Annuity. The Annuity also offers two different optional Death Benefits. Either benefit can be purchased for an additional charge. The additional charge is deducted to compensate American Skandia for providing increased insurance protection under the optional Death Benefits. Notwithstanding the additional protection provided under the optional Death Benefits, the additional cost has the impact of reducing the net performance of the investment options. Under certain circumstances, your Death Benefit may be reduced by the amount of any Credits we applied to your Purchase Payments. (see "How are Credits Applied to My Account Value") The basic Death Benefit is the greater of: [X] The sum of all Purchase Payments less the sum of all proportional withdrawals. [X] The sum of your Account Value in the variable investment options and your Interim Value in the Fixed Allocations, less the amount of any Credits applied within 12-months prior to the date of death. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. For example, a withdrawal of 50% of Account Value would be considered as a 50% reduction in Purchase Payments for purposes of calculating the basic Death Benefit. OPTIONAL DEATH BENEFITS - -------------------------------------------------------------------------------- Between January 23, 2002 and November 15, 2002, in those jurisdictions where we received regulatory approval, American Skandia offered the following optional Death Benefits. For Annuity Owners who purchased either of these optional Death Benefits during the applicable period, the optional Death Benefits will be calculated as described below. These optional Death Benefits were only offered and must have been elected at the time you purchased your Annuity. - -------------------------------------------------------------------------------- You can purchase either of two optional Death Benefits with your Annuity to provide an enhanced level of protection for your beneficiaries. NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death Benefit if you have elected any other Optional Death Benefit. Enhanced Beneficiary Protection Optional Death Benefit The Enhanced Beneficiary Protection Optional Death Benefit can provide additional amounts to your Beneficiary that may be used to offset federal and state taxes payable on any taxable gains in your Annuity at the time of your death. Whether this benefit is appropriate for you may depend on your particular circumstances, including other financial resources that may be available to your Beneficiary to pay taxes on your Annuity should you die during the accumulation period. No benefit is payable if death occurs on or after the Annuity Date. The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit that is payable in addition to the basic Death Benefit. If the Annuity has one Owner, the Owner must be age 75 or less at the time the benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If the Annuity is owned by an entity, the Annuitant must be age 75 or less. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is being offered in those jurisdictions where we have received regulatory approval. Certain terms and conditions may differ between jurisdictions once approved. Please refer to the section entitled "Tax Considerations" for a discussion of special tax considerations for purchasers of this benefit. - -------------------------------------------------------------------------------- Calculation of Enhanced Beneficiary Protection Optional Death Benefit If you purchase the Enhanced Beneficiary Protection Optional Death Benefit, the Death Benefit is calculated as follows: 1. the basic Death Benefit described above PLUS 2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. "Proportional withdrawals" are determined by calculating the percentage of your Account Value that each prior withdrawal represented when withdrawn. "Death Benefit Amount" includes your Account Value and any amounts added to your Account Value under the basic Death Benefit when the Death Benefit is calculated. Under the basic Death Benefit, amounts are added to your Account Value when the Account Value is less than Purchase Payments minus proportional withdrawals. The amount calculated in Items 1 & 2 above may be reduced by any Credits under certain circumstances. - -------------------------------------------------------------------------------- The Enhanced Beneficiary Protection Optional Death Benefit is subject to a maximum of 50% of all Purchase Payments applied to the Annuity at least 12 months prior to the death of the decedent that triggers the payment of the Death Benefit. - -------------------------------------------------------------------------------- See Appendix C for examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Guaranteed Minimum Death Benefit If the Annuity has one Owner, the Owner must be age 80 or less at the time the optional Death Benefit is purchased. If the Annuity has joint Owners, the oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the Annuitant must be age 80 or less. Key Terms Used with the Guaranteed Minimum Death Benefit [X] The Death Benefit Target Date is the contract anniversary on or after the 80th birthday of the current Owner, the oldest of either joint Owner or the Annuitant, if entity owned. [X] The Highest Anniversary Value equals the highest of all previous "Anniversary Values" on or before the earlier of the Owner's date of death and the "Death Benefit Target Date". [X] The Anniversary Value is the Account Value as of each anniversary of the Issue Date plus the sum of all Purchase Payments on or after such anniversary less the sum of all "Proportional Reductions" since such anniversary. [X] A Proportional Reduction is a reduction to the value being measured caused by a withdrawal, equaling the percentage of the withdrawal as compared to the Account Value as of the date of the withdrawal. For example, if your Account Value is $10,000 and you withdraw $2,000 (a 20% reduction), we will reduce both your Anniversary Value and the amount determined by Purchase Payments increasing at the appropriate interest rate by 20%. Calculation of Guaranteed Minimum Death Benefit The Guaranteed Minimum Death Benefit depends on whether death occurs before or after the Death Benefit Target Date. If the Owner dies before the Death Benefit Target Date, the Death Benefit equals the greatest of: 1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed Allocations (no MVA) as of the date we receive in writing "due proof of death"; and 2. the sum of all Purchase Payments minus the sum of all Proportional Reductions, each increasing daily until the Owner's date of death at a rate of 5.0%, subject to a limit of 200% of the difference between the sum of all Purchase Payments and the sum of all withdrawals as of the Owner's date of death; and 3. the "Highest Anniversary Value" on or immediately preceding the Owner's date of death. The amount determined by this calculation is increased by any Purchase Payments received after the Owner's date of death and decreased by any Proportional Reductions since such date. The amount calculated in Items 1 & 3 above may be reduced by any Credits under certain circumstances. If the Owner dies on or after the Death Benefit Target Date, the Death Benefit equals the greater of: 1. the Account Value as of the date we receive in writing "due proof of death" (an MVA may be applicable to amounts in any Fixed Allocations); and 2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the sum of all Purchase Payments less the sum of all Proportional Reductions since the Death Benefit Target Date. The amount calculated in Item 1 above may be reduced by any Credits under certain circumstances. See Appendix C for examples of how the Guaranteed Minimum Death Benefit is calculated. Annuities with joint Owners For Annuities with Joint Owners, the Death Benefit is calculated as shown above except that the age of the oldest of the Joint Owners is used to determine the Death Benefit Target Date. NOTE: If you and your spouse own the Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole primary Beneficiary is the surviving spouse, then the surviving spouse can elect to assume ownership of the Annuity and continue the contract instead of receiving the Death Benefit. Annuities owned by entities For Annuities owned by an entity, the Death Benefit is calculated as shown above except that the age of the Annuitant is used to determine the Death Benefit Target Date. Payment of the Death Benefit is based on the death of the Annuitant (or Contingent Annuitant, if applicable). Can I terminate the optional Death Benefits? Do the optional Death Benefits terminate under other circumstances? You can terminate the Enhanced Beneficiary Protection Optional Death Benefit and the Guaranteed Minimum Death Benefit at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the benefit. Both optional Death Benefits will terminate automatically on the Annuity Date. We may also terminate any optional Death Benefit if necessary to comply with our interpretation of the Code and applicable regulations. What are the charges for the optional Death Benefits? We deduct a charge from your Account Value if you elect to purchase either optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30% of the current Death Benefit. The charges for these death benefits are deducted in arrears each Annuity Year. No charge applies after the Annuity Date. We deduct the charge: 1. on each anniversary of the Issue Date; 2. when Account Value is transferred to our general account prior to the Annuity Date; 3. if you surrender your Annuity; and 4. if you choose to terminate the benefit (Enhanced Beneficiary Protection Optional Death Benefit only) If you surrender the Annuity, elect to begin receiving annuity payments or terminate the benefit on a date other than an anniversary of the Issue Date, the charge will be prorated. During the first year after the Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, it would be prorated from the last anniversary of the Issue Date. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. If your Annuity's Account Value is insufficient to pay the charge, we may deduct your remaining Account Value and terminate your Annuity. We will notify you if your Account Value is insufficient to pay the charge and allow you to submit an additional Purchase Payment to continue your Annuity. Please refer to the section entitled "Tax Considerations" for additional considerations in relation to the optional Death Benefit. AMERICAN SKANDIA'S ANNUITY REWARDS What is the Annuity Rewards benefit? The Annuity Rewards benefit offers Owners the ability to capture any market gains since the Issue Date of their Annuity as an enhancement to their current Death Benefit so their Beneficiaries will not receive less than the Annuity's value as of the date the Owner elects the benefit. Under the Annuity Rewards benefit, American Skandia guarantees that the Death Benefit will not be less than: your Account Value in the variable investment options plus the Interim Value in any Fixed Allocations as of the effective date of the Owner's election MINUS any proportional withdrawals* following the date of election PLUS any additional Purchase Payments applied to the Annuity following the date of election. * "Proportional withdrawals" are determined by calculating the percentage of the Account Value that each withdrawal represented when withdrawn. For example, a withdrawal of 50% of your Account Value would be treated as a 50% reduction in the amount payable under the Death Benefit. The Annuity Rewards Death Benefit enhancement does not affect the basic Death Benefit calculation or any Optional Death Benefits available under the Annuity. If the Death Benefit amount payable under your Annuity's basic Death Benefit or any Optional Death Benefits you purchase is greater than the enhanced Death Benefit under the Annuity Rewards benefit on the date the Death Benefit is calculated, your Beneficiary will receive the higher amount. If your Annuity includes the Enhanced Beneficiary Protection Optional Death Benefit, the enhanced Death Benefit under the Annuity Rewards program will be considered when calculating the amount due under the Enhanced Beneficiary Protection Optional Death Benefit. Who is eligible for the Annuity Rewards benefit? Owners can elect the Annuity Rewards Death Benefit enhancement following the eighth (8th) anniversary of the Annuity's Issue Date. However, the election is subject to the requirement that their Account Value on the election date is greater than the amount that would be payable to their Beneficiary under the Death Benefit provided under the Annuity as of the election date (including any Optional Death Benefits other than the Enhanced Beneficiary Protection Optional Death Benefit). If an Owner is ineligible when he or she applies for the optional benefit, the Owner can elect the Annuity Rewards Death Benefit enhancement on any subsequent date if they otherwise qualify. The election must occur before annuity payments begin. An Owner can only elect the Annuity Rewards Death Benefit enhancement once. There is no additional charge for electing the Annuity Rewards Death Benefit enhancement. PAYMENT OF DEATH BENEFITS Payment of Death Benefit to Beneficiary Except in the case of a spousal Beneficiary, in the event of your death, the death benefit must be distributed: [X] as a lump sum amount at any time within five (5) years of the date of death; or [X] as a series of annuity payments not extending beyond the life expectancy of the Beneficiary or over the life of the Beneficiary. Payments under this option must begin within one year of the date of death. Unless you have made an election prior to death benefit proceeds becoming due, a Beneficiary can elect to receive the Death Benefit proceeds as a series of fixed annuity payments (annuity payment options 1-4) or as a series of variable annuity payments (annuity payment options 1-3 or 5 and 6). See the section entitled "What Types of Annuity Options are Available." Spousal Beneficiary - Assumption of Annuity You may name your spouse as your Beneficiary. If you and your spouse own the Annuity jointly, we assume that the sole primary Beneficiary will be the surviving spouse unless you elect an alternative Beneficiary designation. Unless you elect an alternative Beneficiary designation, the spouse Beneficiary may elect to assume ownership of the Annuity instead of taking the Death Benefit payment. Any Death Benefit (including any optional Death Benefits) that would have been payable to the Beneficiary will become the new Account Value as of the date we receive due proof of death and any required proof of a spousal relationship. As of the date the assumption is effective, the surviving spouse will have all the rights and benefits that would be available under the Annuity to a new purchaser of the same attained age. For purposes of determining any future Death Benefit for the surviving spouse, the new Account Value will be considered as the initial Purchase Payment. No CDSC will apply to the new Account Value. However, any additional Purchase Payments applied after the date the assumption is effective will be subject to all provisions of the Annuity, including any CDSC that may apply to the additional Purchase Payments. See the section entitled "Managing Your Annuity - Spousal Contingent Annuitant" for a discussion of the treatment of a spousal Contingent Annuitant in the case of the death of the Annuitant in an entity owned Annuity. IRA Beneficiary Continuation Option The Code provides for alternative death benefit payment options when an Annuity is used as an IRA, 403(b) or other "qualified investment" that requires Minimum Distributions. Upon the Owner's death under an IRA, 403(b) or other "qualified investment", a Beneficiary may generally elect to continue the Annuity and receive Minimum Distributions under the Annuity instead of receiving the death benefit in a single payment. The available payment options will depend on whether the Owner died on or before the date he or she was required to begin receiving Minimum Distributions under the Code and whether the Beneficiary is the surviving spouse. [X] If death occurs before the date Minimum Distributions must begin under the Code, the Death Benefit can be paid out in either a lump sum, within five years from the date of death, or over the life or life expectancy of the designated Beneficiary (as long as payments begin by December 31st of the year following the year of death). However, if the spouse is the Beneficiary, the Death Benefit can be paid out over the life or life expectancy of the spouse with such payments beginning no earlier than December 31st of the year following the year of death or December 31st of the year in which the deceased would have reached age 70 1/2, which ever is later. [X] If death occurs after the date Minimum Distributions must begin under the Code, the Death Benefit must be paid out at least as rapidly as under the method then in effect. A Beneficiary has the flexibility to take out more each year than required under the Minimum Distribution rules. Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment" continue to be tax deferred. Amounts withdrawn each year, including amounts that are required to be withdrawn under the Minimum Distribution rules, are subject to tax. You may wish to consult a professional tax advisor for tax advice as to your particular situation. See the section entitled "How are Distributions From Qualified Contracts Taxed? - Minimum Distributions after age 70 1/2." Upon election of this IRA Beneficiary Continuation option: [X] the Annuity contract will be continued in the Owner's name, for the benefit of the Beneficiary. [X] the Account Value will be equal to any Death Benefit (including any optional Death Benefit) that would have been payable to the Beneficiary if they had taken a lump sum distribution. [X] the Beneficiary may request transfers among Sub-accounts, subject to the same limitations and restrictions that applied to the Owner. NOTE: The Sub-accounts offered under the IRA Beneficiary Continuation option may be limited. [X] no additional Purchase Payments can be applied to the Annuity. [X] the basic Death Benefit and any optional Death Benefits elected by the Owner will no longer apply to the Beneficiary. [X] the Beneficiary can request a withdrawal of all or a portion of the Account Value at any time without application of a CDSC. [X] upon the death of the Beneficiary, any remaining Account Value will be paid in a lump sum to the person(s) named by the Beneficiary. [X] all amounts in the Annuity must be paid out to the Beneficiary according to the Minimum Distribution rules described above. Please contact American Skandia for additional information on the availability, restrictions and limitations that will apply to a Beneficiary under the IRA Beneficiary Continuation option. Are there any exceptions to these rules for paying the Death Benefit? Yes, there are exceptions that apply no matter how your Death Benefit is calculated. There are exceptions to the Death Benefit if the decedent was not the Owner or Annuitant as of the Issue Date and did not become the Owner or Annuitant due to the prior Owner's or Annuitant's death. Any Death Benefit (including either optional Death Benefit) that applies will be suspended for a two-year period from the date he or she first became Owner or Annuitant. After the two-year suspension period is completed, the Death Benefit is the same as if this person had been an Owner or Annuitant on the Issue Date. When do you determine the Death Benefit? We determine the amount of the Death Benefit as of the date we receive "due proof of death", any instructions we require to determine the method of payment and any other written representations we require to determine the proper payment of the Death Benefit to all Beneficiaries. "Due proof of death" may include a certified copy of a death certificate, a certified copy of a decree of a court of competent jurisdiction as to the finding of death or other satisfactory proof of death. Upon our receipt of "due proof of death" we automatically transfer the Death Benefit to the AST Money Market Sub-account until we further determine the universe of eligible Beneficiaries. Once the universe of eligible Beneficiaries has been determined each eligible Beneficiary may allocate his or her eligible share of the Death Benefit to the Sub-accounts according to our rules. Each Beneficiary must make an election as to the method they wish to receive their portion of the Death Benefit. Absent an election of a Death Benefit payment method, no Death Benefit can be paid to the Beneficiary. We may require written acknowledgment of all named Beneficiaries before we can pay the Death Benefit. During the period from the date of death until we receive all required paper work, the amount of the Death Benefit may be subject to market fluctuations. VALUING YOUR INVESTMENT HOW IS MY ACCOUNT VALUE DETERMINED? During the accumulation period, the Annuity has an Account Value. The Account Value is determined separately for each Sub-account allocation and for each Fixed Allocation. The Account Value is the sum of the values of each Sub-account allocation and the value of each Fixed Allocation. The Account Value does not reflect any CDSC that may apply to a withdrawal or surrender. The Account Value includes any Credits we applied to your Purchase Payments that we are entitled to recover under certain circumstances. When determining the Account Value on any day other than 30 days prior to a Fixed Allocation's Maturity Date, the Account Value may include any Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn or transferred) on that day. WHAT IS THE SURRENDER VALUE OF MY ANNUITY? The Surrender Value of your Annuity is the value available to you on any day during the accumulation period. The Surrender Value is equal to your Account Value minus any CDSC, the Annual Maintenance Fee and the charge for any optional benefits. The Surrender Value will also include any Market Value Adjustment that may apply. HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS? When you allocate Account Value to a Sub-account, you are purchasing units of the Sub-account. Each Sub-account invests exclusively in shares of an underlying Portfolio. The value of the Units fluctuates with the market fluctuations of the Portfolios. The value of the Units also reflects the daily accrual for the Insurance Charge and if you elected one or more optional benefits whose annual charge is deducted daily, the additional charge made for such benefits. There may be several different Unit Prices for each Sub-account to reflect the Insurance Charge and the charges for any optional benefits. The Unit Price for the Units you purchase will be based on the total charges for the benefits that apply to your Annuity. See the section entitled "What Happens to My Units When There is a Change in Daily Asset-Based Charges?" for a detailed discussion of how Units are purchased and redeemed to reflect changes in the daily charges that apply to your Annuity. Each Valuation Day, we determine the price for a Unit of each Sub-account, called the "Unit Price." The Unit Price is used for determining the value of transactions involving Units of the Sub-accounts. We determine the number of Units involved in any transaction by dividing the dollar value of the transaction by the Unit Price of the Sub-account as of the Valuation Day. Example Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the Sub-account. Assume that later, you wish to transfer $3,000 of your Account Value out of that Sub-account and into another Sub-account. On the Valuation Day you request the transfer, the Unit Price of the original Sub-account has increased to $16.79. To transfer $3,000, we sell 178.677 Units at the current Unit Price, leaving you 158.477 Units. We then buy $3,000 of Units of the new Sub-account at the Unit Price of $17.83. You would then have 168.255 Units of the new Sub-account. HOW DO YOU VALUE FIXED ALLOCATIONS? During the Guarantee Period, we use the concept of an Interim Value. The Interim Value can be calculated on any day and is equal to the initial value allocated to a Fixed Allocation plus all interest credited to a Fixed Allocation as of the date calculated. The Interim Value does not include the impact of any Market Value Adjustment. If you made any transfers or withdrawals from a Fixed Allocation, the Interim Value will reflect the withdrawal of those amounts and any interest credited to those amounts before they were withdrawn. To determine the Account Value of a Fixed Allocation on any day other than its Maturity Date, we multiply the Account Value of the Fixed Allocation times the Market Value Adjustment factor. WHEN DO YOU PROCESS AND VALUE TRANSACTIONS? American Skandia is generally open to process financial transactions on those days that the New York Stock Exchange (NYSE) is open for trading. There may be circumstances where the NYSE does not open on a regularly scheduled date or time or closes at an earlier time than scheduled (normally 4:00 p.m. EST). Financial transactions requested before the close of the NYSE which meet our requirements will be processed according to the value next determined following the close of business. Financial transactions requested on a non-business day or after the close of the NYSE will be processed based on the value next computed on the next business day. There may be circumstances when the opening or closing time of the NYSE is different than other major stock exchanges, such as NASDAQ or the American Stock Exchange. Under such circumstances, the closing time of the NYSE will be used when valuing and processing transactions. There may be circumstances where the NYSE is open, however, due to inclement weather, natural disaster or other circumstances beyond our control, our offices may be closed or our business processing capabilities may be restricted. Under those circumstances, your Account Value may fluctuate based on changes in the Unit Values, but you may not be able to transfer Account Value, or make a purchase or redemption request. The NYSE is closed on the following nationally recognized holidays: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. On those dates, we will not process any financial transactions involving purchase or redemption orders. American Skandia will also not process financial transactions involving purchase or redemption orders or transfers on any day that: [X] trading on the NYSE is restricted; [X] an emergency exists making redemption or valuation of securities held in the separate account impractical; or [X] the SEC, by order, permits the suspension or postponement for the protection of security holders. Initial Purchase Payments: We are required to allocate your initial Purchase Payment to the Sub-accounts within two (2) days after we receive all of our requirements to issue the Annuity. If we do not have all the required information to allow us to issue your Annuity, we may retain the Purchase Payment while we try to reach you or your representative to obtain all of our requirements. If we are unable to obtain all of our required information within five (5) days, we are required to return the Purchase Payment at that time, unless you specifically consent to our retaining the Purchase Payment while we gather the required information. Once we obtain the required information, we will invest the Purchase Payment and issue the Annuity within two (2) days. During any period that we are trying to obtain the required information, your money is not invested. Additional Purchase Payments: We will apply any additional Purchase Payments on the Valuation Day that we receive the Purchase Payment with satisfactory allocation instructions. Scheduled Transactions: "Scheduled" transactions include transfers under a Dollar Cost Averaging, rebalancing, or asset allocation program, Systematic Withdrawals, Minimum Distributions or annuity payments. Scheduled transactions are processed and valued as of the date they are scheduled, unless the scheduled day is not a Valuation Day. In that case, the transaction will be processed and valued on Valuation Day prior to the scheduled transaction date. Unscheduled Transactions: "Unscheduled" transactions include any other non-scheduled transfers and requests for Partial Withdrawals or Free Withdrawals or Surrenders. Unscheduled transactions are processed and valued as of the Valuation Day we receive the request at our Office and have all of the required information. Medically-related Surrenders & Death Benefits: Medically-related surrender requests and Death Benefit claims require our review and evaluation before processing. We price such transactions as of the date we receive at our Office all supporting documentation we require for such transactions and that are satisfactory to us. Transactions in ProFunds VP Sub-accounts: Generally, purchase or redemption orders or transfer requests must be received by us by no later than the close of the NYSE to be processed on the current Valuation Day. However, any purchase or redemption order or transfer request involving the ProFunds VP Sub-accounts must be received by us no later than one hour prior to any announced closing of the applicable securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the current Valuation Day. The "cut-off" time for such financial transactions involving a ProFunds VP Sub-account will be extended to1/2hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for transactions submitted electronically through American Skandia's Internet website (www.americanskandia.com). You cannot request a transaction involving the purchase, redemption or transfer of Units in one of the ProFunds VP Sub-accounts between the applicable "cut-off" time and 4:00 p.m. Transactions received after 4:00 p.m. will be treated as received by us on the next Valuation Day. WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES? Termination of Optional Benefit: If you terminate the Guaranteed Return Option program, we will no longer deduct the charge we apply to purchase the optional benefit. On the date the charge no longer applies, your Annuity will become subject to a different daily asset-based charge. We will process a transaction where your Account Value allocated to the Sub-accounts will be used to purchase new Units of the Sub-accounts that reflect the Insurance Charge, but not the charge for the optional program that you terminated. The number of Units attributed to your Annuity will be decreased and the Unit Price of each unit of the Sub-accounts in which you invested will be increased. The adjustment in the number of Units and Unit Price will not affect your Account Value. Beginning on that date, your Account Value will be determined based on the change in the value of Units that reflect the Insurance Charge. TAX CONSIDERATIONS WHAT ARE SOME OF THE FEDERAL TAX CONSIDERATIONS OF THIS ANNUITY? Following is a brief summary of some of the Federal tax considerations relating to this Annuity. However, since the tax laws are complex and tax consequences are affected by your individual circumstances, this summary of our interpretation of the relevant tax laws is not intended to be fully comprehensive nor is it intended as tax advice. Therefore, you may wish to consult a professional tax advisor for tax advice as to your particular situation. HOW ARE AMERICAN SKANDIA AND THE SEPARATE ACCOUNTS TAXED? The Separate Accounts are taxed as part of American Skandia. American Skandia is taxed as a life insurance company under Part I, subchapter L of the Code. No taxes are due on interest, dividends and short-term or long-term capital gains earned by the Separate Accounts with respect to the Annuities. IN GENERAL, HOW ARE ANNUITIES TAXED? Section 72 of the Code governs the taxation of annuities in general. Taxation of the Annuity will depend in large part on: 1. whether the Annuity is used by: [X] a qualified pension plan, profit sharing plan or other retirement arrangement that is eligible for special treatment under the Code (for purposes of this discussion, a "Qualified Contract"); or [X] an individual or a corporation, trust or partnership (a "Non-qualified Contract"); and 2. whether the Owner is: [X] an individual person or persons; or [X] an entity including a corporation, trust or partnership. Individual Ownership: If one or more individuals own an Annuity, the Owner of the Annuity is generally not taxed on any increase in the value of the Annuity until an amount is received (a "distribution"). This is commonly referred to as "tax deferral". A distribution can be in the form of a lump sum payment including payment of a Death Benefit, or in annuity payments under one of the annuity payment options. Certain other transactions may qualify as a distribution and be subject to taxation. Entity Ownership: If the Annuity is owned by an entity and is not a Qualified Contract, generally the Owner of the Annuity must currently include any increase in the value of the Annuity during a tax year in its gross income. An exception from current taxation applies for annuities held by an employer with respect to a terminated tax-qualified retirement plan, a trust holding an annuity as an agent for a natural person, or by a decedent's estate by reason of the death of the decedent. A tax-exempt entity for Federal tax purposes may not be subject to income tax as a result of this provision. HOW ARE DISTRIBUTIONS TAXED? Distributions from an Annuity are taxed as ordinary income and not as capital gains. Distributions Before Annuitization: Distributions received before annuity payments begin are generally treated as coming first from "income on the contract" and then as a return of the "investment in the contract". The amount of any distribution that is treated as receipt of "income on the contract" is includible in the taxpayer's gross income and taxable in the year it is received. The amount of any distribution treated as a return of the "investment in the contract" is not includible in gross income. [X] "Income on the contract" is calculated by subtracting the taxpayer's "investment in the contract" from the aggregate value of all "related contracts" (discussed below). [X] "Investment in the contract" is equal to total purchase payments for all "related contracts" minus any previous distributions or portions of such distributions from such "related contracts" that were 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, endowment, or annuity contracts under Section 1035 of the Code. The "investment in the contract" for a Qualified Contract will be considered zero for tax reporting purposes. Distributions After Annuitization: A portion of each annuity payment received on or after the Annuity Date will generally be taxable. The taxable portion of each annuity payment is determined by a formula which establishes the ratio that the "investment in the contract" bears to the total value of annuity payments to be made. This is called the "exclusion ratio." The investment in the contract is excluded from gross income. Any portion of an annuity payment received that exceeds the exclusion ratio will be entirely includible in gross income. The formula for determining the exclusion ratio differs between fixed and variable annuity payments. When 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 may be allowed as a deduction on the decedent's final income tax return. Penalty Tax on Distributions: Generally, any distribution from an annuity not used in conjunction with a Qualified Contract (Qualified Contracts are discussed below) is subject to a penalty equal to 10% of the amount includible in gross income. This penalty does not apply to certain distributions, including: [X] Distributions made on or after the taxpayer has attained age 591/2; [X] Distributions made on or after the death of the contract owner, or, if the owner is an entity, the death of the annuitant; [X] Distributions attributable to the taxpayer's becoming disabled within the meaning of Code section 72(m)(7); [X] Distributions which are part of a series of substantially equal periodic payments for the life (or life expectancy) of the taxpayer or the joint lives (or joint life expectancies) of the taxpayer and the taxpayer's designated beneficiary; [X] Distributions of amounts which are treated as "investments in the contract" made prior to August 14, 1982; [X] Payments under an immediate annuity as defined in the Code; [X] Distributions under a qualified funding asset under Code Section 130(d); or [X] 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. Special rules applicable to "related contracts": Contracts issued by the same insurer to the same contract owner within the same calendar year (other than certain contracts owned in connection with a tax-qualified retirement arrangement) are to be treated as one annuity contract when determining the taxation of distributions before annuitization. We refer to these contracts as "related contracts." In situations involving related contracts we believe that the values under such contracts and the investment in the contracts will be added together to determine the proper taxation of a distribution from any one contract described under the section "Distributions before Annuitization." Generally, distributions will be treated as coming first from income on the contract until all of the income on all such related contracts is withdrawn, and then as a return of the investment in the contract. There is some uncertainty regarding the manner in which the Internal Revenue Service would view related contracts when one or more contracts are immediate annuities or are contracts that have been annuitized. The Internal Revenue Service has not issued guidance clarifying this issue as of the date of this Prospectus. You are particularly cautioned to seek advice from your own tax advisor on this matter. Special concerns regarding "substantially equal periodic payments": (also known as "72(t)" or "72(q)" distributions) Any modification to a program of distributions which are part of a series of substantially equal periodic payments that occur before the later of the taxpayer reaching age 59 1/2or five (5) years from the first of such payments will result in the requirement to pay the 10% premature distribution penalty that would have been due had the payments been treated as subject to the 10% premature distribution penalty in the years received, plus interest. This does not apply when the modification is by reason of death or disability. American Skandia does not currently support a section 72(q) program. Special concerns regarding immediate annuities: The Internal Revenue Service has ruled that the immediate annuity exception to the 10% penalty described above under "Penalty Tax on Distributions" 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 a contract if: (a) purchase payments for the exchanged contract were contributed or deemed to be contributed more than one year prior to the annuity starting date 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. Special rules in relation to tax-free exchanges under Section 1035: 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 purchased through a tax-free exchange of a life insurance, annuity or endowment contract that was purchased prior to August 14, 1982, then any distributions other than as annuity payments will be considered to come: [X] First, from the amount of "investment in the contract" made prior to August 14, 1982 and exchanged into the annuity; [X] Then, from any "income on the contract" that is attributable to the purchase payments made prior to August 14, 1982 (including income on such original purchase payments after the exchange); [X] Then, from any remaining "income on the contract"; and [X] Lastly, from the amount of any "investment in the contract" made after August 13, 1982. Therefore, to the extent a distribution is equal to or less than the remaining investment in the contract made prior to August 14, 1982, such amounts are not included in taxable income. Further, distributions received that are considered to be a return of investment on the contract from purchase payments made prior to August 14, 1982, such distributions are not subject to the 10% tax penalty. In all other respects, the general provisions of the Code apply to distributions from annuities obtained as part of such an exchange. Partial surrenders may be treated in the same way as tax-free 1035 exchanges of entire contracts, therefore avoiding current taxation of any gains in the contract as well as the 10% IRS tax penalty on pre-age 59 1/2withdrawals. The IRS has reserved the right to treat transactions it considers abusive as ineligible for this favorable partial 1035 exchange treatment. We do not know what transactions may be considered abusive. For example, we do not know how the IRS may view early withdrawals or annuitizations after a partial exchange. As of the date of this prospectus, we will treat a partial surrender of this type involving a non-qualified annuity contract as a "tax-free" exchange for future tax reporting purposes, except to the extent that we, as a reporting and withholding agent, believe that we would be expected to deem the transaction to be abusive. However, some insurance companies may not recognize these partial surrenders as tax-free exchanges and may report them as taxable distributions to the extent of any gain distributed as well as subjecting the taxable portion of the distribution to the 10% IRS early distribution penalty. We strongly urge you to discuss any transaction of this type with your tax advisor before proceeding with the transaction. There is no guidance from the Internal Revenue Service as to whether a partial exchange from a life insurance contract is eligible for non-recognition treatment under Section 1035 of the Code. We will continue to report a partial surrender of a life insurance policy as subject to current taxation to the extent of any gain. In addition, please be cautioned that no specific guidance has been provided as to the impact of such a transaction on the remaining life insurance policy, particularly as to the subsequent methods to be used to test for compliance under the Code for both the definition of life insurance and the definition of a modified endowment contract. Special Considerations for Purchasers of the Enhanced Beneficiary Protection Optional Death Benefit: As of the date of this Prospectus, it is our understanding that the charges related to the optional Death Benefit are not subject to current taxation and we will not report them as such. However, the IRS could take the position that these charges should be treated as partial withdrawals subject to current taxation to the extent of any gain and, if applicable, the 10% tax penalty. We reserve the right to report charges for the optional Death Benefit as partial withdrawals if we, as a reporting and withholding agent, believe that we would be expected to report them as such. WHAT TAX CONSIDERATIONS ARE THERE FOR TAX-QUALIFIED RETIREMENT PLANS OR QUALIFIED CONTRACTS? An annuity may be suitable as a funding vehicle for various types of tax-qualified retirement plans. We have provided summaries below of the types of tax-qualified retirement plans with which we may issue an Annuity. These summaries provide general information about the tax rules and are not intended to be complete discussions. The tax rules regarding qualified plans are complex. These rules may include limitations on contributions and restrictions on distributions, including additional taxation of distributions and additional penalties. The terms and conditions of the tax-qualified retirement plan may impose other limitations and restrictions that are in addition to the terms of the Annuity. The application of these rules depends on individual facts and circumstances. Before purchasing an Annuity for use in a qualified plan, you should obtain competent tax advice, both as to the tax treatment and suitability of such an investment. American Skandia does not offer all of its annuities to all of these types of tax-qualified retirement plans. Economic Growth and Tax Relief Reconciliation Act (EGTRRA): Certain states do not conform to the pension provisions included in EGTRRA. We recommend that you consult with your tax advisor to determine the status of your state's statutes as they relate to EGTRRA and your tax qualified retirement plan. Corporate Pension and Profit-sharing Plans: Annuities may be used to fund employee benefits of various corporate pension and profit-sharing plans established by corporate employers under Section 401(a) of the Code including 401(k) plans. Contributions to such plans are not taxable to the employee until distributions are made from the retirement plan. The Code imposes limitations on the amount that may be contributed and the timing of 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 Sheltered Annuities: Under Section 403(b) of the Code, a tax sheltered annuity ("TSA") is a contract into which contributions may be made by certain qualifying employers such as public schools and certain charitable, educational and scientific organizations specified in Section 501(c)(3) for the benefit of their employees. 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 also apply. 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. Individual Retirement Arrangements or "IRAs": Section 408 of the Code allows eligible individuals to maintain an individual retirement account or individual retirement annuity ("IRA"). IRAs are subject to limitations on the amount that may be contributed, the contributions that may be deducted from taxable income, the persons who may be eligible to establish an IRA and the time when distributions must commence. Further, an Annuity may be established with "roll-over" distributions from certain tax-qualified retirement plans and maintain the tax-deferred status of these amounts. Roth IRAs: A form of IRA is also available called a "Roth IRA". Contributions to a Roth IRA are not tax deductible. However, distributions from a Roth IRA are free from Federal income taxes and are not subject to 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 1/2or 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 Federal income and penalty taxes. 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 or another qualified plan, 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. SEP IRAs: Eligible employers that meet specified criteria may establish Simplified Employee Pensions or SEP IRAs. Employer contributions that may be made to employee SEP IRAs are larger than the amounts that may be contributed to other IRAs, and may be deductible to the employer. HOW ARE DISTRIBUTIONS FROM QUALIFIED CONTRACTS TAXED? Distributions from Qualified Contracts are generally taxed under Section 72 of the Code. Under these rules, a portion of each distribution may be excludable from income. The excludable amount is the proportion of a distribution representing after-tax contributions. Generally, a 10% penalty tax applies to the taxable portion of a distribution from a Qualified Contract made prior to age 59 1/2. However, the 10% penalty tax does not apply when the distribution: [X] is part of a properly executed transfer to another IRA or another eligible qualified account; [X] 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); [X] is part of a series 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; [X] is subsequent to a separation from service after the taxpayer attains age 55*; [X] does not exceed the employee's allowable deduction in that tax year for medical care; [X] is made to an alternate payee pursuant to a qualified domestic relations order*; [X] is made pursuant to an IRS levy; [X] is made to pay qualified acquisition costs for a first time home purchase (IRA only); [X] is made to pay qualified higher education expenses (IRA only); and [X] is not more than the cost of your medical insurance (IRA only). The exceptions above which are followed by an asterisk (*) do not apply to IRAs. Certain other exceptions may be available. Minimum Distributions after age 70 1/2: A participant's interest in a Qualified Contract must generally be distributed, or begin to be distributed, by the "required beginning date". This is April 1st of the calendar year following the later of: [X] the calendar year in which the individual attains age 70 1/2; or [X] the calendar year in which the individual retires from service with the employer sponsoring the plan. The retirement option is not available to IRAs. The IRS has released Treasury regulations containing new Minimum Distribution rules. For Minimum Distributions required in 2003 and later, individuals are required to use the rules under the 2002 Final Regulations. The 2002 Final Regulations contain a provision which could increase the amount of minimum distributions required for certain individuals. Under the 2002 Final Regulations, individuals are required to include in their annuity contract value the actuarial value of any other benefits that will be provided under the annuity. We and other annuity providers are currently seeking clarification of this new rule. You should consult your tax adviser to determine the impact of this rule on your Minimum Distributions. Under the new Minimum Distribution rules, a uniform life expectancy table will be utilized by all participants except those with a spouse who is more than ten (10) years younger than the participant. In that case, the new rules permit the participant to utilize the actual life expectancies of the participant and the spouse. In most cases, the beneficiary may be changed during the participant's lifetime with no affect on the Minimum Distributions. At death, the designated Beneficiary may generally take Minimum Distributions over his/her life expectancy or in a lump sum. If the amount distributed is less than the minimum required distribution for the year, the participant is subject to a 50% tax on the amount that was not properly distributed. Because of the many recent changes to the Minimum Distribution rules, we strongly encourage you to consult with your tax advisor for more detailed information. GENERAL TAX CONSIDERATIONS 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). If the diversification requirements under the Code are not met and the annuity is not treated as an annuity, the taxpayer will be subject to income tax on the annual gain in the contract. The Treasury Department's regulations prescribe the diversification requirements for variable annuity contracts. We expect the underlying mutual fund portfolios to comply with the terms of these regulations. 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. 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, known as eligible rollover distributions, from Qualified Contracts, are subject to automatic 20% withholding for Federal income taxes. The following distributions are not eligible rollover distributions and not subject to 20% withholding: [X] any portion of a distribution paid as a Minimum Distribution; [X] direct transfers to the trustee of another retirement plan; [X] distributions from an individual retirement account or individual retirement annuity; [X] 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; [X] distributions that are part of a series of substantial periodic payments pursuant to Section 72(q) or 72(t) of the Code; and [X] certain other distributions where automatic 20% withholding may not apply. 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 is treated as a distribution subject to taxation under the distribution rules set forth above. Any gain in an annuity on or after the assignment or pledge of an entire annuity and 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 as Qualified Contracts, 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 someone other than the spouse of the owner (or former spouse incident to a divorce) is treated, for income tax purposes, as a distribution. 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 $1.1 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. We will deduct from your Annuity or from any applicable payment treated as a direct skip any amount of tax we are required to pay. Considerations for Contingent Annuitants: There may be adverse tax consequences if a contingent annuitant succeeds an annuitant when the Annuity is owned by a trust that is neither tax exempt nor qualifies for preferred treatment under certain sections of the Code. In general, the Code is designed to prevent indefinite deferral of tax. 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. GENERAL INFORMATION HOW WILL I RECEIVE STATEMENTS AND REPORTS? We send any statements and reports required by applicable law or regulation to you at your last known address of record. You 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. We may confirm regularly scheduled transactions, such as the Annual Maintenance Fee, systematic withdrawals (including 72(t) payments and required minimum distributions), bank drafting, dollar cost averaging, and static rebalancing, in quarterly statements instead of confirming them immediately. You should review the information in these statements carefully. You may request additional reports. We reserve the right to charge up to $50 for each such additional report. Any errors or corrections on transactions for your Annuity must be reported to us at our Office as soon as possible 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 30 days from the date you receive the confirmation. For transactions that are first confirmed on the quarterly statement, we assume all transactions are accurate unless you notify us within 30 days from the date you receive the quarterly statement. All transactions confirmed immediately or by quarterly statement are deemed conclusive after the applicable 30-day period. We may also send an annual report and a semi-annual report containing applicable financial statements for the Separate Account and the Portfolios, as of December 31 and June 30, respectively, to Owners or, with your prior consent, make such documents available electronically through our Internet Website or other electronic means. WHO IS AMERICAN SKANDIA? American Skandia Life Assurance Corporation ("American Skandia") is a stock life insurance company domiciled in Connecticut with licenses in all 50 states, the District of Columbia and Puerto Rico. American Skandia is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). American Skandia markets its products to broker-dealers and financial planners through an internal field marketing staff. In addition, American Skandia markets through and in conjunction with financial institutions such as banks that are permitted directly, or through affiliates, to sell annuities. American Skandia is in the business of issuing annuity and life insurance products. American Skandia currently offers the following products: (a) flexible premium deferred annuities and single premium fixed deferred annuities that are registered with the SEC; (b) certain other fixed deferred annuities that are not registered with the SEC; (c) both fixed and variable immediate adjustable annuities; and (d) a single premium variable life insurance policy that is registered with the SEC. On December 20, 2002, Skandia Insurance Company Ltd. (publ), an insurance company organized under the laws of the Kingdom of Sweden ("Skandia"), and on that date, the ultimate parent company of American Skandia, announced that it and Skandia U.S. Inc. had entered into a definitive Stock Purchase Agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"). Under the terms of the Stock Purchase Agreement, Prudential Financial will acquire Skandia U.S. Inc., a Delaware corporation, from Skandia. Skandia U.S. Inc. is the sole shareholder of ASI, which is the parent company of American Skandia. The transaction is expected to close during the second quarter of 2003. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. No company other than American Skandia has any legal responsibility to pay amounts that it owes under its annuity and variable life insurance contracts. However, following the closing of the acquisition, Prudential Financial will exercise significant influence over the operations and capital structure of American Skandia. WHAT ARE SEPARATE ACCOUNTS? The separate accounts are where American Skandia sets aside and invests the assets of some of our annuities. In the accumulation period, assets supporting Account Values of the Annuities are held in a separate account established under the laws of the State of Connecticut. We are the legal owner of assets in the separate accounts. In the payout period, assets supporting fixed annuity payments and any adjustable annuity payments we make available are held in our general account. Assets supporting variable annuity payment options may be invested in our separate accounts. Income, gains and losses from assets allocated to these separate accounts are credited to or charged against each such separate account without regard to other income, gains or losses of American Skandia or of any other of our separate accounts. These assets may only be charged with liabilities which arise from the Annuities issued by American Skandia. The amount of our obligation 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 During the accumulation period, the assets supporting obligations based on allocations to the variable investment options are held in Sub-accounts of American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B". Separate Account B was established by us pursuant to Connecticut law on November 25, 1987. 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. Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. The name of each Sub-account generally corresponds to the name of the underlying Portfolio. Each Sub-account in Separate Account B may have several different Unit Prices to reflect the Insurance Charge and the charges for any optional benefits that are offered under this Annuity and other annuities issued by us through Separate Account B. Separate Account B is registered with the SEC under the Investment Company Act of 1940 ("Investment Company Act") as a unit investment trust, which is a type of investment company. The SEC does not supervise investment policies, management or practices of Separate Account B. Prior to November 18, 2002, Separate Account B was organized as a single separate account with six different Sub-account classes, each of which was registered as a distinct unit investment trust under the Investment Company Act. Effective November 18, 2002, each Sub-account class of Separate Account B will be consolidated into the unit investment trust formerly named American Skandia Life Assurance Corporation Variable Account B (Class 1 Sub-accounts), which will subsequently be renamed American Skandia Life Assurance Corporation Variable Account B. Each Sub-account of Separate Account B will have multiple Unit Prices to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for each optional benefit offered under Annuity contracts funded through Separate Account B. The consolidation of Separate Account B will have no impact on Annuity Owners. We reserve the right to make changes to the Sub-accounts available under the Annuity as we determine appropriate. We may offer new Sub-accounts, eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may also close Sub-accounts to additional Purchase Payments on existing Annuity contracts or close Sub-accounts for Annuities purchased on or after specified dates. We may also substitute an underlying mutual fund or portfolio of an underlying mutual fund for another underlying mutual fund or portfolio of an underlying mutual fund, subject to our receipt of any exemptive relief that we are required to obtain under the Investment Company Act. We will notify Owners of changes we make to the Sub-accounts available under the Annuity. 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. Your Account Value allocated to the Sub-accounts may increase or decrease. You bear the entire investment risk. There is no assurance that the Account Value of your Annuity will equal or be greater than the total of the Purchase Payments you make to us. Separate Account D During the accumulation period, assets supporting our obligations based on Fixed Allocations are held in American Skandia Life Assurance Corporation Separate Account D, also referred to as "Separate Account D". Such obligations are based on the fixed 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 units in Separate Account D. The Fixed Allocations are guaranteed by our general account. An Annuity Owner who allocates a portion of their Account Value to Separate Account D does not participate in the investment gain or loss on assets maintained in 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. We currently employ investment managers to manage the assets maintained in Separate Account D. Each manager we employ is responsible for investment management of a different portion 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) and have sole discretion over the investment managers we retain. We are not obligated to invest according to specific guidelines or strategies except as may be required by Connecticut and other state insurance laws. WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS? Each underlying mutual fund is registered as an open-end management investment company under the Investment Company Act. Shares of the underlying mutual fund portfolios are sold to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be sold directly to qualified pension and retirement plans. Voting Rights We are the legal owner of the shares of the underlying mutual funds in which the Sub-accounts invest. However, under SEC rules, you have voting rights in relation to Account Value maintained in the Sub-accounts. If an underlying mutual fund portfolio requests a vote of shareholders, we will vote our shares based on instructions received from Owners with Account Value allocated to that Sub-account. Owners have the right to vote an amount equal to the number of shares attributable to their contracts. If we do not receive voting instructions in relation to certain shares, we will vote those shares in the same manner and proportion as the shares for which we have received instructions. We will furnish those Owners who have Account Value allocated to a Sub-account whose underlying mutual fund portfolio has requested a "proxy" vote with proxy materials and the necessary forms to provide us with their voting instructions. Generally, you will be asked to provide instructions for us to vote on matters such as changes in a fundamental investment strategy, adoption of a new investment advisory agreement, or matters relating to the structure of the underlying mutual fund that require a vote of shareholders. American Skandia Trust (the "Trust") has obtained an exemption from the Securities and Exchange Commission that permits its investment adviser, American Skandia Investment Services, Incorporated ("ASISI"), subject to approval by the Board of Trustees of the Trust, to change sub-advisors for a Portfolio and to enter into new sub-advisory agreements, without obtaining shareholder approval of the changes. This exemption (which is similar to exemptions granted to other investment companies that are organized in a similar manner as the Trust) is intended to facilitate the efficient supervision and management of the sub-advisors by ASISI and the Trustees. The Trust is required, under the terms of the exemption, to provide certain information to shareholders following these types of changes. Material Conflicts It is possible that differences may occur between companies that offer shares of an underlying mutual fund portfolio to their respective separate accounts issuing variable annuities and/or variable life insurance products. Differences may also occur surrounding the offering of an underlying mutual fund portfolio to variable life insurance policies and variable annuity contracts that we offer. Under certain circumstances, these differences could be considered "material conflicts," in which case we would take necessary action to protect persons with voting rights under our variable annuity contracts and variable life insurance policies against persons with voting rights under other insurance companies' variable insurance products. If a "material conflict" were to arise between owners of variable annuity contracts and variable life insurance policies issued by us we would take necessary action to treat such persons equitably in resolving the conflict. "Material conflicts" could arise due to differences in voting instructions between owners of variable life insurance and variable annuity contracts of the same or different companies. We monitor any potential conflicts that may exist. Service Fees Payable to American Skandia American Skandia or our affiliates have entered into agreements with the investment adviser or distributor of many of the underlying Portfolios. Under the terms of these agreements, American Skandia provides administrative and support services to the Portfolios for which a fee is paid that is generally based on a percentage of the average assets allocated to the Portfolios under the Annuity. Any fees payable will be consistent with the services rendered or the expected cost savings resulting from the arrangement. These agreements may be different for each underlying mutual fund whose portfolios are offered as Sub-accounts. WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA? American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of American Skandia, Inc., is the distributor and principal underwriter of the securities offered through this prospectus. ASM acts as the distributor of a number of annuity and life insurance products we offer and both American Skandia Trust and American Skandia Advisor Funds, Inc., a family of retail mutual funds. ASM also acts as an introducing broker-dealer through which it receives a portion of brokerage commissions in connection with purchases and sales of securities held by portfolios of American Skandia Trust which are offered as underlying investment options under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as broker-dealer under the Securities Exchange Act of 1934 ("Exchange Act") and is a member of the National Association of Securities Dealers, Inc. ("NASD"). The Annuity is offered on a continuous basis. ASM enters into distribution agreements with independent broker-dealers who are registered under the Exchange Act and with entities that may offer the Annuity but are exempt from registration. Applications for the Annuity are solicited by registered representatives of those firms. Such representatives will also be our appointed insurance agents under state insurance law. In addition, ASM may offer the Annuity directly to potential purchasers. Compensation is paid to firms on sales of the Annuity according to one or more schedules. The individual representative will receive a portion of the compensation, depending on the practice of the firm. Compensation is generally based on a percentage of Purchase Payments made, up to a maximum of 7.0%. Alternative compensation schedules are available that provide a lower initial commission plus ongoing annual compensation based on all or a portion of Account Value. We may also provide compensation for providing ongoing service to you in relation to the Annuity. Commissions and other compensation paid in relation to the Annuity do not result in any additional charge to you or to the Separate Account. No compensation is payable on Annuities purchased by a member of the designated class of Owners (see "Credits Applied to Purchase Payments for Designated Class of Annuity Owner"). In addition, firms may receive separate compensation or reimbursement for, among other things, training of sales personnel, marketing or other services they provide to us or our affiliates. We or ASM may enter into compensation arrangements with certain firms. These arrangements will not be offered to all firms and the terms of such arrangements may differ between firms. Any such compensation will be paid by us or ASM and will not result in any additional charge to you. To the extent permitted by NASD rules and other applicable laws and regulations, ASM may pay or allow other promotional incentives or payments in the form of cash or other compensation. Advertising: We may advertise certain information regarding the performance of the investment options. Details on how we calculate performance for the Sub-accounts are found in the Statement of Additional Information, including how we account for Credits in these performance measures. This 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 receive the beneficial tax treatment given to annuities under the Code. We may advertise the performance of the Portfolios in the form of "Standard" and "Non-standard" Total Returns calculated for each Sub-account. "Standard Total Return" figures assume a hypothetical initial investment of $1,000 allocated to a Sub-account during the most recent one, five and ten year periods (or since the inception date that the Portfolio has been offered as a Sub-account, if less). "Standard Total Return" figures assume that the applicable Insurance Charge and the Annual Maintenance Fee are deducted and that the Annuity is surrendered at the end of the applicable period, meaning that any Contingent Deferred Sales Charge that would apply upon surrender is also deducted. "Standard Total Return" figures do not take into consideration any Credits. "Non-standard Total Return" figures include any performance figures that do not meet the SEC's rules for Standard Total Returns. Non-standard Total Returns are calculated in the same manner as standardized returns except that the figures may not reflect all fees and charges. In particular, they may assume no surrender at the end of the applicable period so that the CDSC does not apply. "Non-standard Total Return" figures may assume Credits of 1.5%, 4.0% or 5.0%, respectively, depending on the cumulative amount of Purchase Payments being illustrated. The amount of credits illustrated may be more or less than the Credits applicable to your Annuity (see "How do I Receive Credits?"). Standard and Non-standard Total Returns will not reflect the additional asset-based charges that are deducted when you elect any optional benefits. The additional cost associated with any optional benefits you elected will reduce your performance. Non-standard Total Returns must be accompanied by Standard Total Returns. Some of the underlying 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 Portfolios have been in existence, but the Sub-accounts have not. Such hypothetical historical performance is calculated using the same assumptions employed in calculating actual performance since inception of the Sub-accounts. Hypothetical historical performance of the underlying Portfolios prior to the existence of the Sub-accounts may only be presented as Non-standard Total Returns. We may advertise the performance of money market-type Sub-accounts using a measure of the "current and effective yield". The current yield of a money market-type Sub-account is calculated based upon the previous seven-day period ending on the date of calculation. The effective yield of a money market-type Sub-account reflects the reinvestment of net income earned daily on the assets of such a Sub-account. The current and effective yields reflect the Insurance Charge and the charge for any optional benefits (if applicable) deducted against the Sub-account. In a low interest rate environment, yields for money market-type Sub-accounts, after deduction of the Insurance Charge, and the charge for any optional benefits (if applicable) may be negative even though the yield (before deducting for such charges) is positive. Current and effective yield information will fluctuate. This information may not provide a basis for comparisons with deposits in banks or other institutions which pay a fixed yield over a stated period of time, or with investment companies which do not serve as underlying mutual funds for variable annuities and/or do not have additional asset-based charges deducted for the insurance protection provided by the Annuity. Performance information on the Sub-accounts is based on past performance only and is not an indication or representation of future performance. Performance of the Sub-accounts is not fixed. Actual performance will depend on the type, quality and, for some of the Sub-accounts, the maturities of the investments held by the underlying mutual funds or portfolios and upon prevailing market conditions and the response of the underlying mutual funds to such conditions. Actual performance will also depend on changes in the expenses of the underlying mutual funds or portfolios. Such changes are reflected, in turn, in the Sub-accounts which invest in such underlying mutual fund or portfolio. In addition, the total amount of asset-based charges assessed against each Sub-account will affect performance. The information we may advertise regarding the Fixed Allocations may include the then current interest rates we are crediting to new Fixed Allocations. Information on current rates will be as of the date specified in such advertisement. Rates will be included in advertisements to the extent permitted by law. Given that the actual rates applicable to any Fixed Allocation are as of the date of any such Fixed Allocation's Guarantee Period begins, the rate credited to a Fixed Allocation may be more or less than those quoted in an advertisement. 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 NASDAQ 100, 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. AVAILABLE INFORMATION A Statement of Additional Information is available from us without charge upon your request. This Prospectus is part of the registration statement we filed with the 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 exhibits thereto at the SEC's public reference facilities at the above address, Room 1024, and at the SEC's Regional Offices, The Woolworth Building, 233 Broadway, New York, NY and 175 W. Jackson Boulevard, Suite 900, Chicago, IL. These documents, as well as documents incorporated by reference, may also be obtained through the SEC's Internet Website (http://www.sec.gov) for this registration statement as well as for other registrants that file electronically with the SEC. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE To the extent and only to the extent that any statement in a document incorporated by reference into this Prospectus is modified or superseded by a statement in this Prospectus or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Prospectus. The Annual Report on Form 10-K for the year ended December 31, 2002 previously filed by the Company with the SEC under the Exchange Act is incorporated by reference in this Prospectus. We will 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 will do so upon receipt of your written or oral request. HOW TO CONTACT US You can contact us by: [X] calling Skandia's Telephone Automated Response System (STARS) at 1-800-766-4530. [X] writing to us via regular mail at American Skandia - Variable Annuities, P.O. Box 7040, Bridgeport, Connecticut 06601-7040 OR for express mail American Skandia - Variable Annuities, One Corporate Drive, Shelton, Connecticut 06484. NOTE: Failure to send mail to the proper address may result in a delay in our receiving and processing your request. [X] sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. [X] accessing information about your Annuity through our Internet Website at www.americanskandia.com. You can obtain account information through Skandia's Telephone Automated Response System (STARS) and at www.americanskandia.com, our Internet Website. Our Customer Service representatives are also available during business hours to provide you with information about your account. You can request certain transactions through our telephone voice response system, our Internet Website or through a customer service representative. You can provide authorization for a third party, including your attorney-in-fact acting pursuant to a power of attorney or an investment professional, to access your account information and perform certain transactions on your account. You will need to complete a form provided by us which identifies those transactions that you wish to authorize via telephonic and electronic means and whether you wish to authorize a third party to perform any such transactions. We require that you or your representative provide proper identification before performing transactions over the telephone or through our Internet Website. This may include a Personal Identification Number (PIN) that will be provided to you upon issue of your Annuity or you may establish or change your PIN through STARS and at www.americanskandia.com, our Internet Website. Any third party that you authorize to perform financial transactions on your account will be assigned a PIN for your account. Transactions requested via telephone are recorded. To the extent permitted by law, we will not be responsible for any claims, loss, liability or expense in connection with a transaction requested by telephone or other electronic means if we acted on such transaction instructions after following reasonable procedures to identify those persons authorized to perform transactions on your Annuity using verification methods which may include a request for your Social Security number, PIN or other form of electronic identification. We may be liable for losses due to unauthorized or fraudulent instructions if we did not follow such procedures. American Skandia does not guarantee access to telephonic, facsimile, Internet or any other electronic information or that we will be able to accept transaction instructions via such means at all times. Regular and/or express mail will be the only means by which we will accept transaction instructions when telephonic, facsimile, Internet or any other electronic means are unavailable or delayed. American Skandia reserves the right to limit, restrict or terminate telephonic, facsimile, Internet or any other electronic transaction privileges at any time. INDEMNIFICATION Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Securities Act") 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 SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. LEGAL PROCEEDINGS As of the date of this Prospectus, American Skandia and its affiliates are not involved in any legal proceedings outside of the ordinary course of business. American Skandia and its affiliates are involved in pending and threatened legal proceedings in the normal course of its business, however, we do not anticipate that the outcome of any such legal proceedings will have a material adverse affect on the Separate Account, or American Skandia's ability to meet its obligations under the Annuity, or on the distribution of the Annuity. CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION The following are the contents of the Statement of Additional Information: General Information about American Skandia [X] American Skandia Life Assurance Corporation [X] American Skandia Life Assurance Corporation Variable Account B [X] American Skandia Life Assurance Corporation Separate Account D Principal Underwriter/Distributor - American Skandia Marketing, Incorporated How Performance Data is Calculated [X] Current and Effective Yield [X] Total Return How the Unit Price is Determined Additional Information on Fixed Allocations [X] How We Calculate the Market Value Adjustment General Information [X] Voting Rights [X] Modification [X] Deferral of Transactions [X] Misstatement of Age or Sex [X] Ending the Offer Annuitization Independent Auditors Legal Experts Financial Statements [X] Appendix A - American Skandia Life Assurance Corporation Variable Account B APPENDIX A - FINANCIAL INFORMATION ABOUT AMERICAN SKANDIA SELECTED FINANCIAL DATA (dollars in thousands) The following table summarizes information with respect to the operations of the Company:
For the Year Ended December 31, --------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ------------ ------------ ------------ ------------ ------------ STATEMENTS OF INCOME DATA Revenues: Annuity and life insurance $ 370,004 $ 388,696 $ 424,578 $ 289,989 $ 186,211 charges and fees (a) (b) Fee income (b) 97,650 111,196 130,610 83,243 50,839 Net investment income 19,632 20,126 18,595 11,477 11,130 Net realized capital (losses) gains and other revenues (e) (7,438) 2,698 4,195 3,688 1,360 ------------ ------------ ------------ ------------ ------------ Total revenues $ 479,848 $ 522,716 $ 577,978 $ 388,397 $ 249,540 ============ ============ ============ ============ ============ Benefits and Expenses: Annuity and life insurance $ 3,391 $ 1,955 $ 751 $ 612 $ 558 benefits Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 (671) 1,053 (c) Guaranteed minimum death benefit claims, net of 23,256 20,370 2,618 4,785 - hedge (b) Return credited to contract 5,196 5,796 8,463 (1,639) (8,930) owners Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 125,434 86,306 Amortization of deferred acquisition costs (b) (d) 510,059 224,047 184,616 83,861 86,628 Interest expense 14,544 73,424 85,998 69,502 41,004 ------------ ------------ ------------ ------------ ------------ Total benefits and expenses $ 747,915 $ 482,449 $ 482,382 $ 281,884 $ 206,619 ============ ============ ============ ============ ============ Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 $ 30,344 $ 8,154 ============ ============ ============ ============ ============ Net (loss) income $ (165,257) $ 33,099 $ 64,817 $ 76,169 $ 34,767 ============ ============ ============ ============ ============ STATEMENTS OF FINANCIAL CONDITION DATA Total assets (b) $ 23,708,585 $ 28,009,782 $ 31,702,705 $ 30,881,579 $ 18,848,273 ============ ============ ============ ============ ============ Future fees payable to parent $ 708,249 $ 799,472 $ 934,410 $ 576,034 $ 368,978 ============ ============ ============ ============ ============ Surplus notes $ 110,000 $ 144,000 $ 159,000 $ 179,000 $ 193,000 ============ ============ ============ ============ ============ Shareholder's equity $ 683,061 $ 577,668 $ 496,911 $ 359,434 $ 250,417 ============ ============ ============ ============ ============
a. On annuity and life insurance sales of $3,472,044, $3,834,167, $8,216,167, $6,862,968, and $4,159,662, during the years ended December 31, 2002, 2001, 2000, 1999, and 1998, respectively, with contract owner assets under management of $21,894,636, $26,017,847, $29,751,822, $29,396,693, and $17,854,761, as of December 31, 2002, 2001, 2000, 1999, and 1998, respectively. b. These items are significantly impacted by equity market volatility. c. For the year ended December 31, 2000, change in annuity and life insurance policy reserves reflected increases to those reserves for guaranteed minimum death benefit ("GMDB") exposure. For the year ended December 31, 2001, the Company changed certain of its assumptions related to its GMDB exposure resulting in a benefit to operations. See Results of Operations in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for a further discussion. d. During the year ended December 31, 2002, the Company recorded an acceleration of amortization of $206,000 against the deferred acquisition cost asset. See the MD&A for a further discussion. e. Net realized capital (losses) gains and other revenues include $5,845 of net realized capital losses on sales of securities during 2002 and an other than temporary impairment charge of $3,769 recorded during 2002 on the Company's equity securities. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (dollars in thousands) Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and the notes thereto and Item 6, Selected Financial Data. Results of Operations - --------------------- Annuity and life insurance sales were $3,472,044, $3,834,167 and $8,216,167, in 2002, 2001 and 2000, respectively. The decrease in sales in 2002 and 2001 was primarily the result of the general decline in sales in the industry, attributed in large part to the continued uncertainty in the equity markets. In addition, the Company believes uncertainty regarding its future ownership has adversely impacted sales, primarily in the latter part of 2002. The Company announced, in the first quarter of 2002, its intention to focus on the growth of its core variable annuity business. Average assets under management totaled $23,637,559 in 2002, $26,792,877 in 2001 and $31,581,902 in 2000, representing a decrease of 12% and 15% in 2002 and 2001, respectively, due primarily to weak equity markets. The decrease in annuity and life insurance charges and fees and fee income before surrender charge income and reinsurance was consistent with the decline in assets under management. Surrender charge income increased in 2002 as compared to 2001. This was caused by higher lapses when compared to the applicable prior year periods, and was primarily attributable, the Company believes, to concerns by contract holders, rating agencies and the Company's distribution channels, surrounding the uncertainty in the equity markets and its impact on variable annuity companies generally and, prior to the announcement of the Acquisition, uncertainty concerning the Company's future (See Liquidity and Capital Resources for rating agency actions). Net realized capital losses in 2002 were primarily from $9,593 of losses on sales and $3,769 of other-than-temporary impairments of mutual fund investments that are held in support of a deferred compensation program for certain of the Company's employees. The deferred compensation program losses were offset by net gains of $3,746 during 2002 on sales of fixed maturities. Included in those net gains on sales of fixed maturities for 2002, was a realized loss of approximately $1,236 on the sale of a WorldCom, Inc. bond. The net capital gains in 2001 related primarily to sales of fixed maturity investments, were partially offset by losses on securities in the fixed maturity portfolio. The most significant loss was $2,636 related to Enron securities. In addition net realized capital losses of $3,534 in 2001 were incurred due to sales of mutual fund holdings in support of the Company's non-qualified deferred compensation program. The change in annuity and life insurance policy reserves includes changes in reserves related to annuity contracts with mortality risks. During 2001, the Company's Guaranteed Minimum Death Benefit ("GMDB") reserve decreased $43,984, as the result of an update of certain reserve assumptions as to risks inherent in the benefit. Previous assumptions had been based on statutory valuation principles as an approximation for U.S. GAAP. In addition, future mortality rates were lowered in 2001 to reflect favorable past experience. However, offsetting the resulting increase in earnings and equity as a result of changes in the GMDB liability in 2001, assumptions related to GMDB claim costs were also updated in the calculation of the deferred acquisition cost asset, resulting in additional amortization of this asset. The Company uses derivative instruments, which consist of equity option contracts for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. GMDB claims, net of hedge, consist of GMDB claims offset by the mark to market and realized capital gain/loss results of the Company's option contracts. During 2002 and 2001, the fluctuations in GMDB claims, net of hedge, were driven by an increase in hedge related benefits of $19,776 and $14,646, respectively. Hedge related benefits were partially offset by increases in GMDB claims of $22,662 and $32,398 during 2002 and 2001, respectively. Return credited to contract owners consists primarily of net investment results from the Company's fixed, market value adjusted, separate account investment option and changes in the Company's experience rated reinsurance receivables. The decrease in 2002 was primarily due to increased net investment results on the Company's fixed, market value adjusted, separate account investment option. As the equity markets decline, movement from variable investment options to fixed investment options, primarily due to one of the Company's product features, has increased the assets invested in the fixed separate account investment option. Included in 2002 net investment results is $9,849 of realized and unrealized losses on certain securities, of which $5,427 related to WorldCom, Inc. bonds. The increase in net investment results was partially offset by a decrease in experience rated reinsurance receivables in 2002 due to unfavorable experience on certain blocks of variable annuity business. In 2001, return credited to contract owners decreased primarily due to favorable experience on certain blocks of variable annuity contracts increasing the experience rated reinsurance receivable. Partially offsetting the 2001 decrease is net investment losses of $1,662 related to Enron securities. Underwriting, acquisition and other insurance expenses for 2002, 2001 and 2000 were as follows:
2002 2001 2000 ----------- ----------- ----------- Commissions and purchase credits $ 287,612 $ 248,187 $ 430,743 General operating expenses 145,438 157,704 214,957 Acquisition costs deferred (244,322) (209,136) (495,103) ----------- ----------- ----------- Underwriting, acquisition and other insurance expenses $ 188,728 $ 196,755 $ 150,597 =========== =========== ===========
New products launched, as well as a larger proportion of sales of products with higher commissions as compared to 2001 led to an increase in commissions and purchase credits during 2002. Lower sales and asset levels led to a decrease in commissions and purchase credits during 2001. Partially offsetting this decline in 2001, the company launched a commission promotion program that increased commissions as a percentage of new sales. Commission promotions in 2002 were approximately equivalent as compared to 2001. General operating expenses decreased during 2002 and 2001 as a result of lower sales-based compensation, as well as expense reduction programs implemented during 2001 and continued strong expense management in 2002. Variable compensation and long-term incentive plan expenses have decreased due to the slowdown in sales and the decline in the equity markets. Amortization of deferred acquisition costs increased over the past two years, in general, due to the further depressed equity markets in 2002 and 2001, thereby decreasing expectations of future gross profits and actual gross profits from asset based fees and increased expected and actual claim costs associated with minimum death benefit guarantees. During 2002, the Company also performed a recoverability study and an analysis of its short-term assumptions of future gross profits and determined those assumptions of future profits to be excessive. This analysis resulted in a current year acceleration of amortization of $206,000. During 2002 and 2001, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization. See Note 2 of Notes to Consolidated Financial Statements for a further discussion on amortization of deferred acquisition costs. Interest expense decreased during 2002 primarily due to lower interest expense related to the future fees payable to ASI liability (See Note 8). Interest expense on these obligations is driven by the cash flows from the underlying annuity contracts acting as collateral. Due to the depressed asset values of those annuity contracts driven by the decline in the equity markets, the cash flows, and therefore the interest expense, decreased from prior year levels. Interest expense decreased in 2001 as a result of a reduction in borrowing. The Company's income tax (benefit) expense varies directly with increases or decreases in (loss) income from operations. The effective income tax rate varied from the corporate rate of 35% due primarily to the deduction for dividends received. Total assets and liabilities decreased $4,301,197 and $4,406,590, respectively, from December 31, 2001. This change resulted primarily from the declining equity markets. Significant Accounting Policies - ------------------------------- Deferred Acquisition Costs The costs of acquiring new business, which vary with and are primarily related to new business generated, are deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. If the Company's long-term fund growth rate assumption was 7% instead of 8%, the Company's deferred acquisition cost asset at December 31, 2002 would be reduced by $26,273. Future Fees Payable to ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, historical mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability. The Company has determined, using assumptions for lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management, that the present value of future payments to ASI would be $429,773. Deferred Taxes The Company evaluates the necessity of recording a valuation allowance against its deferred tax asset in accordance with Statement of Financial Accounting Standards No. 109, Income Taxes ("SFAS 109"). In performing this evaluation, the Company considers all available evidence in making the determination as to whether it is more likely than not that deferred tax assets are not realizable. For the Company, that evidence includes: cumulative U.S. GAAP pre-tax income in recent years past, whether or not operating losses have expired unused in the past, the length of remaining carryback or carryforward periods, and net taxable income or loss expectations in early future years. The net taxable income or loss projections are based on profit assumptions consistent with those used to amortize deferred acquisition costs (see above discussion on deferred acquisition costs). As of December 31, 2002, the Company has approximately $361,000 gross deferred tax assets related principally to net operating loss carryforwards that expire in 2016 and 2017 and insurance reserve differences. After considering the impact of gross reversing temporary liabilities of $323,000, the Company estimates that the Company will generate sufficient taxable income to fully utilize gross deferred tax assets within 2 years (prior to the expiration of the net operating losses). Liquidity and Capital Resources The Company's liquidity requirements have generally been met by cash from insurance operations, investment activities, borrowings from ASI, reinsurance, capital contributions and securitization transactions with ASI (see Note 8). The Company's cash from insurance operations is primarily comprised of fees generated off of assets under management, less commission expense on sales, sales and marketing expenses and other operating expenses. Fund performance driven by the equity markets directly impact assets under management and therefore, the fees the Company can generate off of those assets. During 2002 and 2001, assets under management declined consistent with the equity market declines resulting in reductions in fee revenues. In addition, the equity markets impact sales of variable annuities. As sales have declined in a declining equity market, non-promotional commission expense declined, however, in order to boost sales levels, the Company has offered various sales promotions increasing the use of cash for commission expense. In order to fund the cash strain generated from acquisition costs on current sales, the Company has relied on cash generated from its direct insurance operations as well as reinsurance and securitization transactions. The Company has used modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving , the future fees generated from that book of business. These reinsurance agreements also mitigate the recoverability risk associated with the payment of up-front commissions and other acquisition costs. Similarly, the Company has entered into securitization transactions whereby the Company issues to ASI, in exchange for cash, the right to receive future fees generated off of a specific book of business. On April 12, 2002, the Company entered into a new securitization transaction with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was approximately $101,713. As of December 31, 2002, 2001 and 2000, the Company had short-term borrowings of $10,000, $10,000 and $10,000, respectively, and had long-term surplus notes liabilities of $110,000, $144,000 and $159,000, respectively. During 2002, the Company borrowed $263,091 and paid back $263,091 related to short-term borrowing. During 2002 and 2001, the Company received permission from the State of Connecticut Insurance Department to pay down surplus notes in the amount of $34,000 and $15,000, respectively. See Notes 14 and 15 of Notes to Consolidated Financial Statements for more information on surplus notes and short-term borrowing, respectively. As of December 31, 2002, 2001 and 2000, shareholder's equity totaled $683,061, $577,668 and $496,911, respectively. The Company received capital contributions of $259,720 and $48,000 from ASI during 2002 and 2001, respectively. Of this, $4,520 and $2,500, respectively, was used to support its investment in Skandia Vida. Net (loss) income of ($165,257) and $33,099, for the years ended December 31, 2002 and 2001, respectively, contributed to the respective changes in shareholder's equity in 2002 and 2001. The National Association of Insurance Commissioners ("NAIC") requires insurance companies to report information regarding minimum Risk Based Capital ("RBC") requirements. These requirements are intended to allow insurance regulators to identify companies that may need regulatory attention. The RBC model law requires that insurance companies apply various factors to asset, premium and reserve items, all of which have inherent risks. The formula includes components for asset risk, insurance risk, interest rate risk and business risk. The Company has complied with the NAIC's RBC reporting requirements and has total adjusted capital well above required capital. During 2002, all of the major rating agencies reviewed the U.S. life insurance sector, including the Company. Based on these reviews the rating agencies have evolving concerns surrounding the risk profile of variable annuity companies due to their significant exposure to equity market performance. This exposure has resulted, and may continue to result, in earnings volatility. Based on the reviews made during 2002, the following ratings actions took place: On May 8, 2002, Fitch Ratings downgraded the Company's "insurer financial strength" rating to A+ from AA- with a "stable" outlook. On September 19, 2002, Fitch Ratings lowered the Company's "insurer financial strength" rating to A- from A+ with an "evolving" outlook. On September 27, 2002, A.M. Best Co. lowered the Company's "financial strength" rating to A- from A with negative implications. On October 16, 2002, Standard and Poor's lowered the Company's "counter party credit" and "financial strength" ratings to A- from A+ with a negative outlook and removed the Company from Credit Watch. Subsequent to the announcement of the Acquisition, Standard and Poor's placed the Company on CreditWatch with positive implications. Effects of Inflation - -------------------- The rate of inflation has not had a significant effect on the Company's financial statements. Outlook - -------- The Company believes that it is well positioned to retain and enhance its position as a leading provider of financial products for long-term savings and retirement purposes as well as to address the economic impact of premature death, estate planning concerns and supplemental retirement needs. The Company has renewed its focus on its core variable annuity business, offering innovative long-term savings and income products, strengthening its wholesaling efforts and providing consistently good customer service in order to gain market share and improve profitability in an increasingly competitive market. The Gramm-Leach-Bliley Act of 1999 (the Financial Services Modernization Act) permits affiliation among banks, securities firms and insurance companies. This legislative change has created opportunities for continued consolidation in the financial services industry and increased competition as large companies offer a wide array of financial products and services. Various other legislative initiatives could impact the Company such as pension reform and capital gains and estate tax changes. These include the proposed exclusion from tax for corporate dividends, potential changes to the deductibility of dividends received from the Company's separate accounts and newly proposed tax-advantaged savings programs. Additional pension reform may change current tax deferral rules and allow increased contributions to retirement plans, which may lead to higher investments in tax-deferred products and create growth opportunities for the Company. A capital gains tax reduction may cause tax-deferred products to be less attractive to consumers, which could adversely impact the Company. In addition, NAIC statutory reserving guidelines and/or interpretations of those guidelines may change in the future. Such changes may require the Company to modify, perhaps materially, its statutory-based reserves for variable annuity contracts. Forward Looking Information - --------------------------- The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a "safe harbor" for forward-looking statements, so long as those statements are identified as forward-looking, and the statements are accompanied by meaningful cautionary statements that identify important factors that could cause actual results to differ materially from those discussed in the statement. We want to take advantage of these safe harbor provisions. Certain information contained in the Management's Discussion and Analysis of Financial Condition and Results of Operations is forward-looking within the meaning of the 1995 Act or Securities and Exchange Commission rules. These forward-looking statements rely on a number of assumptions concerning future events, and are subject to a number of significant uncertainties and results may differ materially from these statements. You should not put undue reliance on these forward-looking statements. We disclaim any intention or obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to potential fluctuations in earnings and the fair value of certain of its assets and liabilities, as well as variations in expected cash flows due to changes in market interest rates and equity prices. The following discussion focuses on specific exposures the Company has to interest rate and equity price risk and describes strategies used to manage these risks, and includes "forward-looking statements" that involve risk and uncertainties. The discussion is limited to financial instruments subject to market risks and is not intended to be a complete discussion of all of the risks to which the Company is exposed. Interest Rate Risk - ------------------ Fluctuations in interest rates can potentially impact the Company's profitability and cash flows. At December 31, 2002, 91% of assets held under management by the Company are in non-guaranteed Separate Accounts for which the Company's interest rate and equity market exposure is not significant, as the contract owner assumes substantially all of the investment risk. Of the remaining 9% of assets, the interest rate risk from contracts that carry interest rate exposure is managed through an asset/liability matching program which takes into account the risk variables of the insurance liabilities supported by the assets. At December 31, 2002, the Company held fixed maturity investments in its general account that are sensitive to changes in interest rates. These securities are held in support of the Company's fixed immediate annuities, fixed supplementary contracts, the fixed investment option offered in its variable life insurance contracts, and in support of the Company's target solvency capital. The Company has a conservative investment philosophy with regard to these investments. All investments are investment grade corporate securities, government agency or U.S. government securities. The Company's deferred annuity products offer a fixed investment option which subjects the Company to interest rate risk. The fixed option guarantees a fixed rate of interest for a period of time selected by the contract owner. Guarantee period options available range from one to ten years. Withdrawal of funds, or transfer of funds to variable investment options, before the end of the guarantee period subjects the contract owner to a market value adjustment ("MVA"). In the event of rising interest rates, which make the fixed maturity securities underlying the guarantee less valuable, the MVA could be negative. In the event of declining interest rates, which make the fixed maturity securities underlying the guarantee more valuable, the MVA could be positive. The resulting increase or decrease in the value of the fixed option, from calculation of the MVA, should substantially offset the increase or decrease in the market value of the securities underlying the guarantee. The Company maintains strict asset/liability matching to enable this offset. However, the Company still takes on the default risk for the underlying securities, the interest rate risk of reinvestment of interest payments and the risk of failing to maintain the asset/liability matching program with respect to duration and convexity. Liabilities held in the Company's guaranteed separate account as of December 31, 2002 totaled $1,828,048. Assets, primarily fixed income investments, supporting those liabilities had a fair value of $1,828,048. The Company performed a sensitivity analysis on these interest-sensitive liabilities and assets at December 31, 2002. The analysis showed that an immediate decrease of 100 basis points in interest rates would result in a net increase in liabilities and the corresponding assets of approximately $69,150 and $68,500, respectively. An analysis of a 100 basis point decline in interest rates at December 31, 2001, showed a net increase in interest-sensitive liabilities and the corresponding assets of approximately $39,800 and $39,900, respectively. Equity Market Exposure - ---------------------- The primary equity market risk to the Company comes from the nature of the variable annuity and variable life products sold by the Company. Various fees and charges earned are substantially derived as a percentage of the market value of assets under management. In a market decline, this income will be reduced. This could be further compounded by customer withdrawals, net of applicable surrender charge revenues, partially offset by transfers to the fixed option discussed above. A 10% decline in the market value of the assets under management at December 31, 2002, sustained throughout 2003, would result in an approximate drop in related mortality and expense charges and annual fee income of $36,350. Another equity market risk exposure of the Company relates to guaranteed minimum death benefit payments. Declines in equity markets and, correspondingly, the performance of the funds underlying the Company's products, increase exposure to guaranteed minimum death benefit payments. As discussed in Note 2D of the consolidated financial statements, the Company uses derivative instruments to hedge against the risk of significant decreases in equity markets. Prior to the implementation of this program, the Company used reinsurance to mitigate this risk. The Company has a portfolio of equity investments consisting of mutual funds, which are held in support of a deferred compensation program. In the event of a decline in market values of underlying securities, the value of the portfolio would decline; however the accrued benefits payable under the related deferred compensation program would decline by a corresponding amount. Estimates of interest rate risk and equity price risk were obtained using computer models that take into consideration various assumptions about the future. Given the uncertainty of future interest rate movements, volatility in the equity markets and consumer behavior, actual results may vary from those predicted by the Company's models. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Report of Independent Auditors To the Board of Directors and Shareholder of American Skandia Life Assurance Corporation Shelton, Connecticut We have audited the consolidated statements of financial condition of American Skandia Life Assurance Corporation (the "Company" which is an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States. 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Skandia Life Assurance Corporation at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States. As discussed in Note 2, in 2002 the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. As discussed in Note 2, effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. /s/ Ernst & Young LLP Hartford, Connecticut February 3, 2003 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Financial Condition (in thousands, except share data)
As of December 31, 2002 2001 -------------- -------------- ASSETS ------ Investments: Fixed maturities - at fair value (amortized cost of $379,422 and $356,882, respectively) $ 398,601 $ 362,831 Equity securities - at fair value (amortized cost of $52,017 and $49,886, respectively) 51,769 45,083 Derivative instruments - at fair value 10,370 5,525 Policy loans 7,559 6,559 -------------- -------------- Total investments 468,299 419,998 Cash and cash equivalents 51,339 - Accrued investment income 4,196 4,737 Deferred acquisition costs 1,117,544 1,383,281 Reinsurance receivable 5,447 7,733 Receivable from affiliates 3,961 3,283 Income tax receivable - 30,537 Deferred income taxes 38,206 - Fixed assets, at depreciated cost (accumulated depreciation of $7,555 and $4,266, respectively) 12,132 17,752 Other assets 101,848 103,912 Separate account assets 21,905,613 26,038,549 -------------- -------------- Total assets $ 23,708,585 $ 28,009,782 ============== ============== LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Liabilities: Reserves for future policy and contract benefits $ 149,349 $ 91,126 Accounts payable and accrued expenses 133,543 192,952 Income tax payable 6,547 - Deferred income taxes - 54,980 Payable to affiliates 2,223 101,035 Future fees payable to American Skandia, Inc. ("ASI") 708,249 799,472 Short-term borrowing 10,000 10,000 Surplus notes 110,000 144,000 Separate account liabilities 21,905,613 26,038,549 -------------- -------------- Total liabilities 23,025,524 27,432,114 -------------- -------------- Commitments and contingent liabilities (Note 18) Shareholder's equity: Common stock, $100 par value, 25,000 shares authorized, issued and outstanding 2,500 2,500 Additional paid-in capital 595,049 335,329 Retained earnings 73,821 239,078 Accumulated other comprehensive income 11,691 761 -------------- -------------- Total shareholder's equity 683,061 577,668 -------------- -------------- Total liabilities and shareholder's equity $ 23,708,585 $ 28,009,782 ============== ==============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Income (in thousands)
For the Years Ended December 31, 2002 2001 2000 --------------- --------------- ---------------- REVENUES -------- Annuity and life insurance charges and fees $ 370,004 $ 388,696 $ 424,578 Fee income 97,650 111,196 130,610 Net investment income 19,632 20,126 18,595 Net realized capital (losses) gains (9,614) 928 (688) Other 2,176 1,770 4,883 --------------- --------------- ---------------- Total revenues 479,848 522,716 577,978 --------------- --------------- ---------------- EXPENSES -------- Benefits: Annuity and life insurance benefits 3,391 1,955 751 Change in annuity and life insurance policy reserves 2,741 (39,898) 49,339 Guaranteed minimum death benefit claims, net of hedge 23,256 20,370 2,618 Return credited to contract owners 5,196 5,796 8,463 --------------- --------------- ---------------- Total benefits 34,584 (11,777) 61,171 Other: Underwriting, acquisition and other insurance expenses 188,728 196,755 150,597 Amortization of deferred acquisition costs 510,059 224,047 184,616 Interest expense 14,544 73,424 85,998 --------------- --------------- ---------------- 713,331 494,226 421,211 --------------- --------------- ---------------- Total benefits and expenses 747,915 482,449 482,382 --------------- --------------- ---------------- (Loss) income from operations before income tax (benefit) expense (268,067) 40,267 95,596 Income tax (benefit) expense (102,810) 7,168 30,779 --------------- --------------- ---------------- Net (loss) income $ (165,257) $ 33,099 $ 64,817 =============== =============== ================
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Shareholder's Equity (in thousands)
Accumulated Other Comprehensive Income Additional Foreign Unrealized Common Paid in Retained Currency Gains Stock Capital Earnings Translation (Losses) Total ------------ ------------- ------------ ------------ ------------ ------------- As of December 31, 1999 $ 2,500 $ 215,879 $ 141,162 $ 148 ($ 255) $ 359,434 Net income 64,817 64,817 Other comprehensive income: Unrealized capital gains 843 843 Reclassification adjustment for realized losses included in net realized capital (losses) gains 433 433 Foreign currency translation (66) (66) Other comprehensive income 1,210 Comprehensive income 66,027 Capital contributions 71,450 71,450 ------------ ------------- ------------ ------------ ------------- ------------ As of December 31, 2000 2,500 287,329 205,979 82 1,021 496,911 Net income 33,099 33,099 Other comprehensive loss: Unrealized capital losses (261) (261) Reclassification adjustment for realized gains included in net realized capital (losses) gains (14) (14) Foreign currency translation (67) (67) Other comprehensive loss (342) Comprehensive income 32,757 Capital contributions 48,000 48,000 ------------ ------------- ------------ ------------ ------------- ------------ As of December 31, 2001 2,500 335,329 239,078 15 746 577,668 Net loss (165,257) (165,257) Other comprehensive income: Unrealized capital gains 10,434 10,434 Reclassification adjustment for realized losses included in net realized capital (losses) gains 1,126 1,126 Foreign currency translation (630) (630) Other comprehensive income 10,930 Comprehensive loss (154,327) Capital contributions 259,720 259,720 ------------ ------------- ------------ ------------ ------------- ------------ As of December 31, 2002 $ 2,500 $ 595,049 $ 73,821 $ (615) $ 12,306 $ 683,061
Unrealized capital gains (losses) is shown net of tax expense (benefit) of $5,618, ($140) and $454 for 2002, 2001 and 2000, respectively. Reclassification adjustment for realized losses (gains) included in net realized capital (losses) gains is shown net of tax expense (benefit) of $606, ($8) and $233 for 2002, 2001 and 2000, respectively. Foreign currency translation is shown net of tax benefit of $339, $36 and $36 for 2002, 2001 and 2000, respectively. See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Consolidated Statements of Cash Flows (in thousands)
For the Years Ended December 31, 2002 2001 2000 ------------ ------------ ------------ Cash flow from operating activities: Net (loss) income $ (165,257) $ 33,099 $ 64,817 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Amortization and depreciation 21,649 13,374 5,758 Deferral of acquisition costs (244,322) (209,136) (495,103) Amortization of deferred acquisition costs 510,059 224,047 184,616 Deferred tax (benefit) expense (99,071) 46,215 60,023 Change in unrealized (gains) losses on derivatives (5,149) 2,902 (2,936) Increase (decrease) in policy reserves 3,293 (38,742) 50,892 (Decrease) increase in net receivable/payable to affiliates (99,490) 103,496 (72,063) Change in net income tax receivable/payable 37,084 4,083 (58,888) Increase in other assets (9,546) (12,105) (65,119) Decrease (increase) in accrued investment income 541 472 (1,155) Decrease (increase) in reinsurance receivable 2,286 (1,849) 420 (Decrease) increase in accounts payable and accrued expenses (59,409) 55,912 (21,550) Net realized capital (gains) losses on derivatives (26,654) (14,929) 5,554 Net realized capital losses (gains) on investments 9,616 (928) 688 ------------ ------------ ------------ Net cash (used in) provided by operating activities (124,370) 205,911 (344,046) ------------ ------------ ------------ Cash flow from investing activities: Purchase of fixed maturity investments (388,053) (462,820) (380,737) Proceeds from sale and maturity of fixed maturity investments 367,263 390,816 303,736 Purchase of derivatives (61,998) (103,533) (14,781) Proceeds from exercise or sale of derivative instruments 88,956 113,051 5,936 Purchase of shares in equity securities and dividend reinvestments (49,713) (55,430) (18,136) Proceeds from sale of shares in equity securities 34,220 25,228 8,345 Purchase of fixed assets (2,423) (10,773) (7,348) Increase in policy loans (1,000) (2,813) (2,476) ------------ ------------ ------------ Net cash used in investing activities (12,748) (106,274) (105,461) ------------ ------------ ------------ Cash flow from financing activities: Capital contribution 259,720 48,000 71,450 Pay down of surplus notes (34,000) (15,000) (20,000) (Decrease) increase in future fees payable to ASI, net (91,223) (137,355) 358,376 Deposits to contract owner accounts 808,209 59,681 172,441 Withdrawals from contract owner accounts (164,964) (130,476) (102,603) Change in contract owner accounts, net of investment earnings (588,315) 62,875 (55,468) ------------ ------------ ------------ Net cash provided by (used in) financing activities 189,427 (112,275) 424,196 ------------ ------------ ------------ Net increase (decrease) in cash and cash equivalents 52,309 (12,638) (25,311) Change in foreign currency translation (970) (103) (101) Cash and cash equivalents at beginning of period -- 12,741 38,153 Cash and cash equivalents at end of period $ 51,339 $ -- $ 12,741 ============ ============ ============ Income taxes (received) paid $ (40,823) $ (43,130) $ 29,644 ============ ============ ============ Interest paid $ 23,967 $ 56,831 $ 114,394 ============ ============ ============
See notes to consolidated financial statements. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements December 31, 2002 (dollars in thousands) 1. ORGANIZATION AND OPERATION American Skandia Life Assurance Corporation ("ASLAC" or the "Company"), with its principal offices in Shelton, Connecticut, is a wholly-owned subsidiary of American Skandia, Inc. ("ASI"). On December 19, 2002, Skandia Insurance Company Ltd. (publ) ("SICL"), an insurance company organized under the laws of the Kingdom of Sweden, and the ultimate parent company of the Company, entered into a definitive purchase agreement with Prudential Financial, Inc., a New Jersey corporation ("Prudential Financial"), whereby Prudential Financial will acquire the Company and certain of its affiliates (the "Acquisition"). Consummation of the transaction is subject to various closing conditions, including regulatory approvals and approval of certain matters by the board of directors and shareholders of the mutual funds advised by American Skandia Investment Services, Inc. ("ASISI"), a subsidiary of ASI. The transaction is expected to close during the second quarter of 2003. The Company develops long-term savings and retirement products, which are distributed through its affiliated broker/dealer company, American Skandia Marketing, Incorporated ("ASM"). The Company currently issues term and variable universal life insurance and variable deferred and immediate annuities for individuals and groups in the United States of America and its territories. The Company has 99.9% ownership in Skandia Vida, S.A. de C.V. ("Skandia Vida"), which is a life insurance company domiciled in Mexico. Skandia Vida had total shareholder's equity of $5,023 and $4,179 as of December 31, 2002, and 2001, respectively. Skandia Vida has generated net losses of $2,706, $2,619 and $2,540 in 2002, 2001 and 2000, respectively. As part of the Acquisition, it is expected that the Company will sell its ownership interest in Skandia Vida to SICL. The Company has filed for required regulatory approvals from the State of Connecticut and Mexico related to the sale of Skandia Vida. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Reporting ------------------ The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States ("U.S. GAAP"). Skandia Vida has been consolidated in these financial statements. Intercompany transactions and balances between the Company and Skandia Vida have been eliminated in consolidation. Certain reclassifications have been made to prior year amounts to conform with the current year presentation. B. New Accounting Standard ----------------------- Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 137 and SFAS 138 (collectively "SFAS 133"). Derivative instruments held by the Company consist of equity put option contracts utilized to AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) manage the economic risks associated with guaranteed minimum death benefits ("GMDB"). These derivative instruments are carried at fair value. Realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. The adoption of SFAS No. 133 did not have a material effect on the Company's financial statements. Effective April 1, 2001, the Company adopted the Emerging Issues Task Force ("EITF") Issue 99-20, "Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets." Under the consensus, investors in certain asset-backed securities are required to record changes in their estimated yield on a prospective basis and to evaluate these securities for an other than temporary decline in value. If the fair value of the asset-backed security has declined below its carrying amount and the decline is determined to be other than temporary, the security is written down to fair value. The adoption of EITF Issue 99-20 did not have a significant effect on the Company's financial statements. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards. No. 142 "Accounting for Goodwill and Intangible Assets" ("SFAS 142"). Under the new standard, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized but will be subject to annual impairment tests in accordance with the new standard. Other intangible assets will continue to be amortized over their useful lives. The Company applied the new rules on the accounting for goodwill and other intangible assets in the first quarter of 2002. The adoption of SFAS 142 did not have a significant impact on the Company's financial statements. C. Investments ----------- The Company has classified its fixed maturity investments as available-for-sale and, as such, they are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. The Company has classified its equity securities held in support of a deferred compensation plan (see Note 12) as available-for-sale. Such investments are carried at fair value with changes in unrealized gains and losses reported as a component of other comprehensive income. Policy loans are carried at their unpaid principal balances. Realized capital gains and losses on disposal of investments are determined by the specific identification method. Other than temporary impairment charges are determined based on an analysis that is performed on a security by security basis and includes quantitative and qualitative factors. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) D. Derivative Instruments ---------------------- The Company uses derivative instruments, which consist of equity put option contracts, for risk management purposes, and not for trading or speculation. The Company hedges the economic GMDB exposure associated with equity market fluctuations. As the equity markets decline, the Company's exposure to future GMDB claims increases. Conversely, as the equity markets increase the Company's exposure to future GMDB claims decreases. The claims exposure is reduced by the market value effect of the option contracts purchased. Based on criteria described in SFAS 133, the Company's fair value hedges do not qualify as "effective" hedges and, therefore, hedge accounting may not be applied. Accordingly, the derivative investments are carried at fair value with changes in unrealized gains and losses being recorded in income as those changes occur. As such, both realized and unrealized gains and losses are reported in the Consolidated Statements of Income, together with GMDB claims expense, as a component of Guaranteed Minimum Death Benefit Claims, Net of Hedge. As of December 31, 2002 and 2001, the accumulated difference between cost and market value on the Company's derivatives was an unrealized gain of $1,434 and an unrealized loss of $3,715, respectively. The amount of realized and unrealized gains (losses) on the Company's derivatives recorded during the years ended December 31, 2002, 2001 and 2000 was $31,803, $12,027 and ($2,619), respectively. E. Cash Equivalents ---------------- The Company considers all highly liquid time deposits, commercial paper and money market mutual funds purchased with a maturity date, at acquisition, of three months or less to be cash equivalents. As of December 31, 2002, $50 of cash reflected on the Company's financial statements was restricted in compliance with regulatory requirements. F. State Insurance Licenses ------------------------ Licenses to do business in all states have been capitalized and reflected at the purchase price of $6,000 less accumulated amortization of $2,038 at December 31, 2002. Due to the adoption of SFAS 142, the cost of the licenses is no longer being amortized but is subjected to an annual impairment test. As of December 31, 2002, the Company estimated the fair value of the state insurance licenses to be in excess of book value and, therefore, no impairment charge was required. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) G. Income Taxes ------------ The Company is included in the consolidated federal income tax return filed by Skandia U.S. Inc. and its U.S. subsidiaries. In accordance with the tax sharing agreement, the federal income tax provision is computed on a separate return basis as adjusted for consolidated items. Pursuant to the terms of this agreement, the Company has the right to recover the value of losses utilized by the consolidated group in the year of utilization. To the extent the Company generates income in future years, the Company is entitled to offset future taxes on that income through the application of its loss carry forward generated in the current year. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. H. Recognition of Revenue and Contract Benefits -------------------------------------------- Revenues for variable deferred annuity contracts consist of charges against contract owner account values or separate accounts for mortality and expense risks, administration fees, surrender charges and an annual maintenance fee per contract. Revenues for mortality and expense risk charges and administration fees are recognized as assessed against the contract holder. Surrender charge revenue is recognized when the surrender charge is assessed against the contract holder at the time of surrender. Annual maintenance fees are earned ratably throughout the year. Benefit reserves for the variable investment options on annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Fee income from mutual fund organizations is recognized when assessed against assets under management. Revenues for variable immediate annuity and supplementary contracts with life contingencies consist of certain charges against contract owner account values including mortality and expense risks and administration fees. These charges and fees are recognized as revenue as assessed against the contract holder. Benefit reserves for variable immediate annuity contracts represent the account value of the contracts and are included in the separate account liabilities. Revenues for the market value adjusted fixed investment option on annuity contracts consist of separate account investment income reduced by amounts credited to the contract holder for interest. This net spread is included in return credited to contract owners on the consolidated statements of income. Benefit reserves for these contracts represent the account value of the contracts plus a AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) market value adjustment, and are included in the general account reserve for future policy and contract benefits to the extent in excess of the separate account assets, typically for the market value adjustment at the reporting date. Revenues for fixed immediate annuity and fixed supplementary contracts without life contingencies consist of net investment income, reported as a component of return credited to contract owners. Revenues for fixed 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 applicable actuarial standards with assumed interest rates that vary by issue year and are included in the general account reserve for future policy and contract benefits. Assumed interest rates ranged from 6.25% to 8.25% at December 31, 2002 and 2001. Revenues for variable life insurance contracts consist of charges against contract owner account values or separate accounts for mortality and expense risk fees, administration fees, cost of insurance fees, taxes and surrender charges. Certain contracts also include charges against premium to pay state premium taxes. All of these charges are recognized as revenue when assessed against the contract holder. Benefit reserves for variable life insurance contracts represent the account value of the contracts and are included in the separate account liabilities. I. Deferred Acquisition Costs -------------------------- The costs of acquiring new business, which vary with and are primarily related to new business generated, are being deferred, net of reinsurance. These costs include commissions, purchase credits, costs of contract issuance, and certain selling expenses that vary with production. The Company uses the retrospective deposit method for amortizing deferred acquisition costs. This method results in deferred acquisition costs being amortized in proportion to expected gross profits, from surrender charges and policy and asset based fees, net of operating and claim costs. The deferred acquisition cost asset is adjusted retrospectively and prospectively when estimates of current and future gross profits to be realized from a group of products are revised. Critical assumptions in estimating gross profits include those for surrenders, long-term fund growth rate, expenses and death benefits. The long-term fund growth rate, in large part, determines the estimated future asset levels on which the most significant revenues are based. The Company's long-term fund growth rate assumption is 8% (net of charges assessed against the underlying mutual fund, but before charges assessed at the separate account and contract level). When current period actual asset growth is greater or less than the Company's long-term expectation, the Company adjusts the short-term asset growth rate to a level that will allow the Company, in the short-term, to resume the long-term asset growth rate expectation. The short-term asset growth rate is subject to constraints surrounding actual market conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Details of deferred acquisition costs and related amortization for the years ended December 31, are as follows:
2002 2001 2000 ------------- ------------- ------------- Balance at beginning of year $ 1,383,281 $ 1,398,192 $ 1,087,705 Acquisition costs deferred during the year 244,322 209,136 495,103 Acquisition costs amortized during the year (510,059) (224,047) (184,616) ------------- ------------- ------------- Balance at end of year $ 1,117,544 $ 1,383,281 $ 1,398,192 ============= ============= =============
As asset growth rates, during 2002 and 2001, have been far below the Company's long-term assumption, the adjustment to the short-term asset growth rate had risen to a level, before being capped, that in management's opinion was excessive in the current market environment. Based on an analysis of those short-term rates, the related estimates of future gross profits and an impairment study, management of the Company determined that the short-term asset growth rate should be reset to the level of the long-term growth rate expectation as of September 30, 2002. This resulted in an acceleration of amortization of approximately $206,000. Throughout the year, the Company also updated its future estimated gross profits with respect to certain mortality assumptions reflecting actual experience and the decline in the equity markets resulting in additional increased amortization of approximately $72,000. J. Reinsurance ----------- The Company cedes reinsurance under modified co-insurance arrangements. These reinsurance arrangements provide additional capacity for growth in supporting the cash flow strain from the Company's variable annuity and variable life insurance business. The reinsurance is effected under quota share contracts. At December 31, 2002 and 2001, in accordance with the provisions of the modified coinsurance agreements, the Company accrued approximately $5,447 and $7,733, respectively, for amounts receivable from favorable reinsurance experience on certain blocks of variable annuity business. K. Translation of Foreign Currency ------------------------------- The financial position and results of operations of Skandia Vida are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at each year-end. Statements of income and changes in 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 reported as a component of other comprehensive income. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) L. Separate Accounts ----------------- Assets and liabilities in separate accounts are included as separate captions in the consolidated statements of financial condition. Separate account assets consist principally of long term bonds, investments in mutual funds, short-term securities and cash and cash equivalents, all of which are carried at fair value. The investments are managed predominately through ASISI, utilizing various fund managers as sub-advisors. The remaining investments are managed by independent investment firms. The contract holder has the option of directing funds to a wide variety of investment options, most of which invest in mutual funds. The investment risk on the variable portion of a contract is borne by the contract holder. Fixed options with minimum guaranteed interest rates are also available. The Company bears the credit risk associated with the investments that support these fixed options. Included in Separate Account liabilities are reserves of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, relating to deferred annuity investment options for which the contract holder is guaranteed a fixed rate of return. These reserves are calculated using the Commissioners Annuity Reserve Valuation Method. Separate Account assets of $1,828,048 and $1,092,944 at December 31, 2002 and 2001, respectively, consisting of fixed maturities, equity securities, short-term securities, cash and cash equivalents, accrued investment income, accrued liabilities and amounts due to/from the General Account are held in support of these annuity obligations, pursuant to state regulation. Included in the general account, within Reserves for Future Policy and Contract Benefits, is the market value adjustment associated with the guaranteed, fixed rate investment options, assuming the market value adjustment at the reporting date. Net investment income (including net realized capital gains and losses) and interest credited to contract holders on separate account assets are not separately reflected in the Consolidated Statements of Income. M. Unearned Performance Credits ---------------------------- The Company defers certain bonus credits applied to contract holder deposits. The credit is reported as a contract holder liability within separate account liabilities and the deferred expense is reported as a component of other assets. As the contract holder must keep the contract in-force for 10 years to earn the bonus credit, the Company amortizes the deferred expense on a straight-line basis over 10 years. If the contract holder surrenders the contract or the contract holder dies prior to the end of 10 years, the bonus credit is returned to the Company. This component of the bonus credit is amortized in proportion to expected surrenders and mortality. As of December 31, 2002 and 2001, the unearned performance credit asset was $83,288 and $89,234, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) N. Estimates --------- The preparation of financial statements in conformity with U.S. GAAP 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 estimates of future policy lapses, investment returns and maintenance expenses. Actual results could differ from those estimates. 3. INVESTMENTS The amortized cost, gross unrealized gains and losses and fair value of fixed maturities and investments in equity securities as of December 31, 2002 and 2001 are shown below. All securities held at December 31, 2002 and 2001 were publicly traded. Investments in fixed maturities as of December 31, 2002 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ----------- ----------- ----------- ----------- U.S. Government obligations $ 270,969 $ 15,658 $ (78) $ 286,549 Obligations of state and political subdivisions 253 9 (1) 261 Corporate securities 108,200 3,631 (40) 111,791 ----------- ----------- ----------- ----------- Totals $ 379,422 $ 19,298 $ (119) $ 398,601 =========== =========== =========== ===========
The amortized cost and fair value of fixed maturities, by contractual maturity, at December 31, 2002 are shown below. Actual maturities may differ from contractual maturities due to call or prepayment provisions. Amortized Cost Fair Value ------------- ----------- Due in one year or less $ 12,793 $ 12,884 Due after one through five years 165,574 171,830 Due after five through ten years 186,609 198,913 Due after ten years 14,446 14,974 ------------- ----------- Total $ 379,422 $ 398,601 ============= =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) Investments in fixed maturities as of December 31, 2001 consisted of the following:
Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value ----------- ----------- ----------- ----------- U.S. Government obligations $ 198,136 $ 2,869 $ (413) $ 200,592 Obligations of state and political subdivisions 252 8 -- 260 Corporate securities 158,494 4,051 (566) 161,979 ----------- ----------- ----------- ----------- Totals $ 356,882 $ 6,928 $ (979) $ 362,831 =========== =========== =========== ===========
Proceeds from sales of fixed maturities during 2002, 2001 and 2000 were $367,213, $386,816 and $302,632, respectively. Proceeds from maturities during 2002, 2001 and 2000 were $50, $4,000 and $1,104, respectively. The cost, gross unrealized gains/losses and fair value of investments in equity securities at December 31 are shown below: Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value ---------- ---------- ---------- ---------- 2002 $ 52,017 $ 136 $ (384) $ 51,769 2001 $ 49,886 $ 122 $ (4,925) $ 45,083 Net realized investment gains (losses), determined on a specific identification basis, were as follows for the years ended December 31: 2002 2001 2000 ------------ ------------ ------------- Fixed maturities: Gross gains $ 8,213 $ 8,849 $ 1,002 Gross losses (4,468) (4,387) (3,450) Investment in equity securities: Gross gains 90 658 1,913 Gross losses (13,451) (4,192) (153) ------------ ------------ ------------- Totals $ (9,616) $ 928 $ (688) ============ ============ ============= During 2002, the Company determined that certain amounts of its investment in equity securities were other than temporarily impaired and, accordingly, recorded a loss of $3,769. As of December 31, 2002, the Company did not own any investments in fixed maturity securities whose carrying value exceeded 10% of the Company's equity. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 3. INVESTMENTS (continued) As of December 31, 2002, the following fixed maturities were restricted in compliance with regulatory requirements: Security Fair Value - ----------- ---------- U.S. Treasury Note, 6.25%, February 2003 $ 4,345 U.S. Treasury Note, 3.00%, November 2003 183 Puerto Rico Commonwealth, 4.60%, July 2004 210 Puerto Rico Commonwealth, 4.875%, July 2023 52 4. 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 equity securities are based on quoted market prices. The fair value of derivative instruments is determined based on the current value of the underlying index. The carrying value of cash and cash equivalents (cost) approximates fair value due to the short-term nature of these investments. The carrying value of policy loans approximates fair value. Fair value of future fees payable to ASI are determined on a discounted cash flow basis, using best estimate assumptions of lapses, mortality, free withdrawals and a long-term fund growth rate of 8% on the Company's assets under management. The carrying value of short-term borrowings (cost) approximates fair value due to the short-term nature of these liabilities. Fair value of surplus notes are determined based on a discounted cash flow basis with a projected payment of principal and all accrued interest at the maturity date (see Note 14 for payment restrictions). AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 4. FAIR VALUES OF FINANCIAL INSTRUMENTS (continued) The fair values and carrying values of financial instruments at December 31, 2002 and 2001 are as follows:
December 31, 2002 December 31, 2001 Fair Value Carrying Value Fair Value Carrying Value ------------ -------------- ------------ -------------- Assets - ------ Fixed Maturities $ 398,601 $ 398,601 $ 362,831 $ 362,831 Equity Securities 51,769 51,769 45,083 45,083 Derivative Instruments 10,370 10,370 5,525 5,525 Policy Loans 7,559 7,559 6,559 6,559 Liabilities - ----------- Future Fees Payable to ASI 429,773 708,249 546,357 799,472 Short-term Borrowing 10,000 10,000 10,000 10,000 Surplus Notes and accrued interest of $29,230 and $25,829 in 2002 and 2001, respectively 140,777 139,230 174,454 169,829
5. NET INVESTMENT INCOME The sources of net investment income for the years ended December 31 were as follows: 2002 2001 2000 ------------ ------------ ------------ Fixed maturities $ 18,015 $ 18,788 $ 13,502 Cash and cash equivalents 1,116 909 5,209 Equity securities 809 622 99 Policy loans 403 244 97 Total investment income 20,343 20,563 18,907 Investment expenses (711) (437) (312) Net investment income $ 19,632 $ 20,126 $ 18,595 6. INCOME TAXES The significant components of income tax expense for the years ended December 31 were as follows:
2002 2001 2000 ------------- ------------- ------------- Current tax benefit $ (3,739) $ (39,047) $ (29,244) Deferred tax expense, excluding operating loss carryforwards 35,915 60,587 60,023 Deferred tax benefit for operating and capital loss carryforwards (134,986) (14,372) -- ------------- ------------- ------------- Total income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ============= ============= =============
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 6. INCOME TAXES (continued) Deferred tax assets (liabilities) include the following at December 31: 2002 2001 ------------ ------------ Deferred tax assets: GAAP to tax reserve differences $ 165,348 $ 241,503 Future fees payable to ASI 21,475 63,240 Deferred compensation 20,603 20,520 Net operating loss carry forward 147,360 14,372 Other 6,530 17,276 ------------ ------------ Total deferred tax assets 361,316 356,911 ------------ ------------ Deferred tax liabilities: Deferred acquisition costs, net (312,933) (404,758) Net unrealized gains on fixed maturity securities (6,713) (2,082) Other (3,464) (5,051) ------------ ------------ Total deferred tax liabilities (323,110) (411,891) ------------ ------------ Net deferred tax asset (liability) $ 38,206 $ (54,980) ============ ============ In accordance with SFAS 109, the Company has performed an analysis of its deferred tax assets to assess recoverability. Looking at a variety of items, most notably, the timing of the reversal of temporary items and future taxable income projections, the Company determined that no valuation allowance is needed. The income tax (benefit) 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:
2002 2001 2000 ------------- ------------- ------------- (Loss) income before taxes Domestic $ (265,361) $ 42,886 $ 98,136 Foreign (2,706) (2,619) (2,540) ------------- ------------- ------------- Total (268,067) 40,267 95,596 Income tax rate 35% 35% 35% Tax (benefit) expense at federal statutory income tax rate (93,823) 14,093 33,459 ------------- ------------- ------------- Tax effect of: Dividend received deduction (12,250) (8,400) (7,350) Losses of foreign subsidiary 947 917 889 Meals and entertainment 603 603 841 State income taxes -- (62) (524) Federal provision to return differences 709 (177) 3,235 Other 1,004 194 229 ------------- ------------- ------------- Income tax (benefit) expense $ (102,810) $ 7,168 $ 30,779 ============= ============= =============
The Company's net operating loss carry forwards, totaling approximately $421,029 (pre-tax) at December 31, 2002, will expire in 2016 and 2017. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 7. COST ALLOCATION AGREEMENTS WITH AFFILIATES Certain operating costs (including rental of office space, furniture, and equipment) have been charged to the Company at cost by American Skandia Information Services and Technology Corporation ("ASIST"), an affiliated company. ASLAC signed a written service agreement with ASIST for these services executed and approved by the Connecticut Insurance Department in 1995. This agreement automatically continues in effect from year to year and may be terminated by either party upon 30 days written notice. The Company has also paid and charged operating costs to several of its affiliates. The total cost to the Company for these items was $8,177, $6,179 and $13,974 in 2002, 2001 and 2000, respectively. Income received for these items was approximately $13,052, $13,166 and $11,186 in 2002, 2001 and 2000, respectively. Allocated depreciation expense was $7,440, $8,764 and $9,073 in 2002, 2001 and 2000, respectively. Allocated lease expense was $5,808, $6,517 and $5,606 in 2002, 2001 and 2000, respectively. Allocated sub-lease rental income, recorded as a reduction to lease expense, was $738, $30 and $0 in 2002, 2001 and 2000, respectively. Assuming that the written service agreement between ASLAC and ASIST continues indefinitely, ASLAC's allocated future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ---------- --------- 2003 $ 4,847 $ 1,616 2004 5,275 1,773 2005 5,351 1,864 2006 5,328 1,940 2007 5,215 1,788 2008 and thereafter 19,629 7,380 Total $ 45,645 $ 16,361 Beginning in 1999, the Company was reimbursed by ASM for certain distribution related costs associated with the sales of business through an investment firm where ASM serves as an introducing broker dealer. Under this agreement, the expenses reimbursed were $8,255, $6,610 and $6,064 in 2002, 2001 and 2000, respectively. As of December 31, 2002 and 2001, amounts receivable under this agreement were approximately $458 and $639, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI In a series of transactions with ASI, the Company transferred certain rights to receive a portion of future fees and contract charges expected to be realized on designated blocks of deferred annuity contracts. The proceeds from the transfers 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 Company did not transfer the right to receive future fees and charges after the expiration of the surrender charge period. In connection with these transactions, ASI, through special purpose trusts, issued collateralized notes in private placements, which are secured by the rights to receive future fees and charges purchased from the Company. Under the terms of the securitization purchase agreements, the rights transferred provide for ASI to receive a percentage (60%, 80% or 100% depending on the underlying commission option) of future mortality and expense charges and contingent deferred sales charges, after reinsurance, expected to be realized over the remaining surrender charge period of the designated contracts (generally 6 to 8 years). The liability for future fees payable to ASI at the balance sheet date is based on the consideration received less principal repayments according to amortization schedules that were developed at the inception of the transactions. If actual mortality and expense charges and contingent deferred sales charges are less than those projected in the original amortization schedules, calculated on a transaction by transaction basis, ASI has no recourse against the Company. As account values associated with the designated contracts have declined, consistent with the overall decline in the equity markets, current mortality and expense charges have been lower than expected on certain transactions and it is likely that future mortality and expense charges, on those same transactions, will be lower than originally projected. As a result, the ultimate cash flows associated with these transactions that will transfer to ASI may be lower than the current carrying amount of the liability (see Note 4). On April 12, 2002, the Company entered into a new securitization purchase agreement with ASI. This transaction covers designated blocks of business issued from November 1, 2000 through December 31, 2001. The estimated present value of the transaction at April 12, 2002, using a discount rate of 6.00%, was $101,713. Payments, representing fees and charges in the aggregate amount, of $186,810, $207,731 and $219,523 were made by the Company to ASI in 2002, 2001 and 2000, respectively. Related interest expense of $828, $59,873 and $70,667 has been included in the consolidated statements of income for 2002, 2001 and 2000, respectively. The Commissioner of the State of Connecticut has approved the transfer 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 restrict the payments due to ASI, into a restricted account, under the Purchase Agreement subject to certain terms and conditions. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 8. FUTURE FEES PAYABLE TO ASI (continued) The present values of the transactions as of the respective effective date were as follows:
Closing Effective Contract Issue Discount Present Transaction Date Date Period Rate Value - ------------- --------- -------------- ----------------- ------- ---------- 1996-1 12/17/96 9/1/96 1/1/94 - 6/30/96 7.5% $ 50,221 1997-1 7/23/97 6/1/97 3/1/96 - 4/30/97 7.5% 58,767 1997-2 12/30/97 12/1/97 5/1/95 - 12/31/96 7.5% 77,552 1997-3 12/30/97 12/1/97 5/1/96 - 10/31/97 7.5% 58,193 1998-1 6/30/98 6/1/98 1/1/97 - 5/31/98 7.5% 61,180 1998-2 11/10/98 10/1/98 5/1/97 - 8/31/98 7.0% 68,573 1998-3 12/30/98 12/1/98 7/1/96 - 10/31/98 7.0% 40,128 1999-1 6/23/99 6/1/99 4/1/94 - 4/30/99 7.5% 120,632 1999-2 12/14/99 10/1/99 11/1/98 - 7/31/99 7.5% 145,078 2000-1 3/22/00 2/1/00 8/1/99 - 1/31/00 7.5% 169,459 2000-2 7/18/00 6/1/00 2/1/00 - 4/30/00 7.25% 92,399 2000-3 12/28/00 12/1/00 5/1/00 - 10/31/00 7.25% 107,291 2000-4 12/28/00 12/1/00 1/1/98 - 10/31/00 7.25% 107,139 2002-1 4/12/02 3/1/02 11/1/00 - 12/31/01 6.00% 101,713
Payments of future fees payable to ASI, according to original amortization schedules, as of December 31, 2002 are as follows: Year Amount ---- ----------- 2003 $ 186,854 2004 171,093 2005 147,902 2006 117,761 2007 66,270 2008 18,369 ----------- Total $ 708,249 =========== AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 9. LEASES The Company entered into an eleven year lease agreement for office space in Westminster, Colorado, effective January 1, 2001. Lease expense for 2002 and 2001 was $2,583 and $1,602, respectively. Sub-lease rental income was $227 in 2002 and $0 in 2001. Future minimum lease payments and sub-lease receipts per year and in aggregate as of December 31, 2002 are as follows: Lease Sub-Lease ---------- ---------- 2003 $ 1,913 $ 426 2004 1,982 455 2005 2,050 500 2006 2,050 533 2007 2,050 222 2008 and thereafter 8,789 0 ---------- ---------- Total $ 18,834 $ 2,136 ========== ========== 10. RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Statutory basis shareholder's equity was $279,957 and $226,780 at December 31, 2002 and 2001, respectively. The Company incurred statutory basis net losses in 2002 of $192,474 due primarily to significant declines in the equity markets, increasing GMDB reserves calculated on a statutory basis. Statutory basis net losses for 2001 were $121,957, as compared to income of $11,550 in 2000. Under various state insurance laws, the maximum amount of dividends that can be paid to shareholders without prior approval of the state insurance department is subject to restrictions relating to statutory surplus and net gain from operations. For 2003, no amounts may be distributed without prior approval. 11. STATUTORY ACCOUNTING PRACTICES The Company prepares its statutory basis financial statements in accordance with accounting practices prescribed by the State of Connecticut Insurance Department. Prescribed statutory accounting practices include publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. The NAIC adopted the Codification of Statutory Accounting Principles (Codification) in March 1998. The effective date for codification was January 1, 2001. The Company's state of domicile, Connecticut, has adopted codification and the Company has made the necessary changes in its statutory accounting and reporting required for implementation. The overall impact of adopting codification in 2001 was a one-time, cumulative change in accounting benefit recorded directly in statutory surplus of $12,047. In addition, during 2001, based on a recommendation from the State of Connecticut Insurance Department, the Company changed its statutory method of accounting for its AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 11. STATUTORY ACCOUNTING PRACTICES (continued) liability associated with securitized variable annuity fees. Under the new method of accounting, the liability for securitized fees is established consistent with the method of accounting for the liability associated with variable annuity fees ceded under reinsurance contracts. This equates to the statutory liability at any valuation date being equal to the Commissioners Annuity Reserve Valuation Method (CARVM) offset related to the securitized contracts. The impact of this change in accounting, representing the difference in the liability calculated under the old method versus the new method as of January 1, 2001, was reported as a cumulative effect of change in accounting benefit recorded directly in statutory surplus of approximately $20,215. In 2001, the Company, in agreement with the Connecticut Insurance Department, changed its reserving methodology to recognize free partial withdrawals and to reserve on a "continuous" rather than "curtate" basis. The impact of these changes, representing the difference in reserves calculated under the new methods versus the old methods, was recorded directly to surplus as changes in reserves on account of valuation basis. This resulted in an increase to the unassigned deficit of approximately $40,511. Effective January 1, 2002, the Company adopted Statement of Statutory Accounting Principles No. 82, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use and Web Site Development Costs" ("SSAP 82"). SSAP 82 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. Prior to the adoption of SSAP 82, the Company expensed all internal use software related costs as incurred. The Company has identified and capitalized $5,935 of costs associated with internal use software as of January 1, 2002 and is amortizing the applicable costs on a straight-line basis over a three year period. The costs capitalized as of January 1, 2002 resulted in a direct increase to surplus. Amortization expense for the year ended December 31, 2002 was $757. 12. EMPLOYEE BENEFITS The Company has a 401(k) plan for which substantially all employees are eligible. Under this plan, the Company provides a 50% match on employees' contributions up to 6% of an employee's salary (for an aggregate match of up to 3% of the employee's salary). Additionally, the Company may contribute additional amounts based on profitability of the Company and certain of its affiliates. Expenses related to this program in 2002, 2001 and 2000 were $719, $2,738 and $3,734, respectively. Company contributions to this plan on behalf of the participants were $921, $2,549 and $4,255 in 2002, 2001 and 2000, respectively. The Company has a deferred compensation plan, which is available to the field marketing staff and certain other employees. Expenses related to this program in 2002, 2001 and 2000 were $3,522, $1,615 and $1,030, respectively. Company contributions to this plan on behalf of the participants were $5,271, $1,678 and $2,134 in 2002, 2001 and 2000, respectively. The Company and certain affiliates cooperatively have a long-term incentive program under which units are awarded to executive officers and other personnel. The Company and certain affiliates also have a profit sharing program, which benefits all employees AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 12. EMPLOYEE BENEFITS (continued) below the officer level. These programs consist of multiple plans with new plans 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 programs. The accrued liability representing the value of these units was $7,083 and $13,645 as of December 31, 2002 and 2001, respectively. Expenses (income) related to these programs in 2002, 2001 and 2000, were $1,471, ($9,842) and $2,692, respectively. Payments under these programs were $8,033, $8,377 and $13,697 in 2002, 2001 and 2000, respectively. 13. FINANCIAL REINSURANCE The Company cedes insurance to other insurers in order to fund the cash strain generated from commission costs on current sales and to limit its risk exposure. The Company uses modified coinsurance reinsurance arrangements whereby the reinsurer shares in the experience of a specified book of business. These reinsurance transactions result in the Company receiving from the reinsurer an upfront ceding commission on the book of business ceded in exchange for the reinsurer receiving in the future, the future fees generated from that book of business. Such transfer does not relieve the Company of its primary liability and, as such, failure of reinsurers to honor their obligation could result in losses to the Company. The Company reduces this risk by evaluating the financial condition and credit worthiness of reinsurers. The effect of reinsurance for the 2002, 2001 and 2000 was as follows:
2002 Gross Ceded Net - --------- ------------ ------------- ------------ Annuity and life insurance charges and fees $ 406,272 $ (36,268) $ 370,004 Return credited to contract owners $ 5,221 $ (25) $ 5,196 Underwriting, acquisition and other insurance expenses (deferal of acquisition costs) $ 154,588 $ 34,140 $ 188,728 Amortization of deferred acquisition costs $ 542,945 $ (32,886) $ 510,059 2001 - --------- Annuity and life insurance charges and fees $ 430,914 $ (42,218) $ 388,696 Return credited to contract owners $ 5,704 $ 92 $ 5,796 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 163,677 $ 33,078 $ 196,755 Amortization of deferred acquisition costs $ 231,290 $ (7,243) $ 224,047 2000 - --------- Annuity and life insurance charges and fees $ 473,318 $ (48,740) $ 424,578 Return credited to contract owners $ 8,540 $ (77) $ 8,463 Underwriting, acquisition and other insurance expenses (deferral of acquisition costs) $ 108,399 $ 42,198 $ 150,597 Amortization of deferred acquisition costs $ 205,174 $ (20,558) $ 184,616
In December 2000, the Company entered into a modified coinsurance agreement with SICL covering certain contracts issued since January 1996. The impact of this treaty to the AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 13. FINANCIAL REINSURANCE (continued) Company was pre-tax (loss) income of ($4,137), $8,394 and $23,341 in 2002, 2001 and 2000, respectively. At December 31, 2002 and 2001, $675 and $1,137, respectively, was receivable from SICL under this agreement. 14. SURPLUS NOTES The Company has issued surplus notes to ASI in exchange for cash. Surplus notes outstanding as of December 31, 2002 and 2001, and interest expense for 2002, 2001 and 2000 were as follows:
Liability as of December 31, Interest Expense Interest For the Years Note Issue Date Rate 2002 2001 2002 2001 2000 - --------------------- ------- ---------- ---------- ---------- ---------- ---------- February 18, 1994 7.28% -- -- -- -- 732 March 28, 1994 7.90% -- -- -- -- 794 September 30, 1994 9.13% -- -- -- 1,282 1,392 December 19, 1995 7.52% -- 10,000 520 763 765 December 20, 1995 7.49% -- 15,000 777 1,139 1,142 December 22, 1995 7.47% -- 9,000 465 682 684 June 28, 1996 8.41% 40,000 40,000 3,411 3,411 3,420 December 30, 1996 8.03% 70,000 70,000 5,699 5,699 5,715 ------- ---------- ---------- ---------- ---------- ---------- Total $ 110,000 $ 144,000 $ 10,872 $ 12,976 $ 14,644 ======= ========== ========== ========== ========== ==========
On September 6, 2002, surplus notes for $10,000, dated December 19, 1995, $15,000, dated December 20, 1995, and $9,000, dated December 22, 1995, were repaid. On December 3, 2001, a surplus note, dated September 30, 1994, for $15,000 was repaid. On December 27, 2000, surplus notes for $10,000, dated February 18, 1994, and $10,000, dated March 28, 1994, were repaid. All surplus notes mature seven 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, 2002 and 2001, $29,230 and $25,829, respectively, of accrued interest on surplus notes was not permitted for payment under these criteria. 15. SHORT-TERM BORROWING The Company had a $10,000 short-term loan payable to ASI at December 31, 2002 and 2001 as part of a revolving loan agreement. The loan had an interest rate of 1.97% and matured on January 13, 2003. The loan was subsequently rolled over with a new interest rate of 1.82% and a new maturity date of March 13, 2003. The loan was further extended to April 30, 2003 and a new interest rate of 1.71%. The total related interest expense to the Company was $271, $522 and $687 in 2002, 2001 and 2000, respectively. Accrued interest payable was $10 and $113 as of December 31, 2002 and 2001, respectively. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 15. SHORT-TERM BORROWING (continued) On January 3, 2002, the Company entered into a $150,000 credit facility with ASI. This credit facility terminates on December 31, 2005 and bears interest at the offered rate in the London interbank market (LIBOR) plus 0.35 percent per annum for the relevant interest period. Interest expense related to these borrowings was $2,243 for the year ended December 31, 2002. As of December 31, 2002, no amount was outstanding under this credit facility. 16. CONTRACT WITHDRAWAL PROVISIONS Approximately 99% of the Company's separate account liabilities are subject to discretionary withdrawal by contract owners at market value or with market value adjustment. Separate account assets, which are carried at fair value, are adequate to pay such withdrawals, which are generally subject to surrender charges ranging from 10% to 1% for contracts held less than 10 years. 17. RESTRUCTURING CHARGES On March 22, 2001 and December 3, 2001, the Company announced separate plans to reduce expenses to better align its operating infrastructure with the current investment market environment. As part of the two plans, the Company's workforce was reduced by approximately 140 positions and 115 positions, respectively, affecting substantially all areas of the Company. Estimated pre-tax severance benefits of $8,500 have been charged against 2001 operations related to these reductions. These charges have been reported in the Consolidated Statements of Income as a component of Underwriting, Acquisition and Other Insurance Expenses. As of December 31, 2002 and 2001, the remaining restructuring liability, relating primarily to the December 3, 2001 plan, was $12 and $4,104, respectively. 18. COMMITMENTS AND CONTINGENT LIABILITIES In recent years, a number of annuity companies have been named as defendants in class action lawsuits relating to the use of variable annuities as funding vehicles for tax- qualified retirement accounts. The Company is currently a defendant in one such lawsuit. A purported class action complaint was filed in the United States District Court for the Southern District of New York on December 12, 2002, by Diane C. Donovan against the Company and certain of its affiliates (the "Donovan Complaint"). The Donovan Complaint seeks unspecified compensatory damages and injunctive relief from the Company and certain of its affiliates. The Donovan Complaint claims that the Company and certain of its affiliates violated federal securities laws in marketing variable annuities. This litigation is in the preliminary stages. The Company believes this action is without merit, and intends to vigorously defend against this action. The Company is also involved in other lawsuits arising, for the most part, in the ordinary course of its business operations. While the outcome of these other lawsuits cannot be determined at this time, after consideration of the defenses available to the Company, applicable insurance coverage and any related reserves established, these other lawsuits are not expected to result in liability for amounts material to the financial condition of the Company, although it may adversely affect results of operations in future periods. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 18. COMMITMENTS AND CONTINGENT LIABILITIES (continued) As discussed previously, on December 19, 2002, SICL entered into a definitive purchase agreement (the "Purchase Agreement") to sell its ownership interest in the Company and certain affiliates to Prudential Financial for approximately $1.265 billion. The closing of this transaction, which is conditioned upon certain customary regulatory and other approvals and conditions, is expected in the second quarter of 2003. The purchase price that was agreed to between SICL and Prudential Financial was based on a September 30, 2002 valuation of the Company and certain affiliates. As a result, assuming the transaction closes, the economics of the Company's business from September 30, 2002 forward will inure to the benefit or detriment of Prudential Financial. Included in the Purchase Agreement, SICL has agreed to indemnify Prudential Financial for certain liabilities that may arise relating to periods prior to September 30, 2002. These liabilities generally include market conduct activities, as well as contract and regulatory compliance (referred to as "Covered Liabilities"). Related to the indemnification provisions contained in the Purchase Agreement, SICL has signed, for the benefit of the Company, an indemnity letter, effective December 19, 2002, to make the Company whole for certain Covered Liabilities that come to fruition during the period beginning December 19, 2002 and ending with the close of the transaction. This indemnification effectively transfers the risk associated with those Covered Liabilities from the Company to SICL concurrent with the signing of the definitive purchase agreement rather than waiting until the transaction closes. 19. SEGMENT REPORTING Assets under management and sales for products other than variable annuities have not been significant enough to warrant full segment disclosures as required by SFAS 131, "Disclosures about Segments of an Enterprise and Related Information," and the Company does not anticipate that they will be so in the future due to changes in the Company's strategy to focus on its core variable annuity business. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) The following table summarizes information with respect to the operations of the Company on a quarterly basis:
Three Months Ended ------------------------------------------------------------- 2002 March 31 June 30 Sept. 30 Dec. 31 - ---- ------------ ----------- ------------ ------------- Premiums and other insurance revenues* $ 118,797 $ 126,614 $ 115,931 $ 108,488 Net investment income 4,965 4,714 5,128 4,825 Net realized capital losses (1,840) (1,584) (2,327) (3,863) Total revenues 121,922 129,744 118,732 109,450 Benefits and expenses* 112,759 160,721 323,529 150,906 Pre-tax net income (loss) 9,163 (30,977) (204,797) (41,456) Income tax expense (benefit) 1,703 (11,746) (72,754) (20,013) Net income (loss) $ 7,460 $ (19,231) $ (132,043) $ (21,443)
* For the quarters ended March 31, 2002 and June 30, 2002, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact.
Three Months Ended ---------------------------------------------------------- 2001 March 31 June 30 Sept. 30 Dec. 31 - ---- ------------ ------------ ------------ ------------ Premiums and other insurance revenues*** $ 130,885 $ 128,465 $ 122,708 $ 119,604 Net investment income** 5,381 4,997 5,006 4,742 Net realized capital gains (losses) 1,902 373 376 (1,723) ------------ ------------ ------------ ------------ Total revenues 138,168 133,835 128,090 122,623 Benefits and expenses** *** 122,729 110,444 123,307 125,969 ------------ ------------ ------------ ------------ Pre-tax net income (loss) 15,439 23,391 4,783 (3,346) Income tax expense (benefit) 4,034 7,451 (480) (3,837) ------------ ------------ ------------ ------------ Net income $ 11,405 $ 15,940 $ 5,263 $ 491 ============ ============ ============ ============
** For the quarters ended March 31, 2001, June 30, 2001 and September 30, 2001, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. *** For the quarters ended September 30, 2001 and December 31, 2001, the Company had overstated premiums ceded in revenues. The above presentation reflects an equal and offsetting reclassification of these amounts to benefits and expenses with no net income impact. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION (an indirect wholly-owned subsidiary of Skandia Insurance Company Ltd.) Notes to Consolidated Financial Statements (continued) 20. QUARTERLY FINANCIAL DATA (UNAUDITED) (continued)
Three Months Ended --------------------------------------------------------- 2000 March 31 June 30 Sept. 30 Dec. 31 - ---- ------------ ------------ ----------- ------------ Premiums and other insurance revenues $ 137,040 $ 139,346 $ 147,819 $ 135,866 Net investment income**** 4,343 4,625 4,619 5,008 Net realized capital gains (losses) 729 (1,436) (858) 877 ------------ ------------ ----------- ------------ Total revenues 142,112 142,535 151,580 141,751 Benefits and expenses**** 107,893 122,382 137,843 114,264 ------------ ------------ ----------- ------------ Pre-tax net income 34,219 20,153 13,737 27,487 Income tax expense 10,038 5,225 3,167 12,349 ------------ ------------ ----------- ------------ Net income $ 24,181 $ 14,928 $ 10,570 $ 15,138 ============ ============ =========== ============
**** For the quarters ended March 31, 2000, June 30, 2000, September 30, 2000 and December 31, 2000, the Company had reported investment performance associated with its derivatives as net investment income. The above presentation reflects a reclassification of these amounts to benefits and expenses. APPENDIX B - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B Separate Account B consists of multiple Sub-accounts. Each Sub-account invests only in a single mutual fund or mutual fund portfolio. All or some of these Sub-accounts are available as investment options for other variable annuities we offer pursuant to different prospectuses. Unit Prices And Numbers Of Units: The following table shows: (a) the Unit Price, as of the dates shown, for Units in each of the Sub-accounts of Separate Account B that are being offered pursuant to this Prospectus; and (b) the number of Units outstanding in each such Sub-account as of the dates shown. The year in which operations commenced in each such Sub-account is noted in parentheses. To the extent a Sub-account commenced operations during a particular calendar year, the Unit Price as of the end of the period reflects only the partial year results from the commencement of operations until December 31st of the applicable year. 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. Unit Prices and Units are provided for Sub-accounts that commenced operations prior to January 1, 2003. Beginning November 18, 2002, multiple Unit Prices will be calculated for each Sub-account of Separate Account B to reflect the daily charge deducted for each combination of the applicable Insurance Charge, Distribution Charge (when applicable) and the charge for the Guaranteed Return Option offered under this Annuity. The Unit Prices below reflect the daily charges for each optional benefit offered between November 18, 2002 and December 31, 2002 only.
Year Ended December 31, ---------------------------------------------------------------------------- Sub-account 2002 2001 2000 1999 1998 - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price $ 19.53 24.28 31.88 43.99 27.18 Number of Units 14,140,023 17,388,860 19,112,622 16,903,883 17,748,560 With One Optional Benefit Unit Price $ 8.56 - - - - Number of Units 2,569,506 - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST William Blair International Growth /2/(1997) With No Optional Benefits Unit Price $ 9.92 13.54 17.96 24.16 13.41 Number of Units 29,062,215 40,507,419 57,327,711 61,117,418 43,711,763 With One Optional Benefit Unit Price $ 9.72 - - - - Number of Units 835,523 - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price $ 10.20 12.85 17.92 21.66 13.30 Number of Units 31,813,722 37,487,425 17,007,352 6,855,601 5,670,336 With One Optional Benefit Unit Price $ 8.52 - - - - Number of Units 2,252,674 - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price $ 8.81 10.77 16.12 23.45 12.54 Number of Units 10,185,535 13,627,264 16,245,805 8,818,599 9,207,623 With One Optional Benefit Unit Price $ 8.19 - - - - Number of Units 269,995 - - - - Year Ended December 31, ---------------------------------------------------------------------------- Sub-account 1997 1996 1995 1994 1993 - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST Strong International Equity /1/ (1989) With No Optional Benefits Unit Price 22.95 19.70 18.23 16.80 16.60 Number of Units 17,534,233 17,220,688 14,393,137 14,043,215 9,063,464 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST William Blair International Growth /2/(1997) With No Optional Benefits Unit Price 11.70 - - - - Number of Units 21,405,891 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST American Century International Growth /3/ (1997) With No Optional Benefits Unit Price 11.35 - - - - Number of Units 2,857,188 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ---------- AST DeAM International Equity /4/ (1994) With No Optional Benefits Unit Price 11.46 11.39 10.23 - - Number of Units 9,988,104 9,922,698 2,601,283 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- -------------- ---------- ---------- ---------- ----------
Year Ended December 31, ------------------------------------------------------------------ Sub-account 2002 2001 2000 1999 1998 - ------------------------------------------ ------------- ---------- ---------- ---------- ---------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price $7.74 8.94 10.08 11.01 - Number of Units 5,878,055 5,806,567 2,803,013 116,756 - With One Optional Benefit Unit Price $9.04 - - - - Number of Units 969,509 - - - - AST PBHG Small-Cap Growth 5 (1994) With No Optional Benefits Unit Price $12.83 19.84 21.51 42.08 17.64 Number of Units 17,093,250 23,048,821 25,535,093 32,134,969 15,003,001 With One Optional Benefit Unit Price $6.92 - - - - Number of Units 1,970,250 - - - - AST DeAM Small-Cap Growth 6 (1999) With No Optional Benefits Unit Price $6.13 8.46 11.98 15.37 - Number of Units 44,042,514 60,703,791 63,621,279 53,349,003 - With One Optional Benefit Unit Price $7.67 - - - - Number of Units 639,695 - - - - AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price $4.96 7.10 9.08 - - Number of Units 5,188,521 6,499,066 196,575 - - With One Optional Benefit Unit Price $7.64 - - - - Number of Units 1,255,415 - - - - AST Goldman Sachs Small-Cap Value 7 (1998) With No Optional Benefits Unit Price $13.72 15.12 13.95 10.57 9.85 Number of Units 20,004,839 26,220,860 15,193,053 6,597,544 4,081,870 With One Optional Benefit Unit Price $9.26 - - - - Number of Units 1,492,775 - - - - AST Gabelli Small-Cap Value 8 (1997) With No Optional Benefits Unit Price $12.58 14.08 13.35 11.11 11.20 Number of Units 32,549,396 35,483,530 23,298,524 21,340,168 24,700,211 With One Optional Benefit Unit Price $9.30 - - - - Number of Units 6,141,523 - - - - AST DeAM Small-Cap Value 9 (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 581,833 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 423,387 - - - -
Year Ended December 31, ------------------------------------------------------------------ Subaccount 1997 1996 1995 1994 1993 - ------------------------------------------- ------------- ---------- ---------- ---------- ---------- AST MFS Global Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST PBHG Small-Cap Growth 5 (1994) With No Optional Benefits Unit Price 17.28 16.54 13.97 10.69 - Number of Units 14,662,728 12,282,211 6,076,373 2,575,105 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST DeAM Small-Cap Growth 6 (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST Federated Aggressive Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST Goldman Sachs Small-Cap Value 7 (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST Gabelli Small-Cap Value 8 (1997) With No Optional Benefits Unit Price 12.70 - - - - Number of Units 14,612,510 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST DeAM Small-Cap Value 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - -
Year Ended December 31, -------------------------------------------------------------- Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ------------- ----------- ----------- ---------- ---------- AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price $2.78 3.88 6.58 - - Number of Units 16,748,577 17,045,776 9,426,102 - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 1,273,118 - - - - - --------------------------------------------------- ------------- ----------- ---------- ---------- ---------- AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price $12.86 18.95 25.90 28.58 19.15 Number of Units 19,674,777 25,717,164 26,517,850 13,460,525 13,389,289 With One Optional Benefit Unit Price $7.41 - - - - Number of Units 2,175,250 - - - - - --------------------------------------------------- ------------- ----------- ----------- ---------- ---------- AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price $17.78 20.16 21.09 16.78 16.10 Number of Units 37,524,187 47,298,313 44,558,699 37,864,586 16,410,121 With One Optional Benefit Unit Price $8.96 - - - - Number of Units 5,118,558 - - - - - --------------------------------------------------- ------------- ----------- ----------- ---------- ---------- AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price $3.51 5.54 6.74 - - Number of Units 85,441,507 125,442,916 28,229,631 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 658,419 - - - - - --------------------------------------------------- ------------- ------------ ---------- ---------- --------- AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price $7.59 9.71 10.06 - - Number of Units 11,924,124 14,934,570 1,273,094 - - With One Optional Benefit Unit Price $8.17 - - - - Number of Units 1,200,225 - - - - - --------------------------------------------------- ------------- ------------ ----------- --------- ----------- AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price $18.36 19.71 19.86 15.88 12.57 Number of Units 5,891,582 6,565,088 6,520,983 6,201,327 5,697,453 With One Optional Benefit Unit Price $9.59 - - - - Number of Units 724,670 - - - - - --------------------------------------------------- ------------- ------------ ----------- --------- ----------- AST Alliance Growth 13 (1996) With No Optional Benefits Unit Price $9.94 14.61 17.38 20.44 15.48 Number of Units 21,295,907 29,478,257 25,796,792 17,059,819 19,009,242 With One Optional Benefit Unit Price $7.46 - - - - Number of Units 1,869,353 - - - - - --------------------------------------------------- ------------- ------------ ----------- --------- -----------
Year Ended December 31, -------------------------------------------------------------------- Sub-account 1997 1996 1995 1994 1993 - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Goldman Sachs Mid-Cap Growth /10/ (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Neuberger Berman Mid-Cap Growth /11/ (1994) With No Optional Benefits Unit Price 16.10 13.99 12.20 9.94 - Number of Units 11,293,799 9,563,858 3,658,836 301,267 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Neuberger Berman Mid-Cap Value /12/ (1993) With No Optional Benefits Unit Price 16.72 13.41 12.20 9.81 10.69 Number of Units 11,745,440 9,062,152 8,642,186 7,177,232 5,390,887 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Alger All-Cap Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Gabelli All-Cap Value (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST T. Rowe Price Natural Resources (1995) With No Optional Benefits Unit Price 14.46 14.19 11.01 - - Number of Units 7,550,076 6,061,852 808,605 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------ AST Alliance Growth 13 (1996) With No Optional Benefits Unit Price 12.33 10.89 - - - Number of Units 18,736,994 4,324,161 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - --------------------------------------------------- --------------- ----------- ----------- ---------- ------------
Year Ended December 31, - --------------------------------------------------- ---------- ----------- ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - --------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST MFS Growth (1999) With No Optional Benefits Unit Price $5.68 8.02 10.38 11.27 - Number of Units 85,193,279 117,716,242 7,515,486 409,467 - With One Optional Benefit Unit Price $7.58 - - - - Number of Units 2,930,432 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price $11.44 13.74 17.81 21.06 14.00 Number of Units 81,046,482 85,895,802 94,627,691 78,684,943 40,757,449 With One Optional Benefit Unit Price $8.32 - - - - Number of Units 10,144,317 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST Goldman Sachs Concentrated Growth 14 (1992) With No Optional Benefits Unit Price $19.17 27.71 41.14 60.44 39.54 Number of Units 56,016,467 84,116,221 99,250,773 94,850,623 80,631,598 With One Optional Benefit Unit Price $7.67 - - - - Number of Units 1,349,939 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST DeAm Large-Cap Growth 9 (2002) With No Optional Benefits Unit Price $7.67 - - - - Number of Units 986,566 - - - - With One Optional Benefit Unit Price $7.65 - - - - Number of Units 207,816 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST DeAm Large-Cap Value 15 (2000) With No Optional Benefits Unit Price $7.64 9.15 9.82 - - Number of Units 4,621,831 4,575,558 586,058 - - With One Optional Benefit Unit Price $8.66 - - - - Number of Units 664,649 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price $7.12 9.63 - - - Number of Units 3,031,899 3,351,836 - - - With One Optional Benefit Unit Price $7.99 - - - - Number of Units 965,912 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price $8.59 10.04 - - - Number of Units 15,239,844 4,207,869 - - - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 6,005,922 - - - - - - -------------------------------------------------- ------------- - ----------- ------------- ------------ ------------ Year Ended December 31, - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST MFS Growth (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST Marsico Capital Growth (1997) With No Optional Benefits Unit Price 10.03 - - - - Number of Units 714,309 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST Goldman Sachs Concentrated Growth 14 (1992) With No Optional Benefits Unit Price 23.83 18.79 14.85 10.91 11.59 Number of Units 62,486,302 46,779,164 28,662,737 22,354,170 13,603,637 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST DeAm Large-Cap Growth 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST DeAm Large-Cap Value 15 (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST Alliance/Bernstein Growth + Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- ----------- AST AST Sanford Bernstein Core Value (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ------------ ---------- ----------- ---------- -----------
Year Ended December 31, ---------------------------------------------------------------- Sub-account 2002 2001 2000 1999 1998 - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price $10.67 10.54 10.39 8.35 8.28 Number of Units 14,017,528 12,268,426 11,891,188 6,224,365 3,771,461 With One Optional Benefit Unit Price $10.08 - - - - Number of Units 1,563,486 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST Sanford Bernstein Managed Index 500 16 (1998) With No Optional Benefits Unit Price $9.41 12.03 13.55 15.08 12.61 Number of Units 39,938,791 48,018,721 48,835,089 39,825,951 22,421,754 With One Optional Benefit Unit Price $8.17 - - - - Number of Units 3,662,406 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST American Century Income & Growth 17 (1997) With No Optional Benefits Unit Price $10.16 12.86 14.24 16.19 13.35 Number of Units 22,410,834 27,386,278 32,388,202 21,361,995 13,845,190 With One Optional Benefit Unit Price $8.25 - - - - Number of Units 1,751,136 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST Alliance Growth and Income 18 (1992) With No Optional Benefits Unit Price $21.31 28.18 28.72 27.60 24.11 Number of Units 49,030,576 63,123,316 53,536,296 52,766,579 47,979,349 With One Optional Benefit Unit Price $8.06 - - - - Number of Units 6,667,373 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price $6.68 8.64 10.36 10.49 - Number of Units 11,173,177 11,896,688 6,937,627 741,323 - With One Optional Benefit Unit Price $8.09 - - - - Number of Units 1,053,007 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST INVESCO Capital Income 19 (1994) With No Optional Benefits Unit Price $16.14 19.84 22.01 21.31 19.34 Number of Units 37,055,825 48,595,962 50,171,495 46,660,160 40,994,187 With One Optional Benefit Unit Price $8.34 - - - - Number of Units 2,110,071 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- AST DeAM Global Allocation 20 (1993) With No Optional Benefits Unit Price $14.50 17.39 19.98 21.19 17.78 Number of Units 18,212,529 26,641,422 30,290,413 23,102,272 22,634,344 With One Optional Benefit Unit Price $8.71 - - - - Number of Units 847,517 - - - - - ---------------------------------------------------- ---------- ----------- ----------- ---------- ---------- Year Ended December 31, ------------------------------------------------------------ Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST Cohen & Steers Realty (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST Sanford Bernstein Managed Index 500 16 (1998) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST American Century Income & Growth 17 (1997) With No Optional Benefits Unit Price 12.06 - - - - Number of Units 9,523,815 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST Alliance Growth and Income 18 (1992) With No Optional Benefits Unit Price 21.74 17.79 15.22 11.98 11.88 Number of Units 42,197,002 28,937,085 18,411,759 7,479,449 4,058,228 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST MFS Growth with Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST INVESCO Capital Income 19 (1994) With No Optional Benefits Unit Price 17.31 14.23 12.33 9.61 - Number of Units 33,420,274 23,592,226 13,883,712 6,633,333 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST DeAM Global Allocation 20 (1993) With No Optional Benefits Unit Price 15.98 13.70 12.49 10.34 10.47 Number of Units 22,109,373 20,691,852 20,163,848 13,986,604 8,743,758 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Year Ended December 31, - ------------------------------------------------- ---------- ----------- ---------- ---------- ----------- Sub-account 2002 2001 2000 1999 1998 - ------------------------------------------------- ---------- ----------- ---------- ---------- ----------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price $12.01 13.50 14.23 14.90 13.37 Number of Units 12,683,097 14,369,895 14,498,180 13,944,535 6,714,065 With One Optional Benefit Unit Price $9.14 - - - - Number of Units 1,126,058 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price $16.13 18.15 19.33 19.70 18.12 Number of Units 15,466,227 17,579,107 19,704,198 22,002,028 18,469,315 With One Optional Benefit Unit Price $9.09 - - - - Number of Units 921,329 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST T. Rowe Price Global Bond 21 (1994) With No Optional Benefits Unit Price $12.04 10.62 10.49 10.69 11.82 Number of Units 14,576,376 9,668,062 11,219,503 12,533,037 12,007,692 With One Optional Benefit Unit Price $11.34 - - - - Number of Units 1,739,313 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST Federated High Yield (1994) With No Optional Benefits Unit Price $12.47 12.64 12.80 14.38 14.30 Number of Units 38,477,793 39,130,467 36,914,825 41,588,401 40,170,144 With One Optional Benefit Unit Price $9.71 - - - - Number of Units 5,592,940 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price $10.18 10.28 10.12 - - Number of Units 10,468,962 5,506,982 650,253 - - With One Optional Benefit Unit Price $9.94 - - - - Number of Units 4,146,530 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST DeAM Bond 9 (2002) With No Optional Benefits Unit Price $10.67 - - - - Number of Units 1,487,730 - - - - With One Optional Benefit Unit Price $10.65 - - - - Number of Units 561,446 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------ AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price $16.65 15.46 14.40 13.09 13.43 Number of Units 113,007,310 99,028,465 82,545,240 73,530,507 64,224,618 With One Optional Benefit Unit Price $10.57 - - - - Number of Units 20,544,075 - - - - - ---------------------------------------------------- ---------- ----------- ------------- ------------ ------------
Year Ended December 31, - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST American Century Strategic Balanced (1997) With No Optional Benefits Unit Price 11.18 - - - - Number of Units 2,560,866 - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST T. Rowe Price Asset Allocation (1994) With No Optional Benefits Unit Price 15.53 13.30 11.92 9.80 - Number of Units 13,524,781 8,863,840 4,868,956 2,320,063 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST T. Rowe Price Global Bond 21 (1994) With No Optional Benefits Unit Price 10.45 10.98 10.51 9.59 - Number of Units 12,089,872 8,667,712 4,186,695 1,562,364 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST Federated High Yield (1994) With No Optional Benefits Unit Price 14.13 12.62 11.27 9.56 - Number of Units 29,663,242 15,460,522 6,915,158 2,106,791 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST Lord Abbett Bond-Debenture (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST DeAM Bond 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ---------- AST PIMCO Total Return Bond (1994) With No Optional Benefits Unit Price 12.44 11.48 11.26 9.61 - Number of Units 144,098,036 29,921,643 19,061,840 4,577,708 - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------------ ---------- ---------- ---------- ---------- ----------
Year Ended December 31, - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Sub-account 2002 2001 2000 1999 1998 - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price $14.26 13.61 12.79 11.96 11.73 Number of Units 61,707,894 42,410,807 31,046,956 32,560,943 28,863,932 With One Optional Benefit Unit Price $10.34 - - - - Number of Units 11,274,642 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- AST Money Market (1992) With No Optional Benefits Unit Price $13.23 13.24 12.94 12.38 12.00 Number of Units 163,759,511 184,612,059 172,493,206 187,609,708 75,855,442 With One Optional Benefit Unit Price $9.96 - - - - Number of Units 36,255,772 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price $5.79 6.50 7.09 10.06 6.19 Number of Units 10,957,884 14,095,135 12,899,472 12,060,036 10,534,383 With One Optional Benefit Unit Price $8.66 - - - - Number of Units 283,466 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price $7.46 9.37 10.05 9.96 - Number of Units 1,361,988 1,019,937 502,986 136,006 - With One Optional Benefit Unit Price $8.25 - - - - Number of Units 196,720 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price $6.03 8.98 13.23 13.91 - Number of Units 9,117,894 13,391,660 11,409,827 2,022,585 - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 543,762 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price $3.49 6.66 12.48 16.52 - Number of Units 18,830,138 26,652,622 29,491,113 4,622,242 - With One Optional Benefit Unit Price $5.50 - - - - Number of Units 293,307 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price $9.37 12.58 14.59 11.34 - Number of Units 11,475,199 17,419,141 19,381,405 786,518 - With One Optional Benefit Unit Price $8.00 - - - - Number of Units 475,873 - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Year Ended December 31, - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- AST PIMCO Limited Maturity Bond (1995) With No Optional Benefits Unit Price 11.26 10.62 10.37 - - Number of Units 25,008,310 18,894,375 15,058,644 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - AST Money Market (1992) With No Optional Benefits Unit Price 11.57 11.16 10.77 10.35 10.12 Number of Units 66,869,998 42,435,169 30,564,442 27,491,389 11,422,783 With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- The Montgomery Variable Series - MV Emerging Markets (1996) With No Optional Benefits Unit Price 10.05 10.25 - - - Number of Units 10,371,104 2,360,940 - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - Wells Fargo Variable Trust - Equity Income (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- INVESCO VIF - Dynamics (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - INVESCO VIF - Technology (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- ----------- INVESCO VIF - Health Sciences (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------------- ----------- ----------- ----------- ----------- -----------
Year Ended December 31, - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price $10.47 12.48 14.04 11.41 - Number of Units 7,556,596 11,612,048 14,091,636 759,104 - With One Optional Benefit Unit Price $8.76 - - - - Number of Units 366,258 - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price $2.43 5.01 11.05 15.17 - Number of Units 9,354,303 13,553,158 17,856,118 4,184,526 - With One Optional Benefit Unit Price $5.78 - - - - Number of Units 94,004 - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Evergreen VA - International Growth 22 (2000) With No Optional Benefits Unit Price $8.21 9.30 8.70 - - Number of Units 45,975 45,358 57,408 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price $7.08 9.00 10.55 11.72 - Number of Units 1,442,329 1,520,376 887,758 23,101 - With One Optional Benefit Unit Price $8.15 - - - - Number of Units 113,389 - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price $7.16 9.98 11.01 12.19 - Number of Units 2,205,267 2,540,062 1,731,145 152,342 - With One Optional Benefit Unit Price $7.44 - - - - Number of Units 127,728 - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Evergreen VA - Omega (2000) With No Optional Benefits Unit Price $4.93 6.71 7.98 - - Number of Units 2,594,817 2,585,848 1,637,475 - - With One Optional Benefit Unit Price $7.78 - - - - Number of Units 39,943 - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------ Evergreen VA - Capital Growth (2000) With No Optional Benefits Unit Price $8.10 10.60 12.35 - - Number of Units 707,212 788,396 268,886 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ------------ ------------
Year Ended December 31, - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Sub-account 1997 1996 1995 1994 1993 - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- INVESCO VIF - Financial Services (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- INVESCO VIF - Telecommunications (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Evergreen VA - International Growth 22 (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Evergreen VA - Global Leaders (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Evergreen VA - Special Equity (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Evergreen VA - Omega (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ---------- Evergreen VA - Capital Growth (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ------------ ------------ ------------ ---------- ----------
Year Ended December 31, - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- Sub-account 2002 2001 2000 1999 1998 - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- Evergreen VA - Blue Chip (2000) With No Optional Benefits Unit Price $5.68 7.39 8.99 - - Number of Units 463,160 526,302 351,338 - - With One Optional Benefit Unit Price $8.01 - - - - Number of Units 148 - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- Evergreen VA - Equity Index (2000) With No Optional Benefits Unit Price $6.29 8.22 9.47 - - Number of Units 539,595 526,290 302,954 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- Evergreen VA - Foundation (2000) With No Optional Benefits Unit Price $7.75 8.70 9.65 - - Number of Units 949,349 1,019,799 755,890 - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- ProFund VP - Europe 30 (1999) With No Optional Benefits Unit Price $5.76 7.87 10.52 12.24 - Number of Units 2,550,567 5,711,763 2,327,562 273,963 - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 292,396 - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- ProFund VP - Asia 30 9 (2002) With No Optional Benefits Unit Price $7.76 - - - - Number of Units 2,060,741 - - - - With One Optional Benefit Unit Price $7.75 - - - - Number of Units 281,993 - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- ProFund VP - Japan 9 (2002) With No Optional Benefits Unit Price $7.25 - - - - Number of Units 338,472 - - - - With One Optional Benefit Unit Price $7.24 - - - - Number of Units 65,845 - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- ProFund VP - Banks 9 (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 555,999 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 101,136 - - - - - ------------------------------------------------ ---------- ----------- ----------- ----------- ----------- Year Ended December 31, - ---------------------------------------------- ---------- ----------- ----------- ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - ---------------------------------------------- ---------- ----------- ----------- ----------- ----------- Evergreen VA - Blue Chip (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Equity Index (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- Evergreen VA - Foundation (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Europe 30 (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Asia 30 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Japan 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Banks 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ---------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- Sub-account 2002 2001 2000 1999 1998 - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price $8.47 - - - - Number of Units 361,568 - - - - With One Optional Benefit Unit Price $8.46 - - - - Number of Units 76,331 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Biotechnology /21/ (2001) With No Optional Benefits Unit Price $5.16 8.37 - - - Number of Units 2,412,670 5,093,235 - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 130,082 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price $7.26 - - - - Number of Units 319,201 - - - - With One Optional Benefit Unit Price $7.25 - - - - Number of Units 128,022 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price $8.29 - - - - Number of Units 406,966 - - - - With One Optional Benefit Unit Price $8.28 - - - - Number of Units 148,446 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Energy 21 (2001) With No Optional Benefits Unit Price $7.51 9.19 - - - Number of Units 1,985,954 2,299,149 - - - With One Optional Benefit Unit Price $8.71 - - - - Number of Units 299,833 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Financial /21/ (2001) With No Optional Benefits Unit Price $7.74 9.22 - - - Number of Units 1,086,464 2,154,106 - - - With One Optional Benefit Unit Price $8.85 - - - - Number of Units 221,377 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Healthcare /21/ (2001) With No Optional Benefits Unit Price $7.13 9.35 - - - Number of Units 1,313,814 3,489,097 - - - With One Optional Benefit Unit Price $7.94 - - - - Number of Units 388,508 - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- Year Ended December 31, - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- Sub-account 1997 1996 1995 1994 1993 - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Basic Materials /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Biotechnology /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Consumer Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Consumer Non-Cyclical /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Energy /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Financial /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ---------- ProFund VP - Healthcare /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - ---------------------------------------------- ---------- ---------- ---------- ---------- ----------
Year Ended December 31, - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- Sub-account 2002 2001 2000 1999 1998 - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Industrial 9 (2002) With No Optional Benefits Unit Price $7.94 - - - - Number of Units 126,611 - - - - With One Optional Benefit Unit Price $7.93 - - - - Number of Units 12,642 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Internet 9 (2002) With No Optional Benefits Unit Price $8.58 - - - - Number of Units 2,982,656 - - - - With One Optional Benefit Unit Price $8.57 - - - - Number of Units 306,572 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Pharmaceuticals 9 (2002) With No Optional Benefits Unit Price $8.57 - - - - Number of Units 241,916 - - - - With One Optional Benefit Unit Price $8.56 - - - - Number of Units 136,599 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Precious Metals 9 (2002) With No Optional Benefits Unit Price $9.72 - - - - Number of Units 3,992,389 - - - - With One Optional Benefit Unit Price $9.70 - - - - Number of Units 1,175,651 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price $10.61 10.76 - - - Number of Units 1,489,153 3,592,834 - - - With One Optional Benefit Unit Price $9.86 - - - - Number of Units 441,318 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP -Semiconductor 9 (2002) With No Optional Benefits Unit Price $5.14 - - - - Number of Units 608,142 - - - - With One Optional Benefit Unit Price $5.14 - - - - Number of Units 93,241 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- ProFund VP - Technology (2001) With No Optional Benefits Unit Price $3.46 5.91 - - - Number of Units 3,290,202 2,524,295 - - - With One Optional Benefit Unit Price $6.03 - - - - Number of Units 254,131 - - - - - ----------------------------------------------------- ---------- ---------- ---------- ----------- ----------- Year Ended December 31, - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- Sub-account 1997 1996 1995 1994 1993 - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP - Industrial 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- --------- ProFund VP - Internet 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP - Pharmaceuticals 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP - Precious Metals 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP - Real Estate (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP -Semiconductor 9 (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ---------- ProFund VP - Technology (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - ----------------------------------------------------- ------------ ------------ ------------ ----------- ----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price $4.35 7.10 - - - Number of Units 3,082,428 583,065 - - - With One Optional Benefit Unit Price $7.15 - - - - Number of Units 272,408 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Utilities /21/ (2001) With No Optional Benefits Unit Price 8.12 - - - Number of Units 1,589,344 - - - With One Optional Benefit Unit Price - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bull /9/ (2002) With No Optional Benefits Unit Price $7.98 - - - - Number of Units 6,296,621 - - - - With One Optional Benefit Unit Price $7.97 - - - - Number of Units 954,792 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Bear /21/ (2001) With No Optional Benefits Unit Price 11.54 - - - Number of Units 3,059,897 - - - With One Optional Benefit Unit Price - - - - Number of Units - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraBull /23/ (2001) With No Optional Benefits Unit Price $4.71 7.47 - - - Number of Units 6,435,217 7,628,819 - - - With One Optional Benefit Unit Price $6.78 - - - - Number of Units 297,435 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - OTC (2001) With No Optional Benefits Unit Price $3.49 5.77 - - - Number of Units 18,242,013 11,681,189 - - - With One Optional Benefit Unit Price $6.45 - - - - Number of Units 1,346,852 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Short OTC /9/ (2002) With No Optional Benefits Unit Price $11.02 - - - - Number of Units 682,058 - - - - With One Optional Benefit Unit Price $11.00 - - - - Number of Units 433,181 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Telecommunications (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Utilities /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bull /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Bear /21/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraBull /23/ (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - OTC (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Short OTC /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price $0.58 1.91 6.19 23.58 - Number of Units 70,200,723 50,124,696 17,597,528 2,906,024 - With One Optional Benefit Unit Price $3.53 - - - - Number of Units 1,003,123 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.68 - - - - Number of Units 1,089,843 - - - - With One Optional Benefit Unit Price $7.66 - - - - Number of Units 438,387 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 1,444,783 - - - - With One Optional Benefit Unit Price $7.70 - - - - Number of Units 439,054 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price $5.72 - - - - Number of Units 2,276,660 - - - - With One Optional Benefit Unit Price $5.71 - - - - Number of Units 477,953 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price $7.71 - - - - Number of Units 2,138,861 - - - - With One Optional Benefit Unit Price $7.69 - - - - Number of Units 772,260 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price $7.10 - - - - Number of Units 2,908,617 - - - - With One Optional Benefit Unit Price $7.09 - - - - Number of Units 994,778 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - UltraSmall-Cap /24/ (1999) With No Optional Benefits Unit Price $4.73 8.37 9.18 11.96 - Number of Units 5,664,617 10,010,482 3,258,574 813,904 - With One Optional Benefit Unit Price $6.14 - - - - Number of Units 212,085 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraOTC (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Mid-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraMid-Cap /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Growth /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Small-Cap Value /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - UltraSmall-Cap /24/ (1999) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
Year Ended December 31, - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Sub-account 2002 2001 2000 1999 1998 - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price $11.58 - - - - Number of Units 7,945,270 - - - - With One Optional Benefit Unit Price $11.56 - - - - Number of Units 2,486,854 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price $8.03 - - - - Number of Units 583,657 - - - - With One Optional Benefit Unit Price $8.02 - - - - Number of Units 165,792 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ First Trust(R)10 Uncommon Values (2000) With No Optional Benefits Unit Price $2.94 4.72 7.43 - - Number of Units 1,716,102 2,255,266 2,690,435 - - With One Optional Benefit Unit Price $6.80 - - - - Number of Units 19,826 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price $5.62 7.39 - - - Number of Units 550,334 273,843 - - - With One Optional Benefit Unit Price $8.01 - - - - Number of Units 89,806 - - - - - - -------------------------------------------------- ------------- ------------ ------------- ------------ ------------ Year Ended December 31, - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Sub-account 1997 1996 1995 1994 1993 - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - U.S. Government Plus /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- ProFund VP - Rising Rates Opportunity /9/ (2002) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- First Trust(R)10 Uncommon Values (2000) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- ----------- Prudential - SP Jennison International Growth (2001) With No Optional Benefits Unit Price - - - - - Number of Units - - - - - With One Optional Benefit Unit Price - - - - - Number of Units - - - - - - - -------------------------------------------------- ------------ ------------ ------------ ----------- -----------
/1./ Effective December 10, 2001, Strong Capital Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM International Equity." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam International Equity." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Equity Portfolio." /2./ Effective November 11, 2002, William Blair & Company, L.L.C. became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Overseas Growth." /3./ This Portfolio reflects the addition of the net assets of the AST American Century International Growth Portfolio II ("Portfolio II") as a result of the merger between the Portfolio and Portfolio II. Effective May 1, 2000, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Rowe Price-Fleming International, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price International Equity Portfolio." /4./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Founders Asset Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Founders Passport." Prior to October 15, 1996, Seligman Henderson Co. served as Sub-advisor of the Portfolio, then named "Seligman Henderson International Small Cap Portfolio." /5./ Effective September 17, 2001 Pilgrim Baxter & Associates, Ltd. became Sub-advisor of the Portfolio. Prior to September 17, 2001, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Small-Cap Growth." Prior to December 31, 1998, Founders Asset Management, LLC served as Sub-advisor of the Portfolio, then named "Founders Capital Appreciation Portfolio." /6./ Effective December 10, 2001, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to December 10, 2001, Zurich Scudder Investments, Inc. served as Sub-advisor of the Portfolio, then named "AST Scudder Small-Cap Growth Portfolio". Prior to May 1, 2001 the Portfolio was named "AST Kemper Small-Cap Growth Portfolio." /7./ Effective May 1, 2001, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to May 1, 2001, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Small Cap Value." 8. Effective October 23, 2000, GAMCO Investors, Inc. became Sub-advisor of the Portfolio. Prior to October 23, 2000, T. Rowe Price Associates, Inc. served as Sub-advisor of the Portfolio, then named "AST T. Rowe Price Small Company Value Portfolio." /9./ These portfolios were first offered as Sub-accounts on May 1, 2002. /10./ Effective November 11, 2002, Goldman Sachs Asset management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Mid-Cap Growth." /11./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Berger Associates, Inc. served as Sub-advisor of the Portfolio, then named "Berger Capital Growth Portfolio." /12./ Effective May 1, 1998, Neuberger Berman Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 1998, Federated Investment Counseling served as Sub-advisor of the Portfolio, then named "Federated Utility Income Portfolio." /13./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Between December 31, 1998 and May 1, 2000, OppenheimerFunds, Inc. served as Sub-advisor of the Portfolio, then named "AST Oppenheimer Large-Cap Growth Portfolio." Prior to December 31, 1998, Robertson, Stephens & Company Investment Management, L.P. served as Sub-advisor of the Portfolio, then named "Robertson Stephens Value + Growth Portfolio." /14./ Effective November 11, 2002, Goldman Sachs Asset Management became Sub-advisor of the Portfolio. Prior to November 11, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST JanCap Growth." /15./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, Janus Capital Corporation served as Sub-advisor of the Portfolio, then named "AST Janus Strategic Value." /16./ Effective May 1, 2000, Sanford C. Bernstein & Co., Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Bankers Trust Company served as Sub-advisor of the Portfolio, then named "AST Bankers Trust Managed Index 500 Portfolio." /17./ Effective May 3, 1999, American Century Investment Management, Inc. became Sub-advisor of the Portfolio. Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Value Growth & Income." /18./ Effective May 1, 2000, Alliance Capital Management, L.P. became Sub-advisor of the Portfolio. Prior to May 1, 2000, Lord, Abbett & Co. served as Sub-advisor of the Portfolio, then named "AST Lord Abbett Growth and Income Portfolio." /19./ Effective July 1, 2002, the AST INVESCO Equity Income portfolio changed its name to AST INVESCO Capital Income. /20./ Effective May 1, 2002, Deutsche Asset Management, Inc. became Sub-advisor of the Portfolio. Prior to May 1, 2002, A I M Capital Management, Inc. served as Sub-advisor of the Portfolio, then named "AST AIM Balanced." Between October 15, 1996 and May 3, 1999, Putnam Investment Management, Inc. served as Sub-advisor of the Portfolio, then named "AST Putnam Balanced." Prior to October 15, 1996, Phoenix Investment Counsel, Inc. served as Sub-advisor of the Portfolio, then named "AST Phoenix Balanced Asset Portfolio." /21./ Effective August 8, 2000, T. Rowe Price International, Inc. became Sub-advisor of the Portfolio. Effective May 1, 2000, the name of the Portfolio was changed to the "AST T. Rowe Price Global Bond". 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 Sub-advisor of the Portfolio, then named "AST Scudder International Bond Portfolio." /22./ This Portfolio was first offered as a Sub-account on August 1, 2001. On August 3, 2001, pursuant to a shareholder vote, the Perpetual International portfolio of the Evergreen Variable Annuity Trust was merged with the International Growth portfolio. The Evergreen VA Perpetual International portfolio no longer exists. /23./ Effective May 1, 2003, the ProFunds VP Bull Plus portfolio changed its name to ProFund VP UltraBull to reflect a change in its investment objective. /24./ Effective August 1, 2001, Prior to May 1, 2000, ProFund VP UltraSmall-Cap was named "ProFund VP Small Cap" and sought daily investment results that corresponded to the performance of the Russell 2000(R)Index. APPENDIX C - CALCULATION OF OPTIONAL DEATH BENEFITS Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation The following are examples of how the Enhanced Beneficiary Protection Optional Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example with market increase Assume that the Owner's Account Value has been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $75,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12-months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($75,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $75,000 Basic Death Benefit = $75,000 Death Benefit Amount = $75,000 - $50,000 = $25,000 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $75,000 + $12,500 = $87,500 Examples with market decline Assume that the Owner's Account Value has been decreasing due to declines in market performance. On the date we receive due proof of death, the Account Value is $45,000. The basic Death Benefit is calculated as Purchase Payments minus proportional withdrawals, or Account Value, less the amount of any Credits applied within 12-months prior to the date of death, which ever is greater. Therefore, the basic Death Benefit is equal to $50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal to the amount payable under the basic Death Benefit ($50,000) PLUS 50% of the "Death Benefit Amount" less Purchase Payments reduced by proportional withdrawals. Purchase Payments = $50,000 Account Value = $40,000 Basic Death Benefit = $50,000 Death Benefit Amount = $50,000 - $50,000 = $0 Amount Payable Under Enhanced Beneficiary Protection Optional Death Benefit = $50,000 + $0 = $50,000 In this example you would receive no additional benefit from purchasing the Enhanced Beneficiary Protection Optional Death Benefit. Examples of Guaranteed Minimum Death Benefit Calculation The following are examples of how the Guaranteed Minimum Death Benefit is calculated. Each example assumes that a $50,000 initial Purchase Payment is made and that no withdrawals are made prior to the Owner's death. Each example assumes that there is one Owner who is age 50 on the Issue Date and that all Account Value is maintained in the variable investment options. NOTE: The examples below do not include Credits which may be recovered by American Skandia under certain circumstances. Example of market increase Assume that the Owner's Account Value has generally been increasing due to positive market performance. On the date we receive due proof of death, the Account Value is $90,000. The Highest Anniversary Value at the end of any previous period is $72,000. The Death Benefit would be the Account Value ($90,000) because it is greater than the Highest Anniversary Value ($72,000) or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77). Example of market decrease Assume that the Owner's Account Value generally increased until the fifth anniversary but generally has been decreasing since the fifth contract anniversary. On the date we receive due proof of death, the Account Value is $48,000. The Highest Anniversary Value at the end of any previous period is $54,000. The Death Benefit would be the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77) because it is greater than the Highest Anniversary Value ($54,000) or the Account Value ($48,000). Example of market increase followed by decrease Assume that the Owner's Account Value increased significantly during the first six years following the Issue Date. On the sixth anniversary date the Account Value is $90,000. During the seventh Annuity Year, the Account Value increases to as high as $100,000 but then subsequently falls to $80,000 on the date we receive due proof of death. The Death Benefit would be the Highest Anniversary Value at the end of any previous period ($90,000), which occurred on the sixth anniversary, although the Account Value was higher during the subsequent period. The Account Value on the date we receive due proof of death ($80,000) is lower, as is the sum of all prior Purchase Payments increased by 5.0% annually ($73,872.77). APPENDIX D - Plus40(TM)OPTIONAL LIFE INSURANCE RIDER ================================================================================ American Skandia's Plus40(TM)Optional Life Insurance Rider was offered, in those states where approved, between September 17, 2001 and May 1, 2003. The description below of the Plus40(TM)benefit applies to those Contract Owners who purchased an Annuity during that time period and elected the Plus40(TM)benefit. ================================================================================ The life insurance coverage provided under the Plus40(TM)Optional Life Insurance Rider ("Plus40(TM)rider" or the "Rider") is supported by American Skandia's general account and is not subject to, or registered as a security under, either the Securities Act of 1933 or the Investment Company Act of 1940. Information about the Plus40(TM)rider is included as an Appendix to this Prospectus to help you understand the Rider and the relationship between the Rider and the value of your Annuity. It is also included because you can elect to pay for the Rider with taxable withdrawals from your Annuity. The staff of the Securities and Exchange Commission has not reviewed this information. However, the information may be subject to certain generally applicable provisions of the Federal securities laws regarding accuracy and completeness. The income tax-free life insurance payable to your Beneficiary(ies) under the Plus40(TM)rider is equal to 40% of the Account Value of your Annuity as of the date we receive due proof of death, subject to certain adjustments, restrictions and limitations described below. ELIGIBILITY The Plus40(TM)rider may be purchased as a rider on your Annuity. The Rider must cover those persons upon whose death the Annuity's death benefit becomes payable - the Annuity's owner or owners, or the Annuitant (in the case of an entity owned Annuity). If the Annuity has two Owners, the Rider's death benefit is payable upon the first death of such persons. If the Annuity is owned by an entity, the Rider's death benefit is payable upon the death of the Annuitant, even if a Contingent Annuitant is named. The minimum allowable age to purchase the Plus40(TM)rider is 40; the maximum allowable age is 75. If the Rider is purchased on two lives, both persons must meet the age eligibility requirements. The Plus40(TM)rider is not available to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered Annuity (or 403(b)) or as a funding vehicle for a qualified plan under Section 401 of the Internal Revenue Code ("Code"). ADJUSTMENTS, RESTRICTIONS & LIMITATIONS [X] If you die during the first 24 months following the effective date of the Plus40(TM)rider (generally, the Issue Date of your Annuity), the death benefit will be limited to the amount of any charges paid for the Rider while it was in effect. While we will return the charges you have paid during the applicable period as the death benefit, your Beneficiary(ies) will receive no additional life insurance benefit from the Plus40(TM)rider if you die within 24 months of its effective date. [X] If you make a Purchase Payment within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Purchase Payment(s). If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on those Purchase Payments as an additional amount included in the death benefit under the Rider. [X] If we apply Credits to your Annuity based on Purchase Payments, such Credits are treated as Account Value for purposes of determining the death benefit payable under the Plus40(TM)rider. However, if Credits were applied to Purchase Payments made within 24 months prior to the date of death, the Account Value used to determine the amount of the death benefit will be reduced by the amount of such Credits. If we reduce the death benefit payable under the Plus40(TM)rider based on this provision, we will return 50% of any charges paid for the Rider based on such Credits as an additional amount included in the death benefit under the Rider. [X] If you become terminally ill (as defined in the Rider) and elect to receive a portion of the Plus40(TM)rider's death benefit under the Accelerated Death Benefit provision, the amount that will be payable under the Rider upon your death will be reduced. Please refer to the Accelerated Death Benefit provision described below. [X] If charges for the Plus40(TM)rider are due and are unpaid as of the date the death benefit is being determined, such charges will be deducted from the amount paid to your Beneficiary(ies). [X] If the age of any person covered under the Plus40(TM)rider is misstated, we will adjust any coverage under the Rider to conform to the facts. For example, if, due to the misstatement, we overcharged you for coverage under the Rider, we will add any additional charges paid to the amount payable to your Beneficiary(ies). If, due to the misstatement, we undercharged you for coverage under the Rider, we will reduce the death benefit in proportion to the charges not paid as compared to the charges that would have been paid had there been no misstatement. [X] On or after an Owner reaches the expiry date of the Rider (the anniversary of the Annuity's Issue Date on or immediately after the 95th birthday), coverage will terminate. No charge will be made for an Owner following the expiry date. If there are two Owners, the expiry date applies separately to each Owner; therefore, coverage may continue for one Owner and terminate as to the other Owner. MAXIMUM BENEFIT The Plus40(TM)rider is subject to a Maximum Death Benefit Amount based on the Purchase Payments applied to your Annuity. The Plus40(TM) rider may also be subject to a Per Life Maximum Benefit that is based on all amounts paid under any annuity contract we issue to you under which you have elected the Plus40(TM)rider or similar life insurance coverage. [X] The Maximum Death Benefit Amount is 100% of the Purchase Payments increasing at 5% per year following the date each Purchase Payment is applied to the Annuity until the date of death. If Purchase Payments are applied to the Annuity within 24 months prior to the date of death, the Maximum Death Benefit Amount is decreased by the amount of such Purchase Payments. [X] The Per Life Maximum Benefit applies to Purchase Payments applied to any such annuity contracts more than 24 months from the date of death that exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000, we will reduce the aggregate death benefit payable under all Plus40(TM)riders, or similar riders issued by us, based on the combined amount of Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per Life Maximum Benefit applies, we will reduce the amount payable under each applicable Plus40(TM)rider on a pro-rata basis. If the Per Life Maximum Benefit applies upon your death, we will return any excess charges that you paid on the portion of your Account Value on which no benefit is payable. The Per Life Maximum Benefit does not limit the amount of Purchase Payments that you may apply to your Annuity. ACCELERATED DEATH BENEFIT PROVISION If you become terminally ill, you may request that a portion of the death benefit payable under the Plus40(TM)rider be prepaid instead of being paid to your Beneficiary(ies) upon your death. Subject to our requirements and where allowed by law, we will make a one time, lump sum payment. Our requirements include proof satisfactory to us, in writing, of terminal illness after the Rider's Effective Date. The maximum we will pay, before any reduction, is the lesser of 50% of the Rider's death benefit or $100,000. If you elect to accelerate payment of a portion of the death benefit under the Plus40(TM)rider, the amount of the remaining death benefit is reduced by the prepaid amount accumulating at an annualized interest rate of 6.0%. Eligibility for an accelerated payout of a portion of your Plus40(TM)rider death benefit may be more restrictive than any medically-related surrender provision that may be applicable to you under the Annuity. CHARGES FOR THE PLUS40(TM)RIDER The Plus40(TM)rider has a current charge and a guaranteed maximum charge. The current charge for the Plus40(TM)rider is based on a percentage of your Account Value as of the anniversary of the Issue Date of your Annuity. The applicable percentages differ based on the attained age, last birthday of the Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date the charge is due. We reserve the right to change the current charge, at any time, subject to regulatory approval where required. If there are two Owners, we calculate the current charge that applies to each Owner individually and deduct the combined amount as the charge for the Rider. There is no charge based on a person's life after coverage expires as to that person. However, a charge will still apply to the second of two Owners (and coverage will continue for such Owner) if such Owner has not reached the expiry date. Attained Age Percentage of Account Value - ------------------------- ------------------------ Age 40-75 .80% - ------------------------- ------------------------ Age 76-80 1.60% - ------------------------- ------------------------ Age 81-85 3.20% - ------------------------- ------------------------ Age 86-90 4.80% - ------------------------- ------------------------ Age 91 6.50% - ------------------------- ------------------------ Age 92 7.50% - ------------------------- ------------------------ Age 93 8.50% - ------------------------- ------------------------ Age 94 9.50% - ------------------------- ------------------------ Age 95 10.50% - ------------------------- ------------------------ The charge for the Plus40(TM)rider may also be subject to a guaranteed maximum charge that will apply if the current charge, when applied to the Account Value, exceeds the guaranteed maximum charge. The guaranteed maximum charge is based on a charge per $1,000 of insurance. We determine the charge for the Rider annually, in arrears. We deduct the charge: (1) upon your death; (2) on each anniversary of the Issue Date; (3) on the date that you begin receiving annuity payments; (4) if you surrender your Annuity other than a medically-related surrender; or (5) if you choose to terminate the Rider. If the Rider terminates for any of the preceding reasons on a date other than the anniversary of the Annuity's Issue Date, the charge will be prorated. During the first year after the Annuity's Issue Date, the charge will be prorated from the Issue Date. In all subsequent years, the charge will be prorated from the last anniversary of the Issue Date. You can elect to pay the annual charge through a redemption from your Annuity's Account Value or through funds other than those within the Annuity. If you do not elect a method of payment, we will automatically deduct the annual charge from your Annuity's Account Value. The manner in which you elect to pay for the Rider may have tax implications. [X] If you elect to pay the charge through a redemption of your Annuity's Account Value, the withdrawal will be treated as a taxable distribution, and will generally be subject to ordinary income tax on the amount of any investment gain withdrawn. If you are under age 59 1/2, the distribution may also be subject to a 10% penalty on any gain withdrawn, in addition to ordinary income taxes. We first deduct the amount of the charge pro-rata from the Account Value in the variable investment options. We only deduct the charge pro-rata from the Fixed Allocations to the extent there is insufficient Account Value in the variable investment options to pay the charge. [X] If you elect to pay the charge through funds other than those from your Annuity, we require that payment be made electronically in U.S. currency through a U.S. financial institution. If you elect to pay the charge through electronic transfer of funds and payment has not been received within 31 days from the due date, we will deduct the charge as a redemption from your Annuity, as described above. TERMINATION You can terminate the Plus40(TM)rider at any time. Upon termination, you will be required to pay a pro-rata portion of the annual charge for the Rider. The Plus40(TM)rider will terminate automatically on the date your Account Value is applied to begin receiving annuity payments, on the date you surrender the Annuity or, on the expiry date with respect to such person who reaches the expiry date. We may also terminate the Plus40(TM)rider, if necessary, to comply with our interpretation of the Code and applicable regulations. Once terminated, you may not reinstate your coverage under the Plus40(TM)rider. CHANGES IN ANNUITY DESIGNATIONS Changes in ownership and annuitant designations under the Annuity may result in changes in eligibility and charges under the Plus40(TM) rider. These changes may include termination of the Rider. Please refer to the Rider for specific details. SPOUSAL ASSUMPTION A spousal beneficiary may elect to assume ownership of the Annuity instead of taking the Annuity's Death Benefit. However, regardless of whether a spousal beneficiary assumes ownership of the Annuity, the death benefit under the Plus40(TM)rider will be paid despite the fact that the Annuity will continue. The spousal beneficiary can apply the death benefit proceeds under the Plus40(TM) rider to the Annuity as a new Purchase Payment, can purchase a new annuity contract or use the death benefit proceeds for any other purpose. Certain restrictions may apply to an Annuity that is used as a qualified investment. Spousal beneficiaries may also be eligible to purchase the Plus40(TM)rider, in which case the Annuity's Account Value, as of the date the assumption is effective, will be treated as the initial Purchase Payment under applicable provisions of the Rider. TAX CONSIDERATION The Plus40(TM)rider was designed to qualify as a life insurance contract under the Code. As life insurance, under most circumstances, the Beneficiary(ies) does not pay any Federal income tax on the death benefit payable under the Rider. If your Annuity is being used as an Individual Retirement Annuity (IRA), we consider the Plus40(TM)rider to be outside of your IRA, since premium for the Rider is paid for either with funds outside of your Annuity or with withdrawals previously subject to tax and any applicable tax penalty. We believe payments under the accelerated payout provision of the Rider will meet the requirements of the Code and the regulations in order to qualify as tax-free payments. To the extent permitted by law, we will change our procedures in relation to the Rider, or the definition of terminally ill, or any other applicable term in order to maintain the tax-free status of any amounts paid out under the accelerated payout provision. - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS FUSI ASXT II FOUR-PROS (05/2003). - - -------------------------------------------------------------------------------- ------------------------------------------------------- (print your name) ------------------------------------------------------- (address) ------------------------------------------------------- (city/state/zip code) THIS PAGE IS INTENTIONALLY LEFT BLANK. Variable Annuity Issued by: Variable Annuity Distributed by: AMERICAN SKANDIA LIFE AMERICAN SKANDIA ASSURANCE CORPORATION MARKETING, INCORPORATED One Corporate Drive One Corporate Drive Shelton, Connecticut 06484 Shelton, Connecticut 06484 Telephone: 1-800-766-4530 Telephone: 203-926-1888 http://www.americanskandia.com http://www.americanskandia.com MAILING ADDRESSES: AMERICAN SKANDIA - VARIABLE ANNUITIES P.O. Box 7040 Bridgeport, CT 06601-7040 EXPRESS MAIL: AMERICAN SKANDIA - VARIABLE ANNUITIES One Corporate Drive Shelton, CT 06484 Supplement to Prospectus Dated May 1, 2003 Supplement dated June 13, 2003 This Supplement should be retained with the current Prospectus for your variable annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. PORTFOLIO/SUB-ACCOUNT NAME CHANGE Evergreen VA International Growth Portfolio/Sub-account Effective June 13, 2003, the Evergreen VA International Growth portfolio will change its name to Evergreen VA International Equity. All references in the Prospectus to Evergreen VA International Growth are deleted and replaced with Evergreen VA International Equity. FUSI AS2/ FUSI XT/ FUSI XT-FOUR FSII/ FSXT/FSASL/ FSASL2/ FSXT4 FUSI ASL/ FUSI ASL II - SUPP (06/13/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated June 20, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. Montgomery Variable Series - Emerging Markets Portfolio reorganization into the Gartmore GVIT Developing Markets Portfolio American Skandia anticipates that shareholders will approve the Plan of Reorganization of the Montgomery Variable Series - Emerging Markets Portfolio and the Gartmore GVIT Developing Markets Portfolio and that the reorganization will take place on June 20, 2003. Upon completion of the reorganization, the Montgomery Variable Series - Emerging Markets Portfolio will cease to exist and Annuity Owners will have an equivalent Account Value in the Gartmore GVIT Developing Markets Portfolio. The principal investment objective and policies of the Portfolio will be unchanged as a result of this reorganization. UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Gartmore Variable Investment Trust: GVIT Developing Markets 1.15% 0.24% 0.25% 1.64% N/A 1.64%
ASAP/ ASAP2/ FUSI AS2/ ASAP III/ APEX/ ASXT/ FUSI XT/Wells XTVA/ VIA-SUPP (06/20/2003) ASXT-FOUR/ FUSI XT-FOUR/ ASL/ FUSI ASL/ Wells ASL/ ASPro/92001E0603 Wells VA+/ Wells APEX/ CH2/ ASImpact/ APEX II/ ASL II/ FUSI ASL II/ ASXT-SIX/ VIAS/ VIAT/ VIAG -SUPP (06/20/2003)
Supplement to Prospectus Dated May 1, 2003 Supplement dated October 13, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. WHO IS AMERICAN SKANDIA? The following paragraph is added to this section of the prospectus: Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of ASI, which is the parent of American Skandia, was purchased by Prudential Financial, Inc. Prudential Financial is a New Jersey insurance holding company whose subsidiary companies serve individual and institutional customers worldwide and include The Prudential Insurance Company of America, one of the largest life insurance companies in the U.S. These companies offer a variety of products and services, including life insurance, property and casualty insurance, mutual funds, annuities, pension and retirement related services and administration, asset management, securities brokerage, banking and trust services, real estate brokerage franchises, and relocation services. GUARANTEED RETURN OPTION PlusSM (GRO PlusSM) - -------------------------------------------------------------------------------- The Guaranteed Return Option Plus described below is being offered as of October 13, 2003 in those jurisdictions where we have received regulatory approval, and will be offered subsequently in other jurisdictions when we receive regulatory approval in those jurisdictions. Certain terms and conditions may differ between jurisdictions once approved. The program can be elected by new purchasers on the Issue Date of their Annuity, and can be elected by existing Annuity Owners on either the anniversary of the Issue Date of their Annuity or on a date other than that anniversary, as described below under "Election of the Program". The Guaranteed Return Option Plus is not available if you elect the Guaranteed Return Option program, the Guaranteed Minimum Withdrawal Benefit rider or the Guaranteed Minimum Income Benefit rider. - -------------------------------------------------------------------------------- We offer a program that, after a seven-year period following commencement of the program (we refer to the end of that seven-year period as the "maturity date") and on each anniversary of the maturity date thereafter, guarantees your Account Value will not be less than your Account Value on the effective date of your program (called the "Protected Principal Value"). The program also offers you the opportunity to elect a second, enhanced guaranteed amount at a later date if your Account Value has increased, while preserving the guaranteed amount established on the effective date of your program. The enhanced guaranteed amount (called the "Enhanced Protected Principal Value") guarantees that, after a separate seven-year period following election of the enhanced guarantee and on each anniversary thereafter, your Account Value will not be less than your Account Value on the effective date of your election of the enhanced guarantee. The program monitors your Account Value daily and, if necessary, systematically transfers amounts between variable investment options you choose and Fixed Allocations used to support the Protected Principal Value(s). The program may be appropriate if you wish to protect a principal amount against market downturns as of a specific date in the future, but also wish to invest in the variable investment options to participate in market increases. There is an additional charge if you elect the Guaranteed Return Option Plus program. The guarantees provided by the program exist only on the applicable maturity date(s) and on each anniversary of the maturity date(s) thereafter. However, due to the ongoing monitoring of your Account Value and the transfer of Account Value between variable investment options and Fixed Allocations to support our future guarantees, the program may provide some protection from significant market losses if you choose to surrender the Annuity or begin receiving annuity payments prior to a maturity date. KEY FEATURE - Protected Principal Value/Enhanced Protected Principal Value The Guaranteed Return Option Plus offers a base guarantee as well as the option of electing an enhanced guarantee at a later date. |X| Base Guarantee: Under the base guarantee, American Skandia guarantees that on the maturity date and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Protected Principal Value. On the maturity date and on each anniversary after the maturity date, if your Account Value is below the Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Protected Principal Value. |X| Enhanced Guarantee: On any anniversary following commencement of the program, you can establish an enhanced guaranteed amount based on your current Account Value. Under the enhanced guarantee, American Skandia guarantees that at the end of the seven year period following the election of the enhanced guarantee (also referred to as its "maturity date"), and on each anniversary of the maturity date thereafter, your Account Value will be no less than the Enhanced Protected Principal Value. You can elect an enhanced guarantee more than once; however, a subsequent election supersedes the prior election of an enhanced guarantee. Election of an enhanced guarantee does not impact the base guarantee. In addition, you may elect an "auto step-up" feature that will automatically increase your base guarantee (or enhanced guarantee, if previously elected) on each anniversary of the program (and create a new, seven year maturity period for the new enhanced guarantee) if the Account Value as of that anniversary exceeds the existing base guarantee (or enhanced guarantee, if previously elected) by 7% or more. You may also elect to terminate an enhanced guarantee. If you elect to terminate the enhanced guarantee, the base guarantee will remain in effect. If you have elected the enhanced guarantee, on the guarantee's maturity date and on each anniversary of the maturity date thereafter, if your Account Value is below the Enhanced Protected Principal Value, American Skandia will apply additional amounts to your Annuity from its general account to increase your Account Value to be equal to the Enhanced Protected Principal Value. Any amounts added to your Annuity will be applied, if necessary, to any Fixed Allocations needed to support the applicable guarantee amount as of the maturity date or any anniversary of the maturity date. Any remaining amounts will be allocated pro-rata to your Account Value based on your current Sub-account allocations. We will notify you of any amounts added to your Annuity under the program. The Protected Principal Value is referred to as the "Base Guarantee" and the Enhanced Protected Principal Value is referred to as the "Step-up Guarantee" in the rider we issue for this benefit. Withdrawals under your Annuity Withdrawals from your Annuity, while the program is in effect, will reduce the base guarantee under the program as well as any enhanced guarantee. Cumulative annual withdrawals up to 5% of the Protected Principal Value as of the effective date of the program (adjusted for any subsequent Purchase Payments and any Credits applied to such Purchase Payments) will reduce the applicable guaranteed amount by the actual amount of the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount withdrawn is greater than the dollar-for-dollar limit, the portion of the withdrawal equal to the dollar-for-dollar limit will be treated as described above, and the portion of the withdrawal in excess of the dollar-for-dollar limit will reduce the base guarantee and the enhanced guarantee proportionally, according to the formula as described in the rider for this benefit (see the examples of this calculation below). Withdrawals will be taken pro-rata from the variable investment options and any Fixed Allocations. Withdrawals will be subject to all other provisions of the Annuity, including any Contingent Deferred Sales Charge or Market Value Adjustment that would apply. Charges for other optional benefits under the Annuity that are deducted as an annual charge in arrears will not reduce the applicable guaranteed amount under the Guaranteed Return Option Plus program, however, any partial withdrawals in payment of charges for the Plus40(TM)Optional Life Insurance Rider will be treated as withdrawals and will reduce the applicable guaranteed amount. The following examples of dollar-for-dollar and proportional reductions assume that: 1.) the Issue Date and the effective date of the GRO PlusSM program are October 13, 2003; 2.) an initial Purchase Payment of $250,000; 3.) a base guarantee amount of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): Example 1. Dollar-for-dollar reduction A $10,000 withdrawal is taken on November 29, 2003 (in the first Annuity Year). No prior withdrawals have been taken. As the amount withdrawn is less than the Dollar-for-dollar Limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., by $10,000, from $250,000 to $240,000). .. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance of the first Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). Example 2. Dollar-for-dollar and proportional reductions A second $10,000 withdrawal is taken on December 18, 2003 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from Example 1: .. the base guarantee amount is first reduced by the Remaining Limit (from $240,000 to $237,500); .. The result is then further reduced by the ratio of A to B, where: .. A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or $7,500). .. B is the Account Value less the Remaining Limit ($180,000 - $2,500, or $177,500). The resulting base guarantee amount is: $237,500 x ( 1 - $7,500 / $177,500), or $227,464.79. .. The Remaining Limit is set to zero (0) for the balance of the first Annuity Year. Example 3. Reset of the Dollar-for-dollar Limit A $10,000 withdrawal is made on December 19, 2004 (second Annuity Year). The Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As the amount withdrawn is less than the dollar-for-dollar limit: .. The base guarantee amount is reduced by the amount withdrawn (i.e., reduced by $10,000, from $227,464.79 to $217,464.79). .. The Remaining Limit for the balance of the second Annuity Year is also reduced by the amount withdrawn (from $12,500 to $2,500). KEY FEATURE - Allocation of Account Value In general, you have discretion over the allocation of your Account Value that remains allocated in the variable investment options. However, we reserve the right to prohibit investment in certain Portfolios if you participate in the program. Account Value is only transferred to and maintained in Fixed Allocations to the extent we, in our sole discretion, deem it is necessary to support our guarantee(s) under the program. This permits your Annuity to participate in the upside potential of the Sub-accounts while only transferring amounts to Fixed Allocations to protect against significant market downturns. We monitor fluctuations in your Account Value each business day, as well as the prevailing interest rates on Fixed Allocations, the remaining duration(s) until the applicable maturity date(s) and the amount of Account Value allocated to Fixed Allocation(s) relative to a "reallocation trigger", which determines whether Account Value must be transferred to or from Fixed Allocation(s). While you are not notified when your Account Value reaches a reallocation trigger, you will receive a confirmation statement indicating the transfer of a portion of your Account Value either to or from Fixed Allocation(s). |X| If your Account Value is greater than or equal to the reallocation trigger, your Account Value in the variable investment options will remain allocated according to your most recent instructions. If a portion of Account Value was previously allocated to a Fixed Allocation to support the applicable guaranteed amount, all or a portion of those amounts may be transferred from the Fixed Allocation and re-allocated to the variable investment options pro-rata according to your current allocations (including the model allocations under any asset allocation program you may have elected). A Market Value Adjustment will apply when we reallocate Account Value from a Fixed Allocation to the variable investment options, which may result in a decrease or increase in your Account Value. |X| If your Account Value is less than the reallocation trigger, a portion of your Account Value in the variable investment options will be transferred to a new Fixed Allocation(s) to support the applicable guaranteed amount. These amounts are transferred on a pro-rata basis from the variable investment options. The new Fixed Allocation(s) will have a Guarantee Period equal to the time remaining until the applicable maturity date(s). The Account Value allocated to the new Fixed Allocation(s) will be credited with the fixed interest rate(s) then being credited to a new Fixed Allocation(s) maturing on the applicable maturity date(s) (rounded to the next highest yearly duration). The Account Value will remain invested in each applicable Fixed Allocation until the applicable maturity date unless, at an earlier date, your Account Value is greater than or equal to the reallocation trigger and, therefore, amounts can be transferred to the variable investment options while maintaining the guaranteed protection under the program (as described above). ================================================================================ If a significant amount of your Account Value is systematically transferred to Fixed Allocations to support the Protected Principal Value and/or the Enhanced Protected Principal Value during prolonged market declines, less of your Account Value may be immediately available to participate in the upside potential of the variable investment options if there is a subsequent market recovery. During the period prior to the maturity date of the base guarantee or any enhanced guarantee, or any anniversary of such maturity date(s), a significant portion of your Account Value may be allocated to Fixed Allocations to support any applicable guaranteed amount(s). If your Account Value is less than the reallocation trigger and new Fixed Allocations must be established during periods where the interest rate(s) being credited to such Fixed Allocations is extremely low, a larger portion of your Account Value may need to be transferred to Fixed Allocations to support the applicable guaranteed amount(s). ================================================================================ Separate Fixed Allocations may be established in support of the Protected Principal Value and the Enhanced Protected Principal Value (if elected). There may also be circumstances when a Fixed Allocation will be established only in support of the Protected Principal Value or the Enhanced Protected Principal Value. If you elect an enhanced guarantee, it is more likely that a portion of your Account Value may be allocated to Fixed Allocations and will remain allocated for a longer period of time to support the Enhanced Protected Principal Value, even during a period of positive market performance and/or under circumstances where Fixed Allocations would not be necessary to support the Protected Principal Value. Further, there may be circumstances where Fixed Allocations in support of the Protected Principal Value are transferred to the variable investment options while Fixed Allocations in support of an Enhanced Protected Principal Value are not transferred because they must remain invested in the Fixed Allocation in support of the higher enhanced guarantee. American Skandia uses an allocation mechanism based on assumptions of expected and maximum market volatility to determine the reallocation trigger. The allocation mechanism is used to determine the allocation of Account Value between Fixed Allocations and the Sub-accounts you choose. American Skandia reserves the right to change the allocation mechanism and the reallocation trigger at its discretion, subject to regulatory approval where required. Changes to the allocation mechanism and/or the reallocation trigger may be applied to existing programs where allowed by law. Election of the Program The Guaranteed Return Option Plus program can be elected at the time that you purchase your Annuity, or on any business day thereafter (prior to annuitization). If you elect the program after the Issue Date of your Annuity, the program will be effective as of the business day that we receive the required documentation in good order at our home office, and the guaranteed amount will be based on your Account Value as of that date. If you previously elected the Guaranteed Return Option program and wish to elect the Guaranteed Return Option Plus program, your prior Guaranteed Return Option program will be terminated (including the guaranteed amount(s)) and the Guaranteed Return Option Plus program will be added to your Annuity based on the current Account Value. This election of GRO PlusSM may result in a market value adjustment, which could increase or decrease your Account Value. Termination of the Program The Annuity Owner can elect to terminate the enhanced guarantee but maintain the protection provided by the base guarantee. The Annuity Owner also can terminate the Guaranteed Return Option Plus program entirely. An Annuity Owner who terminates the program entirely can subsequently elect to participate in the program again (based on the Account Value on that date) by furnishing the documentation we require. In a rising market, an Annuity Owner could, for example, terminate the program on a given business day and two weeks later reinstate the program with a higher base guarantee (and a new maturity date). However, your ability to reinstate the program is limited by the following: (A) in any Annuity Year, we do not permit more than two program elections and (B) a program reinstatement cannot be effected on the same business day on which a program termination was effected. The program will terminate automatically upon: (a) the death of the Owner or the Annuitant (in an entity owned contract); (b) as of the date Account Value is applied to begin annuity payments; or (c) upon full surrender of the Annuity. If you elect to terminate the program prior to the applicable maturity date, the Guaranteed Return Option Plus will no longer provide a guarantee of your Account Value. The surviving spouse may elect the benefit at any time after the death of the Annuity Owner. The surviving spouse's election will be effective on the business day that we receive the required documentation in good order at our home office, and the Account Value on that business day will be the Protected Principal Value. The charge for the Guaranteed Return Option Plus program will no longer be deducted from your Account Value upon termination of the program. Special Considerations under the Guaranteed Return Option Plus This program is subject to certain rules and restrictions, including, but not limited to the following: |X| Upon inception of the program, 100% of your Account Value must be allocated to the variable investment options. No Fixed Allocations may be in effect as of the date that you elect to participate in the program. However, the reallocation trigger may transfer Account Value to Fixed Allocations as of the effective date of the program under some circumstances. |X| Annuity Owners cannot allocate any portion of Purchase Payments or transfer Account Value to or from a Fixed Allocation while participating in the program, and cannot participate in any dollar cost averaging program that transfers Account Value from a Fixed Allocation to the variable investment options. |X| Additional Purchase Payments (including any credits associated with such Purchase Payments) applied to the Annuity while the program is in effect will increase the applicable guarantee amount by the actual amount of the Purchase Payment; however, all or a portion of any additional Purchase Payments (including any credits associated with such Purchase Payments) may be allocated by us to Fixed Allocations to support the additional amount guaranteed. |X| Transfers from Fixed Allocations will be subject to the Market Value Adjustment formula under the Annuity; however, the 0.10% "cushion" feature of the formula will not apply. A Market Value Adjustment may be either positive or negative. Transfer amounts will be taken from the most recently applied Fixed Allocation. |X| Transfers from the Sub-accounts to Fixed Allocations or from Fixed Allocations to the Sub-accounts under the program will not count toward the maximum number of free transfers allowable under the Annuity. |X| Any amounts applied to your Account Value by American Skandia on the maturity date or any anniversary of the maturity date will not be treated as "investment in the contract" for income tax purposes. Charges under the Program We deduct a charge equal to 0.25% of Account Value per year to participate in the Guaranteed Return Option Plus program. The annual charge is deducted daily against your Account Value allocated to the Sub-accounts. Account Value allocated to Fixed Allocations under the program is not subject to the charge. The charge is deducted to compensate American Skandia for: (a) the risk that your Account Value on the maturity date is less than the amount guaranteed; and (b) administration of the program. ASAP2 / FUSI AS2 / EVA / ASAP III / APEX / FUSI XT /EVA XT / WELLS XT / FUSI ASXT-4 / ASL / FUSI ASL / WELLS ASL / WELLS APEX / AS PRO / WELLS VA+ / IMPACT / FT PORTFOLIOS / GAL 3 / ASL II /FUSI ASL II / APEX II - SUPP. (GRO Only) - (10/13/2003) 92001b0903
Supplement to Prospectus Dated May 1, 2003 Supplement dated December 5, 2003 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. As described in more detail below, three of the Evergreen portfolios formerly offered as investment options for your annuity were merged into other Evergreen portfolios. A. MERGER Evergreen VA Global Leaders Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Global Leaders portfolio merged into the Evergreen VA International Equity portfolio. As a result of the merger, the Evergreen VA Global Leaders portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA International Equity portfolio, the successor portfolio. Evergreen VA Capital Growth Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Capital Growth portfolio merged into the Evergreen VA Growth and Income portfolio. As a result of the merger, the Evergreen VA Capital Growth portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA Growth and Income portfolio, the successor portfolio. Evergreen VA Blue Chip Effective December 5, 2003, pursuant to shareholder approval, the Evergreen VA Blue Chip portfolio merged into the Evergreen VA portfolio. As a result of the merger, the Evergreen VA Blue Chip portfolio ceased operations and will no longer be offered as an investment option. Evergreen Investment Management Company LLC is the Sub-advisor of the Evergreen VA portfolio, the successor portfolio. The following annual expenses for the successor portfolios are estimates of what the expenses of each successor portfolio will be as a result of the respective mergers: UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES (as a percentage of the average net assets of the underlying Portfolios) Total Annual Fee Waivers Net Annual Portfolio and Expense Portfolio Management Other Operating Reimbursement Operating UNDERLYING PORTFOLIO Fees Expenses 12b-1 Fees Expenses Expenses - - ---------------------------------------------------- --------------- --------------- ---------------- --------------- --------- Evergreen Variable Annuity Trust: International Equity /1/ 0.66% 0.39% 0.00% 1.05% 0.00% 1.05% Growth and Income /2/ 0.75% 0.18% 0.00% 0.93% 0.00% 0.93% VA 3 0.75% 0.24% 0.00% 0.99% 0.00% 0.99%
/1/ The annual expenses of the Evergreen VA International Equity portfolio prior to the Merger were as follows: Management Fee: 0.66%; 12b-1 Fee: 0.00%; Other Expenses: 0.73%; Total Annual Portfolio Operating Expenses: 1.39%; Fee Waiver and Expense Reimbursement: 0.39%; Net Annual Portfolio Operating Expenses: 1.00%. /2/ The annual expenses of the Evergreen VA Growth and Income portfolio prior to the Merger are the same as the estimated annual expenses post-Merger. /3/ The annual expenses of the Evergreen VA portfolio prior to the Merger were as follows: Management Fees: 0.75%; 12b-1 Fee: 0.00%; Other Expenses: 0.23%; and Total Annual Portfolio Operating Expenses: 0.98%. The following descriptions of the investment objectives are effective as of December 5, 2003. INVESTMENT OPTIONS WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS? - - ---------------- --------------------------------------------------------------------------------------------- ------------------ STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO TYPE ADVISOR/ SUB-ADVISOR - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ INTER-NATIONAL Evergreen VA International Equity (acquired Evergreen VA Global Leaders) (f/k/a Evergreen VA Evergreen International Growth): seeks long-term capital growth and, secondarily, modest income. The Investment Portfolio invests primarily in equity securities issued by established, quality, non-U.S. Management Company, companies located in countries with developed markets, but may purchase across all market LLC EQUITY capitalizations. The Portfolio normally invests at least 65% of its assets in securities of companies in at least three different countries (other than the U.S.), but may invest more than 25% of its assets in one country. The Portfolio also invests in emerging markets. - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ LARGE CAP VALUE Evergreen VA Growth and Income (acquired Evergreen VA Capital Growth): seeks capital growth Evergreen in the value of its shares and current income. The Portfolio invests primarily in common Investment stocks of medium and mid-sized U.S. companies. The investment adviser selects stocks using Management Company, a diversified style of equity management that allows the Portfolio to invest in both value- LLC and growth-oriented equity securities. Additionally, the investment adviser seeks companies that are temporarily undervalued in the marketplace, sell at a discount to their private market values and display certain characteristics such as earning a high return on investment and having some kind of competitive advantage in their industry. The Portfolio seeks additional income primarily by investing up to 20% of its assets in convertible bonds, including below investment grade bonds, and convertible preferred stocks of any quality. The Portfolio may invest up to 20% of its assets in foreign securities. - - ---------------- --------------------------------------------------------------------------------------------- ------------------ - - ---------------- --------------------------------------------------------------------------------------------- ------------------ LARGE CAP BLEND Evergreen VA (acquired Evergreen VA Blue Chip): seeks long-term capital growth. The Evergreen Portfolio invests primarily in common stocks of large U.S. companies, whose market Investment capitalizations fall within the range tracked by the Russell 1000(R)Index, at the time of Management Company, purchase. The Investment adviser selects stocks using a diversified style of equity LLC management that employs a blend between growth- and value-oriented stocks. The Portfolio does not invest in foreign securities. - - ---------------- --------------------------------------------------------------------------------------------- ------------------
As described in more detail below, the Evergreen VA Equity Index portfolio that is currently offered as an investment option for your annuity will no longer be available effective December 23, 2003. B. LIQUIDATION Evergreen VA Equity Index American Skandia anticipates that the shareholders of the Evergreen VA Equity Index portfolio (the "Equity Index portfolio") will approve the liquidation of this portfolio, which is currently scheduled to take place on or about December 23, 2003. Accordingly, effective December 23, 2003, the Evergreen VA Equity Index portfolio will no longer be offered as an investment option. Current shareholders of the Evergreen VA Equity Index portfolio have been sent a separate communication explaining their options. ASAP 2 Premier / EVA / ASXT - Premier / EVA XT / ASL Premier / ASXT-Four Premier / ASL II Premier - SUPP. (12/05/2003) Supplement to Prospectus Dated May 1, 2003 Supplement dated January 29, 2004 This Supplement should be retained with the current Prospectus for your annuity contract issued by American Skandia Life Assurance Corporation ("American Skandia"). If you do not have a current Prospectus, please contact American Skandia at 1-800-766-4530. AST Strong International Equity portfolio Pursuant to the exemptive authority granted to American Skandia Trust, its investment advisers, American Skandia Investment Services, Incorporated ("ASISI") and Prudential Investments LLC have changed sub-advisors for the AST Strong International Equity Portfolio ("International Equity Portfolio"). Effective February 23, 2004, J.P. Morgan Investment Management Inc. will become the sub-advisor for the International Equity Portfolio. Accordingly, effective February 23, 2004, all references in the Prospectus and the SAI to the AST Strong International Equity Portfolio are replaced by references to the AST JPMorgan International Equity Portfolio and references to Strong Capital Management, Inc. are replaced by references to J.P. Morgan Investment Management Inc. The investment objective of the International Equity Portfolio is unchanged. ASAP/ ASAP2/ EVA/ FUSI AS2/ ASAP III/ Wells ASAP III/ APEX/VA/ VIA-SUPP (01/2004) ASXT/ EVAXT/ FUSI XT/Wells XT/ASXT-FOUR/ FUSI XT-FOUR/ ASL/92001a0304 FUSI ASL/ Wells ASL/ ASPro/ Wells VA+/ Wells APEX/ CH2/ ASImpact
asl PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution: Not Applicable. Item 15. Indemnification of Directors and Officers: Under Section 33-320a of the Connecticut General Statutes, the Registrant must indemnify a director or officer against judgments, fines, penalties, amounts paid in settlement and reasonable expenses including attorneys' fees, for actions brought or threatened to be brought against him in his capacity as a director or officer when certain disinterested parties determine that he acted in good faith and in a manner he reasonably believed to be in the best interests of the Registrant. In any criminal action or proceeding, it also must be determined that the director or officer had no reason to believe his conduct was unlawful. The director or officer must also be indemnified when he is successful on the merits in the defense of a proceeding or in circumstances where a court determines that he is fairly and reasonable entitled to be indemnified, and the court approves the amount. In shareholder derivative suits, the director or officer must be finally adjudged not to have breached this duty to the Registrant or a court must determine that he is fairly and reasonably entitled to be indemnified and must approve the amount. In a claim based upon the director's or officer's purchase or sale of the Registrants' securities, the director or officer may obtain indemnification only if a court determines that, in view of all the circumstances, he is fairly and reasonably entitled to be indemnified and then for such amount as the court shall determine. The By-Laws of American Skandia Life Assurance Corporation ("ASLAC") also provide directors and officers with rights of indemnification, consistent with Connecticut Law. The foregoing statements are subject to the provisions of Section 33-320a. Directors and officers of ASLAC and American Skandia Marketing, Inc. ("ASM") can also be indemnified pursuant to indemnity agreements between each director and officer and American Skandia, Inc., 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 are covered under a directors and officers liability insurance policy. Such policy will reimburse ASLAC or ASM, 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, as applicable, in his or her past or present capacity as such. Item 16. Exhibits: Exhibits Page 1 Underwriting agreement incorporated by reference to Post-Effective Amendment No. 1 to Registration Statement No. 333-25733, filed via EDGAR March 2, 1998. 2 Plan of acquisition, reorganization, arrangement, liquidation or succession Not applicable 3 Articles of incorporation and by-laws incorporated by reference to Post-Effective Amendment No. 6 to Registration Statement No. 33-87010, filed via EDGAR March 2, 1998. 4 Instruments defining the rights of security holders, including indentures incorporated by reference to Pre-effective Amendment No. 1 to Registration Statement No. 33-62933, filed via EDGAR April 26, 1996 5 Opinion re legality (included as Exhibit 23b) 6 - 9 Not applicable 10 Material contracts (Investment Management Agreement): (a) Agreement with Alliance Capital Management L.P. incorporated by reference to Post-Effective No. 3 to Registration Statement No. 33-53507, filed via EDGAR April 26, 2002. (b) Agreement with Blackrock Financial Management, Inc. incorporated by reference to Post-Effective No. 3 to Registration Statement No. 33-53507, filed via EDGAR April 26, 2002. 11 - 22 Not applicable 23a Consent of PricewaterhouseCoopers LLP FILED HEREWITH 23b Opinion & Consent of Counsel FILED HEREWITH 24 Powers of Attorney for Directors James J. Avery, Helen M. Galt, Ronald P. Joelson, Bernard J. Jacob, Kenneth Y. Tanji, Michael Bohm, Executive Vice President and Chief Financial Officer, and David R. Odenath, Chief Executive Officer, President and Director. FILED HEREWITH 25 - 32 Not applicable - ---------------------------------------------------------------------------------------------------------------------------------
An index to the financial statement schedules is omitted because it is not required or is not applicable. Item 17. Undertakings: (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, post-effective amendments to this registration statement: (i) To include any prospectus required by section 10 (a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement; and (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statemen; (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. - -------------------------------------------------------------------------------- LEGAL EXPERTS: The Counsel of American Skandia Life Assurance Corporation has passed on the legal matters with respect to Federal laws and regulations applicable to the issue and sale of the Annuities and with respect to Connecticut law. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Shelton, State of Connecticut, on the 30th day of August, 2006. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION Depositor By: /s/ LAURA KEALEY ----------------------------------- Laura Kealey, Vice President, Corporate Counsel 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. Signature Title Date - --------- ----------------------- ----------------------- (Principal Executive Officer) David R. Odenath* Chief Executive Officer August 30, 2006 - ----------------------- and President David R. Odenath (Principal Financial Officer and Principal Accounting Officer) Michael Bohm* Executive Vice August 30, 2006 - ----------------------- President and Michael Bohm Chief Financial Officer (Board of Directors) James Avery* Bernard J. Jacob* Helen Galt* - ----------------------- ----------------------- ----------------------- James Avery Bernard J. Jacob Helen Galt Ronald Joelson* David R. Odenath* Kenneth Y. Tanji* - ----------------------- ----------------------- ----------------------- Ronald Joelson David R. Odenath Kenneth Y. Tanji *By /s/ LAURA KEALEY ----------------------- Laura Kealey *Executed by Laura Kealey on behalf of those indicated pursuant to Power of Attorney Exhibits Exhibit 23a Consent of Pricewaterhouse Coopers LLP FILED HEREWITH 23b Opinion and Consent of Counsel FILED HEREWITH 24 Powers of Attorney FILED HEREWITH EX-23.(A) 2 dex23a.txt CONSENT OF PRICEWATERHOUSECOOPERS LLP Exhibit 23(a) Consent of Independent Registered Public Accounting Firm We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our reports dated March 24, 2006 and February 27, 2004, relating to the financial statements of American Skandia Life Assurance Corporation which appears in its Annual Report on Form 10-K for the year ended December 31, 2005. /s/ PricewaterhouseCoopers LLP New York, New York August 30, 2006 EX-23.(B) 3 dex23b.txt OPINION & CONSENT OF COUNSEL Exhibit 23(b) August 30, 2006 RE: Registration Statement on Form S-3 filed by American Skandia Life Assurance Corporation, Registrant Securities Act Registration No. 333-________ Dear Sir/Madam: I have acted as Counsel to American Skandia Life Assurance Corporation (the "Company"), a Connecticut insurance company, in connection with the registration of certain securities with the Securities and Exchange Commission under the Securities Act of 1933, as amended, in the form of a market value adjustable fixed investment option (the "Contracts") issued by the Company. I have examined or caused to be examined such documents (including the Form S-3 registration statement) and reviewed or caused to be reviewed such questions of law as I considered necessary and appropriate, and on the basis of such examination and review, it is my opinion that: 1. The Company is a corporation duly organized and validly existing as a stock life insurance company under the laws of the State of Connecticut and is duly authorized by the Insurance Department of the State of Connecticut to issue the Contracts. 2. The Contracts, when issued as contemplated by the Form S-3 Registration Statement, will constitute legal, validly issued and binding obligations of the Company. I hereby consent to the filing of this opinion as an exhibit to the Form S-3 Registration Statement for the Contracts. Sincerely yours, Laura Kealey /s/Laura Kealey Vice President American Skandia EX-24 4 dex24.txt POWERS OF ATTORNEY Exhibit 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney-in - fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in-fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in-fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 17th day ---- of August, 2006 ------ /s/David R. Odenath -------------------------------------- David R. Odenath Chief Executive Officer, President and Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Corporate Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney-in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in- fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in- fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 15th day -- of August, 2006 ------ /s/ Michael Bohm -------------------------------------- Michael Bohm Chief Financial Officer and Executive Vice President POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney- in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in-fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in-fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney- in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 14th day -- of August, 2006 ------ /s/Helen M. Galt -------------------------------------- Helen M. Galt Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney- in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in-fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in-fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney-in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 15th day -- of August, 2006 ------ /s/Bernard J. Jacob -------------------------------------- Bernard J. Jacob Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney- in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in-fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in-fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney- in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 15th day -- of August, 2006 ------ /s/Ronald P. Joelson -------------------------------------- Ronald P. Joelson Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney- in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in -fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in -fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney- in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 14th day -- of August, 2006 ------ /s/Kenneth Y. Tanji -------------------------------------- Kenneth Y. Tanji Director POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the person whose signature appears below, does hereby make, constitute and appoint Joseph D. Emanuel, Secretary of the American Skandia Life Assurance Corporation (the "Corporation"), and in his absence, Laura K. Kealey, Vice President, Corporate Counsel, or C. Christopher Sprague, Vice President, Corporate Counsel, as his true and lawful attorney- in-fact and agent with all power and authority on his behalf to sign his name, in any and all capabilities, on a Form S-3 registration statement of the Corporation for the market value adjustment option under the American Skandia Advisor Plan III, American Skandia Apex(R) II, American Skandia Xtra Credit SIX, American Skandia LifeVest(R) II, Optimum, Optimum Four, Optimum Plus, American Skandia Apex(R), Stagecoach Apex(R), American Skandia LifeVest(R) II Premier, American Skandia Xtra Credit FOUR, and American Skandia Xtra Credit FOUR Premier contracts, and any and all amendments to such registration statement (such registration statement to register additional securities as currently covered by Reg. No. 333-117052), granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act authorized by the Power of Attorney and gives said agents and attorneys-in-fact full power and authority to act in these premises, including, but not limited to, the power to appoint a substitute or substitutes to act hereunder with the same power and authority as said agent and attorney-in-fact would have if personally acting. The undersigned does hereby ratify and confirm all that said attorney- in-fact and agent may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed hereunder this 16th day -- of August, 2006 ------ /s/James J. Avery -------------------------------------- James J. Avery Director -----END PRIVACY-ENHANCED MESSAGE-----