-----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, DufvoXn/IbG8QoF6p03kjuG5eFor+Y+jCJfp3zlqZUe9FqVs/fAHPDhwFcOMxObi PXf2QTuWsCbA67FCjxHRWg== 0001206774-05-000805.txt : 20050504 0001206774-05-000805.hdr.sgml : 20050504 20050504143538 ACCESSION NUMBER: 0001206774-05-000805 CONFORMED SUBMISSION TYPE: 497 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20050504 DATE AS OF CHANGE: 20050504 EFFECTIVENESS DATE: 20050504 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: 497 SEC ACT: 1933 Act SEC FILE NUMBER: 333-117052 FILM NUMBER: 05798469 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 497 1 d16815.txt AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA APEX(SM) II Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes American Skandia APEX(SM) II, 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. 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. 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: American Skandia Trust, Gartmore Variable Investment Trust, Wells Fargo Variable 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 93. 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: - - 1-800-752-6342 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 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 APEX(SM) II IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA. Prospectus Dated: May 2, 2005 Statement of Additional Information Dated: May 2, 2005 APEX2PROS505 ASAPEXIIPROS
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? ........................................................ 27 Fees and Charges ......................................................................... 28 What Are the Contract Fees and Charges? ................................................ 28 What Charges Apply Solely to the Variable Investment Options? .......................... 29 What Fees and Expenses are Incurred by the Portfolios? ................................. 30 What Charges Apply to the Fixed Allocations? ........................................... 30 What Charges Apply if I Choose an Annuity Payment Option? .............................. 30 Exceptions/Reductions to Fees and Charges .............................................. 30 Purchasing Your Annuity .................................................................. 31 What Are Our Requirements for Purchasing the Annuity? .................................. 31 Managing Your Annuity .................................................................... 32 May I Change the Owner, Annuitant and Beneficiary Designations? ........................ 32 May I Return the Annuity if I Change My Mind? .......................................... 32 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? ....................... 33 Managing Your Account Value .............................................................. 34 How and When Are Purchase Payments Invested? ........................................... 34 How Do I Receive a Loyalty Credit? ..................................................... 34 How are Loyalty Credits Applied to My Account Value? ................................... 34 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 34 Do You Offer Dollar Cost Averaging? .................................................... 36 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
(i) Contents How and When Do I Choose the Annuity Payment Option? ................................... 47 How Are Annuity Payments Calculated? ................................................... 47 Living Benefit Programs .................................................................. 49 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? ........................................................................... 49 Guaranteed Return Option Plus(SM) (GRO Plus(SM)) ....................................... 50 Guaranteed Return Option (GRO) ......................................................... 54 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 57 Guaranteed Minimum Income Benefit (GMIB) ............................................... 61 Lifetime Five Income Benefit (Lifetime Five) ........................................... 65 Death Benefit ............................................................................ 71 What Triggers the Payment of a Death Benefit? .......................................... 71 Basic Death Benefit .................................................................... 71 Optional Death Benefits ................................................................ 71 American Skandia's Annuity Rewards ..................................................... 75 Payment of Death Benefits .............................................................. 75 Valuing Your Investment .................................................................. 78 How is My Account Value Determined? .................................................... 78 What is the Surrender Value of My Annuity? ............................................. 78 How and When Do You Value the Sub-Accounts? ............................................ 78 How Do You Value Fixed Allocations? .................................................... 78 When Do You Process and Value Transactions? ............................................ 78 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 80 Tax Considerations ....................................................................... 81 General Information ...................................................................... 88 How Will I Receive Statements and Reports? ............................................. 88 Who is American Skandia? ............................................................... 88 What Are Separate Accounts? ............................................................ 88 What is the Legal Structure of the Underlying Funds? ................................... 90 Who Distributes Annuities Offered by American Skandia? ................................. 91 Incorporation of Certain Documents by Reference ........................................ 92 Financial Statements ................................................................... 92 How to Contact Us ...................................................................... 92 Indemnification ........................................................................ 93 Legal Proceedings ...................................................................... 93 Contents of the Statement of Additional Information .................................... 93 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 -- Description and Calculation of Previously Offered Optional Death Benefits ........................................................................... D-1 Appendix E -- Additional Information on Asset Allocation Programs ........................ E-1
(ii) AMERICAN SKANDIA 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? - - 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. - - 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 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. - - 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 4, 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 $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 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 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 AMERICAN SKANDIA 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 - ----------------------------------------------------------------------------------------------------------- Contingent Deferred Sales Charge* 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 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 Yrs. 5+ 8.5% 8.0% 7.0% 6.0% 0.0%
3 AMERICAN SKANDIA 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 - ------------------------------------------------------------------------------------------------------------------------- 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(1) (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS)
FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge(2) 1.50% Administration Charge(2) 0.15% Settlement Service Charge(3) 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") Total Annual Charges of the Sub-accounts 1.65% per year of the value of each Sub-account (1.40% per year if you 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 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 APEX II 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 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 0.25% of average daily 1.90%; 1.65% for date, while allowing you to allocate all or a portion of your Account net assets of the Sub- Qualified BCO Value to certain Sub-accounts. accounts GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) We offer a program that guarantees your ability to withdraw amounts 0.35% of average daily 2.00%; 1.75% for over time equal to an initial principal value, regardless of the net assets of the Sub- Qualified BCO impact of market performance on your Account Value. accounts GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** We offer a program that, after a seven-year waiting period, guarantees 0.50% per year of the 1.65% your ability to begin receiving income from your Annuity in the form average Protected of annuity payments based on your total Purchase Payments and an Income Value during PLUS annual increase of 5% on such Purchase Payments adjusted for each year; deducted 0.50% per year of average withdrawals (called the "Protected Income Value"), regardless of the annually in arrears each Protected Income Value impact of market performance on your Account Value. Annuity Year LIFETIME FIVE INCOME BENEFIT** We offer a program that guarantees your ability to withdraw amounts 0.60% of average daily 2.25% equal to a percentage of an initial principal value, regardless of the net assets of the Sub- impact of market performance on your Account Value, subject to our accounts program rules 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 net assets of the Sub- to the basic Death Benefit that can be used to offset federal and accounts state taxes payable on any taxable gains in your Annuity at the time of your death.
5 AMERICAN SKANDIA APEX II PROSPECTUS Summary of Contract Fees and Charges continued
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% protection for your beneficiary(ies) by providing a death benefit net assets of the Sub- equal to the greater of the basic Death Benefit and the Highest accounts Anniversary Value, less 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% protection for your beneficiary(ies) by providing the greater of the net assets of the Sub- Highest Anniversary Value Death Benefit and a 5% annual increase on accounts 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% protection for your beneficiary(ies) by providing a death benefit net assets of the Sub- equal to the greater of the basic Death Benefit and the Highest Daily accounts Value, less 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 1-800-752-6342. 6 AMERICAN SKANDIA 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 APEX II 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 Wells Fargo Variable Trust:(12) - ---------------------------------------------------------------------------------------------------------------- Advantage Equity Income 0.55% 0.23% 0.25% 1.00% 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% ProFund VP:(15) - ---------------------------------------------------------------------------------------------------------------- Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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% 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%
8 AMERICAN SKANDIA 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 ProFund VP:(15) continued 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:(16,17) First Trust[RegTM] 10 Uncommon Values 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(18) 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 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 Global Asset 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 Equity Income 1.00%
(b) In addition, the following name change was made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Income Advantage Equity Income
10 AMERICAN SKANDIA APEX II PROSPECTUS (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) 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. (16) 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) For the period September 30, 2004 through December 31, 2007, First Trust has contractually agreed to waive fees and reimburse expense 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%
(18) The Dow (SM) Target Dividend Portfolio is newly organized. Accordingly, other expenses Other Expenses and Total Annual Fund Portfolio Operating Expenses are based on estimated expenses for the current fiscal year. 11 Expense Examples AMERICAN SKANDIA APEX II 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 (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; and (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 Benefits. 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 THE END OF THE APPLICABLE TIME PERIOD: THE END OF THE APPLICABLE TIME PERIOD: SURRENDER 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 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 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 1-800-752-6342. 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 Annuity, 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 bank drafting, 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. 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. Either of the above 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 each of the above Sub-accounts to all Owners that owned the Annuity prior to the respective close dates. 13 AMERICAN SKANDIA APEX II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- INTERNATIONAL AST JPMORGAN INTERNATIONAL EQUITY: seeks long-term capital J.P. Morgan EQUITY growth by investing in a diversified portfolio of Fleming Asset international equity securities. The Portfolio seeks to meet Management 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. INTERNATIONAL AST WILLIAM BLAIR INTERNATIONAL GROWTH seeks long-term William Blair & EQUITY capital appreciation. The Portfolio invests primarily in Company, L.L.C. stocks of large and 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 Deutsche Asset EQUITY Equity): seeks capital growth. The Portfolio pursues its Management, Inc. 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. INTERNATIONAL AST MFS GLOBAL EQUITY: seeks capital growth. Under normal Massachusetts EQUITY circumstances the Portfolio invests at least 80% of its Financial Services assets in equity securities of U.S. and foreign issuers Company (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. SMALL CAP AST SMALL-CAP GROWTH (formerly AST State Street Research Eagle Asset GROWTH Small-Cap Growth): seeks long-term capital growth. The Management, Portfolio pursues its objective by primarily investing in the Neuberger Berman common stocks of small-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. Management, Inc. 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. SMALL CAP AST FEDERATED AGGRESSIVE GROWTH: seeks capital growth. The Federated Equity GROWTH Portfolio pursues its investment objective by investing Management primarily in the stocks of small companies that are traded on Company of national security exchanges, the NASDAQ stock exchange and Pennsylvania/ the over-the-counter-market. Federated Global Investment Management Corp. SMALL CAP AST GOLDMAN SACHS SMALL-CAP VALUE: seeks long-term capital Goldman Sachs VALUE appreciation. The Portfolio will seek its objective through Asset Management, investments primarily in equity securities that are believed L.P. to be undervalued in the marketplace. The Portfolio primarily seeks companies that are small-sized, based on the value of their outstanding stock.
14 AMERICAN SKANDIA APEX II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------------------------- 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 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 Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net assets Management Inc. 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 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.
15 AMERICAN SKANDIA 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 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. 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 Company 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 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, a significant investment consideration and any income realized on the Portfolio's L.P. 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 GROWTH 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- LARGE CAP AST ALLIANCEBERNSTEIN MANAGED INDEX 500 (formerly, AST Alliance Capital BLEND Sanford Bernstein Managed Index 500): seeks to outperform the Management, L.P. 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 Standard & Poor's 500 Composite Stock Price Index. LARGE CAP AST AMERICAN CENTURY INCOME & GROWTH: seeks capital growth American Century VALUE with current income as a secondary objective. The Portfolio Investment invests primarily in common stocks that offer potential for Management, Inc. capital growth, and may, consistent with its investment objective, invest in stocks that offer potential for current income. LARGE CAP AST ALLIANCEBERNSTEIN GROWTH & INCOME: seeks long-term growth Alliance Capital VALUE of capital and income while attempting to avoid excessive Management, L.P. fluctuations in 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 Hotchkis and Wiley VALUE and long-term growth of income, as well as capital Capital Management, appreciation. The Portfolio invests, under normal LLC circumstances, at least 80% of its net 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): Prudential ALLOCATION/ seeks to obtain the highest potential total return consistent Investments LLC BALANCED 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. ASSET AST AMERICAN CENTURY STRATEGIC BALANCED: seeks capital growth American Century ALLOCATION/ and current income. The Sub-advisor intends to maintain Investment BALANCED approximately 60% of the assets in equity securities and the Management, Inc. remainder in bonds and other fixed income securities. ASSET AST T. ROWE PRICE ASSET ALLOCATION: seeks a high level of T. Rowe Price ALLOCATION/ total return by investing primarily in a diversified Associates, Inc. BALANCED 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. FIXED INCOME AST T. ROWE PRICE GLOBAL BOND: seeks to provide high current T. Rowe Price income and capital growth by investing in high quality International, Inc. 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- FIXED INCOME AST GOLDMAN SACHS HIGH YIELD: seeks a high level of current Goldman Sachs income and may also consider the potential for capital Asset Management, appreciation. The Portfolio invests, under normal L.P. 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 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 Management investment management. The Portfolio will invest in a Company LLC diversified portfolio of fixed-income securities of varying (PIMCO) 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 Pacific Investment return consistent with preservation of capital and prudent Management investment management. The Portfolio will invest in a Company LLC diversified portfolio of fixed-income securities of varying (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 Wells Capital high levels of liquidity. The Portfolio attempts to Management, Inc. 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. INTERNATIONAL GVIT DEVELOPING MARKETS: seeks long-term capital Gartmore Global EQUITY appreciation, under normal conditions by investing at least Asset Management 80% of its total assets in stocks of companies of any size Trust/Gartmore based in the world's developing economies.Under normal market Global Partners developing 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. LARGE CAP ADVANTAGE EQUITY INCOME FUND (formerly Equity Income): Seeks Wells Fargo Funds VALUE long-term capital appreciation and above-average dividend Management, LLC 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------- MID-CAP AIM VARIABLE INSURANCE FUNDS -- AIM V.I. DYNAMICS FUND -- A I M Advisors, GROWTH SERIES I SHARES (formerly, an INVESCO fund): seeks long-term Inc. 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 Growth(R) Index at the time of purchase. SPECIALTY AIM VARIABLE INSURANCE FUNDS -- AIM V.I. TECHNOLOGY FUND -- A I M Advisors, SERIES I SHARES (formerly, an INVESCO fund): seeks capital Inc. 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. SPECIALTY AIM VARIABLE INSURANCE FUNDS -- AIM V.I. HEALTH SCIENCES FUND A I M Advisors, -- SERIES I SHARES (formerly, an INVESCO fund) (Effective Inc. July 1, 2005, AIM 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 A I M Advisors, FUND -- SERIES I SHARES (formerly, an INVESCO fund): seeks Inc. 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. INTERNATIONAL EVERGREEN VA INTERNATIONAL EQUITY (formerly Evergreen VA Evergreen EQUITY International Growth): seeks long-term capital growth and Investment secondarily, modest income. The Portfolio normally invests Management 80% of its assets in equity securities issued by established, Company, LLC 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.). SMALL CAP EVERGREEN VA GROWTH (formerly Evergreen VA Special Equity): Evergreen GROWTH seeks long-term capital growth. The Portfolio invests at Investment least 75% of its assets in common stocks of small- and Management medium-sized companies (i.e., companies whose market Company, LLC capitalizations fall within the range of the Russell 2000(R) Growth Index, at the time of purchase). SPECIALTY EVERGREEN VA OMEGA: seeks long-term capital growth. The Evergreen Portfolio invests primarily, and under normal conditions, Investment substantially all of its assets in common stocks and Management securities convertible into common stocks of U.S. companies Company, LLC across all market capitalizations.
19 AMERICAN SKANDIA APEX II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- INTERNATIONAL PROFUND VP EUROPE 30: seeks daily investment results, before ProFund Advisors EQUITY fees and expenses, that correspond to the daily performance LLC of the ProFunds 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 ProFund Advisors and expenses, that correspond to the daily performance of the LLC Dow Jones 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, ProFund Advisors before fees and expenses, that correspond to the daily LLC 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 economic sector of the U.S. equity market. SPECIALTY PROFUND VP BIOTECHNOLOGY: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to the daily LLC performance of the Dow 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 ProFund Advisors Cyclical): seeks daily investment results, before fees and LLC 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. SPECIALTY PROFUND VP CONSUMER GOODS (formerly, ProFund VP Consumer ProFund Advisors Non-Cyclical): seeks 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP OIL & GAS (formerly, ProFund VP Energy): seeks ProFund Advisors daily investment results, before fees and expenses, that LLC correspond to the 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: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance LLC 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: seeks daily investment results, ProFund Advisors 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: seeks daily investment results, ProFund Advisors 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 ProFund Advisors fees and expenses, that correspond to the daily performance LLC 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. SPECIALTY PROFUND VP PHARMACEUTICALS: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to the daily LLC performance of the Dow 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, ProFund Advisors before fees and expenses, that correspond to the daily LLC performance of the Dow Jones Precious 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, ProFund Advisors before fees and expenses, that correspond to the daily LLC 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 industry portion of the U.S. equity market. SPECIALTY PROFUND VP SEMICONDUCTOR: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to the daily LLC performance of the Dow 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 ProFund Advisors fees and expenses, that correspond to the daily performance LLC of the Dow Jones 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.
21 AMERICAN SKANDIA APEX II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP TELECOMMUNICATIONS: seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to the LLC 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 economic sector of the U.S. equity market. SPECIALTY PROFUND VP UTILITIES: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to the daily performance LLC of the Dow Jones 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 ProFund Advisors and expenses, that correspond to the daily performance of the LLC S&P 500(R) Index. SPECIALTY PROFUND VP BEAR: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of LLC 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, 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 investment results, before ProFund Advisors fees and expenses, that correspond to twice (200%) the daily LLC performance of the S&P 500(R) 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(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. SPECIALTY PROFUND VP OTC: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the daily performance of the LLC NASDAQ-100 Index(R). "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 ProFund Advisors fees and expenses, that correspond to the inverse (opposite) LLC 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, 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 registered under the Securities Exchange Act of 1934.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP ULTRAOTC: seeks daily investment results, before ProFund Advisors fees and expenses, that correspond to twice (200%) the daily LLC 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. "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, ProFund Advisors before fees and expenses, that correspond to the daily LLC performance of the S&P MidCap 400/ Barra Value Index(R). The S&P MidCap400/Barra Value Index(R) 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, ProFund Advisors GROWTH before fees and expenses, that correspond to the daily LLC performance of the S&P MidCap 400/ Barra Growth Index(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) that have comparatively high price-to-book ratios as determined before each semiannual rebalance date. SPECIALTY PROFUND VP ULTRAMID-CAP: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to twice (200%) the LLC 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(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. SMALL CAP PROFUND VP SMALL-CAP VALUE: seeks daily investment results, ProFund Advisors VALUE before fees and expenses, that correspond to the daily LLC performance of the S&P SmallCap 600/ Barra Value Index(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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, ProFund Advisors GROWTH before fees and expenses, that correspond to the daily LLC performance of the S&P SmallCap 600/Barra Growth Index(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) that have comparatively high price-to- book ratios as determined before each semiannual rebalance date.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP ULTRASMALL-CAP: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to twice (200%) the LLC 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 U.S. GOVERNMENT PLUS: seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to one and LLC 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: seeks daily investment ProFund Advisors results, before fees and expenses, that correspond to one and LLC 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. LARGE CAP PROFUND VP LARGE-CAP GROWTH: seeks daily investment results, ProFund Advisors GROWTH before fees and expenses, that correspond to the daily LLC performance of the S&P 500/Barra Growth Index(R). 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, ProFund Advisors VALUE before fees and expenses, that correspond to the daily LLC performance of the S&P 500/Barra Value Index(R). 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.
24 AMERICAN SKANDIA APEX II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP SHORT SMALL-CAP: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to the inverse LLC (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. SPECIALTY PROFUND VP SHORT MID-CAP: seeks daily investment results, ProFund Advisors before fees and expenses, that correspond to the inverse LLC (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. SPECIALTY ACCESS VP HIGH YIELD: seeks to provide investment results ProFund Advisors that correspond generally to the total return of the high LLC yield market 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(R) 10 UNCOMMON VALUES: seeks to provide First Trust Advisors above-average capital appreciation. The Portfolio seeks to L.P. 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 TARGET MANAGED VIP: seeks to provide above-average total First Trust Advisors return. The Portfolio seeks to achieve its objective by L.P. investing in common stocks of the most 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(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) Target 25.
25 AMERICAN SKANDIA APEX II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY THE DOW(SM) DART 10: seeks to provide above-average total First Trust Advisors 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 ten companies in the DJIA that have the highest combined dividend yields and buyback ratios on or about the applicable stock selection date. SPECIALTY GLOBAL DIVIDEND TARGET 15 (formerly, Global Target 15): seeks First Trust Advisors to provide above-average total return. The Portfolio seeks to L.P. 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 S&P(R) TARGET 24: seeks to provide above-average total return. First Trust Advisors The Portfolio seeks to achieve its objective by investing in L.P. 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) based on the sector's market capitalization. SPECIALTY THE DOW(SM) TARGET DIVIDEND seeks to provide above-average First Trust Advisors 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 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(R) TARGET 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by L.P. 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. SPECIALTY NASDAQ(R) TARGET 15: seeks to provide above-average total First Trust Advisors return. The Portfolio seeks to achieve its objective by L.P. 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.
26 AMERICAN SKANDIA APEX II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- INTERNATIONAL THE PRUDENTIAL SERIES FUND, INC. -- SP WILLIAM BLAIR Prudential EQUITY INTERNATIONAL GROWTH: Seeks long-term capital appreciation. Investments LLC/ The Portfolio invests primarily in stocks of large and William Blair & medium-sized companies located in countries included in the Company, LLC 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 fewer than six different countries and will not concentrate investments in any particular industry.
"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. 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. 27 AMERICAN SKANDIA 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 charging 28 AMERICAN SKANDIA APEX II PROSPECTUS 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. 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 & 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. 29 AMERICAN SKANDIA APEX II PROSPECTUS Fees and Charges continued 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. 30 AMERICAN SKANDIA 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 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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. 31 AMERICAN SKANDIA 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: - - 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. 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 original 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 "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. 32 AMERICAN SKANDIA APEX II PROSPECTUS 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. 33 AMERICAN SKANDIA 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 annuitites 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 contract 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 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 34 AMERICAN SKANDIA APEX II PROSPECTUS 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: - - 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 35 AMERICAN SKANDIA APEX II PROSPECTUS Managing Your Account Value continued 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 investment 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 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 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 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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 dur- 36 AMERICAN SKANDIA APEX II PROSPECTUS ing the Guarantee Period. This will reduce the effective rate of return on the Fixed Allocation over the Guarantee Period. 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). 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 elect 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 37 AMERICAN SKANDIA APEX II PROSPECTUS Managing Your Account Value continued 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(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 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(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 * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 38 AMERICAN SKANDIA APEX II PROSPECTUS 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 of 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 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 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 39 AMERICAN SKANDIA APEX II PROSPECTUS Managing Your Account Value continued 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 1-800-752-6342. 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?"). 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. 40 AMERICAN SKANDIA APEX II PROSPECTUS 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. 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 41 AMERICAN SKANDIA APEX II PROSPECTUS Managing Your Account Value continued 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 the Allocation Date and maturing on the 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 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 AMERICAN SKANDIA 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. - - 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. - - You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount 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, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 43 AMERICAN SKANDIA 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 period requested), we may postpone the withdrawal and add 44 AMERICAN SKANDIA APEX II PROSPECTUS 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, 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 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: - - the Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 45 AMERICAN SKANDIA APEX II PROSPECTUS Access To Account Value continued "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; and - - 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: - - 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 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. 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 46 AMERICAN SKANDIA APEX II PROSPECTUS 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 Annuity 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 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. 47 AMERICAN SKANDIA APEX II PROSPECTUS Access To Account Value continued 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 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%. 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. 48 AMERICAN SKANDIA 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: - - protecting a principal amount from decreases in value due to investment performance as of specified future dates; - - taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; or - - 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 payments, may be less tax efficient for 49 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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. - - 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 50 AMERICAN SKANDIA APEX II PROSPECTUS 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 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; 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: - - 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). 51 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued - 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 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. - - 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). 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 52 AMERICAN SKANDIA APEX II PROSPECTUS 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 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 53 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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. - - 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 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. 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 54 AMERICAN SKANDIA APEX II PROSPECTUS 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 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. - - 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 the variable investment options, 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 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, 55 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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 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. 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. 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 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. - - 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. - - 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. - - 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. - - 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 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 56 AMERICAN SKANDIA APEX II PROSPECTUS 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. 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 17, 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. 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 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. - - 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. 57 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued - - 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 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. - - 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, 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, 2004 (still within the first Annuity Year). The Account Value immediately before the withdrawal is $220,000. As the amount 58 AMERICAN SKANDIA APEX II PROSPECTUS 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, 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: - - 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 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. - - 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 59 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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 the 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 the Annuity. - - 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. - - 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 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. 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. - - 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 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 60 AMERICAN SKANDIA APEX II PROSPECTUS 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 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. - - 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 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 61 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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 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 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. - - 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. - - 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. - - 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; 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: - - 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 62 AMERICAN SKANDIA APEX II PROSPECTUS 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 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. 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. 63 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued - - 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 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. - - 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. - - 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 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. - - 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 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 64 AMERICAN SKANDIA APEX II PROSPECTUS 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. 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 1-800-752-6342. 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 65 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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. - - 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. 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, 66 AMERICAN SKANDIA APEX II PROSPECTUS 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 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 67 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued 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: - - 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 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 68 AMERICAN SKANDIA APEX II PROSPECTUS 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: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. - - 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 69 AMERICAN SKANDIA APEX II PROSPECTUS Living Benefit Programs continued (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 the Annuity, including any 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 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. - - 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 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 1-800-752-6342. 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. 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. 70 AMERICAN SKANDIA 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 71 AMERICAN SKANDIA 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. THE ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT IS NOT AVAILABLE IF YOU ELECT THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH BENEFIT. PLEASE SEE APPENDIX D 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 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 72 AMERICAN SKANDIA APEX II PROSPECTUS 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. 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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. PLEASE SEE APPENDIX D 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 80th 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 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. - - 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. - - 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. 73 AMERICAN SKANDIA 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 1-800-752-6342. - -------------------------------------------------------------------------------- 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 prospec- 74 AMERICAN SKANDIA APEX II PROSPECTUS tus 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: - - your Account Value in the variable investment options 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 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, on the date that the Annuity Rewards Benefit is effective, the Account Value 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. 75 AMERICAN SKANDIA 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 76 AMERICAN SKANDIA 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. - - 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 a 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 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. 77 AMERICAN SKANDIA 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. 78 AMERICAN SKANDIA APEX II 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, 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 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. 79 AMERICAN SKANDIA APEX II 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 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 charge, 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). 80 AMERICAN SKANDIA 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 81 AMERICAN SKANDIA APEX II PROSPECTUS Tax Considerations continued the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 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 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. - - 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 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. 82 AMERICAN SKANDIA APEX II PROSPECTUS 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 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: - - 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. - - You purchased more than one annuity contract from the same insurer within the same calendar year (other than contracts held by tax favored plans). 83 AMERICAN SKANDIA APEX II PROSPECTUS Tax Considerations continued 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 taxbenefits (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: - - 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 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 - - 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. 84 AMERICAN SKANDIA APEX II 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: - - 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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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 "SAR-SEPs" 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: - - 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 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 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: - - 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 and any earnings attributable to these amounts). 85 AMERICAN SKANDIA APEX II 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 86 AMERICAN SKANDIA APEX II PROSPECTUS 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) Plans). 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. 87 AMERICAN SKANDIA 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 are held in Sub-accounts of American Skandia Life Assurance 88 AMERICAN SKANDIA APEX II 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 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 managers may cease being employed. We are under no 89 AMERICAN SKANDIA APEX II PROSPECTUS General Information continued 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. In addition, the investment adviser, subadvisor or distributor of the underlying Portfolios may also compensate us by provid- 90 AMERICAN SKANDIA APEX II PROSPECTUS ing 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 service 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 for 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. 91 AMERICAN SKANDIA 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 1-800-752-6342 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, 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. o sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. o accessing information about your Annuity through our Internet Website at www.americanskandia.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, 92 AMERICAN SKANDIA APEX II 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 93 This page intentionally left blank APPENDIX A Appendix A -- Condensed Financial Information About Separate Account B - -------------------------------------------------------------------------------- AMERICAN SKANDIA APEX II 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 AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B - --------------------------------------------------------------------------------
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-2 APPENDIX A AMERICAN SKANDIA 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-3 APPENDIX A AMERICAN SKANDIA 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(1) 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-4 APPENDIX A AMERICAN SKANDIA 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 Goldman Sachs Small-Cap Value (1997) With No Optional Benefits Unit Price $ 15.19 $ 12.85 9.26 Number of Units 1,541,896 1,504,296 1,492,775 With any one of GRO Plus, EBP or HAV Unit Price $ 16.47 $ 13.97 10.09 Number of Units 222,905 102,500 624 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 $ 19.58 $ 16.67 -- Number of Units 61,521 73,852 -- 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 APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, ----------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------- ---------------- ---------------- --------------- 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 -- -- - ------------------------------------ --- ------------- ------------- ------------ 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 -- -- - ------------------------------------ --- ------------- ------------- ------------
A-6 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------- --------------- --------------- --------------- 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 -- -- - --------------------------------------- -- ------------ ------------ ------------ 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 -- -- - --------------------------------------- -- ------------ ------------ ------------
A-7 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, ---------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------ ---------------- --------------- --------------- AST Neuberger Berman Mid-Cap Value (1994) 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 -- -- - -------------------------------------- -- ------------- ------------ ------------ 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 -- -- - -------------------------------------- -- ------------- ------------ ------------
A-8 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------- --------------- --------------- --------------- 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 -- -- - --------------------------------------- -- ------------ ------------ ------------ 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 -- -- - --------------------------------------- -- ------------ ------------ ------------
A-9 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------- --------------- --------------- --------------- AST Alliance Growth 2 (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 -- -- - ------------------------------------ --- ------------ ------------ ------------ 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 -- -- - ------------------------------------ --- ------------ ------------ ------------
A-10 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, ------------------------------------------------------ Sub-account 2004 2003 2002 - --------------------------------------------- ---------------- ---------------- ---------------- 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 -- -- - ----------------------------------------- -- ------------- ------------- ------------- 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 -- -- - ----------------------------------------- -- ------------- ------------- -------------
A-11 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, ------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------- --------------- --------------- ------------- 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 -- -- - ------------------------------------------- -- ------------ ------------ ---------- AST Alliance/Bernstein Growth + Value(3) (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 -- -- - ------------------------------------------- -- ------------ ------------ ----------
A-12 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------ --------------- --------------- --------------- AST Sanford Bernstein Core Value(4) (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 -- -- - -------------------------------------- -- ------------ ------------ ------------ 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 -- -- - -------------------------------------- -- ------------ ------------ ------------
A-13 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------------- --------------- --------------- --------------- AST Sanford Bernstein Managed Index 500(5) (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 -- -- - --------------------------------------------- -- ------------ ------------ ------------ 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 -- -- - --------------------------------------------- -- ------------ ------------ ------------
A-14 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, ----------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------- ---------------- ---------------- --------------- AST Alliance Growth and Income(6) (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 -- -- - ------------------------------------ --- ------------- ------------- ------------ 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 -- -- - ------------------------------------ --- ------------- ------------- ------------
A-15 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------- --------------- --------------- --------------- AST DeAM Global Allocation(7) (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 -- -- - ------------------------------------------- -- ------------ ------------ --------- 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 -- -- - ------------------------------------------- -- ------------ ------------ ------------
A-16 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------------- Sub-account 2004 2003 2002 - ------------------------------------------ --------------- --------------- --------------- 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 -- -- - -------------------------------------- -- ------------ ------------ ---------- 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 -- -- - -------------------------------------- -- ------------ ------------ ------------
A-17 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, ----------------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------- ---------------- ---------------- --------------- 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 -- -- - ------------------------------------ --- ------------- ------------- ------------ 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 -- -- - ------------------------------------ --- ------------- ------------- ------------
A-18 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, ------------------------------------------------------ Sub-account 2004 2003 2002 - ----------------------------------------- ---------------- ---------------- ---------------- 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 -- -- - ------------------------------------ --- ------------- ------------- ------------- 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 -- -- - ------------------------------------ --- ------------- ------------- -------------
A-19 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, ------------------------------------------------------ Sub-account 2004 2003 2002 - --------------------------------------------------------------------- ---------------- ---------------- ---------------- 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 -- -- - ----------------------------------------------------------------- -- ------------- ------------- ------------- 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 -- -- - ----------------------------------------------------------------- -- ------------- ------------- -------------
A-20 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------------------- ------------- ------------- ------------- Wells Fargo Variable Trust -- Equity Income(8) (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 Price $ 13.29 $ 12.23 9.90 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 Value $ 11.61 -- -- Number of Units 13 -- -- - ------------------------------------------------- -- ---------- ---------- ---------- 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-21 APPENDIX A AMERICAN SKANDIA 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. -- 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-22 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-23 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Year Ended December 31, --------------------------------------------- Sub-account 2004 2003 2002 - ----------------------------------------- ------------- ------------- ------------- Evergreen VA -- Special Equity(9) (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-24 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-25 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-26 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-27 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-28 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-29 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-30 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-31 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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 11.30 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-32 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-33 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-34 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-35 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-36 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-37 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-38 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-39 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-40 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-41 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-42 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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 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 -- -- -- - ------------------------------------ --- ---------- ----- ----- 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 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 -- -- --
A-43 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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 6.80 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 10 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-44 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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-45 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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 DowSM 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-46 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS - --------------------------------------------------------------------------------
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 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-47 APPENDIX A AMERICAN SKANDIA APEX II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- 1. Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2. Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 3. Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 4. Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 5. Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 6. Effective May 2, 2005 the name of the AST Alliance Growth and Income Appendix A -- Condensed Financial Information About Separate Account. 7. Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 8. 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. 9. Effective April 15, 2005 the name of the Evergreen VA--Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 10. 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-48 APPENDIX B AMERICAN SKANDIA 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 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 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 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 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 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 APEX II 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 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 - 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. - 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). C-1 APPENDIX C AMERICAN SKANDIA APEX II PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued - 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 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. - 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-2 APPENDIX C AMERICAN SKANDIA APEX II 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-3 APPENDIX C AMERICAN SKANDIA APEX II PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued 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-4 APPENDIX D AMERICAN SKANDIA APEX II PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits 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. D-1 Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued AMERICAN SKANDIA APEX II PROSPECTUS Key Terms Used with the Guaranteed Minimum Death Benefit o 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. o 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". o 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; D-2 APPENDIX D AMERICAN SKANDIA APEX II PROSPECTUS 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. D-3 APPENDIX D AMERICAN SKANDIA APEX II PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued 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). D-4 APPENDIX E AMERICAN SKANDIA APEX II PROSPECTUS Appendix E -- 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") 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 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: - - 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. E-1 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 asapexii-pros (05/2005). ______________________________________ (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: 1-800-766-4530 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 Rd. Dresher, PA 19025 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 ----------------------------------------------- AMERICAN SKANDIA STAGECOACH(TM) APEX(SM) II Flexible Premium Deferred Annuity - -------------------------------------------------------------------------------- PROSPECTUS: MAY 2, 2005 This Prospectus describes Stagecoach(TM) 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. - -------------------------------------------------------------------------------- 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: - -------------------------------------- - -> 1-800-752-6342 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(TM) 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 Statement of Additional Information Dated: May 2, 2005 WFAPX2PR505 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 PlusSM (GRO PlusSM) ........................................... 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
(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? - - 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. - - 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. - - 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 4, 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 $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 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. 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 - -------------------------------------------------------------------------------------------------------------------- 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(1) (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS)
FEE/CHARGE AMOUNT DEDUCTED - -------------------------------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge (2) 1.50% Administration Charge (2) 0.15% Settlement Service Charge (3) 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") Total Annual Charges of the Sub-accounts 1.65% per year of the value of each Sub-account (1.40% per year if you 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 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 of net assets of the Sub- 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 1.90% protection for your beneficiary(ies) by providing amounts in addition to the daily net assets of basic Death Benefit that can be used to offset federal and state taxes the Sub-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
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 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 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 1-800-752-6342. 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% PROFUND VP: (15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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: (15) 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: (16, 17) First Trust(R) 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(R) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(R) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(18) 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) 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. (16) 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. (17) 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%
(18) 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 (when applicable), 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; and (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 and 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 IF YOU DO NOT SURRENDER THE END OF THE APPLICABLE TIME PERIOD: 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 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 1-800-752-6342. 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 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): Deutsche Asset EQUITY seeks capital growth. The Portfolio pursues its objective by primarily Management, Inc. 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(R) 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(R) 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 VALUE AST NEUBERGER BERMAN MID-CAP VALUE: seeks capital growth. Under Neuberger Berman 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 pursues GAMCO Investors, its objective by investing primarily in readily marketable equity securities Inc. 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(R) 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(R) 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 Hotchkis and 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 assets plus Management, LLC 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.
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 Goldman Sachs and may 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 the Lord, Abbett & Co. opportunity for capital appreciation to produce a high total return. To LLC 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 consistent Pacific Investment with preservation of capital and prudent investment management. The Management Portfolio will invest in a diversified portfolio of fixed-income securities Company LLC of varying maturities. The average portfolio duration of the Portfolio (PIMCO) 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 of fixed- Company LLC income securities of varying maturities. The average portfolio duration of (PIMCO) 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 Trust/Gartmore normal market conditions, investments are maintained in at least six Global Partners countries at all times and no more than 35% of total assets in any single one of them.
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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(R) 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 issued Management 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(R) 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
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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 ProFund Advisors expenses, that correspond to the daily performance of the Nikkei 225 LLC 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 fees ProFund Advisors 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(R) 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(R) 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(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.
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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(R) 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(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. SPECIALTY PROFUND VP OTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the NASDAQ-100 LLC Index(R). "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(R). 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(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 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(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. "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(R). The S&P MidCap400/Barra Value Index(R) 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.
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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(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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(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(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. 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(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) 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(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.
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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(R). 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(R). 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(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.
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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(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. 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(R) 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 of L.P. 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(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) Target 25. SPECIALTY THE DOWSM 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(R) 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) 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(R) TARGET 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing in L.P. 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. SPECIALTY NASDAQ(R) 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(R) 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 located in William Blair & countries included in the Morgan Stanley Capital International All Country Company, LLC 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(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 Averagesm", "DJIAsm", "Dow Industrialssm", "Dow Jones Select Dividend Indexsm", and "The Dow 10sm", 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 DowSM 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 TimelinessTM 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. 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. 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 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 30 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS 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 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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: - - 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. 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 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 initial 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 Contract 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: - - 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. - 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 investment 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 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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. 38 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS 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 resticted 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 1-800-752-6342. 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?"). 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 transfered 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. - - "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. 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 the Allocation Date and maturing on the 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). 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. - - 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. - - 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 1-800-752-6342 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 1-800-752-6342 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 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: - - 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. - - 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; and - 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: - - 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 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: - - 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 Annuity 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. - 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%. 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 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. - - 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 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: - - 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). 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: - - 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 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. - - 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: - - 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. - - 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. - - 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. - - 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. - - 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 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 - - 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. - - 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. - - 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 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. 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. - - 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. 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. - - 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. - - 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: - - 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, 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: - - 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, 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: - - 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 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. - - 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. - 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 the 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 the Annuity. - - 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. - - 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 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. - - 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 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. - - 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 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. - - 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. - - 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. - - 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. - - 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. - - 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 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. - - 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: - - 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 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 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 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. - - 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. - - 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 Pur- chase 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 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. - 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 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 1-800-752-6342. 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. - - 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. 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. - - 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 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: - - 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 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 - Annual Income Amount = $1,750 / ($263,000 - $13,250) - $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 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: - - 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 5 years, the Protected Withdrawal Value on March 1, 2011 would be reduced to $198,750 {$265,000 - ($13,250 - 5)}. If a step-up is elected on March 1, 2011, then the following values would result: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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 - - 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 the Annuity, including any 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 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. - - 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 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 1-800-752-6342. 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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 contract 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 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 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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: - - 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. - - 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. - - 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. - - 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 - - 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 1-800-752-6342. 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: - - 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. - - 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. - - 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. - - 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: - - your Account Value in the variable investment options 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 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, 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 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: - - 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. - - 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: - - 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 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 - - 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) $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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - 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: - - 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 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 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: - - 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 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: - - 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 - - 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 to us. 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 for 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 1-800-752-6342 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(R) 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 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 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(R) 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 AMERICAN SKANDIA STAGECOACH APEX II PROSPECTUS APPENDIX A 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 = 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 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 - - 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 - - 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 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: - - 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 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVAPEXII-PROS (05/2005). -------------------------------------- (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: 1-800-752-6342 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 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 OPTIMUM FOUR(SM) Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes Optimum Four(SM), a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Linsco/Private Ledger, Corp. 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. 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: American Skandia Trust and Evergreen Variable Annuity Trust. 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 79. 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: ====> 1-800-752-6342 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 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. OPTIMUM FOURSM IS A SERVICE MARK OF LINSCO/PRIVATE LEDGER, CORP. Prospectus Dated: May 2, 2005 Statement of Additional Information Dated: May 2, 2005 LPL04 APEX2LPLPROS505 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 ......................................................................... 9 Investment Options ....................................................................... 10 What Are the Investment Objectives and Policies of the Portfolios? ..................... 10 What Are the Fixed Allocations? ........................................................ 13 Fees and Charges ......................................................................... 14 What Are the Contract Fees and Charges? ................................................ 14 What Charges Apply Solely to the Variable Investment Options? .......................... 15 What Fees and Expenses are Incurred by the Portfolios? ................................. 16 What Charges Apply to the Fixed Allocations? ........................................... 16 What Charges Apply if I Choose an Annuity Payment Option? .............................. 16 Exceptions/Reductions to Fees and Charges .............................................. 16 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? ............................................... 18 May I Make Scheduled Payments Directly from My Bank Account? ........................... 18 May I Make Purchase Payments Through a Salary Reduction Program? ....................... 19 Managing Your Account Value .............................................................. 20 How and When Are Purchase Payments Invested? ........................................... 20 How Do I Receive a Loyalty Credit? ..................................................... 20 How Are Loyalty Credits Applied To My Account Value? ................................... 20 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 20 Do You Offer Dollar Cost Averaging? .................................................... 22 Do You Offer Any Automatic Rebalancing Programs? ....................................... 23 Are Any Asset Allocation Programs Available? ........................................... 23 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 23 May I Give My Investment Professional Permission to Manage My Account Value? ........... 24 May I Authorize My Third Party Investment Advisor to Manage My Account? ................ 25 How Do the Fixed Allocations Work? ..................................................... 25 How Do You Determine Rates for Fixed Allocations? ...................................... 26 How Does the Market Value Adjustment Work? ............................................. 27 What Happens When My Guarantee Period Matures? ......................................... 28 Access To Account Value .................................................................. 29 What Types of Distributions Are Available to Me? ....................................... 29 Are There Tax Implications for Distributions? .......................................... 29 Can I Withdraw a Portion of My Annuity? ................................................ 29 How Much Can I Withdraw as a Free Withdrawal? .......................................... 30 Is There a Charge for a Partial Withdrawal? ............................................ 30 Can I Make Periodic Withdrawals from the Annuity During the Accumulation Period? ....... 30 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue Code?.................................................................................. 31 What Are Minimum Distributions and When Would I Need to Make Them? ..................... 31 Can I Surrender My Annuity for Its Value? .............................................. 31 What is a Medically-Related Surrender and How Do I Qualify? ............................ 31 What Types of Annuity Options Are Available? ........................................... 32
(i) Contents - -------------------------------------------------------------------------------- How and When Do I Choose the Annuity Payment Option? ................................... 33 How Are Annuity Payments Calculated? ................................................... 33 Living Benefit Programs .................................................................. 35 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? ........................................................................... 35 Guaranteed Return Option PlusSM (GRO PlusSM) ........................................... 36 Guaranteed Return Option (GRO) ......................................................... 40 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 43 Guaranteed Minimum Income Benefit (GMIB) ............................................... 47 Lifetime Five Income Benefit (Lifetime Five) ........................................... 51 Death Benefit ............................................................................ 57 What Triggers the Payment of a Death Benefit? .......................................... 57 Basic Death Benefit .................................................................... 57 Optional Death Benefits ................................................................ 57 American Skandia's Annuity Rewards ..................................................... 61 Payment of Death Benefits .............................................................. 61 Valuing Your Investment .................................................................. 64 How is My Account Value Determined? .................................................... 64 What is the Surrender Value of My Annuity? ............................................. 64 How and When Do You Value the Sub-Accounts? ............................................ 64 How Do You Value Fixed Allocations? .................................................... 64 When Do You Process and Value Transactions? ............................................ 64 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 65 Tax Considerations ....................................................................... 66 General Information ...................................................................... 73 How Will I Receive Statements and Reports? ............................................. 73 Who is American Skandia? ............................................................... 73 What Are Separate Accounts? ............................................................ 73 What is the Legal Structure of the Underlying Funds? ................................... 75 Who Distributes Annuities Offered by American Skandia? ................................. 76 Incorporation of Certain Documents by Reference ........................................ 77 Financial Statements ................................................................... 77 How to Contact Us ...................................................................... 77 Indemnification ........................................................................ 78 Legal Proceedings ...................................................................... 78 Contents of the Statement of Additional Information .................................... 78 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
(ii) OPTIMUM FOUR 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? - - 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. - - 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 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. - - 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 4, 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 $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 OPTIMUM FOUR 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 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 OPTIMUM FOUR 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 - -------------------------------------------------------------------------------------------------------------- Contingent Deferred Sales Charge* 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 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 Yrs. 5+ 8.5% 8.0% 7.0% 6.0% 0.0%
3 OPTIMUM FOUR 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 - ------------------------------------------- --------------------------------------------------------------------- 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(1) (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS) FEE/CHARGE AMOUNT DEDUCTED Mortality & Expense Risk Charge(2) 1.50% Administration Charge2 0.15% Settlement Service Charge3 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option4 ("Qualified BCO") Total Annual Charges of the Sub-accounts 1.65% per year of the value of each Sub-account (1.40% per year if you 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 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 OPTIMUM FOUR 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/ 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 market net assets of the Sub- 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 of Income Value during 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 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 to a percentage of an initial principal value, regardless of the impact of net assets of the Sub- 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, 1.90%; 1.65% for while allowing you to allocate all or a portion of your Account Value to Qualified BCO certain Sub-accounts. GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) - ------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts over 2.00%; 1.75% for time equal to an initial principal value, regardless of the impact of market Qualified BCO performance on your Account Value. GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** - ------------------------------------------------------------------------------------------------------------ We offer a program that, after a seven-year waiting period, guarantees your 1.65% ability to begin receiving income from your Annuity in the form of annuity PLUS payments based on your total Purchase Payments and an annual increase of 0.50% per year of average 5% on such Purchase Payments adjusted for withdrawals (called the Protected Income Value "Protected Income Value"), regardless of the impact of market performance on your Account Value. LIFETIME FIVE INCOME BENEFIT** - ------------------------------------------------------------------------------------------------------------ We offer a program that guarantees your ability to withdraw amounts equal 2.25% 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. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** - ------------------------------------------------------------------------------------------------------------ We offer an Optional Death Benefit that provides an enhanced level of 1.90% 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.
5 OPTIMUM FOUR PROSPECTUS Summary of Contract Fees and Charges continued
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 net assets of the Sub- equal to the greater of the basic Death Benefit and the accounts Highest Anniversary Value, less 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 net assets of the Sub- the Highest Anniversary Value Death Benefit and a 5% accounts annual increase on 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 protection for your beneficiary(ies) by providing a death benefit net assets of the Sub- equal to the greater of the basic Death Benefit and the accounts Highest Daily Value, less proportional withdrawals. TOTAL ANNUAL OPTIONAL BENEFIT CHARGE* - -------------------------------------------------------------------------------- --------------- HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** We offer an Optional Death Benefit that provides an enhanced level of 1.90% 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. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT** We offer an Optional Death Benefit that provides an enhanced level of 2.15% 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. HIGHEST DAILY VALUE DEATH BENEFIT ("HDV")** We offer an Optional Death Benefit that provides an enhanced level of 2.15% 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. 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. 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 1-800-752-6342. 6 OPTIMUM FOUR 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 EXPENSES1 FEES EXPENSES - ---------------------------------------------------------------------------------------------- AMERICAN SKANDIA TRUST:(2),(3) AST William Blair International Growth 1.00% 0.22% None 1.22% AST LSV International Value4 1.00% 0.37% None 1.37% AST Small-Cap Growth5 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 Value6 0.90% 0.18% None 1.08% AST Goldman Sachs Mid-Cap Growth 1.00% 0.25% None 1.25% AST Neuberger Berman Mid-Cap Value 0.90% 0.15% None 1.05% AST MFS Growth 0.90% 0.20% None 1.10% AST Marsico Capital Growth 0.90% 0.14% None 1.04% AST AllianceBernstein Core Value7 0.75% 0.24% None 0.99% AST Hotchkis & Wiley Large-Cap Value 0.75% 0.19% None 0.94% 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% EVERGREEN VARIABLE ANNUITY TRUST: International Equity 0.42% 0.30% None 0.72% Omega 0.52% 0.16% None 0.68%
(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 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 Goldman Sachs Mid-Cap Growth 1.13% AST Neuberger Berman Mid-Cap Value 1.04% AST MFS Growth 1.07% AST Marsico Capital Growth 1.02% AST Hotchkis & Wiley Large-Cap Value 0.90% 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." 7 OPTIMUM FOUR PROSPECTUS Summary of Contract Fees and Charges continued (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 Sanford Bernstein Core Value Portfolio" to "AST AllianceBernstein Core Value Portfolio." 8 OPTIMUM FOUR 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; and (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 Benefits. 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 THE THE END OF THE APPLICABLE TIME PERIOD: END OF THE APPLICABLE TIME PERIOD: - -------------------------------------- ------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS $1,213 $1,982 $2,265 $4,590 $448 $1,352 $2,265 $4,590 IF YOU DO NOT SURRENDER YOUR ANNUITY: ------------------------------------- 1 YR 1 YR 3 YRS 5 YRS 10 YRS $1,213 $448 $1,352 $2,265 $4,590
9 OPTIMUM FOUR 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 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 1-800-752-6342. 10 OPTIMUM FOUR PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR INTERNATIONAL AST WILLIAM BLAIR INTERNATIONAL GROWTH: seeks long-term capital William Blair & EQUITY appreciation. The Portfolio invests primarily in stocks of large and medium-sized Company, L.L.C. 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): seeks Deutsche Asset EQUITY capital growth. The Portfolio pursues its objective by primarily investing at least Management, Inc. 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. 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(R) 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 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 AST NEUBERGER BERMAN MID-CAP VALUE: seeks capital CAP VALUE growth. Under normal Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net assets Management Inc. 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.
11 OPTIMUM FOUR PROSPECTUS Investment Options continued
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 Company 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 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 ALLIANCEBERNSTEIN CORE VALUE (formerly AST Sanford Bernstein Core Alliance Capital GROWTH 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. LARGE CAP AST HOTCHKIS & Wiley Large-Cap Value: seeks current income and long-term Hotchkis and 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 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. FIXED AST LORD ABBETT BOND-DEBENTURE: seeks high current Lord, Abbett & Co. INCOME income and the opportunity for capital LLC 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. FIXED AST PIMCO TOTAL RETURN BOND: seeks to maximize total Pacific Investment INCOME return consistent with preservation of Management capital and prudent investment management. The Portfolio will Company LLC invest in a diversified portfolio of fixed-income (PIMCO) 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. 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 maturities. The average portfolio duration of the Portfolio generally will vary (PIMCO) within a one- to three-year time frame based on the Sub-advisor's forecast for interest rates. FIXED AST MONEY MARKET: seeks high current income while Wells Capital INCOME maintaining 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.
12 OPTIMUM FOUR PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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 Management securities issued by established, quality, Company, LLC 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.). 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
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. 13 OPTIMUM FOUR 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 charging 14 OPTIMUM FOUR PROSPECTUS 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. 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 31/2% 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 & 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. 15 OPTIMUM FOUR PROSPECTUS Fees and Charges continued 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. 16 OPTIMUM FOUR 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 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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. 17 OPTIMUM FOUR 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. 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 original 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 "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. 18 OPTIMUM FOUR PROSPECTUS 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. 19 OPTIMUM FOUR 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 contract 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 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 20 OPTIMUM FOUR PROSPECTUS may do so to conform to any present or future restriction that is imposed by any portfolio available under this Annuity. 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. 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. 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 performance. 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 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. - - 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 investment 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 21 OPTIMUM FOUR PROSPECTUS Managing Your Account Value continued 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 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 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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. 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 22 OPTIMUM FOUR PROSPECTUS 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). 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 elect 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(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 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 Pro- 23 OPTIMUM FOUR PROSPECTUS Managing Your Account Value continued gram (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(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 of 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 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 * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 24 OPTIMUM FOUR PROSPECTUS 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 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." 25 OPTIMUM FOUR PROSPECTUS Managing Your Account Value continued 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?"). 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. 26 OPTIMUM FOUR PROSPECTUS 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. 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 the Allocation Date and maturing on the 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). 27 OPTIMUM FOUR 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. 28 OPTIMUM FOUR 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. - - 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. - - You can also make withdrawals in excess of the Free Withdrawal amount. The maximum amount 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, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 29 OPTIMUM FOUR 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 period requested), we may postpone the withdrawal and add 30 OPTIMUM FOUR PROSPECTUS 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, 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 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: - - the Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 31 OPTIMUM FOUR PROSPECTUS Access To Account Value continued "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; and - - 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: - - 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 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. 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 32 OPTIMUM FOUR PROSPECTUS 2the 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: - - 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 Annuity 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 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. 33 OPTIMUM FOUR PROSPECTUS Access To Account Value continued 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 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%. 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. 34 OPTIMUM FOUR 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: - - protecting a principal amount from decreases in value due to investment performance as of specified future dates; - - taking withdrawals with a guarantee that you will be able to withdraw not less than a principal amount over time; or - - 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 payments, may be less tax efficient for 35 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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. - - 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 36 OPTIMUM FOUR PROSPECTUS MORE THAN ONCE; HOWEVER, A SUBSEQUENT ELECTION SUPER- SEDES 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 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; 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: - - 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). 37 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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 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. - - 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). 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 38 OPTIMUM FOUR PROSPECTUS 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 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: - - 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 39 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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. - - 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 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. 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 40 OPTIMUM FOUR PROSPECTUS 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 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. - - 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 the variable investment options, 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 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, inter- 41 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued est 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. 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 42 OPTIMUM FOUR PROSPECTUS 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 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. - - 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. 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 43 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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. - - 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, 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, 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: - - 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). 44 OPTIMUM FOUR PROSPECTUS 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, 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: - - 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 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. - - 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 the 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 the Annuity. - - 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 with- 45 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued drawal. 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 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. 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. - - 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 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. 46 OPTIMUM FOUR PROSPECTUS 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 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. - - 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 47 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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. - - 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. - - 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. - - 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; 3.) an initial Protected Income Value of $250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000): 48 OPTIMUM FOUR PROSPECTUS 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 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. 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 49 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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 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. - - 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 the Annuity's basic death benefit or any optional death benefit provision you elected will no longer apply. 50 OPTIMUM FOUR PROSPECTUS 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. 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 1-800-752-6342. 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 the impact of market performance on your Account Value, of 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"). 51 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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. - - 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. 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). 52 OPTIMUM FOUR PROSPECTUS 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 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 53 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued 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: - - 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 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 54 OPTIMUM FOUR PROSPECTUS 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: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. - - 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 55 OPTIMUM FOUR PROSPECTUS Living Benefit Programs continued (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 the Annuity, including any 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 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. - - 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 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 1-800-752-6342. 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. 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. 56 OPTIMUM FOUR 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 57 OPTIMUM FOUR 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. THE ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT IS NOT AVAILABLE IF YOU ELECT THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH BENEFIT. PLEASE SEE APPENDIX D 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 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 58 OPTIMUM FOUR PROSPECTUS 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. 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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. PLEASE SEE APPENDIX D 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 80th 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 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. - - 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. - - 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. 59 OPTIMUM FOUR PROSPECTUS Death Benefit continued - - 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 1-800-752-6342. 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: - - 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. - - 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. - - 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. - - 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 prospec- 60 OPTIMUM FOUR PROSPECTUS tus 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, on the date that the Annuity Rewards Benefit is effective, the Account Value 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. 61 OPTIMUM FOUR 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 62 OPTIMUM FOUR PROSPECTUS Death Benefit continued - - 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 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. - - 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. - - 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: - - the 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 62 OPTIMUM FOUR 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. - - 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 a 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 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. 63 OPTIMUM FOUR 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. 64 OPTIMUM FOUR 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, 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. 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 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 charge, 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). 65 OPTIMUM FOUR 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 66 OPTIMUM FOUR PROSPECTUS the annuitant before the full amount of your purchase payments have been recovered, a tax deduction may be allowed for the unrecovered amount. 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. 67 OPTIMUM FOUR PROSPECTUS Tax Considerations continued 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 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). 68 OPTIMUM FOUR 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 taxbenefits (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 require- 69 OPTIMUM FOUR PROSPECTUS Tax Considerations continued ments 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 "SAR-SEPs" 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 70 OPTIMUM FOUR 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 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 71 OPTIMUM FOUR PROSPECTUS Tax Considerations continued 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) Plans). 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. 72 OPTIMUM FOUR 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 73 OPTIMUM FOUR PROSPECTUS General Information continued 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 managers may cease being employed. We are under no 74 OPTIMUM FOUR PROSPECTUS 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. In addition, the investment adviser, sub-advisor or distributor of the underlying Portfolios may also compensate us by 75 OPTIMUM FOUR PROSPECTUS General Information continued 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 (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 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 for 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. 76 OPTIMUM FOUR 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 1-800-752-6342 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, 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. o sending an email to customerservice@skandia.com or visiting our Internet Website at www.americanskandia.com. o accessing information about your Annuity through our Internet Website at www.americanskandia.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, 77 OPTIMUM FOUR PROSPECTUS General Information continued 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 78 This page intentionally left blank APPENDIX A OPTIMUM FOUR 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 OPTIMUM FOUR PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B
Year Ended December 31, ------------------------------------------------ Sub-account 2004 2003 2002 - ---------------------------------------------- ------------- ------------ ----------- 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 -- -- 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 -- --
A-2 APPENDIX A OPTIMUM FOUR PROSPECTUS
Year Ended December 31, ------------------------------------------------ Sub-account 2004 2003 2002 - --------------------------------------------- ------------ ------------ ------------ AST STATE STREET RESEARCH SMALL-CAP GROWTH (1) 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-3 APPENDIX A OPTIMUM FOUR PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 9.30 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-4 APPENDIX A OPTIMUM FOUR PROSPECTUS
Year Ended December 31, ------------------------------------------------ Sub-account 2004 2003 2002 - ------------------------------------------ ------------- ------------ --------- 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 -- -- AST NEUBERGER BERMAN MID-CAP VALUE (1994) 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-5 APPENDIX A OPTIMUM FOUR 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-6 APPENDIX A OPTIMUM FOUR PROSPECTUS
YEAR ENDED DECEMBER 31, ------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------ ------------- ------------- ------------- AST SANFORD BERNSTEIN CORE VALUE (2)(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 -- -- 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 -- --
A-7 APPENDIX A OPTIMUM FOUR 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-8 APPENDIX A OPTIMUM FOUR 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-9 APPENDIX A OPTIMUM FOUR PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - -------------------------------------------- ----------- ----------- ----------- 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 -- -- 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 -- --
1. Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2. Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. A-10 APPENDIX B OPTIMUM FOUR 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, 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 OPTIMUM FOUR 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 OPTIMUM FOUR 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 OPTIMUM FOUR 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 OPTIMUM FOUR 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 OPTIMUM FOUR 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") 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 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: - - 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 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS ASAPEXII-PROS (05/2005). -------------------------------------- (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: 1-800-766-4530 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 Rd. Dresher, PA 19025 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA XTRA CREDIT(SM) SIX Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes American Skandia XTra Credit(SM) SIX, 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. 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. 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: American Skandia Trust, Gartmore Variable Investment Trust, Wells Fargo Variable 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: - -------------------------------------- - -> 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 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. Prospectus Dated: May 2, 2005 Statement of Additional Information Dated: May 2, 2005 XT6PROS505 ASXT II-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 ......................................................................... 12 Investment Options ....................................................................... 13 What Are the Investment Objectives and Policies of the Portfolios? ..................... 13 Fees and Charges ......................................................................... 28 What Are the Contract Fees and Charges? ................................................ 28 What Charges Apply Solely to the Variable Investment Options? .......................... 29 What Fees and Expenses Are Incurred by the Portfolios? ................................. 30 What Charges Apply to the Fixed Allocations? ........................................... 30 What Charges Apply if I Choose an Annuity Payment Option? .............................. 30 Exceptions/Reductions to Fees and Charges .............................................. 30 Purchasing Your Annuity .................................................................. 31 What Are our Requirements for Purchasing the Annuity? .................................. 31 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 How Do I Receive Credits? .............................................................. 35 How Are Credits Applied to my Account Value? ........................................... 35 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 37 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? .... 40 May I Give my Investment Professional Permission to Manage my Account Value? ........... 41 May I Authorize my Third Party Investment Advisor to Manage my Account? ................ 41 How Do the Fixed Allocations Work? ..................................................... 42 How Do You Determine Rates for Fixed Allocations? ...................................... 43 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? .......................................... 45 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? 46 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 .............................................................. 51 Do You Offer Programs Designed to Provide Investment Protection for Owners While They Are Alive? .................................................................. 51 Guaranteed Return Option Plus(SM) (GRO Plus(SM)) ................................... 52 Guaranteed Return Option (GRO) ..................................................... 57 Guaranteed Minimum Withdrawal Benefit (GMWB) ....................................... 60 Guaranteed Minimum Income Benefit (GMIB) ........................................... 64 LifeTime Five Income Benefit (LifeTime Five) ....................................... 69 Death Benefit ........................................................................ 74 What Triggers the Payment of a Death Benefit? ...................................... 74 Basic Death Benefit ................................................................ 74 Optional Death Benefits ............................................................ 74 American Skandia's Annuity Rewards ................................................. 78 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? ...... 84 Tax Considerations ................................................................... 85 General Information .................................................................. 92 How Will I Receive Statements and Reports? ......................................... 92 Who is American Skandia? ........................................................... 92 What Are Separate Accounts? ........................................................ 93 What Is the Legal Structure of the Underlying Funds? ............................... 94 Who Distributes Annuities Offered by American Skandia? ............................. 95 Incorporation of Certain Documents by Reference .................................... 95 Financial Statements ............................................................... 96 How to Contact Us .................................................................. 96 Indemnification .................................................................... 96 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 -- Plus40(TM) Optional Life Insurance Rider ............................... C-1 Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits ..................................................................... D-1 Appendix E -- Additional Information on Asset Allocation Programs .................... E-1
(ii) AMERICAN SKANDIA XTRA CREDIT(SM) 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. - - 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. - - 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. - - 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 XTRA CREDIT(SM) SIX PROSPECTUS Introduction continued 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 phases -- 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 a Credit which we add to your Annuity with each Purchase Payment we receive in Annuity Years one (1) through six (6). - - 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. - - 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 XTRA CREDIT(SM) 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 XTRA CREDIT(SM) 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 - -------------------------------------------------------------------------------------------------------------- 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. Contingent Deferred Sales Charge* $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.) 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 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 XTRA CREDIT(SM) 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 Annual Maintenance Fee or upon surrender) - ------------------------------------------------------------------------------------------------------------------- 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 - ------------------------------------------------------------------------------------------------------------------- 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 Total Annual Charges of the Sub-accounts (1.40% per year if you 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 XTRA CREDIT(SM) 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 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/ 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 0.25% of average daily 1.90% in Annuity Years future date, while allowing you to allocate all or a portion of net assets of the 1-10; 0.90% in Annuity your Account Value to 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 0.35% of average daily 2.00% in Annuity Years amounts equal to an initial principal value, regardless of the net assets of the 1-10; 1.00% in Annuity impact of market performance 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, 0.50% per year of the 1.65% in Annuity Years guarantees your ability to begin receiving income from your average Protected 1-10; 0.65% in Annuity Annuity in the form of annuity payments based on your total Income Value during Years 11 and later PLUS Purchase Payments (and any Credits applied to such Purchase each year; deducted 0.50% per year of Payments) and an annual increase of 5% on such Purchase Payments annually in arrears each average Protected Income adjusted for withdrawals (called the "Protected Income Value"), Annuity Year Value regardless of the impact of market performance on your Account Value. LIFETIME FIVE INCOME BENEFIT** We offer a program that guarantees your ability to withdraw 0.60% of average daily 2.25% in Annuity Years amounts equal to a percentage of an initial principal value, net assets of the 1-10; 1.25% in Annuity regardless of the impact of market performance on your Account Sub-accounts Years 11 and later Value, subject to our program rules regarding the timing and amount of withdrawals. ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT** We offer an Optional Death Benefit that provides an enhanced level 0.25% of average daily 1.90% in Annuity Years of protection for your beneficiary(ies) by providing amounts in net assets of the 1-10; 0.90% in Annuity addition to the basic Death Benefit that can be used to offset Sub-accounts Years 11 and later federal and state taxes payable on any taxable gains in your Annuity at the time of your death.
6 AMERICAN SKANDIA XTRA CREDIT(SM) 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 0.25% of average daily 1.90% in Annuity Years of protection for your beneficiary(ies) by providing a death net assets of the 1-10; 0.90% in Annuity benefit equal to the greater of the basic Death Benefit and the Sub-accounts Years 11 and later Highest Anniversary Value, less proportional withdrawals. COMBINATION 5% ROLL-UP AND HAV DEATH BENEFIT ** We offer an Optional Death Benefit that provides an enhanced level 0.50% of average daily 2.15% in Annuity Years of protection for your beneficiary(ies) by providing the greater net assets of the 1-10; 1.15% in Annuity of the Highest Anniversary Value Death Benefit and a 5% annual Sub-accounts Years 11 and later increase on Purchase 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 0.50% of average daily 2.15% in Annuity Years of protection for your beneficiary(ies) by providing a death net assets of the 1-10; 1.15% in Annuity benefit equal to the greater of the basic Death Benefit and the Sub-accounts Years 11 and later Highest Daily Value, less 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 1-800-752-6342. 7 AMERICAN SKANDIA XTRA CREDIT(SM) 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 EXPENSES1 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 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% Wells Fargo Variable Trust Advantage:(12) - ----------------------------------------------------------------------------------------------------- Advantage Equity Income 0.55% 0.23% 0.25% 1.03%
8 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES - ------------------------------------------------------------------------------------------------------------ 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% PROFUND VP: (15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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% 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%
9 AMERICAN SKANDIA XTRA CREDIT(SM) 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: (15) cont. 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: (16, 17) First Trust(R) 10 Uncommon Values 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(R) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(R) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(18) 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. 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%
10 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 Global Asset 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 Equity Income 1.00%
b: In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Income Advantage Equity Income
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: 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. 16: 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: 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[Reg(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%
18: 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 XTRA CREDIT(SM) 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 assets 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 is 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 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 OR ANNUITIZE YOUR ANNUITY (YOU MAY NOT ANNUITIZE IN THE IF YOU DO NOT SURRENDER TO THE END OF THE APPLICABLE TIME PERIOD: FIRST 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
12 AMERICAN SKANDIA XTRA CREDIT(SM) 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 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 1-800-752-6342. 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 Annuity, 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 bank drafting, 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. 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. Either of the above 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 each of the above Sub-accounts to all Owners that owned the Annuity prior to the respective close dates. 13 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Investment Options
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 William Blair & EQUITY appreciation. The Portfolio invests primarily in stocks of large and medium-sized Company, L.L.C. 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): seeks Deutsche Asset EQUITY capital growth. The Portfolio pursues its objective by primarily investing at least Management, Inc. 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(R) 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 GOLDMAN SACHS SMALL-CAP VALUE: seeks long-term capital appreciation. Goldman Sachs VALUE The Portfolio will seek its objective through investments primarily in equity Asset Management, securities that are believed to be undervalued in the marketplace. The Portfolio L.P. primarily seeks companies that are small-sized, based on the value of their outstanding stock.
14 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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 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(R) 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 Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net assets Management Inc. 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 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.
15 AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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 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. 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 Company securities and depository 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, a significant investment consideration and any income realized on the Portfolio's L.P. 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(R) 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(R) 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.
16 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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. 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 and Value growth of income, as well as capital appreciation. The Portfolio invests, under Wiley Capital 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 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 T. Rowe Price ALLOCATION/ by 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. 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR FIXED INCOME AST GOLDMAN SACHS HIGH YIELD: seeks a high level of current income Goldman Sachs and may also consider the potential for capital appreciation. The Portfolio Asset Management, invests, under normal circumstances, at least 80% of its net assets plus any L.P. 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. 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 its LLC 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 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 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 maturities. The average portfolio duration of the Portfolio generally will vary (PIMCO) 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 normal market Trust/Gartmore conditions, investments are maintained in at least six countries at all times and Global Partners no more than 35% of total assets in any single one of them. 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.
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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(R) 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 normally Inc. 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 (Effective July 1, 2005, AIM V.I. Health Sciences Fund will be Inc. renamed AIM V.I. Global Health Care Fund) (formerly an INVESCO 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 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(R) 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
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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 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. 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 Non-Cyclical): seeks daily ProFund Advisors investment results, before fees and expenses, that correspond to the daily LLC 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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 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 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. SPECIALTY PROFUND VP INTERNET: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones Composite Internet LLC 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 ProFund Advisors and expenses, that correspond to the daily performance of the Dow Jones U.S. LLC 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 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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(R) Index. LLC 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(R) 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(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 investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the S&P LLC 500(R) 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(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. 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(R). "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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR SPECIALTY PROFUND VP SHORT OTC: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to the inverse (opposite) of the daily performance LLC 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, 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 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(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. "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 and ProFund Advisors expenses, that correspond to the daily performance of the S&P MidCap 400/ LLC Barra Value Index(R). The S&P MidCap400/Barra Value Index(R) 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(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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 ProFund Advisors and expenses, that correspond to twice (200%) the daily performance of the S&P LLC 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(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. 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(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) that have comparatively low price-to-book ratios as determined before each semiannual rebalance date.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) 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 ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the Russell LLC 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 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(R). 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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(R). 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(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. SPECIALTY PROFUND VP SHORT MID-CAP: seeks daily investment results, before fees and ProFund Advisors expense that correspond to the inverse (opposite) of the daily performance of the LLC 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. 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(R) 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.
25 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR 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(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) 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. 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(R) 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) 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(R) 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 L.P. common stocks that Value Line(R) gives a #1 ranking for Timeliness(R) 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.
26 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR SPECIALTY NASDAQ(R) 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 L.P. 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. INTERNATIONAL THE PRUDENTIAL SERIES FUND, INC. -- SP William Blair International Prudential EQUITY Growth: Seeks long-term capital appreciation. The Portfolio invests primarily in Investments LLC/ stocks of large and medium-sized companies located in countries included in the William Blair & Morgan Stanley Capital International All Country World Ex-U.S. Index. Under Company, LLC 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(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. 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 1-800-752-6342 to determine availability of Fixed Allocations in your state and for your annuity product. 27 AMERICAN SKANDIA XTRA CREDIT(SM) 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 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 the 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 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 28 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 a 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. 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 29 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Fees and Charges continued 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 section 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 elect 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. 30 AMERICAN SKANDIA XTRA CREDIT(SM) 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 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 - - 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. - - 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. - - 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. - - 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 31 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Purchasing Your Annuity continued 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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 AMERICAN SKANDIA XTRA CREDIT(SM) 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: - - 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. 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 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 "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 33 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Annuity continued 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. 34 AMERICAN SKANDIA XTRA CREDIT(SM) 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%; 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 35 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Account Value continued 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 Credits applied to your Account Value can be recovered by American Skandia under certain circumstances: - - any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be recovered; - - 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; and - - 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 36 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 ($600). 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. 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 37 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Account Value continued - -------------------------------------------------------------------------------- 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. DO YOU OFFER DOLLAR COST AVERAGING? Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar Cost Averaging allows you to systematically 38 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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. 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 39 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Account Value continued 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 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. 40 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS The Guaranteed Return Option Plus (GRO Plus) guaran- tees 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. If you agree (or generally, for annuities issued prior to May 1, 2005, unless you told us otherwise), 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 41 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Account Value continued 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. 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 1-800-752-6342. 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?"). 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 42 AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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. - - "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. 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). 43 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Managing Your Account Value continued 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 the Allocation Date and maturing on the 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 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. 44 AMERICAN SKANDIA XTRA CREDIT(SM) 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. - - 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. - - 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, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 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 45 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Access To Account Value continued 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 $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 46 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS age 59 1/2 if you elect to receive distributions as a series of "sub- stantially 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 591/2 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, 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 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: - - 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; 47 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Access To Account Value continued - - 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; and - - 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: - - 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 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. 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 XTRA CREDIT(SM) SIX 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 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 contract value would be taxable in that year. By choosing to continue to defer after the default date, you will assume the risk that your contract 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 offer three different types of variable annuity payment options. The first annuity payment will be calculated based 49 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Access To Account Value continued 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 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%. 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. 50 AMERICAN SKANDIA XTRA CREDIT(SM) 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: - - 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; or - - 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 not affect your ability to receive guaranteed 51 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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. 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. - - 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 52 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 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); 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: - - 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); 53 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued - - 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 - (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 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. - - 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). 54 AMERICAN SKANDIA XTRA CREDIT(SM) 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 Guarantee 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, any Account Value in the Fixed Allocations will be transferred to the variable investment options pro rata based on the Account 55 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- 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. 56 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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. 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 - - 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. - - 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 57 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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 the variable investment options, 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 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. 58 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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. 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 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. - - 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. - - 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. - - 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. - - 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 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. 59 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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 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. 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. 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. 60 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS We offer a program that guarantees your ability to with- draw 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 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. - - 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. - - 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 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 61 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- 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. 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). 62 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 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. - - 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 the 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 the Annuity. - - 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. - - 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 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. 63 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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 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. - - 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 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 pro- 64 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS gram 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), 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 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. - - 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. - - 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. - - 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. - - 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. - - 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 65 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued - -------------------------------------------------------------------------------- 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. 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 66 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS ----------------------------------------------------------------------------- Income Value. Once you have completed the waiting period, you will have a 30-day period each year, prior to the contract 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. 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. 67 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued - - 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. - 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 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. - 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 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. 68 AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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 1-800-752-6342. 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. - - 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. - - 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 plus associated Credits. 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 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 69 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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. 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 70 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS - ------------------------------------------------------------------------------- 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: 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 71 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Living Benefit Programs continued 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 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: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. - - 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 72 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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 the Annuity, including any 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 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. - - 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 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 1-800-752-6342. 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. 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. 73 AMERICAN SKANDIA XTRA CREDIT(SM) 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 74 AMERICAN SKANDIA XTRA CREDIT(SM) 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 SEE APPENDIX D 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 THE 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 THE HIGHEST ANNIVERSARY VALUE" OR THE "HIGHEST DAILY VALUE" DEATH BENEFIT. PLEASE SEE APPENDIX D 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 Highest Anniversary Value Death Benefit is calculated. 75 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Death Benefit continued 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. 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: - - 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 - - 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) made after the Death Benefit Target Date; MINUS - - the sum of all withdrawals which reduce the 5% Roll-up proportionally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ee 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 80th 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 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. - - 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. - - 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. - - 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 1-800-752-6342. 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. 77 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Death Benefit continued 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, GUARANTEE RETURN OPTION PLUS, THE "COMBINATION 5% ROLL-UP AND HIGHEST ANNIVERSARY VALUE" DEATH BENEFIT, OR THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT. PLEASE SEE APPENDIX D FOR A DESCRIPTION OF THE GUARANTEED MINIMUM DEATH BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. 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 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. - - 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. - - 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). - - 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. 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 78 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS an enhancement to their current Death Benefit so their Benefi- ciaries 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: - - your Account Value in the variable investment options 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 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: - - 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 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. * "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 XTRA CREDIT(SM) SIX PROSPECTUS Death Benefit continued - -------------------------------------------------------------------------------- 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. 80 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Upon election of this Qualified Beneficiary Continuation option: - - the 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 a 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 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 XTRA CREDIT(SM) 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 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 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. 82 AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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: - - 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 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. 83 AMERICAN SKANDIA XTRA CREDIT(SM) 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 charge 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 XTRA CREDIT(SM) 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. 85 AMERICAN SKANDIA XTRA CREDIT(SM) 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: - - 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 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. - - 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 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, 86 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS - ------------------------------------------------------------------------------- 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). 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) 87 AMERICAN SKANDIA XTRA CREDIT(SM) 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 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: - - 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 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 - - 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 require- 88 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS ments 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) $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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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 "SAR-SEPs" 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: - - 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 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 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: - - Your attainment of age 59 1/2; - - Your severance of employment; - - Your death; - - Your total and permanent disability; or 89 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Tax Considerations continued - - 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: - - 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 - - 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 90 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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. 91 AMERICAN SKANDIA XTRA CREDIT(SM) 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 92 AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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 addi- 93 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS General Information continued tional 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 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 many 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 94 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS - -------------------------------------------------------------------------------- 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 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 6.0%. 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 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 for these arrangements is provided in the 95 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS General Information continued - -------------------------------------------------------------------------------- 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. 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 1-800-752-6342 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, 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. 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 96 AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS - -------------------------------------------------------------------------------- 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 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 XTRA CREDIT(SM) 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 XTRA CREDIT(SM) 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-2 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) 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-3 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) 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 (1) 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-4 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) 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 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 GOLDMAN SACHS SMALL-CAP VALUE (1997) WITH NO OPTIONAL BENEFITS Unit Price $ 15.19 $ 12.85 9.26 Number of Units 1,541,896 1,504,296 1,492,775 With any one of GRO Plus, EBP or HAV Unit Price $ 16.47 $ 13.97 10.09 Number of Units 222,905 102,500 624 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 $ 19.58 $ 16.67 -- Number of Units 61,521 73,852 -- 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 XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - -------------------------------- ---------------- --------------- --------------- 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 -- -- 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 -- --
A-6 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------- --------------- --------------- --------------- 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 -- -- 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 -- --
A-7 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------ ---------------- --------------- --------------- 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 -- -- 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 -- --
A-8 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------- --------------- --------------- --------------- 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 -- -- 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 -- --
A-9 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ----------------------------- --------------- --------------- --------------- AST ALLIANCE GROWTH (2) (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 -- -- 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 -- --
A-10 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - --------------------------------------------- ---------------- --------------- --------------- 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 -- -- 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 -- --
A-11 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ----------------------------------------------- --------------- --------------- ------------- 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 -- -- AST ALLIANCE/BERNSTEIN GROWTH + VALUE (3) (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 -- --
A-12 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------ --------------- --------------- --------------- AST SANFORD BERNSTEIN CORE VALUE (4) (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 -- -- 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 -- --
A-13 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------------- --------------- --------------- --------------- AST SANFORD BERNSTEIN MANAGED INDEX 500 (5) (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 -- -- 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 -- --
A-14 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ---------------------------------------- ---------------- --------------- --------------- AST ALLIANCE GROWTH AND INCOME (6) (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 -- -- 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 -- --
A-15 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ----------------------------------------------- --------------- --------------- --------------- AST DEAM GLOBAL ALLOCATION (7) (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 -- -- 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 -- --
A-16 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------------------ --------------- --------------- --------------- 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 -- -- 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 -- --
A-17 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - --------------------------------------- ---------------- --------------- --------------- 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 -- -- 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 -- --
A-18 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - --------------------------------------- ---------------- --------------- --------------- 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 -- -- 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 -- --
A-19 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------ ---------------- --------------- --------------- AST MONEY MARKET (1992) WITH NO OPTIONAL B ENEFITS 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 -- -- 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 -- --
A-20 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ----------------------------------------------------- ------------- ------------- ------------- Wells Fargo Variable Trust -- EQUITY INCOME (8) (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 Price $ 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 Value $ 11.61 -- -- Number of Units 13 -- -- 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-21 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-22 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-23 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ---------------------------------------- ------------- ------------- ------------- Evergreen VA -- SPECIAL EQUITY (9) (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-24 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-25 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-26 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-27 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-28 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-29 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-30 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-31 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-32 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-33 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-34 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-35 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-36 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-37 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-38 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-39 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 -- ULTRA SMALL-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-40 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-41 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------- SUB-ACCOUNT 2004 2003 2002 - ------------------------------- ------- ------ ------ 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 -- -- -- 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 -- LARGE-CAP VALUE 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 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-42 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-43 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------- SUB-ACCOUNT 2004 2003 2002 - ---------------------------------------- ---------- --------- ------ FIRST TRUST(R) 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 (10) 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-44 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
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-45 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-46 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS
YEAR ENDED DECEMBER 31, ----------------------------- SUB-ACCOUNT 2004 2003 2002 - --------------------------------------- ---------- ---- ---- FIRST TRUST VALUE LINE(R) 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-47 APPENDIX A AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued 1. Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2. Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 3. Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 4. Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 5. Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 6. Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 7. Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 8. 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. 9. Effective April 15, 2005 the name of the Evergreen VA - Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 10. 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-48 APPENDIX B AMERICAN SKANDIA XTRA CREDIT(SM) 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 = Value of Fixed Allocations minus proportional withdrawals (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 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 XTRA CREDIT(SM) 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. 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 B-2 APPENDIX B AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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 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 XTRA CREDIT(SM) SIX 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 + $15,0000) 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 XTRA CREDIT(SM) 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 $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 XTRA CREDIT(SM) SIX 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 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 - 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. - 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). C-1 APPENDIX C AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued - If the age of any person covered under the Plus40(TM) rider is misstated, we will adjust any coverage under the Rider to con- form 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 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. - 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-2 APPENDIX C AMERICAN SKANDIA XTRA CREDIT(SM) SIX 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-3 APPENDIX C AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued 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-4 APPENDIX D AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits 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. D-1 APPENDIX D AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued KEY TERMS USED WITH THE GUARANTEED MINIMUM DEATH BENEFIT - - 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. - - 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". - - 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. D-2 APPENDIX D AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS 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. D-3 AMERICAN SKADIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued 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 E AMERICAN SKANDIA XTRA CREDIT(SM) SIX PROSPECTUS Appendix E -- 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") 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 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: - - 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. E-1 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 ASXT II-SIX--PROS (05/2005). _______________________________________ (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: 1-800-752-6342 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 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 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. 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 CreditSM 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 Statement of Additional Information Dated: May 2, 2005 WFXT6PR505 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
(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. - - 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. - - 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. - - 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 INTRODUCTION CONTINUED AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS 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 phases -- 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 a Credit which we add to your Annuity with each Purchase Payment we receive in Annuity Years one (1) through six (6). - - 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. - - 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/ 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 greater of the basic Death Benefit and the Highest Anniversary Value, less Sub-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 Anniversary Value Death Benefit and a 5% annual increase on Purchase Sub-accounts 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 protection for your beneficiary(ies) by providing a death benefit equal to net assets of the the greater of the basic Death Benefit and the Highest Daily Value, less Sub-accounts proportional withdrawals. - --------------------------------------------------------------------------------------------------------------------- TOTAL ANNUAL OPTIONAL BENEFIT CHARGE* - ------------------------------------------------------------------------------------------ ------------------------ HIGHEST ANNIVERSARY VALUE DEATH BENEFIT ("HAV")** - -------------------------------------------------------------------------------------------------------------------- We offer an Optional Death Benefit that provides an enhanced level of 1.90% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to the 1-10; 0.90% in Annuity greater of the basic Death Benefit and the Highest Anniversary Value, less 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 2.15% in Annuity Years protection for your beneficiary(ies) by providing the greater of the Highest 1-10; 1.15% in Annuity Anniversary Value Death Benefit and a 5% annual increase on Purchase 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 2.15% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to 1-10; 1.15% in Annuity the greater of the basic Death Benefit and the Highest Daily Value, less 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 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%
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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% PROFUND VP: (15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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: (15) 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: (16, 17) First Trust(R) (10) Uncommon Values 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(R) Target (24) 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target (15) 0.60% 1.75% 0.25% 2.60% Value Line(R) Target (25) 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend (18) 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 PORTFO- LIO OPERATING EXPENSES AFTER PORTFOLIO NAME 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) 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. (16) 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. (17) 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 PORTFO- LIO OPERATING EXPENSES AFTER PORTFOLIO NAME 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%
(18) 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: (you may not annuitize in the IF YOU SURRENDER YOUR ANNUITY AT first THE END OF THE APPLICABLE TIME PERIOD: three (3) Annuity Years): - -------------------------------------------------------------------- ---------------------------------- 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 IF YOU DO NOT SURRENDER YOUR ANNUITY: ------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS $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 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 1-800-680-6920. 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 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): Deutsche Asset EQUITY seeks capital growth. The Portfolio pursues its objective by primarily Management, Inc. 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(R) 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(R) 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. 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. MID CAP VALUE AST NEUBERGER BERMAN MID-CAP VALUE: seeks capital growth. Under Neuberger Berman 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 pursues GAMCO Investors, its objective by investing primarily in readily marketable equity securities Inc. 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 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(R) 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(R) 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 and 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 assets plus Management, LLC 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.
18 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS
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 Goldman Sachs and may 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 the Lord, Abbett & Co. opportunity for capital appreciation to produce a high total return. To LLC 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 consistent Pacific Investment with preservation of capital and prudent investment management. The Management Portfolio will invest in a diversified portfolio of fixed-income securities Company LLC of varying maturities. The average portfolio duration of the Portfolio (PIMCO) 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 of fixed- Company LLC income securities of varying maturities. The average portfolio duration of (PIMCO) 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 Trust/Gartmore normal market conditions, investments are maintained in at least six Global Partners 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.
20 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS
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(R) 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 issued Management 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(R) 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 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 ProFund Advisors expenses, that correspond to the daily performance of the Nikkei 225 LLC 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.
22 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS
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 LLC Jones Precious Metals Index. The Dow Jones Precious Metals Index measures the performance of the precious metals mining industry.
23 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS INVESTMENT OPTIONS CONTINUED
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(R) 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(R) 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(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.
24 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS
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(R) 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(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. SPECIALTY PROFUND VP OTC: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the NASDAQ-100 LLC Index(R). "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(R). 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(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 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(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. "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(R). The S&P MidCap400/Barra Value Index(R) 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(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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(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(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. 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(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) 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(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.
26
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(R). 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(R). 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(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.
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(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. 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(R) 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 of L.P. 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(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) 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(R) 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) 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(R) TARGET 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing in L.P. 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. SPECIALTY NASDAQ(R) 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(R) 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 located in William Blair & countries included in the Morgan Stanley Capital International All Country Company, LLC 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(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)", "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(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. 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 - - 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. - - 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. - - 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. - - 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." - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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 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 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: - - any Credits applied to your Account Value on Purchase Payments made within the 12 months before the date of death will be recovered. - - 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. - - 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 - - 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. 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 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 program to last. This determines the duration of the Guarantee 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 1-800-752-6342. 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?"). 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. - - "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. 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). 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: - - 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 the Allocation Date and maturing on the 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 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. - - 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. - - 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: - - 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; and - - 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: - - 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 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: - - 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 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. - 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%. 53 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS ACCESS TO ACCOUNT VALUE CONTINUED - 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: - - 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; or - - 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 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. 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. - - 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 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: - - 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). 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: - - 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 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. - - 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: - - 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. - - 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. - - 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. - - 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. - - 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 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 - - 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. - - 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. - - 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. - - 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. - - 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 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. - - 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 Payment). - - 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: - - 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, 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: - - 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, 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: - - 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 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. - - 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. - - 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 the 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 the Annuity. - - 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. - - 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 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. - - 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 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. - - 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. - - 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. - - 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. - - 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. - - 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. - - 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. - - 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 - - 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 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: - - 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 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. - - 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 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. - - 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 - - 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 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. - - 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 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 1-800-752-6342. 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. - 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. - 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 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. - 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 (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: - 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 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: 74 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS - 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 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: - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - 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 - - 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 1-800-752-6342. 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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: - - 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 - - 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) made after the Death Benefit Target Date; MINUS - - 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 CONTRACT 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 80th 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 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 1-800-752-6342. - -------------------------------------------------------------------------------- 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: - 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. - 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. - 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). - 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: - - your Account Value in the variable investment options 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 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. * "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. 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 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 Annu- 83 AMERICAN SKANDIA STAGECOACH XTRA CREDIT SIX PROSPECTUS Death Benefit continued ity 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 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: - - 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 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 charge 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: - - 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. - - 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: - - 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 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 - - 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. 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: - - 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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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: - - 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 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 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: - - 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 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: - - 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 - - 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 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. 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 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 for 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 -- Growth3 (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 Growth4 (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 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 9.30 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 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(R) 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(R) 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 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 - - 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 - - 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 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: - - 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. C-1 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 WFVXT-SIX-PROS (05/2005). -------------------------------------- (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 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA ADVISOR PLAN(SM) III Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes American Skandia Advisor Plan(SM) III, 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. 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. 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: American Skandia Trust, Gartmore Variable Investment Trust, Wells Fargo Variable 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 93. 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: - - 1-800-752-6342 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 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 ADVISOR PLAN(SM) IS A SERVICE MARK OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA. Prospectus Dated: May 2, 2005 Statement of Additional Information Dated: May 2, 2005 ASAP3PROS505 ASIIIPROS 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? ........................................................ 2 Glossary of Terms ........................................................................ 3 Summary of Contract Fees and Charges ..................................................... 4 Expense Examples ......................................................................... 12 Investment Options ....................................................................... 13 What are the Investment Objectives and Policies of the Portfolios? ..................... 13 What are the Fixed Allocations? ........................................................ 27 Fees and Charges ......................................................................... 28 What are the Contract Fees and Charges? ................................................ 28 What Charges Apply Solely to the Variable Investment Options? .......................... 29 What Fees and Expenses are Incurred by the Portfolios? ................................. 30 What Charges Apply to the Fixed Allocations? ........................................... 30 What Charges Apply if I Choose an Annuity Payment Option? .............................. 30 Exceptions/Reductions to Fees and Charges .............................................. 30 Purchasing Your Annuity .................................................................. 31 What are Our Requirements for Purchasing the Annuity? .................................. 31 Managing Your Annuity .................................................................... 32 May I Change the Owner, Annuitant and Beneficiary Designations? ........................ 32 May I Return the Annuity if I Change My Mind? .......................................... 32 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? ....................... 33 Managing Your Account Value .............................................................. 34 How and When are Purchase Payments Invested? ........................................... 34 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 34 Do You Offer Dollar Cost Averaging? .................................................... 36 Do You Offer Any Automatic Rebalancing Programs? ....................................... 36 Are Any Asset Allocation Programs Available? ........................................... 36 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 37 May I Give My Investment Professional Permission to Manage My Account Value? ........... 38 May I Authorize My Third Party Investment Advisor to Manage My Account? ................ 38 How Do the Fixed Allocations Work? ..................................................... 39 How Do You Determine Rates for Fixed Allocations? ...................................... 40 How Does the Market Value Adjustment Work? ............................................. 40 What Happens When My Guarantee Period Matures? ......................................... 41 Access To Account Value .................................................................. 42 What Types of Distributions are Available to Me? ....................................... 42 Are There Tax Implications for Distributions? .......................................... 42 Can I Withdraw a Portion of My Annuity? ................................................ 42 How Much Can I Withdraw as a Free Withdrawal? .......................................... 43 Is There a Charge for a Partial Withdrawal? ............................................ 43 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 44 Code? What are Minimum Distributions and When Would I Need to Make Them? ..................... 44 Can I Surrender My Annuity for Its Value? .............................................. 44 What is a Medically-Related Surrender and How Do I Qualify? ............................ 44 What Types of Annuity Options are Available? ........................................... 45 How and When Do I Choose the Annuity Payment Option? ................................... 46
(i) Contents - -------------------------------------------------------------------------------- How are Annuity Payments Calculated? ............................................... 46 Living Benefit Programs .............................................................. 48 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? .................................................................. 48 Guaranteed Return Option PlusSM (GRO PlusSM) ....................................... 49 Guaranteed Return Option (GRO) ..................................................... 54 Guaranteed Minimum Withdrawal Benefit (GMWB) ....................................... 57 Guaranteed Minimum Income Benefit (GMIB) ........................................... 61 Lifetime Five Income Benefit (Lifetime Five) ....................................... 65 Death Benefit ........................................................................ 71 What Triggers the Payment of a Death Benefit? ...................................... 71 Basic Death Benefit ................................................................ 71 Optional Death Benefits ............................................................ 71 American Skandia's Annuity Rewards ................................................. 75 Payment of Death Benefits .......................................................... 75 Valuing Your Investment .............................................................. 78 How is My Account Value Determined? ................................................ 78 What is the Surrender Value of My Annuity? ......................................... 78 How and When Do You Value the Sub-Accounts? ........................................ 78 How Do You Value Fixed Allocations? ................................................ 78 When Do You Process and Value Transactions? ........................................ 78 What Happens to My Units When There is a Change in Daily Asset-Based Charges? ...... 79 Tax Considerations ................................................................... 81 General Information .................................................................. 88 How Will I Receive Statements and Reports? ......................................... 88 Who is American Skandia? ........................................................... 88 What are Separate Accounts? ........................................................ 89 What is the Legal Structure of the Underlying Funds? ............................... 90 Who Distributes Annuities Offered by American Skandia? ............................. 91 Incorporation of Certain Documents by Reference .................................... 92 Financial Statements ............................................................... 92 How to Contact Us .................................................................. 92 Indemnification .................................................................... 93 Legal Proceedings .................................................................. 93 Contents of the Statement of Additional Information ................................ 93 Appendix A -- Condensed Financial Information About Separate Account B ............... A-1 Appendix B -- Calculation of Previously Offered Optional Death Benefits .............. B-1 Appendix C -- Plus40TM Optional Life Insurance Rider ................................. C-1 Appendix D -- Additional Information on Asset Allocation Programs .................... D-1
(ii) AMERICAN SKANDIA ADVISOR PLAN III 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? - - 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. 1 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Introduction continued 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. 2 AMERICAN SKANDIA ADVISOR PLAN III 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 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. 3 AMERICAN SKANDIA ADVISOR PLAN III 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* 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. Transfer Fee $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.) 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+ 7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
4 AMERICAN SKANDIA 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 - --------------------------------------------------- ------------------------------------------------------------ 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-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) 0.60% in Annuity Years 1-8 Settlement Service Charge(4) 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option5 ("Qualified BCO") Total Annual Charges of the Sub-accounts 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)
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. 5 AMERICAN SKANDIA ADVISOR PLAN III 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 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/ 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 1.50% in Annuity while allowing you to allocate all or a portion of your Account Value to net assets of the Sub- Years 1-8; 0.90% certain Sub-accounts. accounts in Annuity Years 9 and later; 1.65% GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) for Qualified BCO We offer a program that guarantees your ability to withdraw amounts over 0.35% of average daily 1.60% in Annuity time equal to an initial principal value, regardless of the impact of market net assets of the Sub- Years 1-8; 1.00% performance on your Account Value. accounts in Annuity Years 9 and later; 1.75% GUARANTEED MINIMUM INCOME BENEFIT (GMIB)** for Qualified BCO We offer a program that, after a seven-year waiting period, guarantees your 0.50% per year of the 1.25% in Annuity ability to begin receiving income from your Annuity in the form of annuity average Protected Years 1-8; 0.65% in payments based on your total Purchase Payments and an annual increase of Income Value during Annuity Years 9 and later 5% on such Purchase Payments adjusted for withdrawals (called the each year; deducted PLUS "Protected Income Value"), regardless of the impact of market performance annually in arrears each 0.50% per year of aver 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 1.85% in Annuity Years 1-8; to a percentage of an initial principal value, regardless of the impact of net assets of the Sub- 1.25% in Annuity Years 9 market performance on your Account Value, subject to our program rules accounts 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 1.50% in Annuity protection for your beneficiary(ies) by providing amounts in addition to the net assets of the Sub- Years 1-8; 0.90% in basic Death Benefit that can be used to offset federal and state taxes accounts Annuity Years 9 and later payable on any taxable gains in your Annuity at the time of your death.
6 AMERICAN SKANDIA 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 1.50% in Annuity protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- Years 1-8; 0.90% in greater of the basic Death Benefit and the Highest Anniversary Value, less accounts Annuity Years 9 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 1.75% in Annuity protection for your beneficiary(ies) by providing the greater of the Highest net assets of the Sub- Years 1-8; 1.15% in Anniversary Value Death Benefit and a 5% annual increase on Purchase accounts Annuity Years 9 and later 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 1.75% in Annuity Years 1-8; protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- 1.15% in Annuity Years 9 greater of the basic Death Benefit and the Highest Daily Value, less accounts 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 1-800-752-6342. 7 AMERICAN SKANDIA ADVISOR PLAN III 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 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% Wells Fargo Variable Trust Advantage:(12) - ------------------------------------------------------------------------------------------------------- Advantage Equity Income 0.55% 0.23% 0.25% 1.037%
8 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% ProFund VP:(15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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% 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%
9 AMERICAN SKANDIA 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 ProFund VP:15 continued 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:(16), (17) First Trust(R) 10 Uncommon Values 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(R) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(R) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(18) 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. 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. 10 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 Equity Income 1.00%
b: In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Income Advantage Equity Income
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: 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. 16: 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: 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%
18: 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 ADVISOR PLAN III 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, 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 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: 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 $1,405 $2,724 $3,930 $6,475 $730 $2,139 $3,480 $6,475 $730 $2,139 $3,480 $6,475
12 AMERICAN SKANDIA ADVISOR PLAN III 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. 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 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 1-800-752-6342. 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 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 ADVISOR PLAN III 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 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 William Blair & EQUITY appreciation. The Portfolio invests primarily in stocks of large and medium-sized Company, L.L.C. 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) seeks Deutsche Asset EQUITY capital growth. The Portfolio pursues its objective by primarily investing at least Management, Inc. 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(R) 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 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 Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net assets Management Inc. 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 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 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.
15 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Investment Options continued
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 Company 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 is not Asset Management, a significant investment consideration and any income realized on the Portfolio's L.P. 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(R) 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(R) Index. LARGE CAP AST ALLIANCEBERNSTEIN CORE VALUE (formerly AST Sanford Bernstein Core Alliance Capital Growth 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 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 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 and 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 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 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 American Century ALLOCATION/ current income. The Sub-advisor intends to maintain approximately 60% of the Investment BALANCED Portfolio's assets in equity securities and the remainder in bonds and other fixed Management, Inc. 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 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 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- 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 its LLC 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 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 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 maturities. The average portfolio duration of the Portfolio generally will vary (PIMCO) 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 normal market Trust/Gartmore conditions, investments are maintained in at least six countries at all times and Global Partners no more than 35% of total assets in any single one of them. 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. 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(R) 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 normally Inc. 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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- 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. 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(R) 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.
19 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- 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. 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: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones LLC 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: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC 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.
20 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP INDUSTRIALS: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the Dow Jones U.S. LLC 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 expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones Composite Internet LLC 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(R) Index. LLC
21 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP BEAR: seeks daily investment results, before fees and expenses, that ProFund Advisors correspond to the inverse (opposite) of the daily performance of the S&P 500(R) Index. LLC 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(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 investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the S&P LLC 500(R) 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(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. 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(R). "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(R). 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(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 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(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. "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.
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PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------------- MID CAP VALUE PROFUND VP MID-CAP VALUE: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the S&P MidCap 400/ LLC Barra Value Index(R). The S&P MidCap400/Barra Value Index(R) 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(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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(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(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. 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(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) 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 ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the Russell LLC 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.
23 AMERICAN SKANDIA ADVISOR PLAN III 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 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(R). 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(R). 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(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.
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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(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. 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(R) 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 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 Dowsm 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) 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.
25 AMERICAN SKANDIA ADVISOR PLAN III 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(R) 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) 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 stocks issued L.P. 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(R) 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 L.P. 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. SPECIALTY NASDAQ(R) 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 L.P. 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. INTERNATIONAL THE PRUDENTIAL SERIES FUND, INC. -- SP William Blair International Prudential EQUITY Growth: Seeks long-term capital appreciation. The Portfolio invests primarily in Investments LLC/ stocks of large and medium-sized companies located in countries included in the William Blair & Morgan Stanley Capital International All Country World Ex-U.S. Index. Under Company, LLC 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.
26 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS "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 TimelinessTM 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. 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. 27 AMERICAN SKANDIA ADVISOR PLAN III 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 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 28 AMERICAN SKANDIA 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 31/2% 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 Value and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts will affect the charge. 29 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Fees and Charges continued 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. 30 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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, 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 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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. 31 AMERICAN SKANDIA ADVISOR PLAN III 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. 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 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 "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 32 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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. 33 AMERICAN SKANDIA ADVISOR PLAN III 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. 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 34 AMERICAN SKANDIA 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: - - 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. - - 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 investment 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 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. 35 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued ALTHOUGH OUR TRANSFER RESTRICTIONS ARE DESIGNED TO PRE- VENT 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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 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 is 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". 36 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Asset allocation is a sophisticated method of diversifica- tion, 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 invest ment 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 * The rate in this example is hypothetical and may not reflect the current rate for Guarantee Periods of this duration. 37 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued 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 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 38 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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?"). 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 transfered to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transfered to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the 39 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued 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. - - "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. 40 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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. 41 AMERICAN SKANDIA ADVISOR PLAN III 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. - - 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. - - 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, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 42 AMERICAN SKANDIA 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 period requested), we may postpone the withdrawal and add 43 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Access To Account Value continued 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, 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 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: - - The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 44 AMERICAN SKANDIA 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. 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 45 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Access To Account Value continued 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: - - 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 Annuity 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 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 46 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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%. 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. 47 AMERICAN SKANDIA ADVISOR PLAN III 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: - - 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; or - - 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 of 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 48 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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. - - 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 49 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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 the Plus40TM 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; 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: - - 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: 50 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS - - 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 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. - - 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). 51 AMERICAN SKANDIA ADVISOR PLAN III 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 52 AMERICAN SKANDIA ADVISOR PLAN III 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. 53 AMERICAN SKANDIA ADVISOR PLAN III 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 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 - - 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. - - 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 54 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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. - - 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 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. 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. 55 AMERICAN SKANDIA ADVISOR PLAN III 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: - - 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. - - 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 a Fixed Allocation to a variable investment option. - - 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. - - 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. - - 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 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. 56 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Owners who purchased the Annuity between April 1, 2003 and September 30, 2003 (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 the 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 the 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 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 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. 57 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS - - 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. 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. 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. - - 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: - - 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). 58 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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: - - 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, 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: - - 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 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. - - 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 59 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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. 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 60 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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. - - 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 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 61 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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. - - 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. - - 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. - - 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. - - 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. - - 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 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: - - the Protected Income Value is reduced by the amount withdrawn (i.e., by $10,000, from $251,038.10 to $241,038.10). 62 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS - - 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 $2,041.92. 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 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. 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. 63 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued - - 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 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. - - 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. - - 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 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. - - 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 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 64 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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. 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 1-800-752-6342. 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 65 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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. - - 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. 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). 66 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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 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 67 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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: 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 = $489Annual 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 68 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS is 5% of $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. - - 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 the Annuity, including any 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 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 69 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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 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 1-800-752-6342. 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. 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. 70 AMERICAN SKANDIA ADVISOR PLAN III 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 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 71 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Death Benefit continued 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. 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, 72 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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: - - 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. - - 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. - - 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. - - 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. - - 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. 73 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Death Benefit continued 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 1-800-752-6342. 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: - - 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. - - 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. - - 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. - - 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 74 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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. 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 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 variable investment options 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 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 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 * "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. 75 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Death Benefit continued 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 76 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 a 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 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. 77 AMERICAN SKANDIA ADVISOR PLAN III 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. 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. 78 AMERICAN SKANDIA ADVISOR PLAN III 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: - - 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 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 79 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Valuing Your Investment continued 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 Contract. 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). 80 AMERICAN SKANDIA ADVISOR PLAN III 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. 81 AMERICAN SKANDIA ADVISOR PLAN III 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 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. - - 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 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. 82 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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: - - 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. - - 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 83 AMERICAN SKANDIA ADVISOR PLAN III 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, 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: - - 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 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 - - 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) $42,000 in 2005 or (b) 25% of the employee's earned income (not including contri- 84 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS bution 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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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: - - 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 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 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: - - 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 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 85 AMERICAN SKANDIA ADVISOR PLAN III 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 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: - - 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 - - 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 86 AMERICAN SKANDIA ADVISOR PLAN III 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. 87 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS General Information 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. 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 88 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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 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 89 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS General Information continued 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 co-investment advisers, American Skandia Investment Ser- 90 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS vices, 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. 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 7.0%. Alternative compensation schedules are 91 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS General Information continued 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 ASLAC 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, analysis and 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 for 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. 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 1-800-752-6342 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, 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. 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. 92 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS 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, 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 93 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS This page intentionally left blank APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III 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 ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 14.10 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-2 APPENDIX A AMERICAN SKANDIA 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 9.80 -- -- 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-3 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, -------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - --------------------------------------------- ------------- ------------- ------------ ------------ ------------ AST State Street Research Small-Cap Growth 1 With No Optional Benefits Unit Price $ 15.97 $ 17.38 12.12 18.70 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-4 APPENDIX A AMERICAN SKANDIA 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 GMWB 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 GMWB 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-5 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-6 APPENDIX A AMERICAN SKANDIA 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-7 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-8 APPENDIX A AMERICAN SKANDIA 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 -0- 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 2 (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-9 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 6.50 7.80 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-10 APPENDIX A AMERICAN SKANDIA 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-11 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
Year Ended December 31, ------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ----------------------------------------------- ------------- ------------- ------------ ----------- ------ AST Alliance/Bernstein Growth + Value 3 (2001) With No Optional Benefits Unit Price $ 9.66 $ 8.89 7.14 9.64 -- Number of Units 194,363 137,293 37,810 -0- -- 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 4 (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-12 APPENDIX A AMERICAN SKANDIA 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 5 (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-13 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 6.70 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 9.90 -- -- 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 6 (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-14 AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS APPENDIX A
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 9.90 -- -- 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 9.90 -- -- 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 (7)(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-15 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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-16 APPENDIX A AMERICAN SKANDIA 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 10.70 Number of Units 657,913 289,862 36,987 16,390 -0- 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-17 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 10.30 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 11.80 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-18 APPENDIX A AMERICAN SKANDIA 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-19 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 -- -- -- -- -- Wells Fargo Variable Trust -- EQUITY INCOME (8)(1999) WITH NO OPTIONAL BENEFITS Unit Price $ 17.32 $ 15.79 12.67 15.89 17.01 Number of Units 19,612 10,586 1,063 1,992 -0- 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 $ 10.23 -- -- -- Number of Units 2,400 314,757 -- -- -- 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-20 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- ------------- --------- --------- ------ ------ AIM V.I. -- DYNAMICS (1999) With No Optional Benefits Unit Price $ 6.96 $ 6.22 4.57 6.80 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 -- -- -- -- -- 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 -- -- -- -- --
A-21 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, -------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ------ ----- ------ 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 -- -- -- -- -- 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 -- -- -- -- --
A-22 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - -------------------------------------------- -------- -------- ----- ----- ------ 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 -- -- -- -- -- Evergreen VA -- SPECIAL EQUITY 9 (1999) WITH NO OPTIONAL BENEFITS Unit Price $ 9.57 $ 9.16 6.10 8.49 9.35 Number of Units 92,559 69,344 5,427 5,085 -0- 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 -- -- -- -- --
A-23 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- -------- ----- ----- ---- Evergreen VA -- OMEGA (2000) WITH NO OPTIONAL BENEFITS Unit Price $ 9.75 $ 9.21 -- 9.04 -- Number of Units 26,849 15,743 -- -0- -- 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 -- -- -- -- -- ProFund VP -- EUROPE 30 (1999) WITH NO OPTIONAL BENEFITS Unit Price $ 7.90 $ 7.00 5.11 6.97 9.30 Number of Units 201,444 75,543 2,539 7,317 -0- With any one of GRO Plus, EBP or HAV Unit Price $ 14.93 $ 13.26 9.70 -- -- 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 -- -- -- --
A-24 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ---- ---- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-25 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ---- ---- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-26 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ------ ----- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-27 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- -------- ---- ---- ---- 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 -- -- -- -- -- ProFund VP -- OIL & GAS (2001) WITH NO OPTIONAL BENEFITS Unit Price $ 11.62 $ 9.10 -- 9.20 -- Number of Units 186,654 50,155 -- -0- -- 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 -- -- -- -- --
A-28 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ----- ----- ---- 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 -- -- -- -- -- 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 9.60 -- -- 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 9.60 -- -- 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 -- -- -- -- --
A-29 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------------------------ SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ----- ----- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-30 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- ------------- -------- ----- ---- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-31 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- -------- ------- ----- ---- 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 -- -- -- -- -- 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 -- -- -- -- --
A-32 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, -------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - ---------------------------------------- --------- -------- --- ------ ---- 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 -- -- -- -- -- - ---------------------------------------- -- ---------- --------- --- --------- ---- ProFund VP -- Telecommunications (2001) With No Optional Benefits Unit Price $ 5.04 $ 4.41 -- 7.11 -- Number of Units 118,731 30,179 -- -0- -- 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 -- -- -- -- --
A-33 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- --------- ----- ----- ---- 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 -0- -- 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 -- -- -- -- -- 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 -- -- -- --
A-34 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- -------- ------- ------ ---- 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 -0- -- 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 -- -- -- -- -- 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 -0- -- 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-35 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ---------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- --------- ------ ------ ---- ProFund VP -- OTC (2001) With No Optional Benefits Unit Price $ 5.44 $ 5.07 -- 5.77 -- Number of Units 293,311 257,947 -- -0- -- 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 -- -- -- -- 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 -- -- -- -- --
A-36 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- --------- ----- ------ ------ 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 -- -- -- -- -- 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 -- -- -- --
A-37 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- --------- ------ ----- ----- 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 -- -- -- -- -- 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 -- -- -- -- --
A-38 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- --------- ------ ----- ---- 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 -- -- -- -- 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 -- -- -- --
A-39 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - ------------------------------------------ ------------- --------- ----- ------ -------- ProFund VP -- ULTRASMALL-CAP (1999) WITH NO OPTIONAL BENEFITS Unit Price $ 12.28 $ 9.49 4.82 8.50 9.32 Number of Units 143,175 60,051 953 -0- 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 -- -- -- -- -- 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 10.20 -- -- 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 -- -- -- -- --
A-40 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
Year Ended December 31, --------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ---------------------------------------------- -------- -------- ------ ----- ----- 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 9.70 -- -- 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 -- -- -- -- 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 -- -- -- -- --
A-41 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- ----- ----- ----- ----- 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 -- -- -- -- -- 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 -- -- -- -- --
A-42 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
Year Ended December 31, - ----------------------------------------------------------------------------------------------------------------------- Sub-account 2004 2003 2002 2001 2000 - ----------------------------------------------------------------------------------------------------------------------- ProFund VP -- Short Small-Cap With No Optional Benefits Unit Price $ 9.55 -- -- -- -- Number of Units 7,859 -- -- -- -- 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 -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------- 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 -- -- -- -- -- - -----------------------------------------------------------------------------------------------------------------------
A-43 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- --------- --------- ----- ----- ----- 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 -- -- -- -- First Trust The DOW(SM) DART 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 -- -- -- -- --
A-44 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ---------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- ------------- ------------- ------- ------- ------ FIRST TRUST GLOBAL TARGET 15 10 (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 -- -- -- -- -- 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 -- -- -- -- --
A-45 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, -------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - ------------------------------------------- -------- ----- ----- ----- ----- 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 -- -- -- -- -- FIRST TRUST VALUE LINE(R) -- 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 -- -- -- -- --
A-46 APPENDIX A AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, -------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------- -------- ----- ----- ----- ---- 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 -- -- -- -- --
1: Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2: Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 3: Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 4: Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 5: Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 6: Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 7: Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 8: 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. 9: Effective April 15, 2005 the name of the Evergreen VA--Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 10: 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-47 This page intentionally left blank APPENDIX B AMERICAN SKANDIA ADVISOR PLAN III 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, 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 ADVISOR PLAN III 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 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 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 ADVISOR PLAN III 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 ADVISOR PLAN III 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 ADVISOR PLAN III 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 AND MAY 1, 2003. THE DESCRIPTION BELOW OF THE PLUS40 BENEFIT APPLIES TO THOSE CONTRACT OWNERS WHO PURCHASED AN ANNUITY DURING THAT TIME PERIOD AND ELECTED THE PLUS40 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. - 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). C-1 APPENDIX C AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued - 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 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. - 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-2 APPENDIX C AMERICAN SKANDIA ADVISOR PLAN III 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-3 APPENDIX C AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued 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-4 APPENDIX D AMERICAN SKANDIA ADVISOR PLAN III PROSPECTUS Appendix D -- 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") 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 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: - - 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. D-1 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 ASAPIII-PROS (05/2005). -------------------------------------- (print your name) -------------------------------------- (address) -------------------------------------- (city/state/zip code) continued 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 AMERICAN SKANDIA LIFE AASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA STAGECOACH(TM) ADVISOR PLAN(SM) III Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 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. 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: - - 1-800-752-6342 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 Statement of Additional Information WFAS3PR505 Dated: May 2, 2005 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? ........................................................ 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 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? ....................................... 38 Are Any Asset Allocation Programs Available? ........................................... 38 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? ................ 40 How Do the Fixed Allocations Work? ..................................................... 41 How Do You Determine Rates for Fixed Allocations? ...................................... 42 How Does the Market Value Adjustment Work? ............................................. 42 What Happens When My Guarantee Period Matures? ......................................... 43 Access To Account Value .................................................................. 44 What Types of Distributions are Available to Me? ....................................... 44 Are There Tax Implications for Distributions? .......................................... 44 Can I Withdraw a Portion of My Annuity? ................................................ 44 How Much Can I Withdraw as a Free Withdrawal? .......................................... 45 Is There a Charge for a Partial Withdrawal? ............................................ 45 Can I Make Periodic Withdrawals From the Annuity During the Accumulation Period? ....... 45 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue 46 Code? What are Minimum Distributions and When Would I Need to Make Them? ..................... 46 Can I Surrender My Annuity for Its Value? .............................................. 46 What is a Medically-Related Surrender and How Do I Qualify? ............................ 46 What Types of Annuity Options are Available? ........................................... 47 How and When Do I Choose the Annuity Payment Option? ................................... 48 How are Annuity Payments Calculated? ................................................... 48
(i) Contents Living Benefit Programs .................................................................. 51 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? ........................................................................... 51 Guaranteed Return Option PlusSM (GRO PlusSM) ........................................... 52 Guaranteed Return Option (GRO) ......................................................... 57 Guaranteed Minimum Withdrawal Benefit (GMWB) ........................................... 59 Guaranteed Minimum Income Benefit (GMIB) ............................................... 63 Lifetime Five Income Benefit (Lifetime Five) ........................................... 68 Death Benefit ............................................................................ 74 What Triggers the Payment of a Death Benefit? .......................................... 74 Basic Death Benefit .................................................................... 74 Optional Death Benefits ................................................................ 74 American Skandia's Annuity Rewards ..................................................... 78 Payment of Death Benefits .............................................................. 79 Valuing Your Investment .................................................................. 81 How is My Account Value Determined? .................................................... 81 What is the Surrender Value of My Annuity? ............................................. 81 How and When Do You Value the Sub-Accounts? ............................................ 81 How Do You Value Fixed Allocations? .................................................... 81 When Do You Process and Value Transactions? ............................................ 81 What Happens to My Units When There is a Change in Daily Asset-Based Charges? .......... 82 Tax Considerations ....................................................................... 84 General Information ...................................................................... 91 How Will I Receive Statements and Reports? ............................................. 91 Who is American Skandia? ............................................................... 91 What are Separate Accounts? ............................................................ 91 What is the Legal Structure of the Underlying Funds? ................................... 93 Who Distributes Annuities Offered by American Skandia? ................................. 94 Incorporation of Certain Documents by Reference ........................................ 94 Financial Statements ................................................................... 95 How to Contact Us ...................................................................... 95 Indemnification ........................................................................ 95 Legal Proceedings ...................................................................... 96 Contents of the Statement of Additional Information .................................... 96 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
(ii) AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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? - - 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 - ------------------------------------ -------------------------------------------------------------------- 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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-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) 0.60% in Annuity Years 1-8 Settlement Service Charge(4) 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option(5) ("Qualified BCO") Total Annual Charges of the Sub-accounts 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)
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/ 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 1.50% in Annuity Years while allowing you to allocate all or a portion of your Account Value to net assets of the Sub- 1-8; 0.90% in Annuity certain Sub-accounts. accounts 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 0.35% of average daily 1.60% in Annuity Years time equal to an initial principal value,regardless of the impact of market net assets of the Sub- 1-8; 1.00% in Annuity performance on your Account Value. accounts 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 0.50% per year of the 1.25% in Annuity Years ability to begin receiving income from your Annuity in the form of annuity average Protected 1-8; 0.65% in Annuity payments based on your total Purchase Payments and an annual increase Income Value during Years 9 and later of 5% on such Purchase Payments adjusted for withdrawals (called the each year; deducted PLUS "Protected Income Value"), regardless of the impact of market performance annually in arrears 0.50% per year of average on your Account Value. each 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 1.85% in Annuity Years to a percentage of an initial principal value,regardless of the impact of net assets of the Sub- 1-8; 1.25% in Annuity market performance on your Account Value, subject to our program rules accounts 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 0.25% of average daily 1.50% in Annuity Years protection for your beneficiary(ies) by providing amounts in addition to the net assets of the Sub- 1-8; 0.90% in Annuity basic Death Benefit that can be used to offset federal and state taxes accounts Years 9 and later payable on any taxable gains in your Annuity at the time of your death.
5 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Summary of Contact Fees and Charges continued
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 1.50% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- 1-8; 0.90% in Annuity greater of the basic Death Benefit and the Highest Anniversary Value, less accounts Years 9 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 1.75% in Annuity Years protection for your beneficiary(ies) by providing the greater of the Highest net assets of the Sub- 1-8; 1.15% in Annuity Anniversary Value Death Benefit and a 5% annual increase on Purchase accounts Years 9 and later 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 1.75% in Annuity Years protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- 1-8; 1.15% in Annuity greater of the basic Death Benefit and the Highest Daily Value, less accounts 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 1-800-752-6342. 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% PROFUND VP:(15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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 EXPENSES1 FEES EXPENSES - --------------------------------------------------------------------------------------------------------------- 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: (16),(17) First Trust(R) 10 Uncommon Values 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(R) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(R) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(18) 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 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 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) 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. (16) 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. (17) 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%
(18) 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 ADVISOR PLAN III 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 (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 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 $1,405 $2,724 $3,930 $6,475 $730 $2,139 $3,480 $6,475 $730 $2,139 $3,480 $6,475
12 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 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 1-800-752-6342. 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 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 ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- INTERNATIONAL AST JPMORGAN INTERNATIONAL EQUITY: seeks long-term capital growth by investing J.P. Morgan EQUITY in a diversified portfolio of international equity securities. The Fleming Asset Portfolioseeks 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 appreciation. William Blair & EQUITY The Portfolio invests primarily in stocks of large and medium-sized companies Company, L.L.C. 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): seeks Deutsche Asset EQUITY capital growth. The Portfolio pursues its objective by primarily investing at Management, Inc. 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 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 Company 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-Cap Growth): Eagle Asset 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 from a Deutsche Asset GROWTH 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(R) Index. SMALL CAP AST FEDERATED AGGRESSIVE GROWTH: seeks capital growth. The Portfolio pursues Federated Equity GROWTH 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 Management, Lee that appear to be undervalued. The Portfolio will have a non-fundamental Munder Capital policy to invest, under normal circumstances, at least 80% of the value of its Group, J.P. Morgan assets in 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. The Deutsche Asset VALUE 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(R) 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 L.P. 80% of the value of its assets in medium capitalization companies. MID-CAP AST NEUBERGER BERMAN MID-CAP GROWTH: seeks capital growth. Under normal market Neuberger Berman Growth conditions, the Portfolio primarily invests at least 80% of its net assets in Management Inc. 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 Berman Neuberger market conditions, the Portfolio primarily invests at least 80% of its net Management assets Inc. 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 , 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 Inc. 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 primarily T. Rowe Price through the common stocks of companies that own or develop natural resources Associates, Inc. (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): 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.
15 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- LARGE CAP AST MFS GROWTH: seeks long-term capital growth and future income. Under normal Massachusetts GROWTH 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 Company 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 not an Marsico Capital GROWTH 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 manner Goldman Sachs GROWTH consistent with the preservation of capital. Realization of income is not a Asset Management, significant investment consideration and any income realized on the L.P. 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(R) 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(R) Index. LARGE CAP AST ALLIANCEBERNSTEIN CORE VALUE (formerly AST Sanford Bernstein Core Value): Alliance Capital VALUE seeks long-term capital growth by investing primarily in common stocks. The Management, L.P. 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 investment Cohen & Steers in real estate securities. The Portfolio pursues its investment objective by Capital investing, under normal circumstances, at least 80% of its net assets in Management, Inc. 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 income American Century VALUE as a secondary objective. The Portfolio invests primarily in common stocks Investment 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 and Alliance Capital VALUE income while attempting to avoid excessive fluctuations in market value. Management, L.P. 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 and 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 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 Investment Balanced Portfolio's assets in equity securities and the remainder in bonds and other Management, Inc. 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. 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. International, Inc. 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. 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 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Investment Options continued
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 LLC 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 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 Company LLC maturities. The average portfolio duration of the Portfolio generally will (PIMCO) 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 maturities. The average portfolio duration of the Portfolio generally will (PIMCO) 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 of Wells Capital 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 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 all Global Partners 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 maximum Wells Fargo Funds VALUE long-term total return, consistent with minimizing risk to principal. The Management, LLC 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 capital Wells Fargo Funds VALUE appreciation and above-average dividend income. The Portfolio invests in the Management, LLC 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.
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 long-term Wells Fargo Funds GROWTH capital appreciation. The Portfolio focuses on companies that the Sub-advisor Management, LLC 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): Seeks Wells Fargo Funds GROWTH long-term capital appreciation. The Portfolio invests in the common stocks of Management, LLC 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 Management, LLC BALANCED 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 total Wells Fargo Funds return consisting of income and capital appreciation. The Portfolio invests Management, LLC 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. MID CAP AIM VARIABLE INSURANCE FUNDS -- AIM V.I. Dynamics Fund -- Series I shares A I M Advisors, GROWTH (formerly an INVESCO fund): seeks long-term capital growth. The Portfolio Inc. 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(R) 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 Inc. 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 -- Series I A I M Advisors shares (formerly an INVESCO fund) (Effective July 1, 2005, AIM V.I. Health Inc. 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- SPECIALTY AIM VARIABLE INSURANCE FUNDS -- AIM V.I. Financial Services 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 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 Investment stocks of small- and medium-sized companies (i.e., companies whose market Management capitalizations fall within the range of the Russell 2000(R) Growth Index, Company, LLC at the 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 Investment common stocks and securities convertible into common stocks of U.S. companies Management across 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. 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.
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): seeks ProFund Advisors 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): seeks ProFund Advisors 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 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.
21 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP INTERNET: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to the daily performance of the Dow Jones Composite Internet LLC 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(R) 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, that ProFund Advisors correspond to the inverse (opposite) of the daily performance of the S&P LLC 500(R) 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(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 investment results, before fees and expenses, ProFund Advisors that correspond to twice (200%) the daily performance of the S&P 500(R) LLC 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(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. 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(R). "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 expenses, ProFund Advisors that correspond to the inverse (opposite) of the daily performance of the LLC NASDAQ-100 Index(R). 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(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 registered under the Securities Exchange Act of 1934. SPECIALTY PROFUND VP ULTRAOTC: seeks daily investment results, before fees and expenses, ProFund Advisors that correspond to twice (200%) the daily performance of the NASDAQ-100 LLC 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. "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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- MID CAP VALUE PROFUND VP MID-CAP VALUE: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the S&P MidCap 400/ Barra LLC Value Index(R). The S&P MidCap400/Barra Value Index(R) 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/ Barra LLC Growth Index(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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(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(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. SMALL CAP PROFUND VP SMALL-CAP VALUE: seeks daily investment results, before fees and ProFund Advisors VALUE Value expenses, that correspond to the daily performance of the S&P SmallCap LLC 600/Barra Value Index(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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 and ProFund Advisors GROWTH expenses, that correspond to the daily performance of the S&P SmallCap LLC 600/Barra Growth Index(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) 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 ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the Russell LLC 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.
24 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSEPECTUS
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSEPECTUS Investment Options continued
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(R) 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 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 DowSM 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 PROSEPECTUS
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(R) 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(R) 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 L.P. common 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(R) 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 L.P. 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.
27 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 primarily in Investments LLC/ stocks of large and medium-sized companies located in countries included in the William Blair & Morgan Stanley Capital International All Country World Ex-U.S. Index. Under Company, LLC 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(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. 28 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 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. 29 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 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 30 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 31/2% 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 31 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Fees and Charges continued 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. 32 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 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, 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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 ADVISOR PLAN III 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. 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 34 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. 35 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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. 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 36 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: - - 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. - - 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 investment 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 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. 37 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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 elect the Guaranteed Return Option PlusSM, 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." 38 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 PlusSM. (The Guaranteed Return Option Plus (GRO PlusSM) 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 a vailable 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. 39 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued 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 40 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 1-800-752-6342. 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?"). 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 41 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Managing Your Account Value continued 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. 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). 42 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: - - 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 the Allocation Date and maturing on the 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 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. 43 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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. - - 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. - - 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 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 44 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 45 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Access To Account Value continued 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 1-800-752-6342 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 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 46 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS "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; and - - 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: - - 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 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. 47 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Access To Account Value continued 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: - - 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 Annuity 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 48 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. - 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 49 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Access To Account Value continued 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. 50 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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: - - 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; or - - 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 51 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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. - - 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 52 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 PlusSM 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: - - 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); 53 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued - - 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 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. - - 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 54 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 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 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 55 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. 56 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 - - 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. - - 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 57 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued the variable investment options, 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 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 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. 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. 58 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: - - 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. - - 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. - - 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. - - 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. - - 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 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 59 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs Continued 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. - - 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. 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 60 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. - - 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. - - 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: - - 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, 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: - - 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, 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: - - 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 61 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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 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. - - 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 the 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 the Annuity. - - 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. - - 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 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. 62 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. - - 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 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 63 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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. - - 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 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. - - 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. - - 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. - - 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. - - 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. - - 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 64 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. - - 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: - - 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 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. 65 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 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. - - 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. - - 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 66 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS whether to limit Purchase Payments, we will look at Pur chase 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 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. - - 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 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. 67 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 1-800-752-6342. 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. - - 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. You are eligible 68 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 69 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued 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 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: - - 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 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 70 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: - - 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 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: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. 71 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Living Benefit Programs continued - - 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 the Annuity, including any 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 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. - - 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 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 1-800-752-6342. 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. 72 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. 73 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 74 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. 75 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Death Benefit continued 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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 CONTRACT 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 80th 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 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. - - 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. - - 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. - - 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 76 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 OUR ASSET ALLOCATION PROGRAMS. 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 1-800-752-6342. 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: - - 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. - - 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. - - 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. - - 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 77 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Death Benefit continued 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: - - your Account Value in the variable investment options 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 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. 78 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 79 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Death Benefit continued 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. 80 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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. 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. 81 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Valuing Your Investment continued 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 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 82 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). 83 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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. 84 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: - - 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 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. - 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 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 85 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Tax Considerations continued 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 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: - 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. - You purchased more than one annuity contract from the same insurer within the same calendar year (other than contracts held by tax favored plans). 86 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: - 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 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 - 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 87 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Tax Considerations continued - 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) $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; - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - 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: - 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 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 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: - Your attainment of age 59 1/2; - Your severance of employment; - Your death; - Your total and permanent disability; or 88 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 89 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Tax Considerations continued - 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. 90 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 91 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS General Information continued 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 92 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS 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 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. 93 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS General Information continued 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 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 to us or our affiliates. 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 for 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. 94 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 1-800-752-6342 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. 95 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS General Information continued 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 96 APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 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
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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMW B 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 GMW B 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 GMW B 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 GMW B 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 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 -- -- -- -- -- - -------------------------------------------------------------------------------------------- ProFund VP -- Short Small-Cap With No Optional Benefits Unit Price $ 9.55 -- -- -- -- Number of Units 7,859 -- -- -- -- 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 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 -- -- -- -- -- - --------------------------------------------------------------------------------------------
A-46 APPENDIX A AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------ SUB-ACCOUNT 2004 2003 2002 2001 2000 - ---------------------------------------- ---------- --------- ------ ------ ------ FIRST TRUST(R) 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, ----------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 - --------------------------------------------- ---------- ---- ---- ---- ---- FIRST TRUST VALUE LINE(R) -- 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 Growth = investment options plus Interim minus Purchase Payments - 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III PROSPECTUS Appendix B -- Calculation of Optional Death Benefits continued 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 AMERICAN SKANDIA STAGECOACH ADVISOR PLAN III 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") 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 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: - - 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 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS WFVASAPIII-PROS (05/2005). ____________________________________________________ (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: 1-800-752-6342 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 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 OPTIMUM ANNUITY(SM) Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes the Optimum Annuity(SM), a flexible premium deferred annuity (the "Annuity") offered by American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") exclusively through Linsco/Private Ledger, Corp. 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. 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: American Skandia Trust and Evergreen Variable Annuity Trust. 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 80. 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: - -> 1-800-752-6342 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 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. OPTIMUM ANNUITY(SM) IS A SERVICE MARK OF LINSCO/PRIVATE LEDGER, CORP. Prospectus Dated: May 2, 2005 ASAP3LPLPROS505 Statement of Additional Information Dated: May 2, 2005 LPLOAPROS 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? ........................................................ 2 Glossary of Terms ........................................................................ 3 Summary of Contract Fees and Charges ..................................................... 4 Expense Examples ......................................................................... 10 Investment Options ....................................................................... 11 What are the Investment Objectives and Policies of the Portfolios? ..................... 11 What are the Fixed Allocations? ........................................................ 14 Fees and Charges ......................................................................... 15 What are the Contract Fees and Charges? ................................................ 15 What Charges Apply Solely to the Variable Investment Options? .......................... 16 What Fees and Expenses are Incurred 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 .................................................................. 18 What are Our Requirements for Purchasing the Annuity? .................................. 18 Managing Your Annuity .................................................................... 19 May I Change the Owner, Annuitant and Beneficiary Designations? ........................ 19 May I Return the Annuity if I Change My Mind? .......................................... 19 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? ....................... 20 Managing Your Account Value .............................................................. 21 How and When are Purchase Payments Invested? ........................................... 21 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 21 Do You Offer Dollar Cost Averaging? .................................................... 23 Do You Offer Any Automatic Rebalancing Programs? ....................................... 23 Are Any Asset Allocation Programs Available? ........................................... 23 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 24 May I Give My Investment Professional Permission to Manage My Account Value? ........... 25 May I Authorize My Third Party Investment Advisor to Manage My Account? ................ 25 How Do the Fixed Allocations Work? ..................................................... 26 How Do You Determine Rates for Fixed Allocations? ...................................... 27 How Does the Market Value Adjustment Work? ............................................. 27 What Happens When My Guarantee Period Matures? ......................................... 28 Access To Account Value .................................................................. 29 What Types of Distributions are Available to Me? ....................................... 29 Are There Tax Implications for Distributions? .......................................... 29 Can I Withdraw a Portion of My Annuity? ................................................ 29 How Much Can I Withdraw as a Free Withdrawal? .......................................... 30 Is There a Charge for a Partial Withdrawal? ............................................ 30 Can I Make Periodic Withdrawals from the Annuity During the Accumulation Period? ....... 30 Do You Offer a Program for Withdrawals Under Section 72(t) of the Internal Revenue Code? ................................................................................ 31 What are Minimum Distributions and When Would I Need to Make Them? ..................... 31 Can I Surrender My Annuity for Its Value? .............................................. 31 What is a Medically-Related Surrender and How Do I Qualify? ............................ 31 What Types of Annuity Options are Available? ........................................... 32 How and When Do I Choose the Annuity Payment Option? ................................... 33
(i) Contents How are Annuity Payments Calculated? ............................................... 33 Living Benefit Programs .............................................................. 35 Do You Offer Programs Designed to Provide Investment Protection for Owners While They are Alive? .................................................................. 35 Guaranteed Return Option Plus(SM) (GRO Plus(SM)) ................................... 36 Guaranteed Return Option (GRO) ..................................................... 41 Guaranteed Minimum Withdrawal Benefit (GMWB) ....................................... 44 Guaranteed Minimum Income Benefit (GMIB) ........................................... 48 Lifetime Five Income Benefit (Lifetime Five) ....................................... 52 Death Benefit ........................................................................ 58 What Triggers the Payment of a Death Benefit? ...................................... 58 Basic Death Benefit ................................................................ 58 Optional Death Benefits ............................................................ 58 American Skandia's Annuity Rewards ................................................. 62 Payment of Death Benefits .......................................................... 63 Valuing Your Investment .............................................................. 65 How is My Account Value Determined? ................................................ 65 What is the Surrender Value of My Annuity? ......................................... 65 How and When Do You Value the Sub-Accounts? ........................................ 65 How Do You Value Fixed Allocations? ................................................ 65 When Do You Process and Value Transactions? ........................................ 65 What Happens to My Units When There is a Change in Daily Asset-Based Charges? ...... 66 Tax Considerations ................................................................... 68 General Information .................................................................. 75 How Will I Receive Statements and Reports? ......................................... 75 Who is American Skandia? ........................................................... 75 What are Separate Accounts? ........................................................ 76 What is the Legal Structure of the Underlying Funds? ............................... 77 Who Distributes Annuities Offered by American Skandia? ............................. 78 Incorporation of Certain Documents by Reference .................................... 79 Financial Statements ............................................................... 79 How to Contact Us .................................................................. 79 Indemnification .................................................................... 80 Legal Proceedings .................................................................. 80 Contents of the Statement of Additional Information ................................ 80 Appendix A -- Condensed Financial Information About Separate Account B ............... A-1 Appendix B -- Calculation of Previously Offered Optional Death Benefits .............. B-1 Appendix C -- Additional Information on Asset Allocation Programs .................... C-1
(ii) OPTIMUM ANNUITY 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? - - 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. 1 OPTIMUM ANNUITY PROSPECTUS Introduction continued 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. 2 OPTIMUM ANNUITY 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 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. 3 OPTIMUM ANNUITY 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* 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. Transfer Fee $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.) Tax Charge 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 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%
4 OPTIMUM ANNUITY 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 - ------------------------------------------------------------------------------------------------------- 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-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) 0.60% in Annuity Years 1-8 Settlement Service Charge(4) 1.40% per year of the value of each Sub-account if the Owner's beneficiary elects the Qualified Beneficiary Continuation Option5 ("Qualified BCO") Total Annual Charges of the Sub-accounts 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)
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. 5 OPTIMUM ANNUITY 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 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/ 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 1.50% in Annuity while allowing you to allocate all or a portion of your Account Value to net assets of the Sub- Years 1-8; 0.90% certain Sub-accounts. 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 0.35% of average daily 1.60% in Annuity time equal to an initial principal value, regardless of the impact of market net assets of the Sub- Years 1-8; 1.00% performance on your Account Value. accounts 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 0.50% per year of the 1.25% in Annuity ability to begin receiving income from your Annuity in the form of annuity average Protected Years 1-8; 0.65% in payments based on your total Purchase Payments and an annual increase of Income Value during Annuity Years 9 and later 5% on such Purchase Payments adjusted for withdrawals (called the each year; deducted PLUS "Protected Income Value"), regardless of the impact of market performance annually in arrears each 0.50% per year of average 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 1.85% in Annuity Years 1-8; to a percentage of an initial principal value, regardless of the impact of net assets of the Sub- 1.25% in Annuity Years 9 market performance on your Account Value, subject to our program rules accounts 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 1.50% in Annuity protection for your beneficiary(ies) by providing amounts in addition to the net assets of the Sub- Years 1-8; 0.90% basic Death Benefit that can be used to offset federal and state taxes accounts in Annuity Years 9 and later payable on any taxable gains in your Annuity at the time of your death.
6 OPTIMUM ANNUITY 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 1.50% in Annuity protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- Years 1-8; 0.90% greater of the basic Death Benefit and the Highest Anniversary Value, less accounts in Annuity Years 9 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 1.75% in Annuity protection for your beneficiary(ies) by providing the greater of the Highest net assets of the Sub- Years 1-8; 1.15% Anniversary Value Death Benefit and a 5% annual increase on Purchase accounts in Annuity Years 9 and later 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 1.75% in Annuity Years 1-8; protection for your beneficiary(ies) by providing a death benefit equal to the net assets of the Sub- 1.15% in Annuity Years 9 greater of the basic Death Benefit and the Highest Daily Value, less accounts 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 1-800-752-6342. 7 OPTIMUM ANNUITY 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 William Blair International Growth 1.00% 0.22% None 1.22% AST LSV International Value(4) 1.00% 0.37% None 1.37% 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 Goldman Sachs Mid-Cap Growth 1.00% 0.25% None 1.25% AST Neuberger Berman Mid-Cap Value 0.90% 0.15% None 1.05% AST MFS Growth 0.90% 0.20% None 1.10% AST Marsico Capital Growth 0.90% 0.14% None 1.04% AST AllianceBernstein Core Value(7) 0.75% 0.24% None 0.99% AST Hotchkis & Wiley Large-Cap Value 0.75% 0.19% None 0.94% 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% EVERGREEN VARIABLE ANNUITY TRUST: International Equity 0.42% 0.30% None 0.72% Omega 0.52% 0.16% None 0.68%
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 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 Goldman Sachs Mid-Cap Growth 1.13% AST Neuberger Berman Mid-Cap Value 1.04% AST MFS Growth 1.07% AST Marsico Capital Growth 1.02% AST Hotchkis & Wiley Large-Cap Value 0.90% 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%
8 OPTIMUM ANNUITY PROSPECTUS 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 Sanford Bernstein Core Value Portfolio" to "AST AllianceBernstein Core Value Portfolio." 9 OPTIMUM ANNUITY 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, 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 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 $1,084 $1,823 $2,533 $4,138 $409 $1,238 $2,083 $4,138 $409 $1,238 $2,083 $4,138
10 OPTIMUM ANNUITY 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. 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 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 1-800-752-6342. 11 OPTIMUM ANNUITY PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------------------- INTERNATIONAL AST WILLIAM BLAIR INTERNATIONAL GROWTH: seeks long-term capital William Blair & EQUITY appreciation. The Portfolio invests primarily in stocks of large and medium-sized Company, L.L.C. 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): seeks Deutsche Asset EQUITY capital growth. The Portfolio pursues its objective by primarily investing at least Management, Inc. 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. 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(R) 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 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 VALUE AST NEUBERGER BERMAN MID-CAP VALUE: seeks capital growth. Under normal Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net assets Management Inc. 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.
12 OPTIMUM ANNUITY 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 Company 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 ALLIANCEBERNSTEIN CORE VALUE (formerly AST Sanford Bernstein Core Alliance Capital GROWTH 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. LARGE CAP AST HOTCHKIS & Wiley Large-Cap Value: seeks current income and long-term Hotchkis and 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 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. 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 its LLC 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 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 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 maturities. The average portfolio duration of the Portfolio generally will vary (PIMCO) 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.
13 OPTIMUM ANNUITY PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------------- 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.). 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
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. 14 OPTIMUM ANNUITY 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 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 15 OPTIMUM ANNUITY PROSPECTUS Fees and Charges continued 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 Value and any increases or decreases in your Account Value based on market fluctuations of the Sub-accounts will affect the charge. 16 OPTIMUM ANNUITY PROSPECTUS 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. 17 OPTIMUM ANNUITY PROSPECTUS 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, 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 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. - - 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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. 18 OPTIMUM ANNUITY 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. 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 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 "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 19 OPTIMUM ANNUITY PROSPECTUS Managing Your Annuity continued 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. 20 OPTIMUM ANNUITY 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. 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, 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. 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. 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 performance. 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 21 OPTIMUM ANNUITY PROSPECTUS Managing Your Account Value continued 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 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. - - 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 investment 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 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. 22 OPTIMUM ANNUITY 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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 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 is 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". 23 OPTIMUM ANNUITY PROSPECTUS Managing Your Account Value continued Asset allocation is a sophisticated method of diversifica- tion, 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. 24 OPTIMUM ANNUITY 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 our accepting transactions on your behalf. The administrative 25 OPTIMUM ANNUITY PROSPECTUS Managing Your Account Value continued 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 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?"). 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 transfered to the Sub-account(s) you choose at the inception of the program. If no instructions are provided, such Account Value will be transfered to the AST Money Market Sub-account. Short-term Fixed Allocations may not be renewed on the Maturity Date. If you surrender the 26 OPTIMUM ANNUITY 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. - - "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. 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). 27 OPTIMUM ANNUITY PROSPECTUS Managing Your Account Value continued 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 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. 28 OPTIMUM ANNUITY 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. - - 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. - - 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, call 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.com. 29 OPTIMUM ANNUITY PROSPECTUS Access To Account Value continued 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 30 OPTIMUM ANNUITY 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, 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 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: - - The Annuitant must have been named or any change of Annuitant must have been accepted by us, prior to the 31 OPTIMUM ANNUITY PROSPECTUS Access To Account Value continued "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; and - - 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: - - 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 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. 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 32 OPTIMUM ANNUITY PROSPECTUS 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: - - 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 Annuity 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 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 33 OPTIMUM ANNUITY PROSPECTUS Access To Account Value continued 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 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%. 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. 34 OPTIMUM ANNUITY 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: - - 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; or - - 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 of 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 35 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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. - - 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 36 OPTIMUM ANNUITY PROSPECTUS 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 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; 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: - - 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). 37 OPTIMUM ANNUITY 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: - - 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 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. - - 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). 38 OPTIMUM ANNUITY 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 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 39 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. 40 OPTIMUM ANNUITY 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 41 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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 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. 42 OPTIMUM ANNUITY PROSPECTUS 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 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. - - 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 a Fixed Allocation to a variable investment option. - - 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. - - 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. - - 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 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. 43 OPTIMUM ANNUITY 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 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 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. - - If you elect the GMWB program at the time you purchase your Annuity, the Account Value will be your initial Purchase Payment. - - 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. 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 44 OPTIMUM ANNUITY PROSPECTUS 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. - - 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: - - 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, 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: - - 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. 45 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued - - 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: - - 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 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. - - 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 the 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 the Annuity. - - 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. - - 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 perfor- 46 OPTIMUM ANNUITY PROSPECTUS mance, you will be able to receive your Protected Value in the form of periodic benefit payments. - - 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. 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. - - 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 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. 47 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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 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. - - 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 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. - - 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. 48 OPTIMUM ANNUITY PROSPECTUS - - As described below, after the waiting period begins, cumu- lative 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. - - 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. - - 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. - - 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; 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: - - 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 49 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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 $2,041.92. 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 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. 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. 50 OPTIMUM ANNUITY PROSPECTUS - - 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 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. - - 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. - - 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 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. - - 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 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. 51 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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. 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 1-800-752-6342. 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 52 OPTIMUM ANNUITY PROSPECTUS 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. - - 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. 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 53 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued 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 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 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 54 OPTIMUM ANNUITY PROSPECTUS (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: 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 55 OPTIMUM ANNUITY PROSPECTUS Living Benefit Programs continued - - 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. - - 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 - - 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. - - 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 the Annuity, including any CDSC. - - Withdrawals made while the Lifetime Five program is in effect will be treated, for tax purposes, in the same way as any other 56 OPTIMUM ANNUITY PROSPECTUS 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. - - 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 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 1-800-752-6342. 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. 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. 57 OPTIMUM ANNUITY 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals. - - 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. 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 58 OPTIMUM ANNUITY PROSPECTUS 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. 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, 59 OPTIMUM ANNUITY PROSPECTUS Death Benefit continued 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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: - - 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. - - 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. - - 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. - - 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. - - 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. 60 OPTIMUM ANNUITY PROSPECTUS 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 1-800-752-6342. 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: - - 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. - - 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. - - 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. - - 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. 61 OPTIMUM ANNUITY PROSPECTUS Death Benefit continued 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. 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 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 variable investment options 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 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 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. * "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. 62 OPTIMUM ANNUITY 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 63 OPTIMUM ANNUITY PROSPECTUS Death Benefit continued 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. 64 OPTIMUM ANNUITY 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. 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. 65 OPTIMUM ANNUITY 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: 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. 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 (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 66 OPTIMUM ANNUITY PROSPECTUS 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). 67 OPTIMUM ANNUITY 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. 68 OPTIMUM ANNUITY 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 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. - - 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 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. 69 OPTIMUM ANNUITY PROSPECTUS Tax Considerations continued 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: - - 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. - - 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 70 OPTIMUM ANNUITY PROSPECTUS 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: - - 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 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 - - 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) $42,000 in 2005 or (b) 25% of the employee's earned income (not including contri- 71 OPTIMUM ANNUITY PROSPECTUS Tax Considerations continued bution 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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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: - - 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 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 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: - - 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 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 72 OPTIMUM ANNUITY PROSPECTUS 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: - - 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 - - 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 73 OPTIMUM ANNUITY PROSPECTUS Tax Considerations continued 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. 74 OPTIMUM ANNUITY PROSPECTUS General Information 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. 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 75 OPTIMUM ANNUITY PROSPECTUS General Information continued 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 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 76 OPTIMUM ANNUITY PROSPECTUS 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 77 OPTIMUM ANNUITY PROSPECTUS General Information continued 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. 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 78 OPTIMUM ANNUITY PROSPECTUS 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 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 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 ASLAC 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 (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 Annuity's features; conducting due diligence, analysis and 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 for 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. 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 1-800-752-6342 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, P.O. Box 7960, Philadelphia, PA 19176 OR 79 OPTIMUM ANNUITY PROSPECTUS General Information continued 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. 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, 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 80 OPTIMUM ANNUITY PROSPECTUS 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 81 This page intentionally left blank APPENDIX A OPTIMUM ANNUITY 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 OPTIMUM ANNUITY PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- AST WILLIAM BLAIR INTERNATIONAL GROWTH (1997) WITH NO OPTIONAL BENEFITS Unit Price $ 16.42 $ 14.32 10.35 14.10 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 -- -- -- -- 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 9.80 -- -- 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 -- -- -- -- --
A-2 APPENDIX A OPTIMUM ANNUITY PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- AST STATE STREET RESEARCH SMALL-CAP GROWTH (1) WITH NO OPTIONAL BENEFITS Unit Price $ 15.97 $ 17.38 12.12 18.70 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-3 APPENDIX A OPTIMUM ANNUITY PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 GMWB 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 GMWB 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-4 APPENDIX A OPTIMUM ANNUITY PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- 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 -- -- -- -- 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-5 APPENDIX A OPTIMUM ANNUITY PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 6.50 7.80 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-6 APPENDIX A OPTIMUM ANNUITY PROSPECTUS
YEAR ENDED DECEMBER 31, --------------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- AST SANFORD BERNSTEIN CORE VALUE (2) (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 -- -- -- -- 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 9.90 -- -- 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 9.90 -- -- 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 -- -- -- -- --
A-7 APPENDIX A OPTIMUM ANNUITY PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
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 10.30 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 11.80 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-8 APPENDIX A OPTIMUM ANNUITY 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-9 APPENDIX A OPTIMUM ANNUITY PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued
YEAR ENDED DECEMBER 31, -------------------------------------------------------------- SUB-ACCOUNT 2004 2003 2002 2001 2000 ---- ---- ---- ---- ---- 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 -- -- -- -- -- EVERGREEN VA -- OMEGA (2000) WITH NO OPTIONAL BENEFITS Unit Price $ 9.75 $ 9.21 -- 9.04 -- Number of Units 26,849 15,743 -- -0- -- 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 -- -- -- -- --
1: Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2: Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. A-10 APPENDIX B OPTIMUM ANNUITY 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 Growth = investment options plus Interim minus Purchase Payments - 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 OPTIMUM ANNUITY 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 OPTIMUM ANNUITY 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 OPTIMUM ANNUITY 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 OPTIMUM ANNUITY 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 OPTIMUM ANNUITY 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") 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 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: - - 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 PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS ASAPIII-PROS (05/2005). _______________________________ (print your name) _______________________________ (address) _______________________________ (city/state/zip code) OPTIMUM ANNUITY PROSPECTUS 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 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484 AMERICAN SKANDIA LIFEVEST(R) II Flexible Premium Deferred Annuity PROSPECTUS: MAY 2, 2005 This Prospectus describes American Skandia LifeVest(R) II, 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. 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. The Variable Investment Option 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, Gartmore Variable Investment Trust, Wells Fargo Variable 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. 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 90. 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: ====> 1-800-752-6342 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 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 LIFEVEST(R) II IS A REGISTERED TRADEMARK OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA. Prospectus Dated: May 2, 2005 Statement of Additional Information Dated: May 2, 2005 ASL2PROS505 ASLPROS
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 ......................................................................... 11 Investment Options ....................................................................... 12 What Are the Investment Objectives and Policies of the Portfolios? ..................... 12 What Are the Fixed Allocations? ........................................................ 26 Fees and Charges ......................................................................... 27 What Are the Contract Fees and Charges? ................................................ 27 What Charges Apply Solely to the Variable Investment Options? .......................... 28 What Fees and Expenses Are Incurred 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 .................................................................. 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? ............................................... 31 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 .............................................................. 33 How and When Are Purchase Payments Invested? ........................................... 33 Are There Restrictions or Charges on Transfers Between Investment Options? ............. 33 Do You Offer Dollar Cost Averaging? .................................................... 35 Do You Offer any Automatic Rebalancing Programs? ....................................... 35 Are any Asset Allocation Programs Available? ........................................... 35 Do You Offer Programs Designed to Guarantee a "Return of Premium" at a Future Date? .... 36 May I Give My Investment Professional Permission to Manage my Account Value? ........... 37 May I Authorize my Third Party Investment Advisor to Manage my Account? ................ 37 How Do the Fixed Allocations 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 .................................................................. 41 What Types of Distributions Are Available to Me? ....................................... 41 Are There Tax Implications for Distributions? .......................................... 41 Can I Withdraw a Portion of my Annuity? ................................................ 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? ........................................................................ 41 What Are Minimum Distributions and When Would I Need to Make Them? ..................... 42 Can I Surrender My Annuity for its Value? .............................................. 42 What Types of Annuity Options Are Available? ........................................... 42 How and When Do I Choose the Annuity Payment Option? ................................... 43 How Are Annuity Payments Calculated? ................................................... 44
(i) Contents Living Benefit Programs ............................................................. 46 Do You Offer Programs Designed to Provide Investment Protection for Owners While They Are Alive? ........................................................... 46 Guaranteed Return Option Plus(SM) (GRO Plus(SM)) .................................. 47 Guaranteed Return Option (GRO) .................................................... 52 Guaranteed Minimum Withdrawal Benefit (GMWB) ...................................... 55 Guaranteed Minimum Income Benefit (GMIB) .......................................... 59 Lifetime Five Income Benefit (Lifetime Five) ...................................... 63 Death Benefit ....................................................................... 69 What Triggers the Payment of a Death Benefit? ..................................... 69 Basic Death Benefit ............................................................... 69 Optional Death Benefits ........................................................... 69 Valuing Your Investment ............................................................. 76 How Is my Account Value Determined? ............................................... 76 What Is the Surrender Value of my Annuity? ........................................ 76 How and When Do You Value the Sub-Accounts? ....................................... 76 How Do You Value Fixed Allocations? ............................................... 76 When Do You Process and Value Transactions? ....................................... 76 What Happens to my Units When There is a Change in Daily Asset-Based Charges? ..... 77 Tax Considerations .................................................................. 78 General Information ................................................................. 85 How Will I Receive Statements and Reports? ........................................ 85 Who Is American Skandia? .......................................................... 85 What Are Separate Accounts? ....................................................... 85 What Is the Legal Structure of the Underlying Funds? .............................. 87 Who Distributes Annuities Offered by American Skandia? ............................ 88 Incorporation of Certain Documents by Reference ................................... 88 Financial Statements .............................................................. 89 How to Contact Us ................................................................. 89 Indemnification ................................................................... 89 Legal Proceedings ................................................................. 90 Contents of the Statement of Additional Information ............................... 90 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 -- Description and Calculation of Previously Offered Optional Death Benefits .................................................................... D-1 Appendix E -- Additional Information on Asset Allocation Programs ................... E-1
(ii) AMERICAN SKANDIA LIFEVEST(R) 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 - - 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 phases -- 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. - - There is no Contingent Deferred Sales Charge on surrenders or withdrawals. You can withdraw Account Value from your Annuity free of any charges, although the value of any optional guaranteed benefit you elect may be reduced. - - 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 Owners under age 85, 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 LIFEVEST(R) 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. Other than on a contract anniversary, the Account Value is calculated before we assess 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 the 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. There is no Contingent Deferred Sales Charge upon surrender or partial withdrawal. 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 LIFEVEST(R) 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 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 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 - ---------------------------------------------------------------------------------------------------------- There is no Contingent Deferred Sales Charge deducted upon Contingent Deferred Sales Charge surrender or partial withdrawal. $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 Transfer Fee 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.
3 AMERICAN SKANDIA LIFEVEST(R) 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 - ------------------------------------------------------------------------------------------------------------------ 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(1) (AS A PERCENTAGE OF THE AVERAGE DAILY NET ASSETS OF THE SUB-ACCOUNTS)
FEE/CHARGE AMOUNT DEDUCTED - ------------------------------------------------------------------------------------------------------------------------- Mortality & Expense Risk Charge(2) 1.50% Administration Charge(2) 0.15% Settlement Service Charge(3) 1.40% per year of the value of each Sub-account if your beneficiary elects the Qualified Beneficiary Continuation Option(4) ("Qualified BCO") 1.65% per year of the value of each Sub-account Total Annual Charges of the Sub-accounts(2) (1.40% per year if you 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 Mortality & Expense Risk Charge and the Administration 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 LIFEVEST(R) 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 of 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 0.25% of average daily 1.90%; date, while allowing you to allocate all or a portion of your Account net assets of the 1.65% for Qualified BCO Value to certain Sub-accounts. Sub-accounts GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB) We offer a program that guarantees your ability to withdraw amounts 0.35% of average 2.00%; over time equal to an initial principal value, regardless of the daily net assets of 1.75% for Qualified BCO impact of market performance on your Account Value. the Sub-accounts GUARANTEED MINIMUM INCOME BENEFIT (GMIB) ** We offer a program that, after a seven-year waiting period, guarantees 0.50% per year of 1.65% your ability to begin receiving income from your Annuity in the form the average Protected PLUS of annuity payments based on your total Purchase Payments and an Income Value during 0.50% per year of average annual increase of 5% on such Purchase Payments adjusted for each year; deducted Protected Income Value withdrawals (called the "Protected Income Value"), regardless of the annually in arrears each impact of market performance on your Account Value. Annuity Year LIFETIME FIVE INCOME BENEFIT** We offer a program that guarantees your ability to withdraw amounts 0.60% of average 2.25% equal to a percentage of an initial principal value, regardless of the daily net assets of impact of market performance on your Account Value, subject to our the Sub-accounts program rules 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 1.90% protection for your beneficiary(ies) by providing amounts in addition daily net assets of to the basic Death Benefit that can be used to offset federal and the Sub-accounts state taxes payable on any taxable gains in your Annuity at the time of your death.
5 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Summary of Contract Fees and Charges continued
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 1.90% protection for your beneficiary(ies) by providing a death benefit daily net assets of equal to the greater of the basic Death Benefit and the Highest the Sub-accounts Anniversary Value, less 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 2.15% protection for your beneficiary(ies) by providing the greater of the daily net assets of Highest Anniversary Value Death Benefit and a 5% annual increase on the Sub-accounts 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 1.75% in Annuity Years protection for your beneficiary(ies) by providing a death benefit daily net assets of 1-8; 1.15% in Annuity equal to the greater of the basic Death Benefit and the Highest Daily the Sub-accounts Years 9 and later Value, less 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 1-800-752-6342. 6 AMERICAN SKANDIA LIFEVEST(R) 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 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 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% WELLS FARGO VARIABLE TRUST ADVANTAGE:(12) Advantage Equity Income 0.55% 0.23% 0.25% 1.03%
7 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Summary of Contract Fees and Charges continued
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES - --------------------------------------------------------------------------------------------------------------- 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 0.42% 0.30% None 0.72% Growth 0.70% 0.26% None 0.96% Omega 0.52% 0.16% None 0.68% PROFUND VP:(15) Access High Yield 0.75% 1.02% 0.25% 1.98% 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% 0.90% 0.25% 1.90% 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% 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%
8 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
TOTAL ANNUAL PORTFOLIO MANAGEMENT OTHER 12b-1 OPERATING UNDERLYING PORTFOLIO FEES EXPENSES(1) FEES EXPENSES PROFUND VP:(15) CONTINUED 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:(16, 17) First Trust(R) 10 Uncommon Values 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(R) Target 24 0.60% 1.58% 0.25% 2.43% NASDAQ(R) Target 15 0.60% 1.75% 0.25% 2.60% Value Line(R) Target 25 0.60% 1.48% 0.25% 2.33% The Dow Target Dividend(18) 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. 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%
9 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Summary of Contract Fees and Charges continued 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 Global Asset 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 Equity Income 1.00%
b: In addition, the following name changes were made effective May 1, 2005:
OLD PORTFOLIO NAME NEW PORTFOLIO NAME Equity Income Advantage Equity Income
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: 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. 16: 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: 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%
18: 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. 10 AMERICAN SKANDIA LIFEVEST(R) 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 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 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; and (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. 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 DO NOT ELECT ALL OF THE OPTIONAL BENEFITS AVAILABLE OR IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS. 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. A table of accumulation values appears in Appendix A to this Prospectus.
WHETHER OR NOT YOU SURRENDER YOUR ANNUITY IF YOU ANNUITIZE AT THE END OF THE AT THE END OF THE APPLICABLE TIME PERIOD: APPLICABLE TIME PERIOD: - --------------------------------------------------------------------------------------------------------- 1 YR 3 YRS 5 YRS 10 YRS 1 YR 3 YRS 5 YRS 10 YRS $768 $2,241 $3,632 $6,785 $768 $2,241 $3,632 $6,785
11 AMERICAN SKANDIA LIFEVEST(R) 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 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 1-800-752-6342. 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 Annuity, 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 bank drafting, 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. 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. Either of the above 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 each of the above Sub-accounts to all Owners that owned the Annuity prior to the respective close dates. 12 AMERICAN SKANDIA LIFEVEST(R) II 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): Deutsche Asset EQUITY seeks capital growth. The Portfolio pursues its objective by primarily Management, Inc. 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-Cap Eagle Asset GROWTH Growth): seeks long-term capital growth. The Portfolio pursues its Management, 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(R) 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 GOLDMAN SACHS SMALL-CAP VALUE: seeks long-term capital appreciation. Goldman Sachs VALUE The Portfolio will seek its objective through investments primarily in equity Asset Management, securities that are believed to be undervalued in the marketplace. The Portfolio L.P. primarily seeks companies that are small-sized, based on the value of their outstanding stock.
13 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- 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 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(R) 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 L.P. 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 VALUE AST NEUBERGER BERMAN MID-CAP VALUE: seeks capital growth. Under normal Neuberger Berman market conditions, the Portfolio primarily invests at least 80% of its net Management Inc. 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 pursues its GAMCO Investors, objective by investing primarily in readily marketable equity securities Inc. 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.
14 AMERICAN SKANDIA LIFEVEST(R) II 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(R) 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(R) 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.
15 AMERICAN SKANDIA LIFEVEST(R) II 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 long- Hotchkis and Wiley VALUE term growth of income, as well as capital appreciation. The Portfolio invests, Capital under normal circumstances, at least 80% of its net assets Management, LLC 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. 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.
16 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------------ FIXED INCOME AST GOLDMAN SACHS HIGH YIELD: seeks a high level of current income Goldman Sachs and may also consider the potential for capital appreciation. The Asset Management, Portfolio invests, under normal circumstances, at least 80% of its L.P. 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 LLC 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 of fixed- Company LLC income securities of varying maturities. The average portfolio duration of (PIMCO) 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 Management, Inc. 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. 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 Trust/Gartmore economies. Under normal market conditions, Global Partners 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. 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. 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(R) Index at the time of purchase.
17 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------------- 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 Management securities issued by established, quality, Company, LLC 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.). 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(R) 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 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.
18 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP ASIA 30: seeks daily investment results, before fees and ProFund Advisors expenses, that correspond to the daily performance of the LLC 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 and ProFund Advisors expenses, that correspond to the daily performance of the Nikkei 225 LLC 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 to LLC 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. SPECIALTY PROFUND VP CONSUMER GOODS (formerly ProFund VP Consumer Non-Cyclical): ProFund Advisors seeks daily investment results, before fees and expenses, that correspond to LLC 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.
19 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------ 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 LLC daily 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. 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. LLC 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.
20 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ------------------------------------------------------------------------------------------------------------------- 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 U.S. LLC 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(R) 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(R) 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(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 investment results, before fees and ProFund Advisors expenses, that correspond to twice (200%) the daily performance of the S&P LLC 500(R) 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(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. 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(R). 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 and ProFund Advisors expenses, that correspond to the inverse (opposite) of the daily LLC 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, 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 registered under the Securities Exchange Act of 1934.
21 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------------- 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(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. "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 and ProFund Advisors expenses, that correspond to the daily performance of the S&P MidCap LLC 400/Barra Value Index(R). The S&P MidCap400/Barra Value Index(R) 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 LLC 400/Barra Growth Index(R). The S&P MidCap 400/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P MidCap 400 Index(R) 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(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(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. 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 LLC 600/Barra Value Index(R). The S&P SmallCap 600/Barra Value Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Value Index(R) 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(R). The S&P SmallCap 600/Barra Growth Index(R) is a float adjusted market capitalization weighted index comprised of the stocks in the S&P SmallCap 600/Barra Growth Index(R) that have comparatively high price-to-book ratios as determined before each semiannual rebalance date.
22 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------- SPECIALTY PROFUND VP ULTRASMALL-CAP: seeks daily investment results, before fees ProFund Advisors and expenses, that correspond to twice (200%) the daily LLC 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 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 fees ProFund Advisors GROWTH and expenses, that correspond to the daily performance of the S&P LLC 500/Barra Growth Index(R). 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(R). 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.
23 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - ---------------------------------------------------------------------------------------------------------------- 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(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. 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(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. 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(R) 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 of L.P. the most 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(R) Target 15, the S&P Target 24, the Target Small Cap and the Value Line(R) Target 25.
24 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - -------------------------------------------------------------------------------------------------------------------- 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 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 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 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(R) 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(R). The subset of stocks will be taken from each of the eight largest economic sectors of the S&P 500 Index(R) 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(R) TARGET 25: seeks to provide above-average capital First Trust Advisors appreciation. The Portfolio seeks to achieve its objective by investing in L.P. 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.
25 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Investment Options continued
PORTFOLIO STYLE/ ADVISOR/ TYPE INVESTMENT OBJECTIVES/POLICIES SUB-ADVISOR - --------------------------------------------------------------------------------------------------------------------- SPECIALTY NASDAQ(R) TARGET 15: seeks to provide above-average total return. The First Trust Advisors Portfolio seeks to achieve its objective by investing in L.P. 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. 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 Company, L.L.C. 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.
"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. 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. 26 AMERICAN SCANDIA LIFEVEST(R) 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? 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, 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 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 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 27 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Fees and Charges continued 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 & 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. 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 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 annuity. 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 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. 28 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 29 AMERICAN SKANDIA LIFEVEST(R) 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 $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, 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 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 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 as of 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 must be the exact name of your beneficiary, not only a reference to the beneficiary's relationship to you. For example, a designation of "surviving spouse" would not be acceptable. 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. 30 AMERICAN SKANDIA LIFEVEST(R) 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: - - 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. 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. 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 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 Payments(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. 31 AMERICAN SKANDIA LIFEVEST(R) II 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. 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. 32 AMERICAN SKANDIA LIFEVEST(R) 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. 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. 33 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Managing Your Account Value continued 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 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. - - 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 investment 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 then 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 owners. 34 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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: - - You may only use Fixed Allocations with Guarantee Periods of 1, 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 elect the Guaranteed Return Option Plus(SM), the Guaranteed Return Option or the automatic rebalancing programs when it involves transfers out of 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 35 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Managing Your Account Value continued 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 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. 36 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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, AND 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. 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, 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 37 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Managing Your Account Value continued 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. Contracts managed by your investment professional also are subject to the restrictions on transfer 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 reserves 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 1-800-752-6342. 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?"). 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 38 AMERICAN SKANDIA LIFEVEST(R) II 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. - - "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. 39 AMERICAN SKANDIA LIFEVEST(R) II 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 the Allocation Date and maturing on the 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 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. 40 AMERICAN SKANDIA LIFEVEST(R) 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. 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 maximum that you may withdraw will equal your 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. 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 1-800-752-6342 or visit our Internet Website at www.americanskandia.prudential.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. 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 (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 591/2 if 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 41 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Access To Account Value continued 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. 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. 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 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(2)" 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 42 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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? 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 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. 43 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Access To Account Value continued 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 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. - - 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 44 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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%. 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. 45 AMERICAN SKANDIA LIFEVEST(R) 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: - - 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; or - - 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 PlusSM 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 PlusSM 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 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 not affect your ability to receive guaranteed 46 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 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. - - 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 47 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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 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 (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; 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: - - 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: 48 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - - 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 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. - - 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). 49 AMERICAN SKANDIA LIFEVEST(R) 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 Guarantee 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 spousal 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, any Account Value in the Fixed Allocations will be 50 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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: - - 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. - - 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. - - 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. - - 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. - - 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 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. 51 AMERICAN SKANDIA LIFEVEST(R) 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 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 - - 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. - - 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 52 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS the variable investment options, 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 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. 53 AMERICAN SKANDIA LIFEVEST(R) 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: - - 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. - - 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 the variable investment options. - - 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. - - 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. - - 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 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 your Account Value allocated to 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. Owners who purchased the Annuity between February 4, 2002 and August 2, 2002 (the "Promotional Period") will not be charged the 0.25% annual fee for the Guaranteed Return Option program 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. - - 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 at a later date. - - To qualify for the waiver of the 0.25% annual fee, American Skandia must receive an application for the Annuity during the Promotional Period, which meets all of our requirements. - - All other terms and conditions of the Annuity and the Guaranteed Return Option program apply to Owners who qualify for the waiver of the 0.25% annual fee. - - Owners who purchase the Annuity after the completion of the Promotional Period will not qualify for the 0.25% annual fee waiver. 54 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 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 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. - - 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. - - 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 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 annuity anniversary following the first withdrawal under the GMWB program. The Protected 55 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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 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. - - 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: - - 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, 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: - - 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). 56 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - 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, 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: - - 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 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. - - 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. 57 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued OTHER IMPORTANT CONSIDERATIONS - - Withdrawals under the GMWB program are subject to all of the terms and conditions of the Annuity, including any 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 the Annuity. - - 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. - - 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 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. 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. - - 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 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 58 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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 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. - - 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 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. - - 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 59 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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. - - 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; 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: - - 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); 60 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - - 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 $230,870.56). - - 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. 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 61 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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 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. - - 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. - - 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 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. - - 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 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 62 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 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 1-800-752-6342. 63 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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. - - 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. 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 64 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 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. 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. 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 65 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued 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: - - 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 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 66 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Protected Withdrawal Value = $246,450 - max {$6,403} = $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 - 5)}. If a step-up is elected on March 1, 2011, then the following values would result: - - Protected Withdrawal Value = Account Value on March 1, 2011 = $240,000 - - 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 $240,000, which is $12,000. Therefore, the Annual Income Amount remains $13,250. - - 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 - - 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. - - 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 67 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Living Benefit Programs continued (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 the Annuity. - - 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. 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 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 1-800-752-6342. 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. 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. 68 AMERICAN SKANDIA LIFEVEST(R) 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 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: - - The sum of all Purchase Payments less the sum of all proportional withdrawals; and - - 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 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 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. 69 AMERICAN SKANDIA LIFEVEST(R) 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 SEE APPENDIX D 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 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 SEE APPENDIX D 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 70 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS date under the Combination 5% Roll-up and Highest Anniversary Value Death Benefit for Owners who are age 76 or older when the contract 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 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: - - 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 - - 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 made after the Death Benefit Target Date; MINUS - - 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 CONTRACT 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 THE ENHANCED BENEFICIARY PROTECTION DEATH BENEFIT AND/OR THE HIGHEST ANNIVERSARY VALUE DEATH BENEFIT. PLEASE SEE APPENDIX D 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 80th 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 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. - - 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. - - 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. 71 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Death Benefit continued - - 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 1-800-752-6342. 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. PLEASE SEE APPENDIX D FOR A DESCRIPTION OF THE GUARANTEED MINIMUM DEATH BENEFIT OFFERED BEFORE NOVEMBER 18, 2002 IN THOSE JURISDICTIONS WHERE WE RECEIVED REGULATORY APPROVAL. 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 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. - - 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. - - 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. - - 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 72 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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 contract 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 Optional Death Benefit and Highest Anniversary Value Optional 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% of 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. 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 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. 73 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Death Benefit continued 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 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. - - 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: - - the 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. - - 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 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. 74 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 75 AMERICAN SKANDIA LIFEVEST(R) 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. 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 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. 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. 76 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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 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 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 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? 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 charge 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). 77 AMERICAN SKANDIA LIFEVEST(R) 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. 78 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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. 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 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. - - 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 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. 79 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Tax Considerations continued 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 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: - - 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. 80 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - - 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 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: - - 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 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 - - 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 81 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Tax Considerations continued - - 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) $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; - - SEPs must satisfy certain participation and nondiscrimination requirements not generally applicable to IRAs; and - - 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: - - 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 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 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: - - 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 and any earnings attributable to these amounts). 82 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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: - - 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 - - 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. 83 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Tax Considerations continued 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. 84 AMERICAN SKANDIA LIFEVEST(R) 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 are held in Sub-accounts of American Skandia Life Assurance 85 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS General Information continued 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 managers may cease being employed. We are under no 86 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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 advisor, 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 87 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS General Information continued 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 materials 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 2.0%. 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 or the Annuity on the preferred or recommended company or product list and/or access to the firms' 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, marketing and/or administrative services and/or other services they provide to us. 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 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 for 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. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE American Skandia publishes annual and quarterly reports that are filed with the SEC. These reports contain financial 88 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS 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: - - calling our Customer Service Team at 1-800-752-6342 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. - - 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 service@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, 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, 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 89 AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS General Information continued 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 - - 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 90 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) 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 LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-2 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-3 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------------- --------------- -------------- -------------- AST State Street Research Small-Cap Growth(1) 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-4 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ----------------------------------------- --------------- --------------- -------------- 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 -- -- - ------------------------------------- -- ------------ ------------ ----------- AST Goldman Sachs Small-Cap Value (1997) With No Optional Benefits Unit Price $ 15.19 $ 12.85 $ 9.26 Number of Units 1,541,896 1,504,296 1,492,775 With any one of GRO Plus, EBP or HAV Unit Price $ 16.47 $ 13.97 $ 10.09 Number of Units 222,905 102,500 624 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 $ 19.58 $ 16.67 -- Number of Units 61,521 73,852 -- 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 LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------- --------------- --------------- -------------- 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 -- -- - ----------------------------------- -- ------------ ------------ ----------- 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 -- -- - ----------------------------------- -- ------------ ------------ -----------
A-6 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------- --------------- -------------- -------------- 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 -- -- - --------------------------------------- -- ------------ ----------- ----------- 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 -- -- - --------------------------------------- -- ------------ ----------- -----------
A-7 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------ --------------- -------------- -------------- 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 -- -- - -------------------------------------- -- ------------ ----------- ----------- 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 -- -- - -------------------------------------- -- ------------ ----------- -----------
A-8 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------- --------------- -------------- -------------- 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 -- -- - --------------------------------------- -- ------------ ----------- ----------- 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 -- -- - --------------------------------------- -- ------------ ----------- -----------
A-9 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------- --------------- -------------- -------------- AST Alliance Growth 2 (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 -- -- - ----------------------------------- -- ------------ ----------- ----------- 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 -- -- - ----------------------------------- -- ------------ ----------- -----------
A-10 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------------- --------------- --------------- --------------- 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 -- -- - ----------------------------------------- -- ------------ ------------ ------------ 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 -- -- - ----------------------------------------- -- ------------ ------------ ------------
A-11 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ----------------------------------------------- --------------- -------------- ------------ 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 -- -- - ------------------------------------------- -- ------------ ----------- ---------- AST Alliance/Bernstein Growth + Value(3) (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 -- -- - ------------------------------------------- -- ------------ ----------- ----------
A-12 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------ --------------- -------------- -------------- AST Sanford Bernstein Core Value(4) (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 -- -- - -------------------------------------- -- ------------ ----------- ----------- 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 -- -- - -------------------------------------- -- ------------ ----------- -----------
A-13 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------------- --------------- -------------- -------------- AST Sanford Bernstein Managed Index 500(5) (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 -- -- - --------------------------------------------- -- ------------ ----------- ----------- 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 -- -- - --------------------------------------------- -- ------------ ----------- -----------
A-14 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ---------------------------------------- --------------- --------------- -------------- AST Alliance Growth and Income(6) (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 -- -- - ------------------------------------ -- ------------ ------------ ----------- 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 -- -- - ------------------------------------ -- ------------ ------------ -----------
A-15 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ----------------------------------------------- --------------- -------------- -------------- AST DeAM Global Allocation(7) (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 -- -- - ------------------------------------------- -- ------------ ----------- ----------- 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 -- -- - ------------------------------------------- -- ------------ ----------- -----------
A-16 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ------------------------------------------ --------------- -------------- -------------- 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 -- -- - -------------------------------------- -- ------------ ----------- ----------- 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 -- -- - -------------------------------------- -- ------------ ----------- -----------
A-17 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------- --------------- -------------- -------------- AMERICAN SKANDIA LIFEVEST[REGTM] II PROSPECTUS 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 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 -- -- - ----------------------------------- -- ------------ ----------- -----------
A-18 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------- --------------- --------------- --------------- 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 -- -- - ----------------------------------- -- ------------ ------------ ------------ 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 -- -- - ----------------------------------- -- ------------ ------------ ------------
A-19 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------------------------------------- --------------- --------------- --------------- 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 -- -- - ----------------------------------------------------------------- -- ------------ ------------ ------------ 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 -- -- - ----------------------------------------------------------------- -- ------------ ------------ ------------
A-20 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ----------------------------------------------------- ------------- ------------- ------------ Wells Fargo Variable Trust -- Equity Income(8) (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 Price $ 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 Value $ 11.61 -- -- Number of Units 13 -- -- - ------------------------------------------------- -- ---------- ---------- ---------- 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-21 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-22 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-23 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ---------------------------------------- ------------- ------------- ------------ Evergreen VA -- Special Equity(9) (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-24 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-25 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-26 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-27 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-28 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-29 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - --------------------------------------- --------------- ------------ ------------ AMERICAN SKANDIA LIFEVEST[REGTM] II PROSPECTUS 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-30 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-31 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-32 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-33 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-34 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-35 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-36 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-37 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-38 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-39 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-40 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-41 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-42 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-43 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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 (10) 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-44 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
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-45 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - --------------------------------------------------------------------------------
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-46 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - --------------------------------------------------------------------------------
Sub-account 2004 2003 2002 - ---------------------------------------- ------------- ------ ----- First Trust Value Line(R) 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-47 APPENDIX A AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix A -- Condensed Financial Information About Separate Account B continued - -------------------------------------------------------------------------------- 1: Effective May 2, 2005 the name of the AST State Street Research Small-Cap Growth Portfolio has changed to AST Small-Cap Growth Portfolio. 2: Effective May 2, 2005 the name of the AST Alliance Growth Portfolio has changed to AST AllianceBernstein Large-Cap Growth Portfolio. 3: Effective May 2, 2005 the name of the AST Alliance/Bernstein Growth + Value Portfolio has changed to AST AllianceBernstein Growth + Value Portfolio. 4: Effective May 2, 2005 the name of the AST Sanford Bernstein Core Value Portfolio has changed to AST AllianceBernstein Core Value Portfolio. 5: Effective May 2, 2005 the name of the AST Sanford Bernstein Managed Index 500 Portfolio has changed to AST AllianceBernstein Managed Index 500 Portfolio. 6: Effective May 2, 2005 the name of the AST Alliance Growth and Income Portfolio has changed to AST AllianceBernstein Growth & Income Portfolio. 7: Effective May 2, 2005 the name of the AST DeAM Global Allocation Portfolio has changed to AST Global Allocation Portfolio. 8: 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. 9: Effective April 15, 2005 the name of the Evergreen VA--Special Equity Portfolio has changed to Evergreen VA Growth Portfolio. 10: 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-48 APPENDIX B AMERICAN SKANDIA LIFEVEST(R) 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 = 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 AMERICAN SKANDIA LIFEVEST(R) 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 LIFEVEST(R) 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 LIFEVEST(R) 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 LIFEVEST(R) 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 LIFEVEST(R) II 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 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 - 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. - 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). C-1 APPENDIX C AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued - -------------------------------------------------------------------------------- - 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 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. - 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-2 APPENDIX C AMERICAN SKANDIA LIFEVEST(R) II 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 591/2, 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-3 APPENDIX C AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix C -- Plus40(TM) Optional Life Insurance Rider continued - -------------------------------------------------------------------------------- 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-4 APPENDIX D AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits - -------------------------------------------------------------------------------- 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 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 80th 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". D-1 APPENDIX D AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued - -------------------------------------------------------------------------------- - - 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. 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. D-2 APPENDIX D AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS - -------------------------------------------------------------------------------- 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. D-3 APPENDIX D AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix D -- Description and Calculation of Previously Offered Optional Death Benefits continued - -------------------------------------------------------------------------------- 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). D-4 APPENDIX E AMERICAN SKANDIA LIFEVEST(R) II PROSPECTUS Appendix E -- 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") 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 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: - - 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. E-1 - -------------------------------------------------------------------------------- PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN PROSPECTUS ASLII-PROS (05/2005). -------------------------------------- (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: 1-800-752-6342 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 STATEMENT OF ADDITIONAL INFORMATION The Annuity is registered under the Securities Act of 1933 and the Investment Company Act of 1940. The Annuity is issued by AMERICAN SKANDIA LIFE ASSURANCE CORPORATION, a Prudential Financial Company, VARIABLE ACCOUNT B and AMERICAN SKANDIA LIFE ASSURANCE CORPORATION. TABLE OF CONTENTS
Item Page - ---- ---- GENERAL INFORMATION REGARDING AMERICAN SKANDIA LIFE ASSURANCE CORPORATION.................2 AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B............................2 PRINCIPAL UNDERWRITER/DISTRIBUTOR.........................................................3 UNIT PRICE DETERMINATIONS.................................................................5 OTHER TAX RULES...........................................................................6 Federal Tax Status.....................................................................6 VOTING RIGHTS.............................................................................6 MODIFICATION..............................................................................7 DEFERRAL OF TRANSACTIONS..................................................................7 MISSTATEMENT OF AGE OR SEX................................................................8 ENDING OF OFFER...........................................................................8 EXPERTS...................................................................................8 LEGAL EXPERTS.............................................................................8 FINANCIAL STATEMENTS......................................................................8 - -------------------------------------------------------------------------------------------- THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. YOU SHOULD READ THIS INFORMATION ALONG WITH THE PROSPECTUS FOR THE ANNUITY FOR WHICH IT RELATES. THE PROSPECTUS CONTAINS INFORMATION THAT YOU SHOULD CONSIDER BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS SEND A WRITTEN REQUEST TO AMERICAN SKANDIA - VARIABLE ANNUITIES, P.O. BOX 7960, PHILADELPHIA, PA 19176, OR TELEPHONE 1-800-752-6342. OUR ELECTRONIC MAIL ADDRESS IS SERVICE@PRUDENTIAL.COM. - -------------------------------------------------------------------------------------------- Date of Prospectus: May 2, 2005 Date of Statement of Additional Information: May 2, 2005 VIA S/G-SAI [05/2005]
GENERAL INFORMATION REGARDING AMERICAN SKANDIA LIFE ASSURANCE CORPORATION American Skandia Life Assurance Corporation ("American Skandia", "we", "our" or "us") 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's principal business address is One Corporate Drive, Shelton, Connecticut 06484. 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. AMERICAN SKANDIA LIFE ASSURANCE CORPORATION VARIABLE ACCOUNT B American Skandia Life Assurance Corporation Variable Account B, also referred to as "Separate Account B", was established by us pursuant to Connecticut law. Separate Account B also holds assets of other annuities issued by us with values and benefits that vary according to the investment performance the underlying mutual funds or portfolios of underlying mutual funds offered as Sub-accounts of Separate Account B. The underlying mutual funds or portfolios of underlying mutual funds are referred to as the Portfolios. Each Sub-account invests exclusively in a Portfolio. You will find additional information about the Portfolios in their respective prospectuses. Separate Account B is registered with the Securities and Exchange Commission ("SEC") under the Investment Company Act of 1940 (the "Investment Company Act") as a unit investment trust, which is a type of investment company. Values and benefits based on allocations to the Sub-accounts will vary with the investment performance of the Portfolios, as applicable. We do not guarantee the investment results of any Sub-account. You bear the entire investment risk. 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 offer a number of Sub-accounts. Certain Sub-accounts may not be available in all jurisdictions. If and when we obtain approval of the applicable authorities to make such Sub-accounts available, we will notify Owners of the availability of such Sub-accounts. A brief summary of the investment objectives and policies of each Portfolio is found in the Prospectus. More detailed information about the investment objectives, policies, risks, costs and management of the Portfolios are found in the prospectuses and statements of additional information for the Portfolios. Also included in such information is the investment policy of each Portfolio regarding the acceptable ratings by recognized rating services for bonds and other debt obligations. There can be no guarantee that any Portfolio will meet its investment objectives. Each underlying mutual fund is registered under the Investment Company Act, as amended, as an open-end management investment company. Each underlying mutual fund thereof may or may not be diversified as defined in the Investment Company Act. The trustees or directors, as applicable, of an underlying mutual fund may add, eliminate or substitute portfolios from time to time. Generally, each portfolio issues a separate class of shares. Shares of the portfolios are available to separate accounts of life insurance companies offering variable annuity and variable life insurance products. The shares may also be made available, subject to obtaining all required regulatory approvals, for direct purchase by various pension and retirement savings plans that qualify for preferential tax treatment under the Internal Revenue Code ("Code"). 2 We may make other portfolios available by creating new Sub-accounts. Additionally, new portfolios may be made available by the creation of new Sub-accounts from time to time. Such a new portfolio may be disclosed in its prospectus. However, addition of a portfolio does not require us to create a new Sub-account to invest in that portfolio. We may take other actions in relation to the Sub-accounts and/or Separate Account B. PRINCIPAL UNDERWRITER/DISTRIBUTOR American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of ASI, is the distributor and principal underwriter of the Annuity described in the Prospectus and this Statement of Additional Information. American Skandia Life Assurance Corporation and American Skandia Investment Services, Incorporated ("ASISI"), a co-investment manager of American Skandia Trust and American Skandia Advisor Funds, Inc., are also wholly-owned subsidiaries of ASI. American Skandia Information Services and Technology Corporation ("ASIST"), also a wholly-owned subsidiary of ASI, is a service company that provides systems and information services to American Skandia Life Assurance Corporation and its affiliated companies. 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 whom 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 Sub-accounts under the Annuity. ASM's principal business address is One Corporate Drive, Shelton, Connecticut 06484. ASM is registered as a broker-dealer under the Securities and 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 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 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 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. The list below identifies three general types of payments that American Skandia pays which are broadly defined as follows: a. o Percentage Payments based upon "Asset under Management" or "AUM": This type of payment is a percentage payment that is based upon the total amount held in all American Skandia annuity products that were sold through the firm (or its affiliated broker/dealers). o Percentage Payments based upon sales: This type of payment is a percentage payment that is based upon the total amount of money received as purchase payments under American Skandia annuity products sold through the firm (or its affiliated broker/dealers). b. o Fixed payments: These types of payments are made directly to or in sponsorship of the firm (or its affiliated broker/dealers). Examples of arrangements under which such payments may be made currently include, but are not limited to, sponsorships, conferences (national, regional and top producer), speaker fees, promotional items, and reimbursements to firms for marketing activities or services paid by the firms and/or their individual representatives. 3 The amount of these payments varies widely because some payments may encompass only a single event, such as a conference, and others have a much broader scope. In addition, we may make payments upon the initiation of a relationship for systems, operational and other support. The list below includes the names of the firms (or their affiliated broker/dealers) that we are aware (as of May 1, 2005) received payment of more than $10,000 under one or more of these types of arrangements during the last calendar year or that have received or are expected to receive such payment during the current calendar year. Your registered representative can provide you with more information about the compensation arrangements that apply upon the sale of the Annuity. Name of Firm: AIG* American General Securities, Inc. American Portfolios Financial Services, Inc. Associated Securities Corp. Bluevase Securities Brecek & Young Advisors, Inc. Brookstreet Securities Corporation Cadaret, Grant & Co. Inc. Cambridge Investment Research, Inc. Capital Analysts, Inc. Centaurus Financial, Inc. Commonwealth Financial Network Crown Capital Securities CUSO Financial Services Equity Services, Inc. FFP Securities, Inc. Financial Network Investment Corp. (part of the ING selling network)* First Allied Securities, Inc. FSC Securities Corporation (part of the AIG selling network)* Gary Goldberg & Company GunnAllen Financial Incorporated H. Beck, Inc. Hantz Financial Services, Inc. Hibernia Investments, LLC ING Financial Partners* Invest Financial Corp Investment Advisors & Consultants Investment Centers of America Investors Capital Corporation Jefferson Pilot Securities Corp Legend Equities Corporation Lincoln Investment Planning, Inc. Linsco Private Ledger Multi-Financial Securities Corporation (part of the ING selling network)* Mutual Service Corporation National Planning Corporation Next Financial Group, Inc. NFP Securities Prime Capital Services Primevest Financial Services, Inc. (part of the ING selling network)* Questar Capital Corporation Raymond James & Associates, Inc. Raymond James Financial Services, Inc. RBC Dain Rauscher Royal Alliance Associates, Inc. (part of the AIG selling network)* Securities America, Inc. Securities Service Network, Inc. Sigma Financial Corporation SII Investments Stifel, Nicolaus & Company, Inc. SunAmerica Securities, Inc. (part of the AIG selling network)* TD Waterhouse Investor Services, Inc. TFS Securities, Inc. The Investment Center, Inc. United Planners Financial Services of America UVEST Financial Services Group Wachovia Securities, LLC* Wall Street Financial Group Waterstone Financial Group, Inc. Webster Investments World Group Securities, Inc - ------------------- * Also includes payments made in connection with products issued by PruCo Life Insurance Company and PruCo Life Insurance Company of New Jersey. 4 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. ASLAC pays ASM an underwriting commission for its role as principal underwriter/distributor of all variable insurance products issued by ASLAC. ASM is responsible for payment of commissions to the broker-dealer firms who are the ultimate sellers of the product. ASM does not retain any underwriting commissions. For the past three years, the aggregate dollar amount of underwriting commissions paid to ASM in its role as principal underwriter/distributor has been: 2004: 239,555,521; 2003: $182,550,093; 2002: $193,374,436. UNIT PRICE DETERMINATIONS For each Sub-account the initial Unit Price is $10.00. The Unit Price for each subsequent Valuation Period is the net investment factor for that Valuation Period, multiplied by the Unit Price for the immediately preceding Valuation Period. The Unit Price for a Valuation Period applies to each day in the Valuation Period. The net investment factor is an index that measures the investment performance of, and charges assessed against, a Sub-account from one Valuation Period to the next. The net investment factor for a Valuation Period is: (1) divided by (2), less (3), where: (1) is the net result of: (a) the net asset value per share of the Portfolio shares held by that Sub-account at the end of the current Valuation Period plus the per share amount of any dividend or capital gain distribution declared by the Portfolio at the end of the current Valuation Period and paid (in the case of a Portfolio that declares dividends on an annual or quarterly basis) or accrued (in the case of a money market Portfolio that pays dividends monthly); plus or minus (b) any per share charge or credit during the Valuation Period as a provision for taxes attributable to the operation or maintenance of that Sub-account. (2) is the net result of: (a) the net asset value per share of the Portfolio shares held by that Sub-account at the end of the preceding Valuation Period plus the per share amount of any dividend or capital gain distribution declared and unpaid (accrued) by the Portfolio at the end of the preceding Valuation Period; plus or minus 5 (b) any per share charge or credit during the preceding Valuation Period as a provision for taxes attributable to the operation or maintenance of the Sub-account. (3) is the Insurance Charge deducted daily against the assets of the Separate Account. We value the assets in each Sub-account at their fair market value in accordance with accepted accounting practices and applicable laws and regulations. The net investment factor may be greater than, equal to, or less than one. OTHER TAX RULES Federal Tax Status 1. Diversification. The Internal Revenue Code provides that the underlying investments for the variable investment options must satisfy certain diversification requirements. Each Portfolio is required to diversify its investments each quarter so that no more than 55% of the value of its assets is represented by any one investment, no more than 70% is represented by any two investments, no more than 80% is represented by any three investments, and no more than 90% is represented by any four investments. Generally, securities of a single issuer are treated as one investment and obligations of each U.S. Government agency and instrumentality (such as the Government National Mortgage Association) are treated as issued by separate issuers. In addition, any security issued, guaranteed or insured (to the extent so guaranteed or insured) by the United States or an instrumentality of the U.S. will be treated as a security issued by the U.S. Government or its instrumentality, whichever is applicable. We believe the portfolios underlying the variable investment options for the contract meet these diversification requirements. 2. Investor Control. Treasury Department regulations do not provide guidance concerning the extent to which you may direct your investment in the particular investment options without causing you, instead of us to be considered the owner of the underlying assets. Because of this uncertainty, or in response to other changes in tax laws or regulations, we reserve the right to make such changes as we deem necessary to assure that the contract qualifies as an annuity for tax purposes. Any such changes will apply uniformly to affected owners and will be made with such notice to affected contractowners as is feasible under the circumstances. 3. Entity Owners. Where a contract is held by a non-natural person (e.g., a corporation), other than as an agent or nominee for a natural person (or in other limited circumstances), the contract will not be taxed as an annuity and increases in the value of the contract over its cost basis will be subject to tax annually. 4. Purchase Payments Made Before August 14, 1982. If your contract was issued in exchange for a contract containing purchase payments made before August 14, 1982, favorable tax rules may apply to certain withdrawals from the contract. Generally, withdrawals are treated as a recovery of your investment in the contract first until purchase payments made before August 14, 1982 are withdrawn. Moreover, any income allocable to purchase payments made before August 14,1982, is not subject to the 10% tax penalty. 5. Generation-Skipping Transfers. If you transfer your contract to a person two or more generations younger than you (such as a grandchild or grandniece) or to a person that is more than 37 1/2 years younger than you, there may be generation-skipping transfer tax consequences. VOTING RIGHTS You have voting rights in relation to Income Base maintained in the Sub-accounts. 6 We will vote shares of the Portfolios in which the Sub-accounts invest in the manner directed by Owners. Owners give instructions equal to the number of shares represented by the Sub-account Units attributable to their Annuity. We will vote the shares attributable to assets held in the Sub-accounts solely for us rather than on behalf of Owners, or any share as to which we have not received instructions, in the same manner and proportion as the shares for which we have received instructions. We will do so separately for each Sub-account of the Separate Account that may invest in the same Portfolio. The number of votes for a Portfolio will be determined as of the record date for such underlying mutual fund or portfolio as chosen by its board of trustees or board of directors, as applicable. We will furnish Owners with proper forms and proxies to enable them to instruct us how to vote. You may instruct us how to vote on the following matters: (a) changes to the board of trustees or board of directors, as applicable; (b) changing the independent accountant; (c) any change in the fundamental investment policy; (d) any other matter requiring a vote of the shareholders; and (e) approval of changes to the investment advisory agreement or adoption of a new investment advisory agreement. 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. With respect to approval of any change in fundamental investment policy, only Owners maintaining Income Base as of the record date in a Sub-account investing in the applicable underlying mutual fund portfolio will instruct us how to vote on the matter, pursuant to the requirements of Rule 18f-2 under the Investment Company Act. MODIFICATION We reserve the right to do any or all of the following: (a) combine a Sub-account with other Sub-accounts; (b) combine Separate Account B or a portion of it with other "unitized" separate accounts; (c) deregister Separate Account B under the Investment Company Act; (d) operate Separate Account B as a management investment company under the Investment Company Act or in any other form permitted by law; (e) make changes required by any change in the Securities Act, the Exchange Act or the Investment Company Act; (f) make changes that are necessary to maintain the tax status of your Annuity under the Code; (g) make changes required by any change in other Federal or state laws relating to retirement annuities or annuity contracts; and (h) discontinue offering any Sub-account at any time. Also, from time to time, we may make additional Sub-accounts available to you. These Sub-accounts will invest in underlying mutual funds or portfolios of underlying mutual funds we believe to be suitable for the Annuity. We may or may not make a new Sub-account available to invest in any new portfolio of one of the current underlying mutual funds should such a portfolio be made available to Separate Account B. We may eliminate Sub-accounts, combine two or more Sub-accounts or substitute one or more new underlying mutual funds or portfolios for the one in which a Sub-account is invested. Substitutions may be necessary if we believe an underlying mutual fund or portfolio no longer suits the purpose of the Annuity. This may happen due to a change in laws or regulations, or a change in the investment objectives or restrictions of an underlying mutual fund or portfolio, or because the underlying mutual fund or portfolio is no longer available for investment, or for some other reason. We would obtain prior approval from the insurance department of our state of domicile, if so required by law, before making such a substitution, deletion or addition. We also would obtain prior approval from the SEC so long as required by law, and any other required approvals before making such a substitution, deletion or addition. We reserve the right to transfer assets of Separate Account B, which we determine to be associated with the class of contracts to which your Annuity belongs, to another "unitized" separate account. We will notify you (and/or any payee during the payout phase) of any modification to your Annuity. We may endorse your Annuity to reflect the change. DEFERRAL OF TRANSACTIONS We may defer any distribution or transfer from an Annuity Payment for a period not to exceed the lesser of 6 months or the period permitted by law. If we defer a distribution or transfer from any Annuity Payment for more than thirty days, or less where required by law, we pay interest at the minimum rate required by law but not less than 3% or at least 4% if required by your contract, per year on the amount deferred. We may defer payment of proceeds of any distribution from any Sub-account or any transfer from a Sub-account 7 for a period not to exceed 7 calendar days from the date the transaction is effected. Any deferral period begins on the date such distribution or transfer would otherwise have been transacted. 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 Income Base may fluctuate based on changes in the Unit Values, but you may not be able to transfer Income Base, 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. MISSTATEMENT OF AGE OR SEX If there has been a misstatement of the age and/or sex of any person upon whose life Annuity Payments are based, we make adjustments to conform to the facts. As to Annuity Payments: (a) any underpayments by us will be remedied on the next payment following correction; and (b) any overpayments by us will be charged against future amounts payable by us under your Annuity. ENDING OF OFFER We may limit or discontinue offering Annuities. Existing Annuities will not be affected by any such action. EXPERTS PricewaterhouseCoopers LLP, 100 Pearl Street, Hartford, Connecticut 06103, an independent registered public accounting firm, have audited the financial statements of American Skandia Life Assurance Corporation and American Skandia Life Assurance Corporation Variable Account B with respect to the year ended December 31, 2003 and 2004. Ernst & Young LLP, Goodwin Square, 225 Asylum Street, Hartford, Connecticut 06103, an independent registered public accounting firm, have audited the financial statements of American Skandia Life Assurance Corporation and American Skandia Life Assurance Corporation Variable Account B with respect to the years ended December 31, 2002, 2001, 2000 and 1999. The consolidated financial statements of American Skandia Life Assurance Corporation at December 31, 2004 and 2003, and for each of the three years in the period ended December 31, 2004 and the financial statements of American Skandia Life Assurance Corporation Variable Account B at December 31, 2004 and for the periods ended December 31, 2004 and 2003 are included in this Statement of Additional Information. The financial statements included herein have been audited by PricewaterhouseCoopers LLP and Ernst & Young LLP, independent registered public accounting firms, as set forth in their respective reports thereon appearing elsewhere herein, and are included in reliance on such reports given on the authority of each firm as experts in accounting and auditing. LEGAL EXPERTS Counsel for 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. FINANCIAL STATEMENTS The statements which follow in Appendix A are those of American Skandia Life Assurance Corporation and American Skandia Life Assurance Corporation Variable Account B Sub-accounts as of December 31, 2004 and for the years ended December 31, 2004 and 2003. There may be other Sub-accounts included in Variable Account B that are not available in the product described in the applicable prospectus. To the extent and only to the extent that any statement in a document incorporated by reference into this Statement of Additional Information is modified or superseded by a statement in this Statement of Additional Information or in a later-filed document, such statement is hereby deemed so modified or superseded and not part of this Statement of Additional Information. 8 We furnish you without charge a copy of any or all the documents incorporated by reference in this Statement of Additional Information, including any exhibits to such documents which have been specifically incorporated by reference. We do so upon receipt of your written or oral request. Please address your request to American Skandia - Variable Annuities, P.O. Box 7960, Philadelphia, PA 19176. Our phone number is 1-800-752-6342. You may also forward such a request electronically to our Customer Service Department at service@prudential.com. -----END PRIVACY-ENHANCED MESSAGE-----