Filed with the Securities and Exchange Commission on April 20, 2007
Registration No. 333-136996
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
Form S-3
-----------------
Post-Effective Amendment No. 3
Registration Statement Under The Securities Act of 1933*
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
(Exact name of registrant as specified in its charter)
CONNECTICUT
(State or other jurisdiction of incorporation or organization)
63
(Primary Standard Industrial Classification Code Number)
06-1241288
(I.R.S. Employer Identification No.)
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 926-1888
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
JOSEPH D. EMANUEL, CHIEF LEGAL OFFICER
ONE CORPORATE DRIVE, SHELTON, CONNECTICUT 06484 (203) 944-7504
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy To:
LAURA KEALEY, ESQ.
One Corporate Drive, Shelton, Connecticut 06484 (203) 944-5477
Approximate date of commencement of proposed sale to the public:
May 1, 2007 or as soon as practicable after the effective date of this
Registration Statement
-----------------
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box: [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
reinvestment plans, check the following: [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
registration statement for the same offering: [ ]
If this Form is a post-effective amendment pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act
registration number of the earlier registration statement for the same
offering: [ ]
If this Form is a registration statement pursuant to General Instruction I.D.
or a post-effective amendment thereto that shall become effective upon filing
with the Commission pursuant to Rule 462(e) under the Securities Act, check the
following box: [ ]
If this Form is a post-effective amendment to a registration statement filed
pursuant to General Instruction I.D. filed to register additional securities or
additional classes of securities pursuant to rule 413(b) under the Securities
Act, check the following box: [ ]
-----------------
Calculation of Registration Fee
================================================================================
Proposed
Title of each Proposed maximum
class of maximum aggregate
securities to Amount to be offering price offering Amount of
be registered registered per unit price** registration fee
- -------------------------------------------------------------------------------
Market Value
Adjusted
Annuity
Contracts $2,000,000,000.00 $214,000
================================================================================
* Securities are not issued in predetermined units
** Registration fee for these securities, in the amount of $214,000, was paid
at the time the securities were originally registered on Form S-3 as filed
by American Skandia Life Insurance Corporation on August 30, 2006.
American Skandia Marketing, Incorporated, the principal underwriter of these
contracts under a "best efforts" arrangement, will be reimbursed by American
Skandia Life Assurance Corporation for its costs and expenses incurred in
connection with the sale of these contracts.
================================================================================
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
A Prudential Financial Company
One Corporate Drive, Shelton, Connecticut 06484
AMERICAN SKANDIA ADVISOR PLAN/SM/ III ("ASAP III")
AMERICAN SKANDIA APEX(R) II ("APEX II")
AMERICAN SKANDIA XTRA CREDIT/SM/ SIX ("XT6")
AMERICAN SKANDIA LIFEVEST(R) II ("ASL II")
Flexible Premium Deferred Annuities
PROSPECTUS: MAY 1, 2007
This prospectus describes four different flexible premium deferred annuities
(the "Annuities" or the "Annuity") offered by American Skandia Life Assurance
Corporation ("American Skandia", "we", "our", or "us"). Each Annuity may be
offered as an individual annuity contract or as an interest in a group
annuity. Each Annuity has different features and benefits that may be
appropriate for you based on your financial situation, your age and how you
intend to use the Annuity. This Prospectus describes the important features of
the Annuities and what you should consider before purchasing one of the
Annuities. The Prospectus also describes differences among the Annuities which
include differences in the fees and charges you pay and variations in some
product features such as the availability of certain bonus amounts and basic
death benefit protection. These differences among the products are discussed
more fully in the Prospectus and summarized in Appendix F entitled "Selecting
the Variable Annuity That's Right for You". There may also be differences in
the compensation paid to your Financial Professional for each Annuity. In
addition, selling broker-dealer firms through which each Annuity is sold may
decline to make available to their customers certain of the optional features
and investment options offered generally under the Annuity. Alternatively,
such firms may restrict the optional benefits that they do make available to
their customers (e.g., by imposing a lower maximum issue age for certain
optional benefits than what is prescribed generally under the Annuity). Please
speak to your Financial Professional for further details. Each Annuity or
certain of its investment options and/or features may not be available in all
states. Various rights, benefits and certain fees may differ among states to
meet applicable laws and/or regulations. For more information about variations
applicable to your state, please refer to your Annuity contract or consult
your Financial Professional. For some of the variations specific to Annuities
approved for sale by the New York State Insurance Department, see Appendix H.
Certain terms are capitalized in this Prospectus. Those terms are either
defined in the Glossary of Terms or in the context of the particular section.
THE SUB-ACCOUNTS
Each Sub-account of American Skandia Life Assurance Corporation Variable
Account B invests in an underlying mutual fund portfolio. Currently,
portfolios of the following underlying mutual funds are being offered: AIM
Variable Insurance Funds, Advanced Series Trust (formerly named American
Skandia Trust), Evergreen Variable Annuity Trust, First Defined Portfolio Fund
LLC, Gartmore Variable Insurance Trust, ProFunds VP, The Prudential Series
Fund and Wells Fargo Variable Trust. See the following page for the complete
list of Sub-accounts.
PLEASE READ THIS PROSPECTUS
Please read this Prospectus and the current prospectus for the underlying
mutual funds. Keep them for future reference. If you are purchasing one of the
Annuities as a replacement for an existing variable annuity or variable life
coverage or a fixed insurance policy, you should consider any surrender or
penalty charges you may incur when replacing your existing coverage and that
this Annuity may be subject to a contingent deferred sales charge if you elect
to surrender the Annuity or take a partial withdrawal. You should consider
your need to access the Annuity's Account Value and whether the Annuity's
liquidity features will satisfy that need.
AVAILABLE INFORMATION
We have also filed a Statement of Additional Information that is available
from us, without charge, upon your request. The contents of the Statement of
Additional Information are described on page 108. This Prospectus is part of
the registration statement we filed with the SEC regarding this offering.
Additional information on us and this offering is available in the
registration statement and the exhibits thereto. You may review and obtain
copies of these materials at the prescribed rates from the SEC's Public
Reference Section, 100 F Street N.E., Washington, D.C., 20549. (See SEC file
number 333-96577 for ASAP III, 333-71654 for APEX II, 333-71834 for XT6 and
333-71672 for ASL II). These documents, as well as documents incorporated by
reference, may also be obtained through the SEC's Internet Website
(http://www.sec.gov) for this registration statement as well as for other
registrants that file electronically with the SEC.
These annuities are NOT deposits or obligations of, or issued, guaranteed or
endorsed by, any bank, are NOT insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or
any other agency. An investment in an annuity involves investment risks,
including possible loss of value, even with respect to amounts allocated to
the AST Money Market Sub-account.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AMERICAN SKANDIA ADVISOR PLAN III/SM/, AMERICAN SKANDIA APEX(R) II, AMERICAN
SKANDIA XTRA CREDIT SIX/SM/ AND AMERICAN SKANDIA LIFEVEST(R) II ARE SERVICE
MARKS OR REGISTERED TRADEMARKS OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
AND ARE USED UNDER LICENSE BY ITS AFFILIATES.
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION CALL: 1-800-752-6342
Prospectus Dated: May 1, 2007 Statement of Additional Information Dated: May 1, 2007
COREPROS ASAP3SAI, APEX2SAI, XT6SAI, ASL2SAI
PLEASE SEE OUR PRIVACY POLICY AND OUR IRA, ROTH IRA AND FINANCIAL DISCLOSURE
STATEMENTS ATTACHED TO THE BACK COVER OF THIS PROSPECTUS.
INVESTMENT OPTIONS
Advanced Series Trust
AST Advanced Strategies
AST Aggressive Asset Allocation
AST AllianceBernstein Core Value
AST AllianceBernstein Growth & Income
AST AllianceBernstein Managed Index 500
AST American Century Income & Growth
AST American Century Strategic Allocation
AST Balanced Asset Allocation
AST Capital Growth Asset Allocation
AST Cohen & Steers Realty
AST Conservative Asset Allocation
AST DeAM Large-Cap Value
AST DeAM Small-Cap Value
AST Federated Aggressive Growth
AST First Trust Balanced Target
AST First Trust Capital Appreciation Target
AST Goldman Sachs Concentrated Growth
AST Goldman Sachs Mid-Cap Growth
AST Goldman Sachs Small-Cap Value
AST High Yield
AST International Growth
AST International Value
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond Debenture
AST Marsico Capital Growth
AST MFS Global Equity
AST MFS Growth
AST Mid-Cap Value
AST Money Market
AST Neuberger Berman Mid-Cap Growth
AST Neuberger Berman Mid-Cap Value
AST Neuberger Berman Small-Cap Growth
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Preservation Asset Allocation
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Asset Allocation
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
AST T. Rowe Price Natural Resources
AST UBS Dynamic Alpha
AIM Variable Insurance Funds
AIM V.I. Dynamics Fund -- Series I shares
AIM V.I. Financial Services Fund -- Series I shares
AIM V.I. Global Health Care Fund -- Series I shares
AIM V.I. Technology Fund -- Series I shares
Evergreen Variable Annuity Trust
Growth
International Equity
Omega
First Defined Portfolio Fund, LLC
First Trust(R) 10 Uncommon Values
Global Dividend Target 15
NASDAQ(R) Target 15
S&P(R) Target 24
Target Managed VIP
The Dow Target Dividend
The Dow DART 10
Value Line(R) Target 25
Gartmore Variable Insurance Trust
GVIT Developing Markets
ProFund VP
Access VP High Yield
Asia 30
Banks
Basic Materials
Bear
Biotechnology
Bull
Consumer Goods
Consumer Services
Europe 30
Financials
Health Care
Industrials
Internet
Japan
Large-Cap Growth
Large-Cap Value
Mid-Cap Growth
Mid-Cap Value
Oil & Gas
OTC
Pharmaceuticals
Precious Metals
Real Estate
Rising Rates Opportunity
Semiconductor
Short Mid-Cap
Short OTC
Short Small-Cap
Small-Cap Growth
Small-Cap Value
Technology
Telecommunications
U.S. Government Plus
UltraBull
UltraMid-Cap
UltraOTC
UltraSmall-Cap
Utilities
The Prudential Series Fund
SP International Growth
Wells Fargo Variable Trust
Wells Fargo Advantage VT Equity Income
CONTENTS
INTRODUCTION......................................................................... 1
WHY WOULD I CHOOSE TO PURCHASE ONE OF THE ANNUITIES?................................ 1
WHAT ARE SOME OF THE KEY FEATURES OF THE ANNUITIES?................................. 1
HOW DO I PURCHASE ONE OF THE ANNUITIES?............................................. 2
GLOSSARY OF TERMS.................................................................... 3
SUMMARY OF CONTRACT FEES AND CHARGES................................................. 5
EXPENSE EXAMPLES..................................................................... 13
INVESTMENT OPTIONS................................................................... 15
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO?................... 15
WHAT ARE THE FIXED ALLOCATIONS?..................................................... 33
FEES AND CHARGES..................................................................... 34
WHAT ARE THE CONTRACT FEES AND CHARGES?............................................. 34
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?........................................ 36
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?........................... 36
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES........................................... 36
PURCHASING YOUR ANNUITY.............................................................. 37
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?...................... 37
MANAGING YOUR ANNUITY................................................................ 38
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?..................... 38
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?........................................ 38
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?............................................ 39
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?........................ 39
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?.................... 39
MANAGING YOUR ACCOUNT VALUE.......................................................... 40
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?........................................ 40
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE ASAP III AND APEX II ANNUITIES?......... 40
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE ASAP III AND APEX II
ANNUITIES?........................................................................ 40
HOW DO I RECEIVE CREDITS UNDER THE XT6 ANNUITY?..................................... 41
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE XT6 ANNUITY?..................... 41
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?.......... 42
DO YOU OFFER DOLLAR COST AVERAGING?................................................. 44
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?.................................... 44
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?........................................ 45
DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?. 45
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS? 46
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?............. 46
HOW DO THE FIXED ALLOCATIONS WORK?.................................................. 47
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?................................... 47
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?.......................................... 47
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?...................................... 49
ACCESS TO ACCOUNT VALUE.............................................................. 50
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?.................................... 50
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?....................................... 50
CAN I WITHDRAW A PORTION OF MY ANNUITY?............................................. 50
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?....................................... 50
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?..... 51
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(t) OF THE INTERNAL REVENUE
CODE?............................................................................. 51
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?......... 51
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?........................................... 51
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?......................... 52
(i)
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?......................................... 52
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?................................. 53
HOW ARE ANNUITY PAYMENTS CALCULATED?................................................. 54
LIVING BENEFIT PROGRAMS............................................................... 55
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY
ARE ALIVE?......................................................................... 55
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)..................................... 55
GUARANTEED RETURN OPTION (GRO)....................................................... 59
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)......................................... 62
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)............................................. 65
LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)..................................... 69
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)......................... 74
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE)......... 78
DEATH BENEFIT......................................................................... 85
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?........................................ 85
BASIC DEATH BENEFIT.................................................................. 85
OPTIONAL DEATH BENEFITS.............................................................. 85
AMERICAN SKANDIA'S ANNUITY REWARDS................................................... 90
PAYMENT OF DEATH BENEFITS............................................................ 90
VALUING YOUR INVESTMENT............................................................... 93
HOW IS MY ACCOUNT VALUE DETERMINED?.................................................. 93
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?........................................... 93
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?.......................................... 93
HOW DO YOU VALUE FIXED ALLOCATIONS?.................................................. 93
WHEN DO YOU PROCESS AND VALUE TRANSACTIONS?.......................................... 93
WHAT HAPPENS TO MY UNITS WHEN THERE IS A CHANGE IN DAILY ASSET-BASED CHARGES?........ 94
TAX CONSIDERATIONS.................................................................... 95
GENERAL INFORMATION................................................................... 103
HOW WILL I RECEIVE STATEMENTS AND REPORTS?........................................... 103
WHO IS AMERICAN SKANDIA?............................................................. 103
WHAT ARE SEPARATE ACCOUNTS?.......................................................... 103
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?................................. 104
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?............................... 105
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 106
FINANCIAL STATEMENTS................................................................. 107
HOW TO CONTACT US.................................................................... 107
INDEMNIFICATION...................................................................... 107
LEGAL PROCEEDINGS.................................................................... 107
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 108
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B................. A-1
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS................................... B-1
APPENDIX C - PLUS40/TM/ OPTIONAL LIFE INSURANCE RIDER................................. C-1
APPENDIX D - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS...................... D-1
APPENDIX E - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL
DEATH BENEFITS...................................................................... E-1
APPENDIX F - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU...................... F-1
APPENDIX G - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT.. G-1
APPENDIX H - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE DEPARTMENT... H-1
(ii)
INTRODUCTION
WHY WOULD I CHOOSE TO PURCHASE ONE OF THE ANNUITIES?
The Annuities are frequently used for retirement planning because they allow
you to accumulate retirement savings and also offer annuity payment options
when you are ready to begin receiving income. Each Annuity also offers a
choice of different optional benefits, for an additional charge, that can
provide principal protection or guaranteed minimum income protection for
Owners while they are alive and one or more Death Benefits that can protect
your retirement savings if you die during a period of declining markets. Each
Annuity may be used as an investment vehicle for "qualified" investments,
including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit
plans and defined contribution plans such as 401(k), profit sharing and money
purchase plans) or Tax Sheltered annuities (or 403(b)). Each Annuity may also
be used as an investment vehicle for "non-qualified" investments. Each Annuity
allows you to invest your money in a number of Sub-accounts as well as in one
or more Fixed Allocations. This Prospectus describes four different Annuities
including features that these Annuities have in common as well as differences.
For a summary of each Annuity's features, please refer to Appendix F entitled,
"Selecting the Variable Annuity That's Right for You."
When an Annuity is purchased as a "non-qualified" investment, you generally
are not taxed on any investment gains the Annuity earns until you make a
withdrawal or begin to receive annuity payments. This feature, referred to as
"tax-deferral", can be beneficial to the growth of your Account Value because
money that would otherwise be needed to pay taxes on investment gains each
year remains invested and can earn additional money. However, because the
Annuity is designed for long-term retirement savings, a 10% penalty tax may be
applied on withdrawals you make before you reach age 59 1/2. Annuities
purchased as a non-qualified investment are not subject to the maximum
contribution limits that may apply to a qualified investment, and are not
subject to required minimum distributions after age 70 1/2.
When an Annuity is purchased as a "qualified" investment, you should consider
that the Annuity does not provide any tax advantages in addition to the
preferential treatment already available through your retirement plan under
the Internal Revenue Code. In other words, you need not invest in an Annuity
to gain the preferential tax treatment provided by your retirement plan. An
Annuity, however, may offer features and benefits in addition to providing tax
deferral that other investment vehicles may not offer, including Death Benefit
protection for your beneficiaries, lifetime income options and the ability to
make transfers between numerous variable investment options offered under the
Annuity. You should consult with your Financial Professional as to whether the
overall benefits and costs of the Annuity are appropriate considering your
overall financial plan.
WHAT ARE SOME OF THE KEY FEATURES OF THE ANNUITIES?
.. Each Annuity is a "flexible premium deferred annuity." It is called
"flexible premium" because you have considerable flexibility in the timing
and amount of Purchase Payments. Generally, investors "defer" receiving
annuity payments until after an accumulation period.
.. Each Annuity offers both Sub-accounts and Fixed Allocations. If you
allocate your Account Value to Sub-accounts, the value of your Annuity
will vary daily to reflect the investment performance of the underlying
investment options. Fixed Allocations of different durations are offered
that are guaranteed by us, but may have a Market Value Adjustment if you
withdraw or transfer your Account Value before the Maturity Date.
.. Each Annuity features two distinct periods - the accumulation period and
the payout period. During the accumulation period your Account Value is
allocated to one or more investment options.
.. During the payout period, commonly called "annuitization," you can elect
to receive annuity payments (1) for life; (2) for life with a guaranteed
minimum number of payments; (3) based on joint lives; or (4) for a
guaranteed number of payments. We currently make annuity payments
available on a fixed basis only.
.. Each Annuity offers optional income benefits, for an additional charge,
that can provide principal protection or guaranteed minimum income
protection for Owners while they are alive.
.. Each Annuity offers a basic Death Benefit. It also offers optional Death
Benefits that provide an enhanced level of protection for your
beneficiary(ies) for an additional charge.
.. You are allowed to withdraw a limited amount of money from each Annuity on
an annual basis without any charges, although any optional guaranteed
benefit you elect may be reduced. Other product features allow you to
access your Account Value as necessary, although a charge may apply.
.. Transfers between investment options are tax-free. Currently, you may make
twenty transfers each year free of charge. We also offer several programs
that enable you to manage your Account Value as your financial needs and
investment performance change.
1
With respect to XT6 only:
. If you purchase this Annuity, we apply an additional amount (referred to
as an XTra Credit/SM/, Purchase Credit or Credit) to your Account Value
with each Purchase Payment you make, including your initial Purchase
Payment and any additional Purchase Payments during the first six Annuity
Years.
. Please note that during the first 10 years, the total asset-based charges
on the XT6 Annuity are higher than many of our other annuities. In
addition, the Contingent Deferred Sales Charge (CDSC) on the XT6 Annuity
is higher and is deducted for a longer period of time as compared to our
other annuities. The XTra Credit/SM/ amount is included in your Account
Value. However, American Skandia may take back all XTra Credit amounts if
you return your Annuity under the "free-look" provision. In addition,
American Skandia may take back XTra Credits associated with any Purchase
Payment if (a) the XTra Credit was applied within twelve (12) months
prior to the death of the Owner (or Annuitant if entity-owned) or (b) the
XTra Credit was applied within 12 months prior to a request to surrender
the Annuity under the medically-related surrender provision. If you
qualify for the 6.5% Xtra Credit in the first year (for annuities issued
on or after February 13, 2006), only 6% of that amount will be taken back
upon death or medically-related surrender request, both as described
above. However, we will take back the entire 6.5% if you "free look" your
Annuity.
. In these situations, your Account Value could be substantially reduced.
The amount we take back will equal the XTra Credit, without adjustment up
or down for investment performance. Therefore, any gain on the XTra
Credit amount will not be taken back. But if there was a loss on the XTra
Credit, the amount we take back will still equal the amount of the XTra
Credit. Additional conditions and restrictions apply. We do not deduct a
CDSC in any situation where we take back the XTra Credit amount.
. If replacing an annuity, please consider all charges associated with that
annuity. Credits applicable to bonus products should not be viewed as an
offset of any surrender charge that applies to any annuity contract you
currently own. For more information on all available annuities, please
see Appendix F of this prospectus.
With respect to APEX II only:
. For annuities issued on or after June 20, 2005, this Annuity offers a
Loyalty Credit which we add to your Account Value with respect to
Purchase Payments that have been made during the first four Annuity Years
less withdrawals through the fifth Annuity Anniversary, subject to our
rules and state availability.
With respect to ASAP III only:
. For annuities issued on or after February 13, 2006, this Annuity offers a
Loyalty Credit which we add to your Account Value with respect to
Purchase Payments that have been made during the first four Annuity Years
less withdrawals through the fifth Annuity Anniversary, subject to our
rules and state availability.
HOW DO I PURCHASE ONE OF THE ANNUITIES?
We sell each Annuity through licensed, registered Financial Professionals.
Unless we agree otherwise and subject to our rules, each Annuity has minimum
initial Purchase Payments as follows: $1,000 for ASAP III, $10,000 for XT6 and
APEX II, and $15,000 for ASL II. We may allow you to make a lower initial
Purchase Payment provided you establish an electronic funds transfer under
which Purchase Payments received in the first Annuity Year total at least the
minimum initial Purchase Payment for the Annuity purchased. Unless we agree
otherwise and subject to our rules, if the Annuity is owned by an individual
or individuals, the oldest of those Owners must not be older than a maximum
issue age as of the Issue Date of the Annuity as follows: age 80 for ASAP III,
age 75 for XT6 and age 85 for APEX II. For ASL II, there is no maximum issue
age, however the basic death benefit provides greater protection for Owners
under age 85. If the Annuity is owned by an entity, the annuitant must not be
older than the maximum issue age, as of the Issue Date of the Annuity unless
we agree otherwise. The availability and level of protection of certain
optional benefits may vary based on the age of the Owner or Annuitant on the
Issue Date of the Annuity, the date the benefit is elected, or the date of the
Owner's death.
2
GLOSSARY OF TERMS
Many terms used within this Prospectus are described within the text where
they appear. The description of those terms are not repeated in this Glossary
of Terms.
Account Value: The value of each allocation to a Sub-account (also referred to
as a "variable investment option") or a Fixed Allocation prior to the Annuity
Date, plus any earnings, and/or less any losses, distributions and charges.
The Account Value is calculated before we assess any applicable Contingent
Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on an
annuity anniversary, any fee that is deducted from the Annuity annually in
arrears. The Account Value is determined separately for each Sub-account and
for each Fixed Allocation, and then totaled to determine the Account Value for
your entire Annuity. The Account Value of each Fixed Allocation on other than
its Maturity Date may be calculated using a market value adjustment. With
respect to XT6, the Account Value includes any Credits we applied to your
Purchase Payments that we are entitled to take back under certain
circumstances. With respect to ASAP III and APEX II, the Account Value
includes any Loyalty Credit we apply. With respect to Annuities with a Highest
Daily Lifetime Five Income Benefit election, Account Value includes the value
of any allocation to the Benefit Fixed Rate Account.
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 Owner to begin receiving periodic payments for life
(or joint lives), for a guaranteed minimum number of payments or for life with
a guaranteed minimum number of payments.
Annuity Date: The date you choose for annuity payments to commence. Unless we
agree otherwise, for Annuities issued on or after November 20, 2006, the
Annuity Date must be no later than the first day of the calendar month
coinciding with or next following the later of: (a) the oldest Owner's or
Annuitant's 95/th/ birthday, whichever occurs first, and (b) the fifth
anniversary of the Issue Date.
Annuity Year: A 12-month period commencing on the Issue Date of the Annuity
and each successive 12-month period thereafter.
Benefit Fixed Rate Account: An investment option offered as part of this
Annuity that is used only if you have elected the optional Highest Daily
Lifetime Five Income Benefit. Amounts allocated to the Benefit Fixed Rate
Account earn a fixed rate of interest, and are held within our general
account. You may not allocate Purchase Payments to the Benefit Fixed Rate
Account. Rather, Account Value is transferred to the Benefit Fixed Rate
Account only under the asset transfer feature of the Highest Daily Lifetime
Five Income Benefit.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Combination 5% Roll-Up and HAV Death Benefit: We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing the greater of the Highest Anniversary
Value Death Benefit and a 5% annual increase on Purchase Payments adjusted for
withdrawals.
Contingent Deferred Sales Charge (CDSC): This is a sales charge that may be
deducted when you make a full or partial withdrawal under your Annuity. We
refer to this as a "contingent" charge because it is imposed only if you make
a withdrawal. The charge is a percentage of each applicable Purchase Payment
that is being withdrawn. The period during which a particular percentage
applies is measured from the Issue Date of the Annuity. The amount and
duration of the CDSC varies among ASAP III, APEX II and XT6. There is no CDSC
for ASL II. See "Summary of Contract Fees and Charges" for details on the CDSC
for each Annuity.
Enhanced Beneficiary Protection Death Benefit: We offer an Optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing amounts in addition to the basic Death
Benefit that can be used to offset federal and state taxes payable on any
taxable gains in your Annuity at the time of your death.
Fixed Allocation: An investment option that offers a fixed rate of interest
for a specified Guarantee Period during the accumulation period.
Free Look: Under state insurance laws, you have the right, during a limited
period of time, to examine your Annuity and decide if you want to keep it or
cancel it. This right is referred to as your "free look" right. The length of
this time period depends on the law of your state, and may vary depending on
whether your purchase is a replacement or not. Check your Annuity contract for
more details about your free look right.
Guaranteed Minimum Income Benefit (GMIB): We offer an optional benefit that,
for an additional cost, after a seven-year waiting period, guarantees your
ability to begin receiving income from your Annuity in the form of annuity
payments based on your total Purchase Payments and an annual increase of 5% on
such Purchase Payments adjusted for withdrawals (called the "Protected Income
Value"), regardless of the impact of market performance on your Account Value.
3
Guaranteed Minimum Withdrawal Benefit (GMWB): We offer an optional benefit
that, for an additional cost, guarantees your ability to withdraw amounts over
time equal to an initial principal value, regardless of the impact of market
performance on your Account Value.
Guarantee Period: A period of time during the accumulation period where we
credit a fixed rate of interest on a Fixed Allocation.
Guaranteed Return Option Plus/SM/ (GRO Plus/SM/)/Guaranteed Return Option:
We offer an optional benefit that, for an additional cost, guarantees a
"return of premium" at a future date, while allowing you to allocate all or a
portion of your Account Value to certain Sub-accounts.
Highest Anniversary Value Death Benefit ("HAV"): We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing a death benefit equal to the greater of
the basic Death Benefit and the Highest Anniversary Value, less proportional
withdrawals.
Highest Daily Lifetime Five Income Benefit: We offer an optional benefit that,
for an additional cost, guarantees your ability to withdraw an annual amount
equal to a percentage of a principal value called the Total Protected
Withdrawal Value. Subject to our rules regarding the timing and amount of
withdrawals, we guarantee these withdrawal amounts, regardless of the impact
of market performance on your Account Value.
Highest Daily Value Death Benefit ("HDV"): We offer an optional Death Benefit
that, for an additional cost, provides an enhanced level of protection for
your beneficiary(ies) by providing a death benefit equal to the greater of the
basic Death Benefit and the Highest Daily Value, less proportional withdrawals.
Interim Value: The value of a Fixed Allocation on any date other than the
Maturity Date. The Interim Value is equal to the initial value allocated to
the Fixed Allocation plus all interest credited to the Fixed Allocation as of
the date calculated, less any transfers or withdrawals from the Fixed
Allocation.
Issue Date: The effective date of your Annuity.
Lifetime Five Income Benefit: We offer an optional benefit that, for an
additional cost, guarantees your ability to withdraw an annual amount equal to
a percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value.
MVA: A market value adjustment used in the determination of Account Value of
each Fixed Allocation on any day more than 30 days prior to the Maturity Date
of such Fixed Allocation.
Owner: With an Annuity issued as an individual annuity contract, the Owner is
either an eligible entity or person named as having ownership rights in
relation to the Annuity. With an Annuity issued as a certificate under a group
annuity contract, the "Owner" refers to the person or entity who has the
rights and benefits designated as to the "Participant" in the certificate.
Spousal Lifetime Five Income Benefit: We offer an optional benefit that, for
an additional cost, guarantees until the later death of two Designated Lives
(as defined in this Prospectus) the ability to withdraw an annual amount equal
to a percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value.
Sub-Account: We issue your Annuity through our separate account. See "What is
the Separate Account?" under the General Information section. The separate
account invests in underlying mutual fund portfolios. From an accounting
perspective, we divide the separate account into a number of sections, each of
which corresponds to a particular underlying mutual fund portfolio. We refer
to each such section of our separate account as a "Sub-account".
Surrender Value: The value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender minus any applicable CDSC, Annual Maintenance Fee, Tax Charge and
the charge for any optional benefits and any additional amounts we applied to
your Purchase Payments that we may be entitled to recover under certain
circumstances. The surrender value may be calculated using a MVA with respect
to amounts in any Fixed Allocation. No CDSC applies to the ASL II Annuity.
Unit: A measure used to calculate your Account Value in a Sub-account during
the accumulation period.
Valuation Day: Every day the New York Stock Exchange is open for trading or
any other day the Securities and Exchange Commission requires mutual funds or
unit investment trusts to be valued.
4
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and charges for the Annuities. Some fees and
charges are assessed against each Annuity while others are assessed against
assets allocated to the Sub-accounts. The fees and charges that are assessed
against an Annuity include any applicable Contingent Deferred Sales Charge,
Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are
assessed against the Sub-accounts are the Mortality and Expense Risk charge,
the charge for Administration of the Annuity, any applicable Distribution
Charge and the charge for certain optional benefits you elect, other than the
Guaranteed Minimum Income Benefit, which is assessed against the Protected
Income Value. Each underlying mutual fund portfolio assesses a fee for
investment management, other expenses and, with some mutual funds, a 12b-1
fee. The prospectus for each underlying mutual fund provides more detailed
information about the expenses for the underlying mutual funds.
The following tables provide a summary of the fees and charges you will pay if
you surrender your Annuity or transfer Account Value among investment options.
These fees and charges are described in more detail within this Prospectus.
CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY/ 1/
ASAP III
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+
------------------------------------------------------
7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
------------------------------------------------------
APEX II
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5+
------------------------------
8.5% 8.0% 7.0% 6.0% 0.0%
------------------------------
XT6
For Annuities issued prior to November 20, 2006, the following schedule
applies:
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%
--------------------------------------------------------------------
For Annuities issued on or after November 20, 2006 (subject to state
availability), the following schedule applies/ 2/:
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% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
--------------------------------------------------------------------
ASL II
There is no CDSC for this Annuity
1 The Contingent Deferred Sales Charges are assessed upon surrender or
withdrawal. The charge is a percentage of each applicable Purchase Payment
deducted upon surrender or withdrawal. The period during which a particular
percentage applies is measured from the Issue Date of the Annuity.
2 In jurisdictions that have not yet approved this schedule, the schedule for
Annuities issued prior to November 20, 2006 will apply.
- ----------------------------------------------------------------------------------------
OTHER TRANSACTION FEES AND CHARGES
(assessed against each Annuity)
- ----------------------------------------------------------------------------------------
FEE/CHARGE ASAP III APEX II ASL II XT6
- ----------------------------------------------------------------------------------------
Transfer Fee/ 1/ $15.00 maximum $15.00 maximum $15.00 maximum $15.00 maximum
currently, $10.00 currently, $10.00 currently, $10.00 currently, $10.00
- ----------------------------------------------------------------------------------------
Tax Charge/ 2/ 0% to 3.5% 0% to 3.5% 0% to 3.5% 0% to 3.5%
- ----------------------------------------------------------------------------------------
1 Currently, we deduct the fee after the 20/th/ transfer each Annuity Year.
We guarantee that the number of charge free transfers per Annuity Year will
never be less than 8.
2 This charge is deducted generally at the time you annuitize your Annuity.
5
The following table provides a summary of the periodic fees and charges you
will pay while you own your Annuity, excluding the underlying mutual fund
Portfolio annual expenses. These fees and charges are described in more detail
within this Prospectus.
- --------------------------------------------------------------------------------------------
PERIODIC FEES AND CHARGES
(assessed against each Annuity)
- --------------------------------------------------------------------------------------------
FEE/CHARGE ASAP III APEX II ASL II XT6
Annual Lesser
Maintenance Lesser of $35 or 2% Lesser of $35 or 2% Lesser of $35 or 2% of $35
Fee/ 1/ of of of or 2%
Account Account Account of
Value/ Value/ Value/ Account
2/ 2/ 2/ Value
--------------------------------------------------------------------
Beneficiary Lesser Lesser Lesser Lesser
Continuation Option of $30 of $30 of $30 of $30
Only or 2% or 2% or 2% or 2%
------------------------------------------------------------------------------
ANNUAL
FEES/CHARGES
OF THE
SUB-ACCOUNTS/
3/
(assessed
as a
percentage
of the
daily net
assets of
the
Sub-accounts)
------------------------------------------------------------------------------
FEE/CHARGE
0.50% 1.50% 1.50% 0.50%
Mortality &
Expense
Risk
Charge/
4/
------------------------------------------------------------------------------
0.15% 0.15% 0.15% 0.15%
Administration
Charge/ 4/
------------------------------------------------------------------------------
N/A N/A
Distribution 0.60% 1.00%
Charge/ in in
5/ Annuity Annuity
Years Years
1-8 1-10
------------------------------------------------------------------------------
Settlement 1.40% 1.40% 1.40% 1.
Service (qualified); (qualified); (qualified); 40%
Charge/ 1.00% 1.00% 1.00% (qualified);
6/ (non-qualified) (non-qualified) (non-qualified) 1.00%
(non-qualified)
------------------------------------------------------------------------------
1.65% 1.65%
Total 1.25% 1.65%
Annual in in
Charges Annuity Annuity
of Years Years
the 1-8; 0.65% 1-10; 0.65%
Sub-accounts in in
Annuity Annuity
(excluding Years Years
settlement 9 11
service and and
charge) later later
------------------------------------------------------------------------------
1 Assessed annually on the Annuity's anniversary date or upon surrender. For
beneficiaries who elect the non-qualified Beneficiary Continuation Option,
the fee is only applicable if Account Value is less than $25,000.
2 Only applicable if Account Value is less than $100,000.
3 These charges are deducted daily and apply to the Sub-accounts only.
4 The combination of the Mortality and Expense Risk Charge and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this
Prospectus.
5 The Distribution Charge is 0.00% in Annuity Years 9+ for ASAP III and in
Annuity Years 11+ for XT6.
6 The Mortality & Expense Risk Charge, the Administration Charge and the
Distribution Charge (if applicable) do not apply if you are a beneficiary
under the Beneficiary Continuation Option. The Settlement Service Charge
applies only if your beneficiary elects the Beneficiary Continuation
Option. The 1.00% and 1.40% charges set forth above are annual charges that
are assessed against the Account Value in the Sub-accounts.
6
The following table sets forth the charge for each optional benefit under the
Annuity. These fees would be in addition to the periodic fees and transaction
fees set forth in the tables above.
- -----------------------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES
- -----------------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL ANNUAL
CHARGE CHARGE/ 1/ CHARGE/ 1/ CHARGE/ 1/ CHARGE/ 1/
for ASAP III for APEX II for ASL II for XT6
- -----------------------------------------------------------------------------------------------------------------
GUARANTEED RETURN OPTION Plus/SM/ 0.75% maximum/ 2/ 1.50% in Annuity 1.90% 1.90% 1.90% in Annuity
(GRO Plus/SM/ )/GUARANTEED RETURN 0.25% current Years 1-8; Years 1-10;
OPTION charge 0.90% in 0.90% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
GUARANTEED MINIMUM WITHDRAWAL BENEFIT 1.00% maximum/ 2/ 1.60% in Annuity 2.00% 2.00% 2.00% in Annuity
(GMWB) 0.35% current Years 1-8; Years 1-10;
charge 1.00% in 1.00% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
GUARANTEED MINIMUM INCOME BENEFIT 1.00% maximum/ 2/ 1.25% in Annuity 1.65% PLUS 1.65% 1.65% in Annuity
(GMIB) 0.50% current Years 1-8; 0.50% of PLUS Years 1-10;
charge 0.65% in GMIB 0.50% of 0.65% in Annuity
Annuity Years 9 Protected GMIB Years 11 and
and later PLUS Income Protected later PLUS
0.50% of GMIB Value Income 0.50% of GMIB
Protected Income Value Protected Income
Value Value
- -----------------------------------------------------------------------------------------------------------------
LIFETIME FIVE/SM/ INCOME BENEFIT 1.50% maximum/ 2/ 1.85% in Annuity 2.25% 2.25% 2.25% in Annuity
0.60% current Years 1-8; Years 1-10;
charge 1.25% in 1.25% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
SPOUSAL LIFETIME FIVE INCOME BENEFIT 1.50% maximum/ 2 2.00% in Annuity 2.40% 2.40% 2.40% in Annuity
/0.75% current Years 1-8; Years 1-10;
charge 1.40% in 1.40% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME FIVE INCOME 1.50% maximum/ 2 1.85% in Annuity 2.25% 2.25% 2.25% in Annuity
BENEFIT /0.60% current Years 1-8; Years 1-10;
charge 1.25% in 1.25% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION DEATH 0.25% 1.50% in Annuity 1.90% 1.90% 1.90% in Annuity
BENEFIT Years 1-8; Years 1-10;
0.90% in 0.90% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
HIGHEST ANNIVERSARY VALUE DEATH 0.25% 1.50% in Annuity 1.90% 1.90% 1.90% in Annuity
BENEFIT ("HAV") Years 1-8; Years 1-10;
0.90% in 0.90% in Annuity
Annuity Years 9 Years 11 and
and later later
- -----------------------------------------------------------------------------------------------------------------
7
- ---------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES
- ---------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL ANNUAL
CHARGE CHARGE/ 1/ CHARGE/ 1/ CHARGE/ 1/ CHARGE/ 1/
for ASAP III for APEX II for ASL II for XT6
- ---------------------------------------------------------------------------------------------------
COMBINATION 5% ROLL-UP AND HAV DEATH 0.50% 1.75% in 2.15% 2.15% 2.15% in
BENEFIT Annuity Annuity
Years 1-8; Years 1-10;
1.15% in 1.15% in
Annuity Annuity
Years 9 and Years 11
later and later
- ---------------------------------------------------------------------------------------------------
HIGHEST DAILY VALUE DEATH BENEFIT 0.50% 1.75% in 2.15% 2.15% 2.15% in
("HDV") Annuity Annuity
Years 1-8; Years 1-10;
1.15% in 1.15% in
Annuity Annuity
Years 9 and Years 11
later and later
- ---------------------------------------------------------------------------------------------------
Please refer to the section of this Prospectus that describes each optional benefit for a complete
description of the benefit, including any restrictions or limitations that may apply.
- ---------------------------------------------------------------------------------------------------
1 The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit. With respect to GMIB only, the 0.50% current charge is
assessed against the average GMIB Protected Income Value, and not against
the value of the Sub-accounts. These optional benefits are not available
under the Beneficiary Continuation Option.
2 We have the right to increase the charge for each benefit up to the
indicated maximum charge upon a step-up or for a new election of the
benefit, or upon a reset of the benefit, if permitted. However, we have no
present intention of increasing the charge to that maximum level.
The following table provides the range (minimum and maximum) of the total
annual expenses for the underlying mutual funds ("Portfolios") as of
December 31, 2006. 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 0.61% 2.16%
- -----------------------------------------------------------------------------------------------------------------------
The following are the total annual expenses for each underlying mutual fund
("Portfolio") as of December 31, 2006, except as noted. The "Total Annual
Portfolio Operating Expenses" reflect the combination of the underlying
Portfolio's investment management fee, other expenses and any 12b-1 fees. Each
figure is stated as a percentage of the underlying Portfolio's average daily
net assets. There is no guarantee that actual expenses will be the same as
those shown in the table. For certain of the underlying Portfolios, a portion
of the management fee has been waived and/or other expenses have been
partially reimbursed. The existence of any such fee waivers and/or
reimbursements have been reflected in the footnotes. The following expenses
are deducted by the underlying Portfolio before it provides American Skandia
with the daily net asset value. The underlying Portfolio information was
provided by the underlying mutual funds and has not been independently
verified by us. See the prospectuses or statements of additional information
of the underlying Portfolios for further details. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-800-752-6342.
8
- --------------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------------------
For the year ended December 31, 2006
-----------------------------------------------------
UNDERLYING PORTFOLIO Total
Acquired Annual
Portfolio Portfolio
Management Other Fees & Operating
Fee Expenses/ 1/ 12b-1 Fee Expenses Expenses
- --------------------------------------------------------------------------------------------------------------
Advanced Series Trust/ 3/
AST Advanced Strategies 0.85% 0.24% 0.00% 0.00% 1.09%
AST Aggressive Asset Allocation /2/ 0.15% 0.05% 0.00% 0.99% 1.19%
AST AllianceBernstein Core Value 0.75% 0.14% 0.00% 0.00% 0.89%
AST AllianceBernstein Growth & Income 0.75% 0.11% 0.00% 0.00% 0.86%
AST AllianceBernstein Managed Index 500 0.60% 0.14% 0.00% 0.00% 0.74%
AST American Century Income & Growth 0.75% 0.15% 0.00% 0.00% 0.90%
AST American Century Strategic Allocation /4/ 0.85% 0.21% 0.00% 0.00% 1.06%
AST Balanced Asset Allocation /2/ 0.15% 0.02% 0.00% 0.90% 1.07%
AST Capital Growth Asset Allocation /2/ 0.15% 0.02% 0.00% 0.95% 1.12%
AST Cohen & Steers Realty 1.00% 0.13% 0.00% 0.00% 1.13%
AST Conservative Asset Allocation /2/ 0.15% 0.04% 0.00% 0.89% 1.08%
AST DeAM Large-Cap Value 0.85% 0.15% 0.00% 0.00% 1.00%
AST DeAM Small-Cap Value 0.95% 0.23% 0.00% 0.00% 1.18%
AST Federated Aggressive Growth 0.95% 0.14% 0.00% 0.00% 1.09%
AST First Trust Balanced Target 0.85% 0.21% 0.00% 0.00% 1.06%
AST First Trust Capital Appreciation Target 0.85% 0.19% 0.00% 0.00% 1.04%
AST Goldman Sachs Concentrated Growth 0.90% 0.13% 0.00% 0.00% 1.03%
AST Goldman Sachs Mid-Cap Growth 1.00% 0.15% 0.00% 0.00% 1.15%
AST Goldman Sachs Small-Cap Value 0.95% 0.18% 0.00% 0.00% 1.13%
AST High Yield /5/ 0.75% 0.15% 0.00% 0.00% 0.90%
AST International Growth /6/ 1.00% 0.15% 0.00% 0.00% 1.15%
AST International Value/ 7/ 1.00% 0.13% 0.00% 0.00% 1.13%
AST JPMorgan International Equity 0.87% 0.16% 0.00% 0.00% 1.03%
AST Large-Cap Value 0.75% 0.11% 0.00% 0.00% 0.86%
AST Lord Abbett Bond-Debenture 0.80% 0.14% 0.00% 0.00% 0.94%
AST Marsico Capital Growth 0.90% 0.11% 0.00% 0.00% 1.01%
AST MFS Global Equity 1.00% 0.25% 0.00% 0.00% 1.25%
AST MFS Growth 0.90% 0.13% 0.00% 0.00% 1.03%
AST Mid-Cap Value 0.95% 0.21% 0.00% 0.00% 1.16%
AST Money Market 0.50% 0.11% 0.00% 0.00% 0.61%
AST Neuberger Berman Mid-Cap Growth 0.90% 0.14% 0.00% 0.00% 1.04%
AST Neuberger Berman Mid-Cap Value 0.89% 0.11% 0.00% 0.00% 1.00%
AST Neuberger Berman Small-Cap Growth /8/ 0.95% 0.16% 0.00% 0.00% 1.11%
AST PIMCO Limited Maturity Bond 0.65% 0.12% 0.00% 0.00% 0.77%
AST PIMCO Total Return Bond 0.65% 0.12% 0.00% 0.00% 0.77%
AST Preservation Asset Allocation /2/ 0.15% 0.08% 0.00% 0.82% 1.05%
AST Small-Cap Growth 0.90% 0.18% 0.00% 0.00% 1.08%
AST Small-Cap Value/ 9/ 0.90% 0.13% 0.00% 0.00% 1.03%
AST T. Rowe Price Asset Allocation 0.85% 0.14% 0.00% 0.00% 0.99%
AST T. Rowe Price Global Bond 0.80% 0.16% 0.00% 0.00% 0.96%
AST T. Rowe Price Large-Cap Growth 0.90% 0.11% 0.00% 0.00% 1.01%
AST T. Rowe Price Natural Resources Portfolio 0.90% 0.13% 0.00% 0.00% 1.03%
AST UBS Dynamic Alpha /10/ 1.00% 0.21% 0.00% 0.00% 1.21%
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
AIM Variable Insurance Funds /11/
AIM V.I. Dynamics Fund - Series I shares/ 12/ 0.75% 0.38% 0.00% 0.01% 1.14%
AIM V.I. Financial Services Fund - Series I shares 0.75% 0.37% 0.00% 0.01% 1.13%
AIM V.I. Global Health Care Fund - Series I shares/ 13/ 0.75% 0.35% 0.00% 0.01% 1.11%
AIM V.I. Technology Fund - Series I shares 0.75% 0.37% 0.00% 0.00% 1.12%
9
- --------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------
For the year ended December 31, 2006
--------------------------------------------------------
UNDERLYING PORTFOLIOS Acquired Total Annual
Portfolio Portfolio
Management Other Fees & Operating
Fee Expenses/ 1/ 12b-1 Fee Expenses Expenses
- --------------------------------------------------------------------------------------------------
Evergreen Variable Annuity Trust
Growth 0.69% 0.19% 0.00% 0.01% 0.89%
International Equity 0.40% 0.28% 0.00% 0.00% 0.68%
Omega 0.52% 0.18% 0.00% 0.01% 0.71%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
First Defined Portfolio Fund, LLC /14,15/
First Trust(R) 10 Uncommon Values 0.60% 0.94% 0.25% 0.00% 1.79%
Global Dividend Target 15 0.60% 0.62% 0.25% 0.00% 1.47%
NASDAQ(R) Target 15 0.60% 0.99% 0.25% 0.00% 1.84%
S&P(R) Target 24 0.60% 0.71% 0.25% 0.00% 1.56%
Target Managed VIP 0.60% 0.52% 0.25% 0.00% 1.37%
The Dow Target Dividend 0.60% 0.52% 0.25% 0.00% 1.37%
The Dow/SM/ DART 10 0.60% 0.62% 0.25% 0.00% 1.47%
Value Line(R) Target 25 0.60% 0.56% 0.25% 0.00% 1.41%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
Gartmore Variable Insurance Trust /16/
GVIT Developing Markets 1.05% 0.35% 0.25% 0.00% 1.65%
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
ProFund VP /17/
Access VP High Yield 0.75% 0.94% 0.25% 0.00% 1.94%
Asia 30 0.75% 0.66% 0.25% 0.00% 1.66%
Banks 0.75% 0.77% 0.25% 0.00% 1.77%
Basic Materials 0.75% 0.73% 0.25% 0.00% 1.73%
Bear 0.75% 0.69% 0.25% 0.00% 1.69%
Biotechnology 0.75% 0.77% 0.25% 0.00% 1.77%
Bull 0.75% 0.67% 0.25% 0.00% 1.67%
Consumer Goods 0.75% 0.84% 0.25% 0.00% 1.84%
Consumer Services 0.75% 1.16% 0.25% 0.00% 2.16%
Europe 30 0.75% 0.65% 0.25% 0.00% 1.65%
Financials 0.75% 0.72% 0.25% 0.00% 1.72%
Health Care 0.75% 0.72% 0.25% 0.00% 1.72%
Industrials 0.75% 0.87% 0.25% 0.00% 1.87%
Internet 0.75% 0.74% 0.25% 0.00% 1.74%
Japan 0.75% 0.66% 0.25% 0.00% 1.66%
Large-Cap Growth 0.75% 0.71% 0.25% 0.00% 1.71%
Large-Cap Value 0.75% 0.70% 0.25% 0.00% 1.70%
Mid-Cap Growth 0.75% 0.71% 0.25% 0.00% 1.71%
Mid-Cap Value 0.75% 0.71% 0.25% 0.00% 1.71%
Oil & Gas 0.75% 0.70% 0.25% 0.00% 1.70%
OTC 0.75% 0.67% 0.25% 0.00% 1.67%
Pharmaceuticals 0.75% 0.72% 0.25% 0.00% 1.72%
Precious Metals 0.75% 0.68% 0.25% 0.00% 1.68%
Real Estate 0.75% 0.72% 0.25% 0.00% 1.72%
Rising Rates Opportunity 0.75% 0.61% 0.25% 0.00% 1.61%
Semiconductor 0.75% 0.81% 0.25% 0.00% 1.81%
Short Mid-Cap 0.75% 0.80% 0.25% 0.00% 1.80%
Short OTC 0.75% 0.67% 0.25% 0.00% 1.67%
Short Small-Cap 0.75% 0.66% 0.25% 0.00% 1.66%
Small-Cap Growth 0.75% 0.71% 0.25% 0.00% 1.71%
Small-Cap Value 0.75% 0.74% 0.25% 0.00% 1.74%
Technology 0.75% 0.74% 0.25% 0.00% 1.74%
10
- -----------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- -----------------------------------------------------------------------------------------------------
For the year ended December 31, 2006
--------------------------------------------------------
UNDERLYING PORTFOLIOS Acquired Total Annual
Portfolio Portfolio
Management Other Fees & Operating
Fee Expenses /1/ 12b-1 Fee Expenses Expenses
- -----------------------------------------------------------------------------------------------------
ProFund VP/ 17/ continued
Telecommunications 0.75% 0.71% 0.25% 0.00% 1.71%
U.S. Government Plus 0.50% 0.62% 0.25% 0.00% 1.37%
UltraBull 0.75% 0.72% 0.25% 0.00% 1.72%
UltraMid-Cap 0.75% 0.70% 0.25% 0.00% 1.70%
UltraOTC 0.75% 0.69% 0.25% 0.00% 1.69%
UltraSmall-Cap 0.75% 0.67% 0.25% 0.00% 1.67%
Utilities 0.75% 0.71% 0.25% 0.00% 1.71%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
The Prudential Series Fund
SP International Growth 0.85% 0.12% 0.00% 0.00% 0.97%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Wells Fargo Variable Trust /18/
Wells Fargo Advantage VT Equity Income /19/ 0.55% 0.24% 0.25% 0.00% 1.04%
1. As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Many of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of each Annuity under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid by a
Portfolio under those arrangements are included under "Other Expenses." For
more information see the prospectus for each underlying portfolio and,
"Service Fees payable to American Skandia," later in this prospectus.
2. The AST Aggressive Asset Allocation, the AST Balanced Asset Allocation, the
AST Capital Growth Asset Allocation, the AST Conservative Asset Allocation
and the AST Preservation Asset Allocation Portfolios (the "Dynamic Asset
Allocation Portfolios") each invest in other investment companies (the
Acquired Portfolios). For example, each Dynamic Asset Allocation Portfolio
invests in shares of other Portfolios of the Advanced Series Trust, and
some Portfolios invest in other funds, including the Dryden Core Investment
Fund. Investors in a Portfolio indirectly bear the fees and expenses of the
Acquired Portfolios. The expenses shown in the column "Acquired Portfolio
Fees and Expenses" represent a weighted average of the expense ratios of
the Acquired Portfolios in which each Dynamic Asset Allocation Portfolio
invested during the year ended December 31, 2006. The Dynamic Asset
Allocation Portfolios do not pay any transaction fees when they purchase or
redeem shares of the Acquired Portfolios. Where "Acquired Portfolio Fees
and Expenses" are less than 0.01%, such expenses are included in the column
titled "Other Expenses." This may cause the Total Annual Portfolio
Operating Expenses to differ from those set forth in the Financial
Highlights tables in the prospectus for the Portfolios.
3. The total actual operating expenses for certain of the Portfolios listed
above for the year ended December 31, 2006 were less than the amounts shown
in the table above, due to fee waivers, reimbursement of expenses, and
expense offset arrangements ("Arrangements"). These Arrangements are
voluntary and may be terminated at any time. In addition, the Arrangements
may be modified periodically. For more information regarding the
Arrangements, please see the prospectus and statement of additional
information for the Portfolios.
4. Prior to May 1, 2007 the Portfolio was named the "AST American Century
Strategic Balanced Portfolio."
5. Effective June 16, 2006, Goldman Sachs Asset Management L.P. no longer
serves as a Co-Sub-advisor to the Portfolio.
6. Effective November 13, 2006, Marsico Capital Management, LLC became a
Sub-advisor of the Portfolio along with William Blair & Company, LLC. Prior
to November 13, 2006, William Blair & Company, LLC served as the sole
Sub-advisor of the Portfolio, then named the "AST William Blair
International Growth Portfolio."
7. Effective November 13, 2006, Thornburg Investment Management, Inc. became a
Sub-advisor of the Portfolio along with LSV Asset Management. Prior to
November 13, 2006, LSV Asset Management served as the sole Sub-advisor of
the Portfolio, then named the "AST LSV International Value Portfolio."
8. Effective May 1, 2007, Neuberger Berman Management, Inc. became Sub-advisor
to the Portfolio. Prior to May 1, 2007, Deutsche Asset Management, Inc.
served as Sub-advisor of the Portfolio, then named the "AST DeAM Small-Cap
Growth Portfolio."
9. Effective December 2006, Salomon Brothers Asset Management, Inc. one of the
Co-Sub-advisors to the Portfolio changed its name to ClearBridge Advisors,
LLC.
10.Prior to May 1, 2007 the Portfolio was named the "AST Global Allocation
Portfolio." Expenses shown are the annualized estimated operating expense
for AST UBS Dynamic Alpha Portfolio effective May 1, 2007. Operating
expenses for the AST Global Allocation Portfolio based upon the year ended
December 31, 2006 would be as follows: Shareholder Fees (fees paid directly
from your investment) - None; Management Fees - .10%; Distribution (12b-1)
Fees - None; Other Expenses - .09%; Acquired Portfolio Fees & Expenses -
.88%; Total Annual Portfolio Operating Expenses - 1.07%.
11.The Fund's advisor has contractually agreed to waive advisory fees and/or
reimburse expenses of Series I shares to the extent necessary to limit
Total Annual Portfolio Operating Expenses (excluding certain items
discussed below) of Series I shares to 1.30% of average daily net assets.
The expense limitation agreement is in effect through April 30, 2008.
12.Through April 30, 2008, the advisor has contractually agreed to waive a
portion of its advisory fees to the extent necessary so that the advisory
fees payable by the Fund does not exceed a specified maximum annual
advisory fee rate, wherein the fee rate includes breakpoints and is based
upon net asset levels. The Fund's maximum annual advisory fee rate ranges
from 0.745% (for average net assets up to $250 million) to 0.64% (for
average net assets over $10 billion).
13.Through April 30, 2008, the advisor has contractually agreed to waive a
portion of its advisory fees to the extent necessary so that the advisory
fees payable by the Fund does not exceed a specified maximum annual
advisory fee rate, wherein the fee rate includes breakpoints and is based
upon net asset levels. The Fund's maximum annual advisory fee rate ranges
from 0.75% (for average net assets up to $250 million) to 0.68% (for
average net assets over $10 billion).
11
14.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.
15.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 allows 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. To the extent
that the actual expense ratio of a particular Portfolio is less than such
Portfolio's applicable expense cap, First Trust may recover a portion of
the previously waived or reimbursed amount equal to the amount that the
expense cap exceeds the actual expense ratio.
16.Effective January 1, 2006, the Fund implemented a performance fee structure
and the management fee was lowered to 1.05%. Beginning January 1, 2007, the
management fee may be adjusted, on a quarterly basis, upward or downward
depending on the Fund's performance relative to its benchmark, the MSCI
Emerging Markets Free Index. As a result, beginning January 1, 2007, if the
management fee were calculated taking into account all base fee breakpoints
and performance fee adjustment, the management fee could range from 0.95%
at its lowest to 1.15% at its highest.
17.ProFund Advisors LLC has contractually agreed to waive Investment Advisory
and Management Services Fees and to reimburse other expenses to the extent
Total Annual Portfolio Operating Expenses, as a percentage of average daily
net assets, exceed 1.63% (1.33% for VP ProFund U.S. Government Plus)
through April 30, 2008. After such date, any of the expense limitations may
be terminated or revised. Amounts waived or reimbursed in a particular
fiscal year may be repaid to ProFund Advisors LLC within three years of the
waiver or reimbursement to the extent that recoupment will not cause the
Portfolio's expenses to exceed any expense limitation in place at that
time. A waiver or reimbursement lowers the expense ratio and increases
overall returns to investors.
18.The Fund's advisor has committed through April 30, 2008 to waive fees
and/or reimburse expenses to the extent necessary to maintain the Fund's
net operating expenses as shown.
Total Actual Annual
Portfolio Operating Expenses
Portfolio Name After Expense Reimbursement
-------------------------------------------------------------------
Wells Fargo Advantage VT Equity Income 1.00%
19.The Fund's investment adviser has implemented a breakpoint schedule for the
Fund's management fee. The management fee charged to the Fund will decline
as the Fund's assets grow and will continue to be based on a percentage of
the Fund's average daily net assets. The breakpoint schedule for the Fund
is as follows: 0.55% from $0 to $499 million; 0.50% for assets from $500
million to $999 million; 0.45% for assets from $1 billion to $2.99 billion;
0.425% for assets from $3 billion to $4.99 billion; and 0.40% for assets $5
billion and higher.
12
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in one
American Skandia Annuity with the cost of investing in other American Skandia
Annuities and/or other variable annuities.
Below are examples for each Annuity showing what you would pay in expenses at
the end of the stated time periods had you invested $10,000 in the Annuity and
your investment has a 5% return each year.
The examples reflect the following fees and charges for each Annuity as
described in "Summary of Contract Fees and Charges":
. Insurance Charge
. Distribution Charge (if applicable)
. Contingent Deferred Sales Charge (when and if applicable)
. Annual Maintenance Fee
. The maximum combination of optional benefit charges
The examples also assume the following for the period shown:
. You allocate all of your Account Value to the Sub-account with the
maximum total annual operating expenses, and those expenses remain the
same each year*
. For each Sub-account charge, we deduct the current charge rather than any
maximum charge
. You make no withdrawals of Account Value
. You make no transfers, or other transactions for which we charge a fee
. No tax charge applies
. You elect the Lifetime Five Income Benefit, the Highest Daily Value Death
Benefit and the Enhanced Beneficiary Protection Death Benefit (which are
the maximum combination of optional benefit charges)
. For the XT6 example, the Credit applicable to the Annuity is 6.5% of the
Purchase Payment**
. For the APEX II example, the Loyalty Credit applies to the Annuity and is
equal to 2.75% of total Purchase Payments made during the first four
Annuity years
. For the ASAP III example, the Loyalty Credit applies to the Annuity and
is equal to 0.50% of total Purchase Payment made during the first four
Annuity years.
Amounts shown in the examples are rounded to the nearest dollar.
* Note: Not all portfolios offered as Sub-accounts may be available depending
on optional benefit selection, the applicable jurisdiction and selling firm.
** The Credit that is applied to Purchase Payments received after the first
Annuity Year is less than 6.5% (see "How do I Receive Credits?")
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES WILL BE LESS THAN THOSE SHOWN IF YOU ELECT
A DIFFERENT COMBINATION OF OPTIONAL BENEFITS THAN INDICATED IN THE EXAMPLES OR
IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS.
Expense Examples are provided as follows: 1) if you surrender the Annuity at
the end of the stated time period; 2) if you annuitize at the end of the
stated time period; and 3) if you do not surrender your Annuity. A table of
accumulation values appears in Appendix A to this Prospectus.
If you surrender your annuity at the end of the applicable time period:/ 1/
1 yr 3 yrs 5 yrs 10 yrs
------------------------------------
ASAP III $1,186 $2,115 $2,998 $4,969
------------------------------------
APEX II $1,315 $2,270 $2,720 $5,372
------------------------------------
ASL II $550 $1,640 $2,720 $5,372
------------------------------------
XT6/ 3/ $1,447 $2,507 $3,459 $5,790
------------------------------------
13
If you annuitize your annuity at the end of the applicable time period:/ 2/
1 yr 3 yrs 5 yrs 10 yrs
----------------------------------
ASAP III N/A $1,530 $2,548 $4,969
----------------------------------
APEX II N/A $1,640 $2,720 $5,372
----------------------------------
ASL II $550 $1,640 $2,720 $5,372
----------------------------------
XT6/ 3/ N/A N/A $2,883 $5,694
----------------------------------
If you do not surrender your annuity:
1 yr 3 yrs 5 yrs 10 yrs
----------------------------------
ASAP III $511 $1,530 $2,548 $4,969
----------------------------------
APEX II $550 $1,640 $2,720 $5,372
----------------------------------
ASL II $550 $1,640 $2,720 $5,372
----------------------------------
XT6/ 3/ $583 $1,739 $2,883 $5,694
----------------------------------
1 There is no CDSC for ASL II. See "Summary of Contract Fees and Charges" for
the CDSC schedule for each Annuity.
2 If you own XT6, you may not annuitize in the first Three (3) Annuity Years;
if you own ASAP III or APEX II, you may not annuitize in the first Annuity
Year.
3 XT6 Annuities purchased prior to November 20 2006 are subject to a
different CDSC schedule
14
INVESTMENT OPTIONS
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO?
Each variable investment option is a Sub-account of American Skandia Life
Assurance Corporation Variable Account B (see "What are Separate Accounts" for
more detailed information). Each Sub-account invests exclusively in one
Portfolio. You should carefully read the prospectus for any Portfolio in which
you are interested. The following chart classifies each of the Portfolios
based on our assessment of their investment style (as of the date of this
Prospectus). The chart also provides a description of each Portfolio's
investment objective (in italics) and a short, summary description of their
key policies to assist you in determining which Portfolios may be of interest
to you. There is no guarantee that any underlying Portfolio will meet its
investment objective. Not all portfolios offered as Sub-accounts may be
available depending on optional benefit selection, the applicable jurisdiction
and selling firm. The Portfolios that you select are your choice - we do not
provide investment advice, and we do not recommend or endorse any particular
Portfolio.
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 Advanced Series Trust (formerly American Skandia Trust). The
investment managers for AST are AST Investment Services, Inc. (formerly,
American Skandia Investment Services, Incorporated), a Prudential Financial
Company, and Prudential Investments LLC, both of which are affiliated
companies of American Skandia. However, a sub-advisor, as noted below, is
engaged to conduct day-to-day management.
The Portfolios are not publicly traded mutual funds. They are only available
as investment options in variable annuity contracts and variable life
insurance policies issued by insurance companies, or in some cases, to
participants in certain qualified retirement plans. However, some of the
Portfolios available as Sub-accounts under the Annuities are managed by the
same portfolio advisor or sub-advisor as a retail mutual fund of the same or
similar name that the Portfolio may have been modeled after at its inception.
Certain retail mutual funds may also have been modeled after a Portfolio.
While the investment objective and policies of the retail mutual funds and the
Portfolios may be substantially similar, the actual investments will differ to
varying degrees. Differences in the performance of the funds can be expected,
and in some cases could be substantial. You should not compare the performance
of a publicly traded mutual fund with the performance of any similarly named
Portfolio offered as a Sub-account. Details about the investment objectives,
policies, risks, costs and management of the Portfolios are found in the
prospectuses for the underlying mutual funds. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-800-752-6342.
Effective May 1, 2004, the SP International Growth Portfolio (formerly the SP
William Blair International Growth Portfolio) is no longer offered as a
Sub-account under the Annuities, except as follows: if at any time prior to
May 1, 2004 you had any portion of your Account Value allocated to the SP
William Blair International Growth Sub-account, you may continue to allocate
Account Value and make transfers into and/ or out of the SP William Blair
International Growth Sub-account, including any electronic funds transfer,
dollar cost averaging, asset allocation and rebalancing programs. If you never
had a portion of your Account Value allocated to the SP William Blair
International Growth Sub-account prior to May 1, 2004 or if you purchase your
Annuity on or after May 1, 2004, you cannot allocate Account Value to the SP
William Blair International Growth Sub-account.
With respect to XT6, APEX II and ASL II: Effective as of the close of business
June 28, 2002, the AST Goldman Sachs Small-Cap Value Portfolio is no longer
offered as a Sub-account under the Annuities, except as follows: if at any
time on or prior to June 28, 2002 you had any portion of your Account Value
allocated to the AST Goldman Sachs Small-Cap Value Sub-account, you may
continue to allocate Account Value and make transfers into and/or out of the
AST Goldman Sachs Small-Cap Value Sub-account, including any electronic funds
transfer, dollar cost averaging, asset allocation and rebalancing programs. If
you never had a portion of your Account Value allocated to the AST Goldman
Sachs Small-Cap Value Sub-account on or prior to June 28, 2002 or if you
purchase your Annuity after June 28, 2002, you cannot allocate Account Value
to the AST Goldman Sachs Small-Cap Value Sub-Account. The AST Goldman Sachs
Small-Cap Value Portfolio is not available nor was it ever available under
ASAP III.
Either of these Sub-accounts may be offered to new Owners at some future date;
however, at the present time, there is no intention to do so. We also reserve
the right to offer or close this Sub-account to all Owners that owned the
Annuity prior to the close date.
15
The following chart lists the currently available and permitted investment
options when you choose certain optional benefits:
Optional Benefit Name* Permitted Portfolios:
Lifetime Five Income Benefit AST Advanced Strategies Portfolio
AST American Century Strategic
Allocation Portfolio
AST Balanced Asset Allocation
Portfolio
AST Capital Growth Asset Allocation
Spousal Lifetime Five Income Benefit Portfolio
AST Conservative Asset Allocation
Portfolio
AST First Trust Balanced Target
Portfolio
Highest Daily Lifetime Five Income AST First Trust Capital Appreciation
Benefit Target Portfolio
AST Preservation Asset Allocation
Portfolio
AST T. Rowe Price Asset Allocation
Portfolio
Highest Daily Value Death Benefit AST UBS Dynamic Alpha
------------------------------------------------------------------------------
Combo 5% Rollup & HAV Death Benefit
All Investment Options Permitted
EXCEPT for the following:
Guaranteed Minimum Income Benefit Access VP High Yield Fund
AIM V.I. Technology
First Trust 10 Uncommon Values
Portfolio
Guaranteed Minimum Withdrawal Benefit NASDAQ Target 15 Portfolio
ProFund VP Biotechnology
ProFund VP Internet
GRO/GRO PLUS ProFund VP Semiconductor
ProFund VP Short Mid-Cap
ProFund VP Short Small-Cap
ProFund VP Technology
ProFund VP Ultra OTC
ProFund VP Ultra Small Cap
ProFund VP UltraBull
Highest Anniversary Value Death
Benefit Value Line Target 25
------------------------------------------------------------------------------
Enhanced Beneficiary Protection
Death Benefit
All Investment Options Permitted
------------------------------------------------------------------------------
* Detailed Information regarding these optional benefits can be found in the
"Living Benefits" and "Death Benefit" sections of this Prospectus.
16
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
ADVANCED SERIES TRUST
-----------------------------------------------------------------
ASSET AST Advanced Strategies Portfolio: LSV Asset
ALLOCA- seeks a high level of absolute Management/
TION/ return. The Portfolio invests Marsico Capital
BALANCED primarily in a diversified portfolio Management,
of equity and fixed income securities LLC/Pacific
across different investment Investment
categories and investment managers. Management
The Portfolio pursues a combination Company LLC
of traditional and non-traditional (PIMCO)/
investment strategies. T. Rowe Price
Associates, Inc./
William Blair &
Company, L.L.C.
-----------------------------------------------------------------
ASSET AST Aggressive Asset Allocation
ALLOCA- Portfolio: seeks the highest
TION/ potential total return consistent
BALANCED with its specified level of risk
tolerance. The Portfolio will invest
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 92.5% to 100% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 0% to 7.5% of its net
assets to underlying portfolios AST Investment
investing primarily in debt Services, Inc./
securities and money market Prudential
instruments. Investments LLC
-----------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The subadviser expects
that the majority of the Portfolio's
assets will be invested in the common
stocks of large companies that appear
to be undervalued. Among other
things, the Portfolio seeks to
identify compelling buying
opportunities created when companies
are undervalued on the basis of
investor reactions to near-term
problems or circumstances even though
their long-term prospects remain
sound. The subadviser seeks to
identify individual companies with
earnings growth potential that may
not be recognized by the market at
large.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Growth & Income AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.
VALUE capital and income while attempting
to avoid excessive fluctuations in
market value. The Portfolio normally
will invest in common stocks (and
securities convertible into common
stocks). The subadviser will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects.
-----------------------------------------------------------------
LARGE AST AllianceBernstein Managed Index AllianceBernstein
CAP 500 Portfolio: seeks to outperform L.P.
BLEND the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500")
through stock selection resulting in
different weightings of common stocks
relative to the index. The Portfolio
will invest, under normal
circumstances, at least 80% of its
net assets in securities included in
the S&P(R) 500.
-----------------------------------------------------------------
LARGE AST American Century Income & Growth American Century
CAP Portfolio: seeks capital growth with Investment
VALUE current income as a secondary Management, Inc.
objective. The Portfolio invests
primarily in common stocks that offer
potential for capital growth, and
may, consistent with its investment
objective, invest in stocks that
offer potential for current income.
The subadviser utilizes a
quantitative management technique
with a goal of building an equity
portfolio that provides better
returns than the S&P 500 Index
without taking on significant
additional risk and while attempting
to create a dividend yield that will
be greater than the S&P 500 Index.
-----------------------------------------------------------------
ASSET AST American Century Strategic American Century
ALLOCA- Allocation Portfolio (formerly known Investment
TION/ as AST American Century Strategic Management, Inc.
BALANCED Balanced Portfolio): long-term
capital growth with some regular
income. The Portfolio will invest,
under normal circumstances, in any
type of U.S. or foreign equity
security that meets certain
fundamental and technical standards.
The portfolio managers will draw on
growth, value and quantitative
investment techniques in managing the
equity portion of the Portfolio and
diversify the Portfolio's investments
among small, medium and large
companies.
-----------------------------------------------------------------
17
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
ASSET AST Balanced Asset Allocation
ALLOCA- Portfolio: seeks the highest
TION/ potential total return consistent
BALANCED with its specified level of risk
tolerance. The Portfolio will invest
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 27.5% to 42.5% of its
net assets to underlying portfolios AST Investment
investing primarily in debt Services, Inc./
securities and money market Prudential
instruments. Investments LLC
-----------------------------------------------------------------
ASSET AST Capital Growth Asset Allocation
ALLOCA- Portfolio: seeks the highest
TION/ potential total return consistent
BALANCED with its specified level of risk
tolerance. The Portfolio will invest
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 72.5% to 87.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 12.5% to 27.5% of its
net assets to underlying portfolios AST Investment
investing primarily in debt Services, Inc./
securities and money market Prudential
instruments. Investments LLC
-----------------------------------------------------------------
SPECIALTY AST Cohen & Steers Realty Portfolio: Cohen & Steers
seeks to maximize total return Capital
through investment in real estate Management, Inc.
securities. The Portfolio pursues its
investment objective by investing,
under normal circumstances, at least
80% of its net assets in securities
of real estate issuers. Under normal
circumstances, the Portfolio will
invest substantially all of its
assets in the equity securities of
real estate companies, i.e., a
company that derives at least 50% of
its revenues from the ownership,
construction, financing, management
or sale of real estate or that has at
least 50% of its assets in real
estate. Real estate companies may
include real estate investment trusts
(REITs).
-----------------------------------------------------------------
ASSET AST Conservative Asset Allocation
ALLOCA- Portfolio: seeks the highest
TION/ potential total return consistent
BALANCED with its specified level of risk
tolerance. The Portfolio will invest
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 47.5% to 62.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 37.5% to 52.5% of its
net assets to underlying portfolios AST Investment
investing primarily in debt Services, Inc./
securities and money market Prudential
instruments. Investments LLC
-----------------------------------------------------------------
LARGE AST DeAM Large-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of capital by Investment
VALUE investing primarily in the value Management
stocks of larger companies. The Americas, Inc.
Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
the value of its assets in the equity
securities of large-sized companies
included in the Russell 1000(R) Value
Index. The subadviser employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 1000(R) Value Index,
but which attempts to outperform the
Russell 1000(R) Value Index through
active stock selection.
-----------------------------------------------------------------
SMALL AST DeAM Small-Cap Value Portfolio: Deutsche
CAP seeks maximum growth of investors' Investment
VALUE capital by investing primarily in the Management
value stocks of smaller companies. Americas, Inc.
The Portfolio pursues its objective,
under normal market conditions, by
primarily investing at least 80% of
its total assets in the equity
securities of small-sized companies
included in the Russell 2000(R) Value
Index. The subadviser employs an
investment strategy designed to
maintain a portfolio of equity
securities which approximates the
market risk of those stocks included
in the Russell 2000(R) Value Index,
but which attempts to outperform the
Russell 2000(R) Value Index.
-----------------------------------------------------------------
SMALL AST Federated Aggressive Growth
CAP Portfolio: seeks capital growth. The
GROWTH Portfolio pursues its investment
objective by investing primarily in Federated Equity
the stocks of small companies that Management
are traded on national security Company of
exchanges, NASDAQ stock exchange and Pennsylvania/
the over-the-counter-market. Small Federated Global
companies will be defined as Investment
companies with market capitalizations Management
similar to companies in the Russell Corp./Federated
2000 Growth Index. MDTA LLC
-----------------------------------------------------------------
18
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
ASSET AST First Trust Balanced Target First Trust
ALLOCA- Portfolio: seeks long-term capital Advisors L.P.
TION/ growth balanced by current income.
BALANCED The Portfolio seeks to achieve its
objective by investing approximately
65% in common stocks and 35% in fixed
income securities. The Portfolio
allocates the equity portion of the
portfolio across five uniquely
specialized strategies - the Dow/SM/
Target Dividend, the Value Line(R)
Target 25, the Global Dividend Target
15, the NYSE(R) International Target
25, and the Target Small Cap. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy which utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index.
------------------------------------------------------------------
ASSET AST First Trust Capital Appreciation First Trust
ALLOCA- Target Portfolio: seeks long-term Advisors L.P.
TION/ growth of capital. The Portfolio
BALANCED seeks to achieve its objective by
investing approximately 80% in common
stocks and 20% in fixed income
securities. The portfolio allocates
the equity portion of the portfolio
across five uniquely specialized
strategies - the Value Line(R) Target
25, the Global Dividend Target 15,
the Target Small Cap, the Nasdaq(R)
Target 15, and the NYSE(R)
International Target 25. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks. The fixed income
allocation is determined by the Dow
Jones Income strategy utilizes
certain screens to select bonds from
the Dow Jones Corporate Bond Index or
like-bonds not in the index..
------------------------------------------------------------------
LARGE AST Goldman Sachs Concentrated Growth Goldman Sachs
CAP Portfolio: seeks growth of capital in Asset
GROWTH a manner consistent with the Management, L.P.
preservation of capital. The
Portfolio will pursue its objective
by investing primarily in equity
securities of companies that the
subadviser believes have the
potential to achieve capital
appreciation over the long-term. The
Portfolio seeks to achieve its
investment objective by investing,
under normal circumstances, in
approximately 30 - 45 companies that
are considered by the subadviser to
be positioned for long-term growth.
------------------------------------------------------------------
MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset
growth. The Portfolio pursues its Management, L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the time
of investment) fall within the range
of companies in the Russell Mid-cap
Growth Index. The subadviser seeks to
identify individual companies with
earnings growth potential that may
not be recognized by the market at
large.
------------------------------------------------------------------
SMALL AST Goldman Sachs Small-Cap Value Goldman Sachs
CAP Portfolio: seeks long-term capital Asset
VALUE growth. The Portfolio will seek its Management, L.P.
objective through investments
primarily in equity securities that
are believed to be undervalued in the
marketplace. The Portfolio will
invest, under normal circumstances,
at least 80% of the value of its
assets in small capitalization
companies. The 80% investment
requirement applies at the time the
Portfolio invests its assets. The
Portfolio generally defines small
capitalization companies as companies
with market capitalizations that are
within the range of the Russell 2000
Value Index at the time of purchase.
------------------------------------------------------------------
FIXED AST High Yield Portfolio: seeks a Pacific Investment
INCOME high level of current income and may Management
also consider the potential for Company LLC
capital appreciation. The Portfolio (PIMCO)
invests, under normal circumstances,
at least 80% of its net assets plus
any borrowings for investment
purposes (measured at time of
purchase) in high yield, fixed-income
securities that, at the time of
purchase, are non-investment grade
securities. Such securities are
commonly referred to as "junk bonds".
------------------------------------------------------------------
19
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
INTER- AST International Growth Portfolio Marsico Capital
NATIONAL (formerly, AST William Blair Management,
EQUITY International Growth Portfolio): LLC; William
seeks long-term capital growth. Under Blair & Company,
normal circumstances, the Portfolio L.L.C.
invests at least 80% of the value of
its assets in securities of issuers
that are economically tied to
countries other than the United
States. Although the Portfolio
intends to invest at least 80% of its
assets in the securities of issuers
located outside the United States, it
may at times invest in U.S. issuers
and it may invest all of its assets
in fewer than five countries or even
a single country. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth.
----------------------------------------------------------------
INTER- AST International Value Portfolio
NATIONAL (formerly known as AST LSV
EQUITY International Value Portfolio): seeks
long-term capital appreciation. The
Portfolio normally invests at least
80% of the Portfolio's assets in
equity securities. The Portfolio will
invest at least 65% of its net assets
in the equity securities of companies LSV Asset
in at least three different Management/
countries, without limit as to the Thornburg
amount of assets that may be invested Investment
in a single country. Management, Inc.
----------------------------------------------------------------
INTER- AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of the
world. The equity securities will
ordinarily be traded on a recognized
foreign securities exchange or traded
in a foreign over-the-counter market
in the country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
----------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks
CAP current income and long-term growth
VALUE of income, as well as capital
appreciation. The Portfolio invests,
under normal circumstances, at least Dreman Value
80% of its net assets in common Management LLC/
stocks of large capitalization Hotchkis and
companies. Large capitalization Wiley Capital
companies are those companies with Management LLC/
market capitalizations within the J.P. Morgan
market capitalization range of the Investment
Russell 1000 Value Index. Management, Inc.
----------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett &
INCOME Portfolio: seeks high current income Co. LLC
and the opportunity for capital
appreciation to produce a high total
return. The Portfolio invests, under
normal circumstances, at least 80% of
the value of its assets in fixed
income securities. To pursue its
objective, the Portfolio normally
invests primarily in high yield and
investment grade debt securities,
securities convertible into common
stock and preferred stocks. The
Portfolio may find good value in high
yield securities, sometimes called
"lower-rated bonds" or "junk bonds,"
and frequently may have more than
half of its assets invested in those
securities. At least 20% of the
Portfolio's assets must be invested
in any combination of investment
grade debt securities, U.S.
Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in equity
securities.
----------------------------------------------------------------
20
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
LARGE AST Marsico Capital Growth Portfolio: Marsico Capital
CAP seeks capital growth. Income Management, LLC
GROWTH realization is not an investment
objective and any income realized on
the Portfolio's investments,
therefore, will be incidental to the
Portfolio's objective. The Portfolio
will pursue its objective by
investing primarily in common stocks
of large companies that are selected
for their growth potential. Large
capitalization companies are
companies with market capitalizations
within the market capitalization
range of the Russell 1000 Growth
Index. In selecting investments for
the Portfolio, the subadviser uses an
approach that combines "top down"
macroeconomic analysis with "bottom
up" stock selection. The "top down"
approach identifies sectors,
industries and companies that may
benefit from the trends the
subadviser has observed. The
subadviser then looks for individual
companies with earnings growth
potential that may not be recognized
by the market at large, utilizing a
"bottom up" stock selection process.
The Portfolio will normally hold a
core position of between 35 and 50
common stocks. The Portfolio may hold
a limited number of additional common
stocks at times when the Portfolio
manager is accumulating new
positions, phasing out existing or
responding to exceptional market
conditions.
------------------------------------------------------------------
INTER- AST MFS Global Equity Portfolio: Massachusetts
NATIONAL seeks capital growth. Under normal Financial Services
EQUITY circumstances the Portfolio invests Company
at least 80% of its assets in equity
securities. The Portfolio will invest
in the securities of U.S. and foreign
issuers (including issuers in
developing countries). While the
portfolio may invest its assets in
companies of any size, the Portfolio
generally focuses on companies with
relatively large market
capitalizations relative to the
markets in which they are traded.
------------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future, Financial Services
GROWTH rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of its
net assets in common stocks and
related securities, such as preferred
stocks, convertible securities and
depositary receipts, of companies
that the subadviser believes offer
better than average prospects for
long-term growth. The subadviser uses
a "bottom up" as opposed to a "top
down" investment style in managing
the Portfolio.
------------------------------------------------------------------
MID CAP AST Mid Cap Value Portfolio: seeks to EARNEST
VALUE provide capital growth by investing Partners LLC/
primarily in mid-capitalization WEDGE Capital
stocks that appear to be undervalued. Management, LLP
The Portfolio generally invests,
under normal circumstances, at least
80% of the value of its net assets in
mid-capitalization companies.
Mid-capitalization companies are
generally those that have market
capitalizations, at the time of
purchase, within the market
capitalization range of companies
included in the Russell Midcap Value
Index during the previous 12-months
based on month-end data.
------------------------------------------------------------------
FIXED AST Money Market Portfolio: seeks Prudential
INCOME high current income while maintaining Investment
high levels of liquidity. The Management, Inc.
Portfolio invests in high-quality,
short-term, U.S. dollar denominated
corporate, bank and government
obligations. The Portfolio will
invest in securities which have
effective maturities of not more than
397 days.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Growth Neuberger Berman
GROWTH Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of its
net assets in the common stocks of
mid-capitalization companies.
Mid-capitalization companies are
those companies whose market
capitalization is within the range of
market capitalizations of companies
in the Russell Midcap Growth Index.
Using fundamental research and
quantitative analysis, the subadviser
looks for fast-growing companies that
are in new or rapidly evolving
industries.
------------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman
VALUE Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of its
net assets in the common stocks of
medium capitalization companies. For
purposes of the Portfolio, companies
with market capitalizations that fall
within the range of the Russell
Midcap(R) Index at the time of
investment are considered medium
capitalization companies. Some of the
Portfolio's assets may be invested in
the securities of large-cap companies
as well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
------------------------------------------------------------------
21
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Growth Neuberger Berman
CAP Portfolio (formerly known as AST DeAM Management Inc.
GROWTH Small-Cap Growth Portfolio): seeks
maximum growth of investors' capital
from a portfolio of growth stocks of
smaller companies. The Portfolio
pursues its objective, under normal
circumstances, by primarily investing
at least 80% of its total assets in
the equity securities of small-sized
companies included in the Russell
2000 Growth(R) Index.
------------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital. The Portfolio will invest (PIMCO)
in a portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a one- to three-year
time frame based on the subadviser's
forecast for interest rates.
------------------------------------------------------------------
FIXED AST PIMCO Total Return Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital. The Portfolio will invest (PIMCO)
in a portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a three- to six-year
time frame based on the subadviser's
forecast for interest rates.
------------------------------------------------------------------
ASSET AST Preservation Asset Allocation AST
ALLOCA- Portfolio: seeks the highest Investment
TION/ potential total return consistent Services, Inc./
BALANCED with its specified level of risk Prudential
tolerance. The Portfolio will invest Investments LLC
its assets in several other Advanced
Series Trust Portfolios. Under normal
market conditions, the Portfolio will
devote between 27.5% to 42.5% of its
net assets to underlying portfolios
investing primarily in equity
securities, and 57.5% to 72.5% of its
net assets to underlying portfolios
investing primarily in debt
securities and money market
instruments.
------------------------------------------------------------------
SMALL AST Small-Cap Growth Portfolio: seeks Eagle Asset
CAP long-term capital growth. The Management/
GROWTH Portfolio pursues its objective by Neuberger Berman
investing, under normal Management Inc.
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000 Index at the time of the
Portfolio's investment.
------------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC/
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC/
appear to be undervalued. The J.P. Morgan
Portfolio invests, under normal Investment
circumstances, at least 80% of the Management, Inc./
value of its net assets in small Lee Munder
capitalization stocks. Small Investments, Ltd
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000 Value Index. The
Portfolio will focus on common stocks
that appear to be undervalued.
------------------------------------------------------------------
ASSET AST T. Rowe Price Asset Allocation T. Rowe Price
ALLOCA- Portfolio: seeks a high level of Associates, Inc.
TION/ total return by investing primarily
BALANCED in a diversified portfolio of fixed
income and equity securities. The
Portfolio normally invests
approximately 60% of its total assets
in equity securities and 40% in fixed
income securities. This mix may vary
depending on the subadviser's outlook
for the markets. The subadviser
concentrates common stock investments
in larger, more established
companies, but the Portfolio may
include small and medium-sized
companies with good growth prospects.
The fixed income portion of the
Portfolio will be allocated among
investment grade securities, high
yield or "junk" bonds, emerging
market securities, foreign high
quality debt securities and cash
reserves.
------------------------------------------------------------------
22
--------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign and
U.S. dollar-denominated bonds. The
Portfolio will invest at least 80% of
its total assets in fixed income
securities. The Portfolio invests in
all types of bonds, including high
quality bonds issued or guaranteed by
U.S. or foreign governments or their
agencies and by foreign authorities,
provinces and municipalities as well
as investment grade corporate bonds
and mortgage and asset-backed
securities of U.S. and foreign
issuers. The Portfolio generally
invests in countries where the
combination of fixed-income returns
and currency exchange rates appears
attractive, or, if the currency trend
is unfavorable, where the subadviser
believes that the currency risk can
be minimized through hedging. The
Portfolio may also invest up to 20%
of its assets in the aggregate in
below investment-grade, high-risk
bonds ("junk bonds"). In addition,
the Portfolio may invest up to 30% of
its assets in mortgage-related
(including derivatives, such as
collateralized mortgage obligations
and stripped mortgage securities) and
asset-backed securities.
--------------------------------------------------------------------
LARGE AST T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term growth of Associates, Inc.
GROWTH capital by investing predominantly in
the equity securities of a limited
number of large, carefully selected,
high-quality U.S. companies that are
judged likely to achieve superior
earnings growth. The Portfolio takes
a growth approach to investment
selection and normally invests at
least 80% of its net assets in the
common stocks of large companies.
Large companies are those whose
market cap is larger than the median
market cap of companies in the
Russell 1000 Growth Index as of the
time of purchase.
--------------------------------------------------------------------
SPECIALTY AST T. Rowe Price Natural Resources T. Rowe Price
Portfolio: seeks long-term capital Associates, Inc.
growth primarily through the common
stocks of companies that own or
develop natural resources (such as
energy products, precious metals and
forest products) and other basic
commodities. The Portfolio invests,
under normal circumstances, at least
80% of the value of its assets in
natural resource companies. The
Portfolio looks for companies that
have the ability to expand
production, to maintain superior
exploration programs and production
facilities, and the potential to
accumulate new resources. Although at
least 50% of Portfolio assets will be
invested in U.S. securities, up to
50% of total assets also may be
invested in foreign securities.
--------------------------------------------------------------------
ASSET AST UBS Dynamic Alpha Portfolio UBS Global Asset
ALLOCA- (formerly known as AST Global Management
TION/ Allocation Portfolio): seeks to (Americas) Inc.
BALANCED maximize total return, consisting of
capital appreciation and current
income. The Portfolio invests in
securities and financial instruments
to gain exposure to global equity,
global fixed income and cash
equivalent markets, including global
currencies. The Portfolio may invest
in equity and fixed income securities
of issuers located within and outside
the United States or in open-end
investment companies advised by UBS
Global Asset Management (Americas)
Inc., the Portfolio's subadviser, to
gain exposure to certain global
equity and global fixed income
markets.
--------------------------------------------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------------------------------------------
MID CAP AIM Variable Insurance Funds - AIM A I M Advisors,
GROWTH V.I. Dynamics Fund - Series I shares: Inc.
seeks long-term capital growth. The
Portfolio pursues its objective by
normally investing at least 65% of
its assets in common stocks of
mid-sized companies that are included
in the Russell Midcap(R) Growth Index
at the time of purchase.
--------------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM A I M Advisors,
V.I. Financial Services Fund - Series Inc.
I shares: seeks capital growth. The
Portfolio normally invests at least
80% of its net assets in the equity
securities and equity-related
instruments of companies involved in
the financial services sector. These
companies include, but are not
limited to, banks, insurance
companies, investment and
miscellaneous industries, and
suppliers to financial services
companies.
--------------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM A I M Advisors,
V.I. Global Health Care Fund - Series Inc.
I shares: (formerly AIM V.I. Health
Sciences Fund) seeks capital growth.
The Portfolio normally invests at
least 80% of its net assets in
securities of health care industry
companies.
--------------------------------------------------------------------
23
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
SPECIALTY AIM Variable Insurance Funds - AIM A I M Advisors,
V.I. Technology Fund - Series I Inc.
shares: seeks capital growth. The
Portfolio normally invests at least
80% of its net assets in the equity
securities and equity-related
instruments of companies engaged in
technology-related industries. These
include, but are not limited to,
various applied technologies,
hardware, software, semiconductors,
telecommunications equipment and
services and service-related
companies in information technology.
----------------------------------------------------------------
EVERGREEN VARIABLE ANNUITY TRUST
----------------------------------------------------------------
SMALL Evergreen VA Growth: seeks long-term Evergreen
CAP capital growth. The Portfolio invests Investment
GROWTH at least 75% of its assets in common Management
stocks of small- and medium-sized Company, LLC
companies (i.e., companies whose
market capitalizations fall within
the market capitalization range of
the companies tracked by the Russell
2000(R) Growth Index, measured at the
time of purchase). The remaining
portion of the Portfolio's assets may
be invested in companies of any size.
The Portfolio's managers employ a
growth-style of equity management and
will generally seek to purchase
stocks of companies that have
demonstrated earnings growth
potential which they believe is not
yet reflected in the stock's market
price. The Portfolio's managers
consider earnings growth above the
average earnings growth of companies
included in the Russell 2000(R)
Growth Index as a key factor in
selecting investments.
----------------------------------------------------------------
INTER- Evergreen VA International Equity: Evergreen
NATIONAL seeks long-term capital growth and Investment
EQUITY secondarily, modest income. The Management
Portfolio will normally invest 80% of Company, LLC
its assets in equity securities
issued by , in the manager's opinion,
established and quality non-U.S.
companies located in countries with
developed markets. The Portfolio may
purchase securities across all market
capitalizations. The Portfolio
normally invests at least 65% of its
assets in securities of companies in
at least three countries (other than
the U.S.). The Portfolio may also
invest in emerging markets. The
Portfolio's managers seek both growth
and value opportunities For growth
investments, the Portfolio's manager
seeks, among other things, good
business models, good management and
growth in cash flows. For value
investments, the Portfolio's manager
seeks companies that are undervalued
in the marketplace compared to their
assets. The Portfolio normally
intends to seek modest income from
dividends paid by its equity
holdings. Excluding repurchase
agreements and other cash
equivalents, the Portfolio intends to
invest substantially all of its
assets in the securities of non-U.S.
issuers.
----------------------------------------------------------------
SPECIALTY Evergreen VA Omega: seeks long-term Evergreen
capital growth. The Portfolio invests Investment
primarily, and under normal Management
conditions substantially all of its Company, LLC
assets, in common stocks of U.S.
companies across all market
capitalizations. The Portfolio's
manager employs a growth style of
equity management that emphasizes
companies with cash flow growth,
sustainable competitive advantages,
returns on invested capital above
their cost of capital and the ability
to manage for profitable growth that
can create long-term value for
shareholders.
----------------------------------------------------------------
FIRST DEFINED PORTFOLIO FUND, LLC
----------------------------------------------------------------
SPECIALTY First Trust 10 Uncommon Values: seeks First Trust
to provide above-average capital Advisors L.P.
appreciation. The Portfolio seeks to
achieve its objective by investing
primarily in the ten common stocks,
listed on a U.S. securities exchange,
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 1/st/ in accordance with
the selections of Lehman Brothers.
Each security is initially equally
weighted in the portfolio.
----------------------------------------------------------------
24
--------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
--------------------------------------------------------------
SPECIALTY Global Dividend Target 15: seeks to First Trust
provide above-average total return. Advisors L.P.
The Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to provide income and to
have the potential for capital
appreciation. The Portfolio invests
primarily in the common stocks of the
companies which are components of the
DJIA, the Financial Times Industrial
Ordinary Share Index ("FT Index") and
the Hang Seng Index. The Portfolio
primarily consists of common stocks
of the five companies with the lowest
per share stock prices of the ten
companies in each of the DJIA, FT
Index and Hang Seng Index,
respectively, that have the highest
dividend yields in the respective
index on or about the applicable
stock selection date. Each security
is initially equally weighted in the
portfolio.
--------------------------------------------------------------
SPECIALTY NASDAQ(R) Target 15: seeks to provide First Trust
above-average total return. The Advisors L.P.
Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to have the potential for
capital appreciation. Beginning with
the stocks in the Nasdaq-100 Index(R)
on or about the applicable stock
selection date, the Portfolio selects
fifteen stocks based on a
multi-factor model. A modified market
capitalization approach is used to
weight each security in the portfolio.
--------------------------------------------------------------
SPECIALTY S&P(R) Target 24: seeks to provide First Trust
above-average total return. The Advisors L.P.
Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to have the potential for
capital appreciation. Beginning with
the stocks in the Standard & Poor's
500 Index, on or about the applicable
stock selection date, the Portfolio
selects three stocks from each of the
eight largest economic sectors of the
Index. The twenty four stocks are
selected based on a multi-factor
model and a modified market
capitalization approach is used to
weight each security in the portfolio.
--------------------------------------------------------------
SPECIALTY Target Managed VIP: seeks to provide First Trust
above-average total return. The Advisors L.P.
Portfolio seeks to achieve its
objective by investing in common
stocks of the companies that are
identified based on six uniquely
specialized strategies - The Dow/SM/
DART 5, the European Target 20, the
Nasdaq(R) Target 15, the S&P(R)
Target 24, the Target Small-Cap and
the Value Line(R) Target 25. Each
strategy employs a quantitative
approach by screening common stocks
for certain attributes and/or using a
multi-factor scoring system to select
the common stocks.
--------------------------------------------------------------
SPECIALTY The Dow/SM/ Target Dividend: seeks to First Trust
provide above-average total return. Advisors L.P.
The Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to provide income and to
have the potential for capital
appreciation. Beginning with the
stocks in the Dow Jones Select
Dividend Index , on or about the
applicable stock selection date, the
Portfolio selects twenty stocks based
on a multi-factor model. Each
security is initially equally
weighted in the portfolio.
--------------------------------------------------------------
SPECIALTY The Dow/SM/ DART 10: seeks to provide First Trust
above-average total return. The Advisors L.P.
Portfolio seeks to achieve its
objective by investing in common
stocks issued by companies that are
expected to provide income and to
have the potential for capital
appreciation. The Portfolio invests
primarily in the common stocks of the
ten companies in the DJIA that have
the highest combined dividend yields
and buyback ratios on or about the
applicable stock selection date. Each
security is initially equally
weighted in the portfolio.
--------------------------------------------------------------
SPECIALTY Value Line(R) Target 25: seeks to First Trust
provide above-average capital Advisors L.P.
appreciation. The Portfolio seeks to
achieve its objective by investing in
common stocks issued by companies
that are expected to have the
potential for capital appreciation.
Value Line(R) ranks approximately
1,700 stocks of which 100 are given
their #1 ranking for Timeliness(TM)
which measures Value Line's view of
their probable price performance
during the next six to 12 months
relative to the others. Beginning
with the 100 stocks that Value
Line(R) ranks #1 for Timeliness(TM),
on or about the applicable stock
selection date, the Portfolio selects
twenty five stocks based on a
multi-factor model. A modified market
capitalization approach is used to
weight each security in the portfolio.
--------------------------------------------------------------
25
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
GARTMORE VARIABLE INSURANCE TRUST
-----------------------------------------------------------------
INTER- GVIT Developing Markets: seeks
NATIONAL long-term capital appreciation, under
EQUITY normal conditions by investing at
least 80% of its total assets in
stocks of companies of any size based
in the world's developing economies.
Under normal market conditions, NWD
investments are maintained in at Management &
least six countries at all times and Research Trust/
no more than 35% of total assets in Gartmore Global
any single one of them. Partners
-----------------------------------------------------------------
PROFUND VP
-----------------------------------------------------------------
Each ProFund VP portfolio described below pursues an investment
strategy that seeks to provide daily investment results,before
fees and expenses, that match a widely followed index, increased
by a specified factor relative to the index, or thatmatch the
inverse of the index or the inverse of the index multiplied by a
specified factor. The investment strategy of someof the
portfolios may magnify (both positively and negatively) the
daily investment results of the applicable index. It
isrecommended that only those Annuity Owners who engage a
financial advisor to allocate their account value using
astrategic or tactical asset allocation strategy invest in these
portfolios. The Portfolios are arranged based on the index
onwhich its investment strategy is based.
-----------------------------------------------------------------
ProFund VP Bull: seeks daily
SPECIALTY investment results, before fees and
expenses, that correspond to the
daily performance of the S&P 500(R) ProFund Advisors
Index. LLC
-----------------------------------------------------------------
SPECIALTY ProFund VP Bear: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
inverse (opposite) of the daily
performance of the S&P 500(R) Index.
If ProFund VP Bear is successful in
meeting its objective, its net asset
value should gain approximately the
same amount, on a percentage basis,
as any decrease in the S&P 500(R)
Index when the Index declines on a
given day. Conversely, its net asset
value should lose approximately the
same amount, on a percentage basis,
as any increase in the Index when the
Index rises on a given day.
-----------------------------------------------------------------
SPECIALTY ProFund VP UltraBull: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(200%) the daily performance of the
S&P 500(R) Index. If ProFund VP
UltraBull is successful in meeting
its objective, its net asset value
should gain approximately twice as
much, on a percentage basis, as the
S&P 500(R) Index when the Index rises
on a given day. Conversely, its net
asset value should lose approximately
twice as much, on a percentage basis,
as the Index when the Index declines
on a given day.
-----------------------------------------------------------------
The S&P 500(R) Index is a measure of large-cap U.S. stock market
performance. It is a float-adjusted market
capitalizationweighted index of 500 U.S. operating companies and
REITS selected by an S&P U.S. Index Committee through
anon-mechanical process that factors criteria such as liquidity,
price, market capitalization and financial viability.
Recon-stitution occurs both on a quarterly and ongoing basis.
-----------------------------------------------------------------
ProFund VP OTC: seeks daily
SPECIALTY investment results, before fees and
expenses, that correspond to the
daily performance of the NASDAQ-100 ProFund Advisors
Index(R). LLC
-----------------------------------------------------------------
SPECIALTY ProFund VP Short OTC: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
inverse (opposite) of the daily
performance of the NASDAQ-100
Index(R). If ProFund VP Short OTC is
successful in meeting its objective,
its net asset value should gain
approximately the same amount, on a
percentage basis, as any decrease in
the NASDAQ-100 Index(R) when the
Index declines on a given day.
Conversely, its net asset value
should lose approximately the same
amount, on a percentage basis, as any
increase in the Index when the Index
rises on a given day.
-----------------------------------------------------------------
26
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
SPECIALTY ProFund VP UltraOTC: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(200%) the daily performance of the
NASDAQ-100 Index(R). If ProFund VP
UltraOTC is successful in meeting its
objective, its net asset value should
gain approximately twice as much, on
a percentage basis, as the NASDAQ-100
Index(R) when the Index rises on a
given day. Conversely, its net asset
value should lose approximately twice
as much, on a percentage basis, as
the Index when the Index declines on
a given day.
-----------------------------------------------------------------
The NASDAQ-100 Index(R) includes 100 of the largest
non-financial domestic and international issues listed on
theNASDAQ Stock Market. To be eligible for inclusion companies
cannot be in bankruptcy proceedings and must meetcertain
additional criteria including minimum trading volume and
"seasoning" requirements. The Index is calculatedunder a
modified capitalization-weighted methodology. Reconstitution and
rebalancing occurs on an annual, quarterly andongoing basis.
-----------------------------------------------------------------
SPECIALTY ProFund VP UltraSmall-Cap: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to
twice (200%) the daily performance of
the Russell 2000(R) Index. If ProFund
VP UltraSmall-Cap is successful in
meeting its objective, its net asset
value should gain approximately twice
as much, on a percentage basis, as
the Russell 2000 Index(R) when the
Index rises on a given day.
Conversely, its net asset value
should lose approximately twice as
much, on a percentage basis, as the
Index when the Index declines on a
given day.
-----------------------------------------------------------------
SPECIALTY ProFund VP Short Small-Cap: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
inverse (opposite) of the daily
performance of the Russell 2000(R)
Index. If ProFund VP Short Small-Cap
is successful in meeting its
objective, its net asset value should
gain approximately the same amount,
on a percentage basis, as any
decrease in the Russell 2000 Index
when the Index declines on a given
day. Conversely, its net asset value
should lose approximately the same
amount, on a percentage basis, as any
increase in the Index when the Index
rises on a given day.
-----------------------------------------------------------------
The Russell 2000 Index is a measure of small-cap U.S. stock
market performance. It is an adjusted market
capitalizationweighted index containing approximately 2000 of
the smallest companies in the Russell 3000 Index or
approximately 8% ofthe total market capitalization of the
Russell 3000 Index, which in turn represents approximately 98%
of the investableU.S. equity market. All U.S. companies listed
on the NYSE, AMEX or NASDAQ meeting an initial minimum ($1)
price areconsidered for inclusion. Reconstitution occurs
annually. Securities are not replaced if they leave the index,
however, newissue securities meeting other membership
requirements may be added on a quarterly basis.
-----------------------------------------------------------------
SPECIALTY ProFund VP UltraMid-Cap: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to twice
(200%) the daily performance of the
S&P MidCap 400 Index(R). If ProFund
VP UltraMid-Cap is successful in
meeting its objective, its net asset
value should gain approximately twice
as much, on a percentage basis, as
the S&P MidCap 400 Index when the
Index rises on a given day.
Conversely, its net asset value
should lose approximately twice as
much, on a percentage basis, as the
Index when the Index declines on a
given day.
-----------------------------------------------------------------
SPECIALTY ProFund VP Short Mid-Cap: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
inverse (opposite) of the daily
performance of the S&P MidCap 400
Index(R). If ProFund VP Short Mid-Cap
is successful in meeting its
objective, its net asset value should
gain approximately the same amount,
on a percentage basis, as any
decrease in the S&P MidCap 400 Index
when the Index declines on a given
day. Conversely, its net asset value
should lose approximately the same
amount, on a percentage basis, as any
increase in the Index when the Index
rises on a given day.
-----------------------------------------------------------------
The S&P MidCap 400 Index is a measure of mid-size company U.S.
stock market performance. It is a float-adjustedmarket
capitalization weighted index of 400 U.S. operating companies
and REITs. Securities are selected for inclusion inthe index by
the S&P U.S. Index Committee through a non-mechanical process
that factors criteria such as liquidity, price,market
capitalization and financial viability. Reconstitution occurs
both on a quarterly and ongoing basis.
-----------------------------------------------------------------
27
---------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
---------------------------------------------------------------
SMALL ProFund VP Small-Cap Value: seeks ProFund Advisors
CAP daily investment results, before fees LLC
VALUE and expenses, that correspond to the
daily performance of the S&P SmallCap
600/Citigroup Value Index(R). The S&P
SmallCap 600/Citigroup Value Index is
designed to provide a comprehensive
measure of small-cap U.S. equity
"value" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P SmallCap
600 Index that have been identified
as being on the value end of the
growth-value spectrum.
---------------------------------------------------------------
SMALL ProFund VP Small-Cap Growth: seeks ProFund Advisors
CAP daily investment results, before fees LLC
GROWTH and expenses, that correspond to the
daily performance of the S&P SmallCap
600/Citigroup Growth Index(R). The
S&P SmallCap 600/Citigroup Growth
Index is designed to provide a
comprehensive measure of small-cap
U.S. equity "growth" performance. It
is an unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P SmallCap
600 Index that have been identified
as being on the growth end of the
growth-value spectrum.
---------------------------------------------------------------
The S&P SmallCap 600 Index is a measure of small-cap company
U.S. stock market performance. It is a float adjustedmarket
capitalization weighted index of 600 U.S. operating companies.
Securities are selected for inclusion in the index byan S&P
committee through a nonmechanical process that factors
criteria such as liquidity, price, market
capitalization,financial viability, and public float.
---------------------------------------------------------------
LARGE ProFund VP Large-Cap Value: seeks ProFund Advisors
CAP daily investment results, before fees LLC
VALUE and expenses, that correspond to the
daily performance of the S&P
500/Citigroup Value Index(R). The S&P
500/Citigroup Value Index is designed
to provide a comprehensive measure of
large-cap U.S. equity "value"
performance. It is an unmanaged float
adjusted market capitalization
weighted index comprised of stocks
representing approximately half the
market capitalization of the S&P 500
Index that have been identified as
being on the value end of the growth
value spectrum.
---------------------------------------------------------------
LARGE ProFund VP Large-Cap Growth: seeks ProFund Advisors
CAP daily investment results, before fees LLC
GROWTH and expenses, that correspond to the
daily performance of the S&P
500/Citigroup Growth Index(R). The
S&P 500/Citigroup Growth Index is
designed to provide a comprehensive
measure of large-cap U.S. equity
"growth" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P 500 Index
that have been identified as being on
the growth end of the growth-value
spectrum.
---------------------------------------------------------------
MID CAP ProFund VP Mid-Cap Value: seeks daily ProFund Advisors
VALUE investment results, before fees and LLC
expenses, that correspond to the
daily performance of the S&P MidCap
400/Citigroup Value Index(R). The S&P
MidCap 400/Citigroup Value Index is
designed to provide a comprehensive
measure of mid-cap U.S. equity
"value" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P MidCap 400
Index that have been identified as
being on the value end of the
growth-value spectrum.
---------------------------------------------------------------
MID CAP ProFund VP Mid-Cap Growth: seeks ProFund Advisors
GROWTH daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the S&P MidCap
400/Citigroup Growth Index(R). The
S&P MidCap 400/Citigroup Growth Index
is designed to provide a
comprehensive measure of mid-cap U.S.
equity "growth" performance. It is an
unmanaged float adjusted market
capitalization weighted index
comprised of stocks representing
approximately half the market
capitalization of the S&P MidCap 400
Index that have been identified as
being on the growth end of the
growth-value spectrum.
---------------------------------------------------------------
28
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
SPECIALTY ProFund VP Asia 30: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the ProFunds
Asia 30 Index. The ProFunds Asia 30
Index, created by ProFund Advisors,
is composed of 30 companies whose
principal offices are located in the
Asia/Pacific region, excluding Japan,
and whose securities are traded on
U.S. exchanges or on the NASDAQ as
depository receipts or ordinary
shares. The component companies in
the ProFunds Asia 30 Index are
determined annually based upon their
U.S. dollar-traded volume. Their
relative weights are determined based
on the modified market capitalization
method.
-----------------------------------------------------------------
INTER- ProFund VP Europe 30: seeks daily ProFund Advisors
NATIONAL investment results, before fees and LLC
EQUITY expenses, that correspond to the
daily performance of the ProFunds
Europe 30 Index. The ProFunds Europe
30 Index, created by ProFund
Advisors, is composed of companies
whose principal offices are located
in Europe and whose securities are
traded on U.S. exchanges or on the
NASDAQ as depositary receipts or
ordinary shares. The component
companies in the ProFunds Europe 30
Index are determined annually based
upon their U.S. dollar-traded volume.
Their relative weights are determined
based on a modified market
capitalization method.
-----------------------------------------------------------------
SPECIALTY ProFund VP Japan: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Nikkei 225
Stock Average. The Fund determines
its success in meeting this
investment objective by comparing its
daily return on a given day with the
daily performance of the
dollar-denominated Nikkei 225 futures
contracts traded in the United
States. The Fund seeks to provide a
return consistent with an investment
in the component equities in the
Nikkei 225 Stock Average hedged to
U.S. dollars.
-----------------------------------------------------------------
The Nikkei 225 Stock Average ("Nikkei" ) is a modified
price-weighted index of the 225 most actively traded and
liquidJapanese companies listed in the First Section of the
Tokyo Stock Exchange (TSE). The Nikkei is calculated from the
pricesof the 225 TSE First Section stocks selected to represent
a broad cross-section of Japanese industries and the
overallperformance of the Japanese equity market. Nihon Keizai
Shimbun, Inc. is the sponsor of the Index. Companies in
theNikkei are reviewed annually. Emphasis is placed on
maintaining the Index's historical continuity while keeping the
Indexcomposed of stocks with high market liquidity. The sponsor
consults with various market experts, considers companyspecific
information and the overall composition of the Index.
-----------------------------------------------------------------
SPECIALTY ProFund VP Banks: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Banks Index. The Dow Jones U.S.
Banks Index measures the performance
of the banking sector of the U.S.
equity market. Component companies
include regional and major U.S.
domiciled banks engaged in a wide
range of financial services,
including retail banking, loans and
money transmissions.
-----------------------------------------------------------------
SPECIALTY ProFund VP Basic Materials: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the Dow Jones
U.S. Basic Materials Index. The Dow
Jones U.S. Basic Materials Index
measures the performance of the basic
materials industry of the U.S. equity
market. Component companies are
involved in the production of
aluminum, steel, non ferrous metals,
commodity chemicals, specialty
chemicals, forest products, paper
products, as well as the mining of
precious metals and coal.
-----------------------------------------------------------------
SPECIALTY ProFund VP Biotechnology: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Biotechnology Index. The Dow
Jones U.S. Biotechnology Index
measures the performance of the
biotechnology subsector of the U.S.
equity market. Component companies
engage in research and development of
biological substances for drug
discovery and diagnostic development.
These companies derive most of their
revenue from the sale of licensing of
drugs and diagnostic tools.
-----------------------------------------------------------------
29
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
SPECIALTY ProFund VP Consumer Goods: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the Dow Jones
U.S. Consumer Goods Index. The Dow
Jones U.S. Consumer Goods Index
measures the performance of consumer
spending in the goods industry of the
U.S. equity market. Component
companies include automobiles and
auto parts and tires, brewers and
distillers, farming and fishing,
durable and non-durable household
product manufacturers, cosmetic
companies, food and tobacco products,
clothing, accessories and footwear.
-----------------------------------------------------------------
SPECIALTY ProFund VP Consumer Services: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the Dow Jones
U.S. Consumer Services Index. The Dow
Jones U.S. Consumer Services Index
measures the performance of consumer
spending in the services industry of
the U.S. equity market. Component
companies include airlines,
broadcasting and entertainment,
apparel and broadline retailers, food
and drug retailers, media agencies,
publishing, gambling, hotels,
restaurants and bars, and travel and
tourism.
-----------------------------------------------------------------
SPECIALTY ProFund VP Financials: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Financials Index. The Dow Jones
U.S. Financials Index measures the
performance of the financial services
industry of the U.S. equity market.
Component companies include regional
banks; major U.S. domiciled
international banks; full line, life,
and property and casualty insurance
companies; companies that invest,
directly or indirectly in real
estate; diversified financial
companies such as Fannie Mae, credit
card issuers, check cashing
companies, mortgage lenders and
investment advisers; securities
brokers and dealers, including
investment banks, merchant banks and
online brokers; and publicly traded
stock exchanges.
-----------------------------------------------------------------
SPECIALTY ProFund VP Health Care: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Health Care Index. The Dow Jones
U.S. Health Care Index measures the
performance of the healthcare
industry of the U.S. equity market.
Component companies include health
care providers, biotechnology
companies, medical supplies, advanced
medical devices and pharmaceuticals.
-----------------------------------------------------------------
SPECIALTY ProFund VP Industrials: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Industrials Index. The Dow Jones
U.S. Industrials Index measures the
performance of the industrial
industry of the U.S. equity market.
Component companies include building
materials, heavy construction,
factory equipment, heavy machinery,
industrial services, pollution
control, containers and packaging,
industrial diversified, air freight,
marine transportation, railroads,
trucking, land-transportation
equipment, shipbuilding,
transportation services, advanced
industrial equipment, electric
components and equipment, and
aerospace.
-----------------------------------------------------------------
SPECIALTY ProFund VP Internet: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
Composite Internet Index. The Dow
Jones Composite Internet Index
measures the performance of stocks in
the U.S. equity markets that generate
the majority of their revenues from
the Internet. The Index is composed
of two sub-groups: Internet Commerce
- companies that derive the majority
of their revenues from providing
goods and/or services through an open
network, such as a web site. Internet
Services - companies that derive the
majority of their revenues from
providing access to the Internet or
providing services to people using
the Internet.
-----------------------------------------------------------------
SPECIALTY ProFund VP Oil & Gas: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Oil & Gas Index. The Dow Jones
U.S. Oil & Gas Index measures the
performance of the oil and gas
industry of the U.S. equity market.
Component companies include oil
drilling equipment and services, oil
companies-major, oil
companies-secondary, pipelines,
liquid, solid or gaseous fossil fuel
producers and service companies.
-----------------------------------------------------------------
30
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
SPECIALTY ProFund VP Pharmaceuticals: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the Dow Jones
U.S. Pharmaceuticals Index. The Dow
Jones U.S. Pharmaceuticals Index
measures the performance of the
pharmaceuticals subsector of the U.S.
equity market. Component companies
include the makers of prescription
and over-the-counter drugs such as
birth control pills, vaccines,
aspirin and cold remedies.
-----------------------------------------------------------------
SPECIALTY ProFund VP Precious Metals: seeks ProFund Advisors
daily investment results, before fees LLC
and expenses, that correspond to the
daily performance of the Dow Jones
Precious Metals Index. The Dow Jones
Precious Metals Index measures the
performance of the precious metals
mining industry. Component companies
include leading miners and producers
of gold, silver and platinum-group
metals whose securities are available
to U.S. investors during U.S. trading
hours. It is a float-adjusted
market-capitalization weighted index.
-----------------------------------------------------------------
SPECIALTY ProFund VP Real Estate: seeks daily ProFund Advisors
investment results, before fees and LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Real Estate Index. The Dow Jones
U.S. Real Estate Index measures the
performance of the real estate sector
of the U.S. equity market. Component
companies include those that invest
directly or indirectly through
development, management or ownership
of shopping malls, apartment
buildings and housing developments;
and real estate investment trusts
("REITs") that invest in apartments,
office and retail properties. REITs
are passive investment vehicles that
invest primarily in income-producing
real estate or real estate related
loans or interests.
-----------------------------------------------------------------
SPECIALTY ProFund VP Semiconductor: seeks daily ProFund
investment results, before fees and Advisors LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Semiconductors Index. The Dow
Jones U.S. Semiconductors Index
measures the performance of the
semiconductor subsector of the U.S.
equity market. Component companies
are engaged in the production of
semiconductors and other integrated
chips, as well as other related
products such as semiconductor
capital equipment and mother-boards.
-----------------------------------------------------------------
SPECIALTY ProFund VP Technology: seeks daily ProFund
investment results, before fees and Advisors LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Technology Index. The Dow Jones
U.S. Technology Index measures the
performance of the technology
industry of the U.S. equity market.
Component companies include those
involved in computers and office
equipment, software, communications
technology, semiconductors,
diversified technology services and
Internet services.
-----------------------------------------------------------------
SPECIALTY ProFund VP Telecommunications: seeks ProFund
daily investment results, before fees Advisors LLC
and expenses, that correspond to the
daily performance of the Dow Jones
U.S. Telecommunications Index. The
Dow Jones U.S. Telecommunications
Index measures the performance of the
telecommunications industry of the
U.S. equity market. Component
companies include fixed-line
communications and wireless
communications companies.
-----------------------------------------------------------------
SPECIALTY ProFund VP Utilities: seeks daily ProFund
investment results, before fees and Advisors LLC
expenses, that correspond to the
daily performance of the Dow Jones
U.S. Utilities Sector Index. The Dow
Jones U.S. Utilities Sector Index
measures the performance of the
utilities industry of the U.S. equity
market. Component companies include
electric utilities, gas utilities and
water utilities.
-----------------------------------------------------------------
SPECIALTY ProFund VP U.S. Government Plus: ProFund
seeks daily investment results, Advisors LLC
before fees and expenses, that
correspond to one and one-quarter
times (125%) the daily price movement
of the most recently issued 30-year
U.S. Treasury bond ("Long Bond"). In
accordance with its stated objective,
the net asset value of ProFund VP
U.S. Government Plus generally should
decrease as interest rates rise. If
ProFund VP U.S. Government Plus is
successful in meeting its objective,
its net asset value should gain
approximately one and one-quarter
times (125%) as much, on a percentage
basis, as any daily increase in the
price of the Long Bond on a given
day. Conversely, its 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.
-----------------------------------------------------------------
31
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
SPECIALTY ProFund VP Rising Rates Opportunity: ProFund
seeks daily investment results, Advisors LLC
before fees and expenses, that
correspond to one and one-quarter
times (125%) the inverse (opposite)
of the daily price movement of the
most recently issued 30-year U.S.
Treasury bond ("Long Bond"). In
accordance with its stated objective,
the net asset value of ProFund VP
Rising Rates Opportunity generally
should decrease as interest rates
fall. If ProFund VP Rising Rates
Opportunity is successful in meeting
its objective, its net asset value
should gain approximately one and
one-quarter times as much, on a
percentage basis, as any daily
decrease in the Long Bond on a given
day. Conversely, its net asset value
should lose approximately one and
one-quarter times as much, on a
percentage basis, as any daily
increase in the price of the Long
Bond on a given day.
------------------------------------------------------------------
SPECIALTY Access VP High Yield Fund: seeks to ProFund
provide investment results that Advisors LLC
correspond generally to the total
return of the high yield market
consistent with maintaining
reasonable liquidity. The Fund will
achieve its high yield exposure
primarily through credit default
swaps (CDSs) but may invest in high
yield debt instruments ("junk
bonds"), interest rate swap
agreements and futures contracts, and
other debt and money market
instruments without limitation,
consistent with applicable
regulations. Under normal market
conditions, the Fund will invest at
least 80% of its net assets in CDSs
and other financial instruments that
in combination have economic
characteristics similar to the high
yield debt market and/or in high
yield debt securities. The Fund seeks
to maintain exposure to the high
yield bond markets regardless of
market conditions and without taking
defensive positions in cash or other
instruments in anticipation of an
adverse climate for the high yield
bond markets. ProFund Advisors does
not conduct fundamental analysis in
managing the Fund.
------------------------------------------------------------------
THE PRUDENTIAL SERIES FUND
------------------------------------------------------------------
INTER- The Prudential Series Fund - SP Prudential
NATIONAL International Growth Portfolio Investments LLC/
EQUITY (formerly, The Prudential Series Fund William Blair &
- SP William Blair International Company, LLC
Growth Portfolio): Seeks long-term
capital appreciation. The Portfolio
invests primarily in stocks of large
and medium-sized companies located in
countries included in the Morgan
Stanley Capital International All
Country World Ex-U.S. Index. Under
normal market conditions, the
portfolio invests at least 80% of its
net assets in equity securities. The
Portfolio's assets normally will be
allocated among not fewer than six
different countries and will not
concentrate investments in any
particular industry. The Portfolio
seeks companies that historically
have had superior growth,
profitability and quality relative to
local markets and relative to
companies within the same industry
worldwide, and that are expected to
continue such performance. (see
information above regarding limited
availability of this option.)
------------------------------------------------------------------
WELLS FARGO VARIABLE TRUST
------------------------------------------------------------------
LARGE Wells Fargo Advantage VT Equity Wells Fargo Funds
CAP Income Fund (formerly known as Wells Management, LLC
VALUE Fargo Advantage Equity Income Fund):
Seeks long-term capital appreciation
and dividend income. The Portfolio
invests principally in equity
securities of large-capitalization
companies, which they define as
companies with market capitalizations
of $3 billion or more.
------------------------------------------------------------------
"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 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.
32
"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 and Value Line Target 25 Portfolio are 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. We may restrict your ability to allocate Account Value to Fixed
Allocations if you elect certain optional benefits. The interest rate that we
credit to the Fixed Allocations may be reduced by an amount that corresponds
to the asset-based charges assessed against the Sub-accounts.
33
FEES AND CHARGES
The charges under each Annuity are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under each Annuity. They are also designed, in the aggregate, to compensate us
for the risks of loss we assume. If, as we expect, the charges that we collect
from the Annuities exceed our total costs in connection with the Annuities, we
will earn a profit. Otherwise we will incur a loss. For example, American
Skandia may make a profit on the Insurance Charge if, over time, the actual
costs of providing the guaranteed insurance obligations under an Annuity are
less than the amount we deduct for the Insurance Charge. To the extent we make
a profit on the Insurance Charge, such profit may be used for any other
corporate purpose, including payment of other expenses that American Skandia
incurs in promoting, distributing, issuing and administering an Annuity and,
in the case of XT6, ASAP III and APEX II to offset a portion of the costs
associated with offering any 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 Annuity. A portion of the proceeds that American Skandia
receives from charges that apply to the Sub-accounts may include amounts based
on market appreciation of the Sub-account values including, for ASAP III, XT6
and APEX II, appreciation on amounts that represent any Credits.
WHAT ARE THE CONTRACT FEES AND CHARGES?
Contingent Deferred Sales Charge: We do not deduct a sales charge from
Purchase Payments you make to your Annuity. However, we may deduct a CDSC if
you surrender your Annuity or when you make a partial withdrawal. The CDSC
reimburses us for expenses related to sales and distribution of the Annuity,
including commissions, marketing materials and other promotional expenses. The
CDSC is calculated as a percentage of your Purchase Payment being surrendered
or withdrawn during the applicable Annuity Year. For purposes of calculating
the CDSC, we consider the year following the Issue Date of your Annuity as
Year 1. The amount of the CDSC decreases over time, measured from the Issue
Date of the Annuity. The CDSC percentages for ASAP III, APEX II and XT6 are
shown under "Summary of Contract Fees and Charges". No CDSC is deducted from
ASL II Annuities. If you purchase XT6 and make a withdrawal that is subject to
a CDSC, we may use part of that CDSC to recoup our costs of providing the
Credit. However, we do not impose any CDSC on your withdrawal of a Credit
amount.
With respect to a partial withdrawal, we calculate the CDSC by assuming that
any available free withdrawal amount is taken out first (see How Much Can I
Withdraw as a Free Withdrawal?). If the free withdrawal amount is not
sufficient, we then assume that withdrawals are taken from Purchase Payments
that have not been previously withdrawn, on a first-in, first-out basis, and
subsequently from any other Account Value in the Annuity.
For purposes of calculating any applicable CDSC on a surrender, the Purchase
Payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you
have made prior partial withdrawals or if your Account Value has declined in
value due to negative market performance. In that scenario, we would determine
the CDSC amount as the applicable percentage of the Purchase Payments being
withdrawn, rather than as a percentage of the remaining Account Value or
withdrawal request. Thus, the CDSC would be greater than if it were calculated
as a percentage of remaining Account Value or withdrawal amount.
We may waive any applicable CDSC under certain circumstances including certain
medically-related circumstances or when taking a Minimum Distribution from an
Annuity purchased as a "qualified" investment. Free Withdrawals,
Medically-Related Surrenders and Minimum Distributions are each explained more
fully in the section entitled "Access to Your Account Value".
Transfer Fee: Currently, you may make twenty (20) free transfers between
investment options each Annuity Year. We will charge $10.00 for each transfer
after the twentieth in each Annuity Year. We do not consider transfers made as
part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation
program when we count the twenty free transfers. All transfers made on the
same day will be treated as one (1) transfer. Renewals or transfers of Account
Value from a Fixed Allocation at the end of its Guarantee Period are not
subject to the Transfer Fee and are not counted toward the twenty free
transfers. We may reduce the number of free transfers allowable each Annuity
Year (subject to a minimum of eight) without charging a Transfer Fee unless
you make use of electronic means to transmit your transfer requests. We may
eliminate the Transfer Fee for transfer requests transmitted electronically or
through other means that reduce our processing costs. If enrolled in any
program that does not permit transfer requests to be transmitted
electronically, the Transfer Fee will not be waived.
34
Annual Maintenance Fee: During the accumulation period we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account
Value invested in the Sub-accounts, whichever is less. This fee will be
deducted annually on the anniversary of the Issue Date of your Annuity or, if
you surrender your Annuity during the Annuity Year, the fee is deducted at the
time of surrender. With respect to ASAP III, APEX II and ASL II, currently,
the Annual Maintenance Fee is only deducted if your Account Value is less than
$100,000 on the anniversary of the Issue Date or at the time of surrender.
With respect to XT6, we deduct the Annual Maintenance Fee regardless of
Account Value. We do not impose the Annual Maintenance Fee upon annuitization,
the payment of a Death Benefit, or a medically-related full surrender. We may
increase the Annual Maintenance Fee. However, any increase will only apply to
Annuities issued after the date of the increase. For beneficiaries that elect
the Beneficiary Continuation Option, the Annual Maintenance Fee is the lesser
of $30 or 2% of Account Value. For a non-qualified Beneficiary Continuation
Option, the fee is only applicable if the Account Value is less than $25,000
at the time the fee is assessed.
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 Purchase Payments 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 Annuity. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividends received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract.
Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed
against the daily assets allocated to the Sub-accounts and is equal to the
amount indicated under "Summary of Contract Fees and Charges". The Insurance
Charge is the combination of the Mortality & Expense Risk Charge and the
Administration Charge. The Insurance Charge is intended to compensate American
Skandia for providing the insurance benefits under each Annuity, including
each Annuity's basic Death Benefit that provides guaranteed benefits to your
beneficiaries even if the market declines and the risk that persons we
guarantee annuity payments to will live longer than our assumptions. The
charge also covers administrative costs associated with providing the Annuity
benefits, including preparation of the contract and prospectus, confirmation
statements, annual account statements and annual reports, legal and accounting
fees as well as various related expenses. Finally, the charge covers the risk
that our assumptions about the mortality risks and expenses under each Annuity
are incorrect and that we have agreed not to increase these charges over time
despite our actual costs. We may increase the portion of the total Insurance
Charge that is deducted for administrative costs; however, any increase will
only apply to Annuities issued after the date of the increase.
The Insurance Charge is not deducted against assets allocated to a Fixed
Allocation. However, the amount we credit to Fixed Allocations may also
reflect similar assumptions about the insurance guarantees provided under each
Annuity.
Distribution Charge: For ASAP III and XT6, we deduct a Distribution Charge
daily. The charge is assessed against the average assets allocated to the
Sub-accounts and is equal to the amount indicated under "Summary of Contract
Fees and Charges" on an annual basis. The Distribution Charge is intended to
compensate us for a portion of our acquisition expenses under the Annuity,
including promotion and distribution of the Annuity and, with respect to XT6,
the costs associated with offering Credits which are funded through American
Skandia's general account. The Distribution Charge is deducted against your
Annuity's Account Value and any increases or decreases in your Account Value
based on market fluctuations of the Sub-accounts will affect the charge.
Optional Benefits for which we assess a charge: Generally, if you elect to
purchase certain optional benefits, we will deduct an additional charge on a
daily basis from your Account Value allocated to the Sub-accounts. The
additional charge is included in the daily calculation of the Unit Price for
each Sub-account. We may assess charges for other optional benefits on a
different basis. Please refer to the section entitled "Summary of Contract
Fees and Charges" for the list of charges for each Optional Benefit.
Settlement Service Charge: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge. The
charge is assessed daily against the average assets allocated to the
Sub-accounts and is equal to an annual charge of 1.00% for non-qualified
Annuities and 1.40% for qualified Annuities.
35
Fees and expenses incurred by the Portfolios: Each Portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. These
fees and expenses are reflected daily by each Portfolio before it provides
American Skandia with the net asset value as of the close of business each
day. More detailed information about fees and expenses can be found in the
prospectuses for the Portfolios.
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
No specific fees or expenses are deducted when determining the rate we credit
to a Fixed Allocation. However, for some of the same reasons that we deduct
the Insurance Charge against Account Value allocated to the Sub-accounts, we
also take into consideration mortality, expense, administration, profit and
other factors in determining the interest rates we credit to Fixed
Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the
Sub-accounts or the Fixed Allocations. A Market Value Adjustment may also
apply to transfers, certain withdrawals, surrender or annuitization from a
Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?
If you select a fixed payment option, the amount of each fixed payment will
depend on the Account Value of your Annuity when you elected to annuitize.
There is no specific charge deducted from these payments; however, the amount
of each annuity payment reflects assumptions about our insurance expenses. If
you select a variable payment option that we may offer, then the amount of
your benefits will reflect changes in the value of your Annuity and will be
subject to charges that apply under the variable immediate annuity option.
Also, a tax charge may apply (see "Tax Charge" above). Currently, we only
offer fixed payment options.
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES
We may reduce or eliminate certain fees and charges or alter the manner in
which the particular fee or charge is deducted. For example, we may reduce the
amount of any CDSC or the length of time it applies, reduce or eliminate the
amount of the Annual Maintenance Fee or reduce the portion of the total
Insurance Charge that is deducted as an Administration Charge. Generally,
these types of changes will be based on a reduction to our sales, maintenance
or administrative expenses due to the nature of the individual or group
purchasing the Annuity. Some of the factors we might consider in making such a
decision are: (a) the size and type of group; (b) the number of Annuities
purchased by an Owner; (c) the amount of Purchase Payments or likelihood of
additional Purchase Payments; (d) whether an annuity is reinstated pursuant to
our rules; and/or (e) other transactions where sales, maintenance or
administrative expenses are likely to be reduced. We will not discriminate
unfairly between Annuity purchasers if and when we reduce any fees and charges.
36
PURCHASING YOUR ANNUITY
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?
Initial Purchase Payment: Unless we agree otherwise and subject to our rules,
you must make a minimum initial Purchase Payment as follows: $1,000 for ASAP
III, $10,000 for XT6 and APEX II and $15,000 for ASL II. However, if you
decide to make payments under a systematic investment or an electronic funds
transfer program, we may accept a lower initial Purchase Payment provided
that, within the first Annuity Year, your subsequent Purchase Payments plus
your initial Purchase Payment total the minimum initial Purchase Payment
amount required for the Annuity purchased.
Where allowed by law, we must approve any initial and additional Purchase
Payments of $1,000,000 or more. We may apply certain limitations and/or
restrictions on an Annuity as a condition of our acceptance, including
limiting the liquidity features or the Death Benefit protection provided under
an Annuity, limiting the right to make additional Purchase Payments, changing
the number of transfers allowable under an Annuity or restricting the
Sub-accounts or Fixed Allocations that are available. Other limitations and/or
restrictions may apply. Applicable laws designed to counter terrorists and
prevent money laundering might, in certain circumstances, require us to block
a contract owner's ability to make certain transactions, and thereby refuse to
accept Purchase Payments or requests for transfers, partial withdrawals, total
withdrawals, death benefits, or income payments until instructions are
received from the appropriate regulator. We also may be required to provide
additional information about you and your Annuity to government regulators.
Except as noted below, Purchase Payments must be submitted by check drawn on a
U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase
Payments may also be submitted via 1035 exchange or direct transfer of funds.
Under certain circumstances, Purchase Payments may be transmitted to American
Skandia via wiring funds through your Financial Professional's broker-dealer
firm. Additional Purchase Payments may also be applied to your Annuity under
an electronic funds transfer arrangement where you authorize us to deduct
money directly from your bank account. We may reject any payment if it is
received in an unacceptable form. Our acceptance of a check is subject to our
ability to collect funds.
Age Restrictions: Unless we agree otherwise and subject to our rules, the
Owner (or Annuitant if entity owned) must not be older than a maximum issue
age as of the Issue Date of the Annuity as follows: age 80 for ASAP III, age
75 for XT6 and age 85 for APEX II. For ASL II, there is no maximum issue age,
however the basic death benefit provides greater protection for Owners under
age 85. If an Annuity is owned jointly, the oldest of the Owners must not be
older than the maximum issue age on the Issue Date. You should consider your
need to access your Account Value and whether the Annuity's liquidity features
will satisfy that need. If you take a distribution prior to age 59 1/2, you
may be subject to a 10% penalty in addition to ordinary income taxes on any
gain. The availability and level of protection of certain optional benefits
may vary based on the age of the Owner on the Issue Date of the Annuity or the
date of the Owner's death.
Owner, Annuitant and Beneficiary Designations: We will ask you to name the
Owner(s), Annuitant and one or more Beneficiaries for your Annuity.
.. Owner: The Owner(s) holds all rights under the Annuity. You may name up to
two Owners in which case all ownership rights are held jointly. Generally,
joint owners are required to act jointly; however, if each owner provides
us with an instruction that we find acceptable, we will permit each owner
to act separately. All information and documents that we are required to
send you will be sent to the first named owner. This Annuity does not
provide a right of survivorship. Refer to the Glossary of Terms for a
complete description of the term "Owner."
.. Annuitant: The Annuitant is the person upon whose life we continue to make
annuity payments. You must name an Annuitant who is a natural person. We do
not accept a designation of joint Annuitants during the accumulation
period. In limited circumstances and where allowed by law, you may name one
or more Contingent Annuitants. Generally, a Contingent Annuitant will
become the Annuitant if the Annuitant dies before the Annuity Date. Please
refer to the discussion of "Considerations for Contingent Annuitants" in
the Tax Considerations section of the Prospectus.
.. Beneficiary: The Beneficiary is the person(s) or entity you name to receive
the Death Benefit. Your Beneficiary Designation should be the exact name of
your beneficiary, not only a reference to the beneficiary's relationship to
you. If you use a designation of "surviving spouse," we will pay the Death
Benefit to the individual that is your spouse at the time of your death (as
defined under the federal tax laws and regulations). If no beneficiary is
named the Death Benefit will be paid to you or your estate.
Your right to make certain designations may be limited if your Annuity is to
be used as an IRA or other "qualified" investment that is given beneficial tax
treatment under the Code. You should seek competent tax advice on the income,
estate and gift tax implications of your designations.
37
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 in a form acceptable to us. 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;
.. a new Annuitant if the latest Annuity Date would be earlier than prior to
the change;
.. for "non-qualified" investments, a new Annuitant prior to the Annuity Date
if the Annuity is owned by an entity; and
.. a change in Beneficiary if the Owner had previously made the designation
irrevocable.
There are also restrictions on designation changes when you have elected
certain optional benefits. See the "Living Benefit Programs" and "Death
Benefits" sections of this Prospectus for any such restrictions.
Spousal Designations
If an Annuity is co-owned by spouses, we will assume that the sole primary
Beneficiary is the surviving spouse that was named as the co-owner unless you
elect an alternative Beneficiary Designation. Unless you elect an alternative
Beneficiary Designation, upon the death of either spousal Owner, the surviving
spouse may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. The Death Benefit that would have been payable will be
the new Account Value of the Annuity as of the date of due proof of death and
any required proof of a spousal relationship. As of the date the assumption is
effective, the surviving spouse will have all the rights and benefits that
would be available under the Annuity to a new purchaser of the same attained
age. For the Spousal Lifetime Five Income Benefit, the eligible surviving
spouse will also be able to assume the benefit with the Annuity. See the
description of this benefit in the "Living Benefit Programs" section of this
Prospectus. For purposes of determining any future Death Benefit for the
beneficiary of the surviving spouse, the new Account Value will be considered
as the initial Purchase Payment. No CDSC will apply to the new Account Value.
However, any additional Purchase Payments applied after the date the
assumption is effective will be subject to all provisions of the Annuity,
including the CDSC when applicable.
Spousal assumption is also permitted, subject to our rules and regulatory
approval, if the Annuity is held by a custodial account established to hold
retirement assets for the benefit of the natural person Annuitant pursuant to
the provisions of Section 408(a) of the Internal Revenue Code ("Code") (or any
successor Code section thereto) ("Custodial Account") and, on the date of the
Annuitant's death, the spouse of the Annuitant is (1) the Contingent Annuitant
under the Annuity and (2) the beneficiary of the Custodial Account. The
ability to continue the Annuity in this manner will result in the Annuity no
longer qualifying for tax deferral under the Code. However, such tax deferral
should result from the ownership of the Annuity by the Custodial Account.
Please consult your tax or legal adviser.
We define a spouse the same as under federal tax laws and regulations.
Contingent Annuitant
Generally, if an Annuity is owned by an entity and the entity has named a
Contingent Annuitant, the Contingent Annuitant will become the Annuitant upon
the death of the Annuitant, and no Death Benefit is payable. Unless we agree
otherwise, the Annuity is only eligible to have a Contingent Annuitant
designation if the entity which owns the Annuity is (1) a plan described in
Internal Revenue Code Section 72(s)(5)(A)(i) (or any successor Code section
thereto); (2) an entity described in Code Section 72(u)(1) (or any successor
Code section thereto); or (3) a Custodial Account, as described in the above
section.
Where the Annuity is held by a Custodial Account, the Contingent Annuitant
will not automatically become the Annuitant upon the death of the Annuitant.
Upon the death of the Annuitant, the Custodial Account will have the choice,
subject to our rules, to either elect to receive the Death Benefit or elect to
continue the Annuity. If the Custodial Account elects to receive the Death
Benefit, the Account Value of the Annuity as of the date of due proof of death
of the Annuitant will reflect the amount that would have been payable had a
Death Benefit been paid. See the section above entitled "Spousal Designations"
for more information about how the Annuity can be continued by a Custodial
Account.
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?
If after purchasing your Annuity you change your mind and decide that you do
not want it, you may return it to us within a certain period of time known as
a right to cancel period. This is often referred to as a "free look."
Depending on the state in which you purchased your Annuity and, in some
states, if you purchased the Annuity as a replacement for a prior contract,
the right to cancel period may be ten (10) days, or longer, measured from the
time that you received your Annuity. If you return your Annuity during the
applicable period, we will refund your current Account Value plus any tax
charge deducted, less any applicable federal and
38
state income tax withholding and depending on your state's requirements, any
applicable insurance charges deducted. The amount returned to you may be
higher or lower than the Purchase Payment(s) applied during the right to
cancel period. Where required by law, we will return your Purchase Payment(s),
or the greater of your current Account Value and the amount of your Purchase
Payment(s) applied during the right to cancel period less any applicable
federal and state income tax withholding. With respect to XT6, if you return
your Annuity, we will not return any XTra Credits we applied to your Annuity
based on your Purchase Payments.
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?
Unless we agree otherwise and subject to our rules, the minimum amount that we
accept as an additional Purchase Payment is $100 unless you participate in
American Skandia's Systematic Investment Plan or a periodic Purchase Payment
program. Purchase Payments made while you participate in an asset allocation
program will be allocated in accordance with such program. Additional Purchase
Payments may be made 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.
We call our electronic funds transfer program "American Skandia's Systematic
Investment Plan." Purchase Payments made through electronic funds transfer may
only be allocated to the Sub-accounts when applied. Different allocation
requirements may apply in connection with certain optional benefits. We may
allow you to invest in your Annuity with a lower initial Purchase Payment, as
long as you authorize payments through an electronic funds transfer that will
equal at least the minimum Purchase Payment set forth above during the first
12 months of your Annuity. We may suspend or cancel electronic funds transfer
privileges if sufficient funds are not available from the applicable financial
institution on any date that a transaction is scheduled to occur.
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?
These types of programs are only available with certain types of qualified
investments. If your employer sponsors such a program, we may agree to accept
periodic Purchase Payments through a salary reduction program as long as the
allocations are made only to Sub-accounts and the periodic Purchase Payments
received in the first year total at least the minimum Purchase Payment set
forth above.
39
MANAGING YOUR ACCOUNT VALUE
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?
(See "Valuing Your Investment" for a description of our procedure for pricing
initial and subsequent Purchase Payments.)
Initial Purchase Payment: Once we accept your application, we invest your
Purchase Payment in your Annuity according to your instructions for allocating
your Account Value. The Purchase Payment is your initial Purchase Payment
minus any tax charges that may apply. You can allocate Account Value to one or
more Sub-accounts or Fixed Allocations. Investment restrictions will apply if
you elect certain optional benefits.
Subsequent Purchase Payments: Unless you participate in an asset allocation
program, or unless you have provided us with other specific allocation
instructions for one, more than one, or all subsequent Purchase Payments, we
will allocate any additional Purchase Payments you make according to your
initial Purchase Payment allocation instructions. If you so instruct us, we
will allocate subsequent Purchase Payments according to any new allocation
instructions. Unless you tell us otherwise, Purchase Payments made while you
participate in an asset allocation program will be allocated in accordance
with such program.
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE ASAP III AND APEX II ANNUITIES?
We apply a Loyalty Credit to your Annuity's Account Value at the end of your
fifth Annuity Year ("fifth Annuity Anniversary"). With respect to ASAP III,
for annuities issued on or after February 13, 2006, the Loyalty Credit is
equal to 0.50% of total Purchase Payments made during the first four Annuity
Years less the cumulative amount of withdrawals made (including the deduction
of any CDSC amounts) through the fifth Annuity Anniversary. With respect to
APEX II, for annuities issued between June 20, 2005 and February 13, 2006, the
Loyalty Credit is equal to 2.25% of total Purchase Payments made during the
first four Annuity Years less the cumulative amount of withdrawals made
(including the deduction of any CDSC amounts) through the fifth Annuity
Anniversary. For APEX II Annuities issued on or after February 13, 2006, the
Loyalty Credit is equal to 2.75% of total Purchase Payments made during the
first four Annuity Years less the cumulative amount of withdrawals made
(including the deduction of any CDSC amounts) through the fifth Annuity
Anniversary.
If the total Purchase Payments made during the first four Annuity Years is
less than the cumulative amount of withdrawals made on or before the fifth
Annuity Anniversary, no Loyalty Credit will be applied to your Annuity. Also,
no Loyalty Credit will be applied to your Annuity if your Account Value is
zero on the fifth Annuity Anniversary. This would include any situation where
the Annuity is still in force due to the fact that payments are being made
under an optional benefit such as Lifetime Five, Spousal Lifetime Five,
Highest Daily 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 Annuity under our spousal continuation option, we will
apply the Loyalty Credit to your Annuity only on the fifth Annuity Anniversary
measured from the date that we originally issued you the Annuity. Since the
Loyalty Credit is applied to the Account Value only, any guarantees that are
not based on Account Value will not reflect the Loyalty Credit. Similarly,
guarantees that are made against a loss in Account Value will not be triggered
in certain very limited circumstances where they otherwise would have been,
had no Loyalty Credit been applied to the Account Value.
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE ASAP III AND
APEX II ANNUITIES?
Any Loyalty Credit that is allocated to your Account Value on the fifth
Annuity Anniversary will be allocated to the Fixed Allocations and
Sub-accounts in the same percentages as Purchase Payments are then being
allocated to your Annuity.
Example of Applying the Loyalty Credit with respect to ASAP III
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is, subject to state availability,
equal to 0.50% of $15,000 (this represents the $20,000 of Purchase Payments
made during the first four Annuity Years minus the $5,000 withdrawal made in
the fifth Annuity Year. The computation disregards the additional $10,000
Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty
Credit amount would be equal to $75.00.
Example of Applying the Loyalty Credit with respect to APEX II
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is,
40
subject to state availability, equal to 2.75% of $15,000 (this represents the
$20,000 of Purchase Payments made during the first four Annuity Years minus
the $5,000 withdrawal made in the fifth Annuity Year. The computation
disregards the additional $10,000 Purchase Payment made in the fifth Annuity
Year.) Therefore, the Loyalty Credit amount would be equal to $412.50.
HOW DO I RECEIVE CREDITS UNDER THE XT6 ANNUITY?
We apply a "Credit" to your Annuity's Account Value each time you make a
Purchase Payment during the first six (6) Annuity Years. The amount of the
Credit is payable from our general account. The amount of the Credit depends
on the Annuity Year in which the Purchase Payment(s) is made, according to the
table below:
For annuities issued prior to February 13, 2006:
ANNUITY YEAR CREDIT
-------------------
1 6.00%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
-------------------
For annuities issued on or after February 13, 2006 (subject to state
availability):
ANNUITY YEAR CREDIT
-------------------
1 6.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
-------------------
Credits Applied to Purchase Payments for Designated Class of Annuity Owner
Prior to May 1, 2004, where allowed by state law, Annuities could be purchased
by a member of the class defined below, with a different table of Credits. The
Credit applied to all Purchase Payments on such Annuities is as follows based
on the Annuity Year in which the Purchase Payment was made: Year 1 -9.0%; Year
2 -9.0%; Year 3 -8.5%; Year 4 -8.0%; Year 5 -7.0%; Year 6 -6.0%; Year 7 -5.0%;
Year 8 -4.0%; Year 9 -3.0%; Year 10 -2%; Year 11+ -0.0%.
The designated class of Annuity Owners included: (a) any parent company,
affiliate or subsidiary of ours; (b) an officer, director, employee, retiree,
sales representative, or in the case of an affiliated broker-dealer,
registered representative of such company; (c) a director, officer or trustee
of any underlying mutual fund; (d) a director, officer or employee of any
investment manager, sub-advisor, transfer agent, custodian, auditing, legal or
administrative services provider that is providing investment management,
advisory, transfer agency, custodian-ship, auditing, legal and/or
administrative services to an underlying mutual fund or any affiliate of such
firm; (e) a director, officer, employee or registered representative of a
broker-dealer or insurance agency that has a then current selling agreement
with us and/or with American Skandia Marketing, Incorporated, a Prudential
Financial Company; (f) a director, officer, employee or authorized
representative of any firm providing us or our affiliates with regular legal,
actuarial, auditing, underwriting, claims, administrative, computer support,
marketing, office or other services; (g) the then current spouse of any such
person noted in (b) through (f), above; (h) the parents of any such person
noted in (b) through (g), above; (i) the child(ren) or other legal dependent
under the age of 21 of any such person noted in (b) through (h); and (j) the
siblings of any such persons noted in (b) through (h) above.
All other terms and conditions of the Annuity apply to Owners in the
designated class.
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE XT6 ANNUITY?
Each Credit is allocated to your Account Value at the time the Purchase
Payment is applied to your Account Value. The amount of the Credit is
allocated to the investment options in the same ratio as the applicable
Purchase Payment is applied.
Examples of Applying Credits
Initial Purchase Payment
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. We would apply a 6.5% Credit to your
Purchase Payment and allocate the amount of the Credit ($650 = $10,000 X .065)
to your Account Value in the proportion that your Purchase Payment is
allocated.
41
Additional Purchase Payment in Annuity Year 2
Assume that you make an additional Purchase Payment of $5,000. We would apply
a 5.0% Credit to your Purchase Payment and allocate the amount of the Credit
($250 = $5,000 X .05) to your Account Value.
Additional Purchase Payment in Annuity Year 6
Assume that you make an additional Purchase Payment of $15,000. We would apply
a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit
($150 = $15,000 X .01) to your Account Value.
The amount of any XTra Credits applied to your XT6 Annuity Account Value can
be taken back by American Skandia under certain circumstances:
. any XTra Credits applied to your Account Value on Purchase Payments made
within the 12 months before the Owner's (or Annuitant's if entity owned)
date of death will be taken back;
. the amount available under the medically-related surrender portion of the
Annuity will not include the amount of any XTra Credits payable on
Purchase Payments made within 12 months prior to the date of a request
under the medically-related surrender provision; and
. if you elect to "free look" your Annuity, the amount returned to you will
not include the amount of any XTra Credits.
If you qualify for the 6.5% Xtra Credit in the first year (for annuities
issued on or after February 13, 2006, subject to state availability), only 6%
of that amount will be taken back in connection with the first two bullets
described above. However, we will take back the entire 6.5% if you "free look"
your Annuity.
The Account Value may be substantially reduced if American Skandia takes back
the XTra Credit amount under these circumstances. The amount we take back will
equal the XTra Credit, without adjustment up or down for investment
performance. Therefore, any gain on the XTra Credit amount will not be taken
back. But if there was a loss on the XTra Credit, the amount we take back will
still equal amount of the XTra Credit. We do not deduct a CDSC in any
situation where we take back the XTra Credit amount. During the first 10
Annuity Years, the total asset-based charges on this Annuity (including the
Insurance Charge and the Distribution Charge) are higher than many of our
other annuities, including other annuities we offer that apply credits to
Purchase Payments.
General Information about Credits
.. We do not consider Credits to be "investment in the contract" for income
tax purposes.
.. You may not withdraw the amount of any Credits under the Free Withdrawal
provision. The Free Withdrawal provision only applies to withdrawals of
Purchase Payments.
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?
During the accumulation period you may transfer Account Value between
investment options subject to the restrictions outlined below. Transfers are
not subject to taxation on any gain. We may require a minimum of $500 in each
Sub-account you allocate Account Value to at the time of any allocation or
transfer. If you request a transfer and, as a result of the transfer, there
would be less than $500 in the Sub-account, we may transfer the remaining
Account Value in the Sub-account pro- rata to the other investment options to
which you transferred.
Currently, any transfer involving the ProFunds VP Sub-accounts must be
received by us no later than one hour prior to any announced closing of the
applicable securities exchange (generally, 3:00 p.m. Eastern time) to be
processed on the current Valuation Day. The "cut-off" time for such financial
transactions involving a ProFunds VP Sub-account will be extended to /1//\\2
\\hour prior to any announced closing (generally, 3:30 p.m. Eastern time) for
transactions submitted electronically, including through American Skandia's
Internet website (www.americanskandia.prudential.com).
Currently, we charge $10.00 for each transfer after the twentieth
(20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar
Cost Averaging, Automatic Rebalancing or asset allocation program do not count
toward the twenty free transfer limit. Renewals or transfers of Account Value
from a Fixed Allocation at the end of its Guarantee Period are not subject to
the transfer charge. We may reduce the number of free transfers allowable each
Annuity Year (subject to a minimum of eight) without charging a Transfer Fee.
We may also increase the Transfer Fee that we charge to $20.00 for each
transfer after the number of free transfers has been used up. We may eliminate
the Transfer Fee for transfer requests transmitted electronically or through
other means that reduce our processing costs. If enrolled in any program that
does not permit transfer requests to be transmitted electronically, the
Transfer Fee will not be waived.
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 Valuation 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.
42
Frequent transfers among Sub-accounts in response to short-term fluctuations
in markets, sometimes called "market timing," can make it very difficult for a
Portfolio manager to manage a Portfolio's investments. Frequent transfers may
cause the Portfolio to hold more cash than otherwise necessary, disrupt
management strategies, increase transaction costs, or affect performance. Each
Annuity offers Sub-accounts designed for Owners who wish to engage in frequent
transfers (i.e., one or more of the Sub-accounts corresponding to the ProFund
Portfolios and the AST Money Market Portfolio), and we encourage Owners
seeking frequent transfers to utilize those Sub-accounts.
In light of the risks posed to Owners and other investors by frequent
transfers, we reserve the right to limit the number of transfers in any
Annuity Year for all existing or new Owners and to take the other actions
discussed below. We also reserve the right to limit the number of transfers in
any Annuity Year or to refuse any transfer request for an Owner or certain
Owners if: (a) we believe that excessive transfer activity (as we define it)
or a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the Portfolios; or
(b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio
manager) that the purchase or redemption of shares in the Portfolio must be
restricted because the Portfolio believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected Portfolio. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate
amount of a trade or trades represented a relatively large proportion of the
total assets of a particular Portfolio. In furtherance of our general
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
.. With respect to each Sub-account (other than the AST Money Market
Sub-account, or a Sub-account corresponding to a ProFund Portfolio), we
track amounts exceeding a certain dollar threshold that were transferred
into the Sub-account. If you transfer such amount into a particular
Sub-account, and within 30 calendar days thereafter transfer (the "Transfer
Out") all or a portion of that amount into another Sub-account, then upon
the Transfer Out, the former Sub-account becomes restricted (the
"Restricted Sub-account"). Specifically, we will not permit subsequent
transfers into the Restricted Sub-account for 90 calendar days after the
Transfer Out if the Restricted Sub-account invests in a non-international
Portfolio, or 180 calendar days after the Transfer Out if the Restricted
Sub-account invests in an international Portfolio. For purposes of this
rule, we (i) do not count transfers made in connection with one of our
systematic programs, such as asset allocation and 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 Financial Professional promptly of the circumstances
concerning the denial.
Contract owners in New York who purchased their contracts prior to March 15,
2004 are not subject to the specific restrictions outlined in bulleted
paragraphs immediately above. In addition, there are contract owners of
different variable annuity contracts that are funded through the same Separate
Account that are not subject to the above-referenced transfer restrictions
and, therefore, might make more numerous and frequent transfers than contract
owners who are subject to such limitations. Finally, there are contract owners
of other variable annuity contracts or variable life contracts that are issued
by American Skandia as well as other insurance companies that have the same
underlying mutual fund portfolios available to them. Since some contract
owners are not subject to the same transfer restrictions, unfavorable
consequences associated with such frequent trading within the underlying
mutual fund (e.g., greater portfolio turnover, higher transaction costs, or
performance or tax issues) may affect all contract owners. Similarly, while
contracts managed by a Financial Professional or third party investment
advisor are subject to the restrictions on transfers between investment
options that are discussed above, if the advisor manages a number of contracts
in the same fashion unfavorable consequences may be associated with management
activity since it may involve the movement of a substantial portion of an
underlying mutual fund's assets which may affect all contract owners invested
in the affected options. Apart from jurisdiction-specific and contract
differences in transfer restrictions, we will apply these rules uniformly
(including contracts managed by a Financial Professional or third party
investment advisor), and will not waive a transfer restriction for any
contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
The Portfolios may have adopted their own policies and procedures with respect
to excessive trading of their respective shares, and we reserve the right to
enforce these policies and procedures. The prospectuses for the Portfolios
describe any such policies and procedures, which may be more or less
restrictive than the policies and procedures we have adopted. Under SEC rules,
we are required to: (1) enter into a written agreement with each Portfolio or
its principal underwriter or its transfer agent that obligates us to provide
to the Portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from the
Portfolio to restrict or prohibit further purchases or transfers by specific
contract owners who
43
violate the excessive trading policies established by the Portfolio. In
addition, you should be aware that some Portfolios may receive "omnibus"
purchase and redemption orders from other insurance companies or
intermediaries such as retirement plans. The omnibus orders reflect the
aggregation and netting of multiple orders from individual owners of variable
insurance contracts and/or individual retirement plan participants. The
omnibus nature of these orders may limit the Portfolios in their ability to
apply their excessive trading policies and procedures. In addition, the other
insurance companies and/or retirement plans may have different policies and
procedures or may not have any such policies and procedures because of
contractual limitations. For these reasons, we cannot guarantee that the
Portfolios (and thus contract owners) will not be harmed by transfer activity
relating to other insurance companies and/or retirement plans that may invest
in the Portfolios.
A Portfolio also may assess a short term trading fee in connection with a
transfer out of the Sub-account investing in that Portfolio that occurs within
a certain number of days following the date of allocation to the Sub-account.
Each Portfolio determines the amount of the short term trading fee and when
the fee is imposed. The fee is retained by or paid to the Portfolio and is not
retained by us. The fee will be deducted from your Account Value, to the
extent allowed by law. At present, no Portfolio has adopted a short-term
trading fee.
DO YOU OFFER DOLLAR COST AVERAGING?
Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar
Cost Averaging allows you to systematically transfer an amount periodically
from one investment option to one or more other investment options. You can
choose to transfer earnings only, principal plus earnings or a flat dollar
amount. You may elect a Dollar Cost Averaging program that transfers amounts
monthly, quarterly, semi-annually, or annually from Sub-accounts, or a program
that transfers amounts monthly from Fixed Allocations. By investing amounts on
a regular basis instead of investing the total amount at one time, Dollar Cost
Averaging may decrease the effect of market fluctuation on the investment of
your Purchase Payment. This may result in a lower average cost of units over
time. However, there is no guarantee that Dollar Cost Averaging will result in
a profit or protect against a loss in a declining market. There is no minimum
Account Value required to enroll in a Dollar Cost Averaging program and we do
not deduct a charge for participating in a Dollar Cost Averaging program.
You can Dollar Cost Average from Sub-accounts or Fixed Allocations. Dollar
Cost Averaging from Fixed Allocations is subject to a number of rules that
include, but are not limited to the following:
. You may only use Fixed Allocations with Guarantee Periods of 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 have elected an
automatic rebalancing program or an asset allocation program. Dollar Cost
Averaging from Fixed Allocations is not available if you elect the Guaranteed
Return Option Plus, the Guaranteed Return Option or the Highest Daily Lifetime
Five Income Benefit.
American Skandia may offer Fixed Allocations with Guarantee Periods of 6
months or 12 months exclusively for use with a Dollar Cost Averaging program
("DCA Fixed Allocations"). DCA Fixed Allocations are designed to automatically
transfer Account Value in either 6 or 12 payments under a Dollar Cost
Averaging program. Dollar Cost Averaging transfers will begin on the day
following the date the DCA Fixed Allocation is established and each month
following until the entire principal amount plus earnings is transferred. DCA
Fixed Allocations may only be established with your initial Purchase Payment
or additional Purchase Payments. You may not transfer existing Account Value
to a DCA Fixed Allocation. We reserve the right to terminate offering these
special purpose Fixed Allocations at any time.
Account Value allocated to the DCA Fixed Allocation will be transferred to the
Sub-accounts you choose under the Dollar Cost Averaging program. If you
terminate the Dollar Cost Averaging program before the entire principal amount
plus earnings has been transferred to the Sub-account(s), you must transfer
all remaining Account Value to any other investment option. Unless you provide
alternate instructions at the time you terminate the Dollar Cost Averaging
program, Account Value will be transferred to the AST Money Market
Sub-account. Transfers from Fixed Allocations as part of a Dollar Cost
Averaging program are not subject to a Market Value Adjustment. However, a
Market Value Adjustment will apply if you terminate the Dollar Cost Averaging
program before the entire principal amount plus earnings has been transferred
to the Sub-account(s).
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?
Yes. During the accumulation period, we offer Automatic Rebalancing among the
Sub-accounts you choose. You can choose to have your Account Value rebalanced
monthly, quarterly, semi-annually, or annually. On the appropriate date, the
Sub-accounts you chose are rebalanced to the allocation percentages you
requested. With Automatic Rebalancing, we transfer the appropriate
44
amount from the "overweighted" Sub-accounts to the "underweighted"
Sub-accounts to return your allocations to the percentages you request. For
example, over time the performance of the Sub-accounts will differ, causing
your percentage allocations to shift.
Any transfer to or from any Sub-account that is not part of your Automatic
Rebalancing program, will be made; however, that Sub-account will not become
part of your rebalancing program unless we receive instructions from you
indicating that you would like such option to become part of the program.
There is no minimum Account Value required to enroll in Automatic Rebalancing.
All rebalancing transfers as part of an Automatic Rebalancing program are not
included when counting the number of transfers each year toward the maximum
number of free transfers. We do not deduct a charge for participating in an
Automatic Rebalancing program. Participation in the Automatic Rebalancing
program may be restricted if you are enrolled in certain other optional
programs. Sub-accounts that are part of a Systematic Withdrawal program or
Dollar Cost Averaging program will be excluded from an Automatic Rebalancing
program.
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?
We currently do not offer any asset allocation programs for use with your
Annuity. Prior to December 5, 2005, we made certain asset allocation programs
available. If you enrolled in one of the asset allocation programs prior to
December 5, 2005, see the Appendix entitled, "Additional Information on the
Asset Allocation Programs" for more information on how the programs are
administered.
DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE
DATE?
Yes. We offer three different programs for investors who wish to invest in the
Sub-accounts but also wish to protect their principal, as of a specific date
in the future. They are the Balanced Investment Program, the Highest Daily
Lifetime Five Income Benefit and the Guaranteed Return Option Plus/SM/ (GRO
Plus/SM/). GRO Plus is not available in all states. In some states where GRO
Plus is not available we offer the Guaranteed Return Option (GRO).) Generally,
all three programs allow you to allocate a portion of your Account Value to
the available Sub-accounts while ensuring that your Account Value will at
least equal your contributions adjusted for withdrawals and transfers on a
specified date. Under GRO Plus, Account Value is allocated to and maintained
in Fixed Allocations to the extent we, in our sole discretion, deem it is
necessary to support our guarantee under the program. Highest Daily Lifetime
Five also includes a specialized asset transfer component under which we may
transfer Account Value between permitted Sub-accounts and a fixed interest
rate account. 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. Under Highest Daily Lifetime Five, the
"return of premium" component is only one feature of the benefit and only
applies if no withdrawals are taken for the first ten years after benefit
election. Generally, more of your Account Value will be allocated to the
Sub-accounts under the GRO Plus and Highest Daily Lifetime Five programs 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 any of these
programs if you expect to begin taking annuity payments before the program
would be completed. In addition, as with most return of premium programs,
amounts that are available to allocate to the Sub-accounts may be
substantially less than they would be if you did not elect a return of premium
program. This means that, if investment experience in the Sub-accounts were
positive, your Account Value would grow at a slower rate than if you did not
elect a return of premium program and allocated all of your Account Value to
the Sub-accounts.
There is no additional charge for participation in the Balanced Investment
Program. There is an additional charge if you elect either GRO Plus or Highest
Daily Lifetime Five. See below for a description of the Balanced Investment
Program. See the "Living Benefit Programs" section of the Prospectus for
details on GRO Plus and Highest Daily Lifetime Five. Restrictions and
limitations apply.
Balanced Investment Program
We offer a balanced investment program where a portion of your Account Value
is allocated to a Fixed Allocation and the remaining Account Value is
allocated to the Sub-accounts that you select. When you enroll in the Balanced
Investment Program, you choose the duration that you wish the program to last.
This determines the duration of the Guarantee Period for the Fixed Allocation.
Based on the fixed rate for the Guarantee Period chosen, we calculate the
portion of your Account Value that must be allocated to the Fixed Allocation
to grow to a specific "principal amount" (such as your initial Purchase
Payment). We determine the amount based on the rates then in effect for the
Guarantee Period you choose. If you continue the program until the end of the
Guarantee Period and make no withdrawals or transfers, at the end of the
Guarantee Period, the Fixed Allocation will have grown to equal the "principal
amount". Withdrawals or transfers from the Fixed Allocation before the end of
the Guarantee Period will terminate the program and may be subject to a Market
Value Adjustment. You can transfer the Account Value that is not allocated to
the Fixed Allocation between any of the Sub-accounts available under your
Annuity. Account Value you allocate to the Sub-accounts is subject to market
fluctuations and may increase or decrease in value. We do not deduct a charge
for participating in the Balanced Investment Program.
Example
Assume you invest $100,000. You choose a 10-year program and allocate a
portion of your Account Value to a Fixed Allocation with a 10-year
Guarantee Period. The rate for the 10-year Guarantee Period is 2.50%*.
Based on the fixed
45
interest rate for the Guarantee Period chosen, the factor is 0.781198
for determining how much of your Account Value will be allocated to the
Fixed Allocation. That means that $78,120 will be allocated to the Fixed
Allocation and the remaining Account Value ($21,880) will be allocated
to the Sub-accounts. Assuming that you do not make any withdrawals or
transfers from the Fixed Allocation, it will grow to $100,000 at the end
of the Guarantee Period. Of course we cannot predict the value of the
remaining Account Value that was allocated to the Sub-accounts.
* The rate in this example is hypothetical and may not reflect the current
rate for Guarantee Periods of this duration.
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION
INSTRUCTIONS?
Yes. Subject to our rules, your Financial Professional may forward
instructions regarding the allocation of your Account Value, and request
financial transactions involving investment options. If your Financial
Professional has this authority, we deem that all transactions that are
directed by your Financial Professional with respect to your Annuity have been
authorized by you. You must contact us immediately if and when you revoke such
authority. We will not be responsible for acting on instructions from your
Financial Professional until we receive notification of the revocation of such
person's authority. We may also suspend, cancel or limit these privileges at
any time. We will notify you if we do.
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?
Yes. You may engage your own investment advisor to manage your account. These
investment advisors may be firms or persons who also are appointed by us, or
whose affiliated broker-dealers are appointed by us, as authorized sellers of
the Annuities. Even if this is the case, however, please note that the
investment advisor you engage to provide advice and/or make transfers for you,
is not acting on our behalf, but rather is acting on your behalf. We do not
offer advice about how to allocate your Account Value under any circumstance.
As such, we are not responsible for any recommendations such investment
advisors make, any investment models or asset allocation programs they choose
to follow or any specific transfers they make on your behalf.
Any fee that is charged by your investment advisor is in addition to the fees
and expenses that apply under your Annuity. If you authorize your investment
advisor to withdraw amounts from your Annuity (to the extent permitted) to pay
for the investment advisor's fee, as with any other withdrawal from your
Annuity, you may incur adverse tax consequences, a CDSC and/or a market value
adjustment. Withdrawals to pay your investment advisor generally will also
reduce the level of various living and death benefit guarantees provided (e.g.
the withdrawals will reduce proportionately your Annuity's guaranteed minimum
death benefit.) We are not a party to the agreement you have with your
investment advisor and do not verify that amounts withdrawn from your Annuity,
including amounts withdrawn to pay for the investment advisor's fee, are
within the terms of your agreement with your investment advisor. You will,
however, receive confirmations of transactions that affect your Annuity. If
your investment advisor has also acted as your Financial Professional with
respect to the sale of your Annuity, he or she may be receiving compensation
for services provided both as a Financial Professional and investment advisor.
Alternatively, the investment advisor may compensate the Financial
Professional from whom you purchased your Annuity for the referral that led
you to enter into your investment advisory relationship with the investment
advisor. If you are interested in the details about the compensation that your
investment advisor and/or your Financial Professional receive in connection
with your Annuity, you should ask them for more details.
We or an affiliate of ours may provide administrative support to licensed,
registered Financial Professionals or Investment advisors who you authorize to
make financial transactions on your behalf. We may require Financial
Professionals or investment advisors, who are authorized by multiple contract
owners to make financial transactions, to enter into an administrative
agreement with American Skandia as a condition of our accepting transactions
on your behalf. The administrative agreement may impose limitations on the
Financial Professional's or investment advisor's ability to request financial
transactions on your behalf. These limitations are intended to minimize the
detrimental impact of a Financial Professional who is in a position to
transfer large amounts of money for multiple clients in a particular Portfolio
or type of portfolio or to comply with specific restrictions or limitations
imposed by a Portfolio(s) of American Skandia.
Please Note: Annuities where your Financial Professional or investment advisor
has the authority to forward instruction on financial transactions are also
subject to the restrictions on transfers between investment options that are
discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON
TRANSFERS BETWEEN INVESTMENT OPTIONS?" Since transfer activity directed by a
Financial Professional or third party investment adviser may result in
unfavorable consequences to all contract owners invested in the affected
options, we reserve the right to limit the investment options available to a
particular Owner where such authority as described above has been given to a
Financial Professional or investment advisor or impose other transfer
restrictions we deem necessary. The administrative agreement may limit the
available investment options, require advance notice of large transactions, or
impose other trading limitations on your Financial Professional. Your
Financial Professional will be informed of all such restrictions on an ongoing
basis. We may also require that your Financial Professional transmit all
financial transactions using the electronic trading functionality available
through our Internet website (www.americanskandia.prudential.com).
Limitations that we may impose on your Financial Professional or investment
advisor under the terms of the administrative agreement do not apply to
financial transactions requested by an Owner on their own behalf, except as
otherwise described in this Prospectus.
46
HOW DO THE FIXED ALLOCATIONS WORK?
We credit a fixed interest rate to the Fixed Allocation throughout a set
period of time called a "Guarantee Period." Fixed Allocations currently are
offered with Guarantee Periods from 1 to 10 years. We may make Fixed
Allocations of different durations available in the future, including Fixed
Allocations offered exclusively for use with certain optional investment
programs. Fixed Allocations may not be available in all states and may not
always be available for all Guarantee Periods depending on market factors and
other considerations.
The interest rate credited to a Fixed Allocation is the rate in effect when
the Guarantee Period begins and does not change during the Guarantee Period.
The rates are an effective annual rate of interest. We determine the interest
rates for the various Guarantee Periods. At the time that we confirm your
Fixed Allocation, we will advise you of the interest rate in effect and the
date your Fixed Allocation matures. We may change the rates we credit new
Fixed Allocations at any time. Any change in interest rate does not affect
Fixed Allocations that were in effect before the date of the change. To
inquire as to the current rates for Fixed Allocations, please call
1-800-752-6342.
A Guarantee Period for a Fixed Allocation begins:
. when all or part of a net Purchase Payment is allocated to that
particular Guarantee Period;
. upon transfer of any of your Account Value to a Fixed Allocation for that
particular Guarantee Period; or
. when you "renew" a Fixed Allocation by electing a new Guarantee Period.
To the extent permitted by law, we may establish different interest rates for
Fixed Allocations offered to a class of Owners who choose to participate in
various optional investment programs we make available. This may include, but
is not limited to, Owners who elect to use Fixed Allocations under a dollar
cost averaging program (see "Do You Offer Dollar Cost Averaging?") or a
balanced investment program (see "Do you offer programs designed to guarantee
a "Return of Premium" at a future date?").
The interest rate credited to Fixed Allocations offered to this class of
purchasers may be different than those offered to other purchasers who choose
the same Guarantee Period but who do not participate in an optional investment
program. Any such program is at our sole discretion.
American Skandia may offer Fixed Allocations with Guarantee Periods of 3
months or 6 months exclusively for use as a short-term Fixed Allocation
("Short-term Fixed Allocations"). Short-term Fixed Allocations may only be
established with your initial Purchase Payment or additional Purchase
Payments. You may not transfer existing Account Value to a Short-term Fixed
Allocation. We reserve the right to terminate offering these special purpose
Fixed Allocations at any time.
On the Maturity Date of the Short-term Fixed Allocation, the Account Value
will be transferred to the Sub-account(s) you choose at the inception of the
program. If no instructions are provided, such Account Value will be
transferred to the AST Money Market Sub-account. Short-term Fixed Allocations
may not be renewed on the Maturity Date. If you surrender the Annuity or
transfer any Account Value from the Short-term Fixed Allocation to any other
investment option before the end of the Guarantee Period, a Market Value
Adjustment will apply.
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?
We do not have a specific formula for determining the fixed interest rates for
Fixed Allocations. Generally the interest rates we offer for Fixed Allocations
will reflect the investment returns available on the types of investments we
make to support our fixed rate guarantees. These investment types may include
cash, debt securities guaranteed by the United States government and its
agencies and instrumentalities, money market instruments, corporate debt
obligations of different durations, private placements, asset-backed
obligations and municipal bonds. In determining rates we also consider factors
such as the length of the Guarantee Period for the Fixed Allocation,
regulatory and tax requirements, liquidity of the markets for the type of
investments we make, commissions, administrative and investment expenses, our
insurance risks in relation to the Fixed Allocations, general economic trends
and competition. Some of these considerations are similar to those we consider
in determining the Insurance Charge that we deduct from Account Value
allocated to the Sub-accounts. The interest rate that we credit to the Fixed
Allocations may be reduced by an amount that corresponds to the asset-based
charges assessed against 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
47
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 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.
48
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee
Period. Before the Maturity Date, you may choose to renew the Fixed Allocation
for a new Guarantee Period of the same or different length or you may transfer
all or part of that Fixed Allocation's Account Value to another Fixed
Allocation or to one or more Sub-accounts. We will not charge a MVA if you
choose to renew a Fixed Allocation on its Maturity Date or transfer the
Account Value to one or more Sub-accounts. We will notify you before the end
of the Guarantee Period about the fixed interest rates that we are currently
crediting to all Fixed Allocations that are being offered. The rates being
credited to Fixed Allocations may change before the Maturity Date.
If you do not specify how you want a Fixed Allocation to be allocated on its
Maturity Date, we will then transfer the Account Value of the Fixed Allocation
to the AST Money Market Sub-account. You can then elect to allocate the
Account Value to any of the Sub-accounts or to a new Fixed Allocation.
49
ACCESS TO ACCOUNT VALUE
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?
During the accumulation period you can access your Account Value through
partial withdrawals, Systematic Withdrawals, and where required for tax
purposes, Minimum Distributions. You can also surrender your Annuity at any
time. We may deduct a portion of the Account Value being withdrawn or
surrendered as a CDSC, if applicable. If you surrender your Annuity, in
addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge
that applies and the charge for any optional benefits. We may also apply a
Market Value Adjustment to any Fixed Allocations being withdrawn or
surrendered. Certain amounts may be available to you each Annuity Year that
are not subject to a CDSC. These are called "Free Withdrawals." Unless you
notify us differently, withdrawals are taken pro-rata based on the Account
Value in the investment options at the time we receive your withdrawal
request. Each of these types of distributions is described more fully below.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?
(For more information, see "Tax Considerations.")
During the Accumulation Period
A distribution during the accumulation period is deemed to come first from any
"gain" in your Annuity and second as a return of your "tax basis", if any.
Distributions from your Annuity are generally subject to ordinary income
taxation on the amount of any investment gain unless the distribution
qualifies as a non-taxable exchange or transfer. If you take a distribution
prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. You may wish to consult a
professional tax advisor for advice before requesting a distribution.
During the Annuitization Period
During the annuitization period, a portion of each annuity payment is taxed as
ordinary income at the tax rate you are subject to at the time of the payment.
The Code and regulations have "exclusionary rules" that we use to determine
what portion of each annuity payment should be treated as a return of any tax
basis you have in your Annuity. Once the tax basis in your Annuity has been
distributed, the remaining annuity payments are taxable as ordinary income.
The tax basis in your Annuity may be based on the tax-basis from a prior
contract in the case of a 1035 exchange or other qualifying transfer.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation period.
. To meet liquidity needs, you can withdraw a limited amount from your
Annuity during each Annuity Year without application of any CDSC. We call
this the "Free Withdrawal" amount. The Free Withdrawal amount is not
available if you choose to surrender your Annuity. Amounts withdrawn as a
Free Withdrawal do not reduce the amount of CDSC that may apply upon a
subsequent withdrawal or surrender of your Annuity. The minimum Free
Withdrawal you may request is $100.
. You can also make withdrawals in excess of the Free Withdrawal amount.
The minimum partial withdrawal you may request is $100.
To determine if a CDSC applies to partial withdrawals, we:
1. First determine what, if any, amounts qualify as a Free Withdrawal. These
amounts are not subject to the CDSC.
2. Next determine what, if any, remaining amounts are withdrawals of Purchase
Payments. Amounts in excess of the Free Withdrawal amount will be treated
as withdrawals of Purchase Payments unless all Purchase Payments have been
previously withdrawn. These amounts are subject to the CDSC. Purchase
Payments are withdrawn on a first in, first out basis.
3. Withdraw any remaining amounts from any other Account Value. These amounts
are not subject to the CDSC.
You may request a withdrawal for an exact dollar amount after deduction of any
CDSC that applies (called a "net withdrawal") or request a gross withdrawal
from which we will deduct any CDSC that applies, resulting in less money being
payable to you than the amount you requested. If you request a net withdrawal,
the amount deducted from your Account Value to pay the CDSC may also be
subject to a CDSC.
Partial withdrawals may also be available following annuitization but only if
you choose certain annuity payment options.
To request the forms necessary to make a withdrawal from your Annuity, call
1-800-752-6342 or visit our Internet Website at
www.americanskandia.prudential.com.
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?
The maximum Free Withdrawal amount during each Annuity Year is equal to 10% of
all Purchase Payments that are subject to a CDSC. Withdrawals made within an
Annuity Year reduce the Free Withdrawal amount available for the remainder of
the Annuity
50
Year. If you do not make a withdrawal during an Annuity Year, you are not
allowed to carry over the Free Withdrawal amount to the next Annuity Year.
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?
Yes. We call these "Systematic Withdrawals." You can receive Systematic
Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals
may be subject to a CDSC. We will determine whether a CDSC applies and the
amount in the same way as we would for a partial withdrawal.
Systematic Withdrawals can be made from Account Value allocated to the
Sub-accounts or Fixed Allocations. Generally, Systematic Withdrawals from
Fixed Allocations are limited to earnings accrued after the program of
Systematic Withdrawals begins, or payments of fixed dollar amounts that do not
exceed such earnings. Systematic Withdrawals are available on a monthly,
quarterly, semi-annual or annual basis.
The minimum amount for each Systematic Withdrawal is $100. If any scheduled
Systematic Withdrawal is for less than $100 (which may occur under a program
that provides payment of an amount equal to the earnings in your Annuity for
the period requested), we may postpone the withdrawal and add the expected
amount to the amount that is to be withdrawn on the next scheduled Systematic
Withdrawal.
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(t) OF THE INTERNAL
REVENUE CODE?
Yes. If your Annuity is used as a funding vehicle for certain retirement plans
that receive special tax treatment under Sections 401, 403(b), 408 or 408A of
the Code, Section 72(t) of the Code may provide an exception to the 10%
penalty tax on distributions made prior to age 59 1/2 if you elect to receive
distributions as a series of "substantially equal periodic payments".
Distributions received under these provisions in any Annuity Year that exceed
the maximum amount available as a free withdrawal will be subject to any
applicable CDSC. We may apply a Market Value Adjustment to any Fixed
Allocations. To request a program that complies with Sections 72(t), 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
Sections 72(t). The minimum amount for any such withdrawal is $100 and
payments may be made monthly, quarterly, semi-annually or annually.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments before age 59 1/2 that are not subject to the 10% penalty.
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?
(See "Tax Considerations" for a further discussion of Required Minimum
Distributions.)
Required Minimum Distributions are a type of Systematic Withdrawal we allow to
meet distribution requirements under Sections 401, 403(b) or 408 of the Code.
Required Minimum Distribution rules do not apply to Roth IRAs during the
Owner's lifetime. Under the Code, you may be required to begin receiving
periodic amounts from your Annuity. In such case, we will allow you to make
Systematic Withdrawals in amounts that satisfy the Required Minimum
Distribution rules under the Code. We do not assess a CDSC on Required Minimum
Distributions from your Annuity if you are required by law to take such
Required Minimum Distributions from your Annuity at the time it is taken.
However, a CDSC (if applicable) may be assessed on that portion of a
Systematic Withdrawal that is taken to satisfy the Required Minimum
Distribution provisions 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 Required Minimum
Distributions paid out monthly, quarterly, semi-annually or annually. The $100
minimum amount that applies to Systematic Withdrawals applies to monthly
Required Minimum Distributions but does not apply to Required 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 Required Minimum Distribution provisions under the
Code.
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?
Yes. During the accumulation period you can surrender your Annuity at any
time. Upon surrender, you will receive the Surrender Value. Upon surrender of
your Annuity, you will no longer have any rights under the surrendered Annuity.
For purposes of calculating any applicable CDSC on surrender, the Purchase
Payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you
have made prior
51
withdrawals under the Free Withdrawal provision or if your Account Value has
declined in value due to negative market performance. In that scenario, we
would determine the CDSC amount as the applicable percentage of the Purchase
Payments being withdrawn, rather than as a percentage of the remaining Account
Value or withdrawal request. Thus, the CDSC would be greater than if it were
calculated as a percentage of remaining Account Value or withdrawal amount. We
may apply a Market Value Adjustment to any Fixed Allocations.
Under certain annuity payment options, you may be allowed to surrender your
Annuity for its then current value.
To request the forms necessary to surrender your Annuity, call 1-800-752-6342
or visit our Internet Website at www.americanskandia.prudential.com.
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?
Where permitted by law, you may request to surrender all or part of your
Annuity prior to the Annuity Date without application of any otherwise
applicable CDSC upon occurrence of a medically-related "Contingency Event" as
described below. We may apply a Market Value Adjustment to any Fixed
Allocations. If you request a full surrender, the amount payable will be your
Account Value minus, with respect to XT6, (a) the amount of any XTra Credits
applied within 12 months prior to your request to surrender your Annuity under
this provision; and (b) the amount of any XTra Credits added in conjunction
with any Purchase Payments received after our receipt of your request for a
medically-related surrender (e.g. Purchase Payments received at such time
pursuant to a salary reduction program). With respect to partial surrenders,
we similarly reserve the right to take back XTra Credits as described above.
This waiver of any applicable CDSC is subject to our rules, including but not
limited to the following:
. The Annuitant must have been named or any change of Annuitant must have
been accepted by us, prior to the "Contingency Event" described below in
order to qualify for a medically-related surrender;
. the Annuitant must be alive as of the date we pay the proceeds of such
surrender request;
. if the Owner is one or more natural persons, all such Owners must also be
alive at such time;
. we must receive satisfactory proof of the Annuitant's confinement in a
Medical Care Facility or Fatal Illness in writing on a form satisfactory
to us;
. this option is not available if the total Purchase Payments received
exceed $500,000 for all annuities issued by us with this benefit where
the same person is named as Annuitant; and
. no additional Purchase Payments can be made to the Annuity.
A "Contingency Event" occurs if the Annuitant is:
.. first confined in a "Medical Care Facility" while your Annuity is in force
and remains confined for at least 90 days in a row; or
.. first diagnosed as having a "Fatal Illness" while your Annuity is in force.
The definitions of "Medical Care Facility" and "Fatal Illness," as well as
additional terms and conditions, are provided in your Annuity. Specific
details and definitions in relation to this benefit may differ in certain
jurisdictions.
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?
We currently make available annuity options that provide fixed annuity
payments or adjustable annuity payments. Your Annuity provides certain fixed
annuity payment options. We do not guarantee to continue to make available any
other option other than the fixed annuity payment options set forth in your
Annuity. Fixed options provide the same amount with each payment. Adjustable
options provide a fixed payment that is periodically adjusted based on current
interest rates. Please refer to the "Guaranteed Minimum Income Benefit," the
"Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit and
the Highest Daily 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 or under the terms of your
Annuity. 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.
See section below entitled "How and When Do I Choose the Annuity Payment
Option?"
Certain of these annuity options may be available to Beneficiaries who choose
to receive the Death Benefit proceeds as a series of payments instead of a
lump sum payment.
Please note, with respect to XT6, you may not annuitize within the first three
Annuity Years and with respect to ASAP III and APEX II, you may not annuitize
within the first Annuity Year.
52
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. 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. 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. Under this option, you cannot
make a partial or full surrender of the annuity.
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.
We may make different annuity payment options available in the future. We do
not guarantee to continue to make available any other option other than the
fixed annuity payment options set forth in your contract.
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?
Unless prohibited by law, we require that you elect either a life annuity or
an annuity with a certain period of at least 5 years if any CDSC would apply
were you to surrender your Annuity on the Annuity Date. Certain annuity
payment options may not be available if your Annuity Date occurs during the
period that a CDSC would apply.
You have a right to choose your Annuity Date, provided it is no later than the
maximum Annuity Date that may be required by law or under the terms of your
Annuity.
For Annuities issued prior to November 20, 2006:
. if you do not provide us with your Annuity Date, a default date for the
Annuity Date will be the first day of the calendar month following the
later of the Annuitant's 85/th/ birthday or the fifth anniversary of our
receipt of your request to purchase an Annuity; and
. unless you instruct us otherwise, the annuity payments, where allowed by
law, will be calculated on a fixed basis under Option 3, Payments for
Life with 10 years certain.
For Annuities issued on or after November 20, 2006:
. Unless we agree otherwise, the Annuity Date you choose must be no later
than the first day of the calendar month coinciding with or next
following the later of: (a) the oldest Owner's or Annuitant's 95/th/
birthday, whichever occurs first, and (b) the fifth anniversary of the
Issue Date. Certain states may have different requirements based on
applicable laws.
. If you do not provide us with your Annuity Date, the maximum date as
described above will be the default date; and, unless you instruct us
otherwise, we will pay you the annuity payments and the annuity payments,
where allowed by law, will be calculated on a fixed basis under Option 3,
Payments for Life with 10 years certain.
If you choose to defer the Annuity Date beyond the default date, the IRS may
not consider your contract to be an annuity under the tax law. If that should
occur, all gain in your Annuity at that time will become immediately taxable
to you. Further, each subsequent year's increase in Account Value would be
taxable in that year. By choosing to continue to defer after the default date,
you will assume the risk that your Annuity will not be considered an annuity
for federal income tax purposes.
Please note that annuitization essentially involves converting your Account
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
53
HOW ARE ANNUITY PAYMENTS CALCULATED?
Fixed Annuity Payments
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.
Adjustable Annuity Payments
We may make an adjustable annuity payment option available. Adjustable annuity
payments are calculated similarly to fixed annuity payments except that on
every fifth (5/th/) anniversary of receiving annuity payments, the annuity
payment amount is adjusted upward or downward depending on the rate we are
currently crediting to annuity payments. The adjustment in the annuity payment
amount does not affect the duration of remaining annuity payments, only the
amount of each payment.
54
LIVING BENEFIT PROGRAMS
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS
WHILE THEY ARE ALIVE?
American Skandia offers different optional benefits, for an additional charge,
that can provide investment protection for Owners while they are alive.
Notwithstanding the additional protection provided under the optional Living
Benefit Programs, the additional cost has the impact of reducing net
performance of the investment options. Each optional benefit offers a distinct
type of guarantee, regardless of the performance of the Sub-accounts, that may
be appropriate for you depending on the manner in which you intend to make use
of your Annuity while you are alive. Depending on which optional benefit you
choose, you can have flexibility to invest in the Sub-accounts while:
.. protecting a principal amount from decreases in value as of specified
future dates due to investment performance;
.. taking withdrawals with a guarantee that you will be able to withdraw not
less than a principal amount over time;
.. guaranteeing a minimum amount of growth will be applied to your principal,
if it is to be used as the basis for certain types of lifetime income
payments; or
.. providing spousal continuation of certain benefits.
The "living benefits" that American Skandia offers are the Guaranteed Return
Option Plus (GRO Plus), the Guaranteed Minimum Withdrawal Benefit (GMWB), the
Guaranteed Minimum Income Benefit (GMIB), the Lifetime Five Income Benefit,
the Spousal Lifetime Five Income Benefit and the Highest Daily Lifetime Five
Income Benefit. Please refer to the benefit descriptions that follow for a
complete description of the terms, conditions and limitations of each optional
benefit. Investment restrictions apply if you elect certain optional living
benefits. See the chart in the "Investment Options" section of the Prospectus
for a list of investment options available and permitted with each benefit.
You should consult with your Financial Professional to determine if any of
these optional benefits may be appropriate for you based on your financial
needs. There are many factors to consider, but we note that among them you may
want to evaluate the tax implications of these different approaches to meeting
your needs, both between these benefits and in comparison to other potential
solutions to your needs (e.g., comparing the tax implications of the
withdrawal benefit and annuity payments).
GUARANTEED RETURN OPTION Plus/SM /(GRO Plus/SM/)
The Guaranteed Return Option Plus described below is only being offered in
those jurisdictions where we have received regulatory approval, and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. The program can be elected by new
purchasers on the Issue Date of their Annuity, and can be elected by existing
Annuity Owners on either the anniversary of the Issue Date of their Annuity or
on a date other than that anniversary, as described below under "Election of
the Program". The Guaranteed Return Option Plus is not available if you elect
the Guaranteed Return Option program (and it is currently active), the
Guaranteed Minimum Withdrawal Benefit, the Guaranteed Minimum Income Benefit,
the Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit,
the Highest Daily Lifetime Five Income Benefit, 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 the Sub-accounts you choose and Fixed
Allocations used to support the Protected Principal Value(s). The program may
be appropriate if you wish to protect a principal amount against market
downturns as of a specific date in the future, but also wish to invest in the
Sub-accounts to participate in market performance. There is an additional
charge if you elect the Guaranteed Return Option Plus program.
The guarantees provided by the program exist only on the applicable maturity
date(s) and on each anniversary of the maturity date(s) thereafter. However,
due to the ongoing monitoring of your Account Value and the transfer of
Account Value between the Sub-accounts and the Fixed Allocations to support
our future guarantees, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
55
Key Feature - Protected Principal Value/Enhanced Protected Principal Value
The Guaranteed Return Option Plus offers a base guarantee as well as the
option of electing an enhanced guarantee at a later date.
. Base Guarantee: Under the base guarantee, American Skandia
guarantees that on the maturity date and on each anniversary of the
maturity date thereafter that the program remains in effect, your
Account Value will be no less than the Protected Principal Value. On
the maturity date and on each anniversary after the maturity date
that the program remains in effect, if your Account Value is below
the Protected Principal Value, American Skandia will apply
additional amounts to your Annuity from its general account to
increase your Account Value to be equal to the Protected Principal
Value.
. Enhanced Guarantee: On any anniversary following commencement of the
program, you can establish an enhanced guaranteed amount based on
your current Account Value. Under the enhanced guarantee, American
Skandia guarantees that at the end of a specified period following
the election of the enhanced guarantee (also referred to as its
"maturity date"), and on each anniversary of the maturity date
thereafter that the enhanced guaranteed amount remains in effect,
your Account Value will be no less than the Enhanced Protected
Principal Value. You can elect an enhanced guarantee more than once;
however, a subsequent election supersedes the prior election of an
enhanced guarantee. Election of an enhanced guarantee does not
impact the base guarantee. In addition, you may elect an "auto
step-up" feature that will automatically create an enhanced
guarantee (or increase your enhanced guarantee, if previously
elected) on each anniversary of the program (and create a new
maturity period for the new enhanced guarantee) if the Account Value
as of that anniversary exceeds the Protected Principal Value or
Enhanced Protected Principal Value by 7% or more. You may also elect
to terminate an enhanced guarantee. If you elect to terminate the
enhanced guarantee, the base guarantee will remain in effect. If you
have elected the enhanced guarantee, on the guarantee's maturity
date and on each anniversary of the maturity date thereafter that
the enhanced guarantee amount remains in effect, if your Account
Value is below the Enhanced Protected Principal Value, American
Skandia will apply additional amounts to your Annuity from its
general account to increase your Account Value to be equal to the
Enhanced Protected Principal Value.
Any amounts added to your Annuity to support our guarantees under the program
will be applied to any Fixed Allocations first and then to the Sub-accounts
pro-rata, based on your most recent allocation instructions in accordance with
the allocation mechanism we use under the program. We will notify you of any
amounts added to your Annuity under the program. If our assumptions are
correct and the operations relating to the administration of the program work
properly, we do not expect that we will need to add additional amounts to your
Annuity. The Protected Principal Value is referred to as the "Base Guarantee"
and the Enhanced Protected Principal Value is referred to as the "Step-up
Guarantee" in the rider we issue for this benefit.
Withdrawals under your Annuity
Withdrawals from your Annuity, while the program is in effect, will reduce the
base guarantee under the program as well as any enhanced guarantee. Cumulative
annual withdrawals up to 5% of the Protected Principal Value as of the
effective date of the program (adjusted for any subsequent Purchase Payments
and, with respect to XT6, any Credits applied to such Purchase Payments) will
reduce the applicable guaranteed amount by the actual amount of the withdrawal
(referred to as the "dollar-for-dollar limit"). If the amount withdrawn is
greater than the dollar-for-dollar limit, the portion of the withdrawal equal
to the dollar-for-dollar limit will be treated as described above, and the
portion of the withdrawal in excess of the dollar-for-dollar limit will reduce
the base guarantee and the enhanced guarantee proportionally, according to the
formula as described in the rider for this benefit (see the examples of this
calculation below). Withdrawals other than Systematic Withdrawals will be
taken pro-rata from the Sub-accounts and any Fixed Allocations. Systematic
Withdrawals will be taken pro-rata from the Sub-accounts and any Fixed
Allocations up to growth attributable to the Fixed Allocations and thereafter
pro-rata solely from the Sub-accounts. Withdrawals will be subject to all
other provisions of your Annuity, including any Contingent Deferred Sales
Charge and Market Value Adjustment that would apply.
Charges for other optional benefits under your Annuity that are deducted as an
annual charge in arrears will not reduce the applicable guaranteed amount
under the Guaranteed Return Option Plus program, however, any partial
withdrawals in payment of charges for the Plus40(TM) Optional Life Insurance
Rider (not currently offered for sale) and any third party investment advisory
service will be treated as withdrawals and will reduce the applicable
guaranteed amount.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus/SM/ program
are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes
any Credits under XT6); 3.) a base guarantee amount of $250,000; and 4.) a
dollar-for-dollar limit of $12,500 (5% of $250,000). The values set forth here
are purely hypothetical and do not reflect the charge for GRO Plus or other
fees and charges.
56
Example 1. Dollar-for-dollar reduction
A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-for-dollar and proportional reductions
A second $10,000 withdrawal is taken on December 18, 2004 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. the base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
.. The Remaining Limit is set to zero (0) for the balance of the first Annuity
Year.
Example 3. Reset of the Dollar-for-dollar Limit
A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The
Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As
the amount withdrawn is less than the dollar-for-dollar limit:
. The base guarantee amount is reduced by the amount withdrawn (i.e.,
reduced by $10,000, from $227,464.79 to $217,464.79).
. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,500 to $2,500).
Key Feature - Allocation of Account Value
Account Value is transferred to and maintained in Fixed Allocations to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee(s) under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rates on Fixed
Allocations, the remaining duration(s) until the applicable maturity date(s)
and the amount of Account Value allocated to Fixed Allocation(s) relative to a
"reallocation trigger", which determines whether Account Value must be
transferred to or from Fixed Allocation(s). While you are not notified when
your Account Value reaches a reallocation trigger, you will receive a
confirmation statement indicating the transfer of a portion of your Account
Value either to or from Fixed Allocation(s).
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain
allocated according to your most recent instructions. If a portion
of Account Value was previously allocated to a Fixed Allocation to
support the applicable guaranteed amount, all or a portion of those
amounts may be transferred from the Fixed Allocation and
re-allocated to the Sub-accounts pro-rata according to your most
recent allocation instructions (including the model allocations
under any asset allocation program you may have elected). A Market
Value Adjustment will apply when we reallocate Account Value from a
Fixed Allocation to the Sub-accounts, which may result in a decrease
or increase in your Account Value.
. If your Account Value is less than the reallocation trigger, a
portion of your Account Value in the Sub-accounts will be
transferred from the Sub-accounts pro-rata according to your
allocations to a new Fixed Allocation(s) to support the applicable
guaranteed amount. The new Fixed Allocation(s) will have a Guarantee
Period equal to the time remaining until the applicable maturity
date(s). The Account Value allocated to the new Fixed Allocation(s)
will be credited with the fixed interest rate(s) then being credited
to a new Fixed Allocation(s) maturing on the applicable maturity
date(s) (rounded to the next highest yearly duration). The Account
Value will remain invested in each applicable Fixed Allocation until
the applicable maturity date unless, at an earlier date, your
Account Value is greater than or equal to the reallocation trigger
and, therefore, amounts can be transferred to the Sub-accounts while
maintaining the guaranteed protection under the program (as
described above).
If a significant amount of your Account Value is systematically transferred to
Fixed Allocations to support the Protected Principal Value and/or the Enhanced
Protected Principal Value during periods of market declines, low interest
rates, and/or as the program nears its maturity date, less of your Account
Value may be available to participate in the investment experience of the
Sub-accounts if there is a subsequent market recovery. During periods closer
to the maturity date of the base guarantee or any enhanced guarantee, or any
anniversary of such maturity date(s), a significant portion of your Account
Value may be allocated to Fixed Allocations to support any applicable
guaranteed amount(s). If your Account
57
Value is less than the reallocation trigger and new Fixed Allocations must be
established during periods where the interest rate(s) being credited to such
Fixed Allocations is low, a larger portion of your Account Value may need to
be transferred to Fixed Allocations to support the applicable guaranteed
amount(s), causing less of your Account Value to be available to participate
in the investment experience of the Sub-accounts.
Separate Fixed Allocations may be established in support of the Protected
Principal Value and the Enhanced Protected Principal Value (if elected). There
may also be circumstances when a Fixed Allocation will be established only in
support of the Protected Principal Value or the Enhanced Protected Principal
Value. If you elect an enhanced guarantee, it is more likely that a portion of
your Account Value may be allocated to Fixed Allocations and will remain
allocated for a longer period of time to support the Enhanced Protected
Principal Value, even during a period of positive market performance and/or
under circumstances where Fixed Allocations would not be necessary to support
the Protected Principal Value. Further, there may be circumstances where Fixed
Allocations in support of the Protected Principal Value or Enhanced Protected
Principal Value are transferred to the Sub-accounts differently than each
other because of the different guarantees they support.
American Skandia uses an allocation mechanism based on assumptions of expected
and maximum market volatility, interest rates and time left to the maturity of
the program to determine the reallocation trigger. The allocation mechanism is
used to determine the allocation of Account Value between Fixed Allocations
and the Sub-accounts you choose. American Skandia reserves the right to change
the allocation mechanism and the reallocation trigger at its discretion,
subject to regulatory approval where required. Changes to the allocation
mechanism and/or the reallocation trigger may be applied to existing programs
where allowed by law.
Election of the Program
The Guaranteed Return Option Plus program can be elected at the time that you
purchase your Annuity, or on any Valuation Day thereafter (prior to
annuitization). If you elect the program after the Issue Date of your Annuity,
the program will be effective as of the Valuation Day that we receive the
required documentation in good order at our home office, and the guaranteed
amount will be based on your Account Value as of that date. If you previously
elected the Guaranteed Return Option program and wish to elect the Guaranteed
Return Option Plus program, your prior Guaranteed Return Option program will
be terminated. Termination of the Guaranteed Return Option for the purpose of
electing the Guaranteed Return Option Plus will be treated as any other
termination of the Guaranteed Return Option (see below), including the
termination of any guaranteed amount, and application of any applicable Market
Value Adjustment when amounts are transferred to the Sub-accounts as a result
of the termination. The 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 Sub-accounts pro-rata based on the
Account Values in such Sub-accounts, or in accordance with any effective asset
allocation program. A Market Value Adjustment will apply.
The program will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of the
Annuity. If you elect to terminate the program, the Guaranteed Return Option
Plus will no longer provide any guarantees. The surviving spouse may elect the
benefit at any time, subject to the limitations described above, after the
death of the Annuity Owner. The surviving spouse's election will be effective
on the Valuation Day that we receive the required documentation in good order
at our home office, and the Account Value on that Valuation Day will be the
Protected Principal Value.
The charge for the Guaranteed Return Option Plus program will no longer be
deducted from your Account Value upon termination of the program.
Special Considerations under the Guaranteed Return Option Plus
This program is subject to certain rules and restrictions, including, but not
limited to the following:
. Upon inception of the program, 100% of your Account Value must be
allocated to the Sub-accounts. No Fixed Allocations may be in effect as
of the date that you elect to participate in the program. However, the
reallocation trigger may transfer Account Value to Fixed Allocations as
of the effective date of the program under some circumstances.
. You cannot allocate any portion of Purchase Payments (including any
Credits applied to such Purchase Payments under XT6) or transfer Account
Value to or from a Fixed Allocation while participating in the program;
however, all or a portion of any Purchase Payments (including any Credits
applied to such Purchase Payments under XT6) may be allocated by us to
58
Fixed Allocations to support the amount guaranteed. You cannot participate
in any dollar cost averaging program that transfers Account Value from a
Fixed Allocation to a Sub-account.
. Transfers from Fixed Allocations made as a result of the allocation
mechanism under the program will be subject to the Market Value
Adjustment formula under an Annuity; however, the 0.10% liquidity factor
in the formula will not apply. A Market Value Adjustment may be either
positive or negative. Transfer amounts will be taken from the most
recently established Fixed Allocation.
. Transfers from the Sub-accounts to Fixed Allocations or from Fixed
Allocations to the Sub-accounts under the program will not count toward
the maximum number of free transfers allowable under an Annuity.
. Any amounts applied to your Account Value by American Skandia on the
maturity date or any anniversary of the maturity date will not be treated
as "investment in the contract" for income tax purposes.
. Low interest rates may require allocation to Fixed Allocations even when
the current Account Value exceeds the guarantee.
. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to
Fixed Allocations.
. We currently limit the Sub-accounts in which you may allocate Account
Value if you participate in this program. We reserve the right to
transfer any Account Value in a prohibited investment option to an
eligible investment option. Should we prohibit access to any investment
option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year. We may also require that you allocate
your Account Value according to an asset allocation model.
Charges under the Program
We currently 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. 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.
If you elect the Enhanced Guarantee under the program, and on the date you
elect to step-up, the charges under the program have changed for new
purchases, your program may be subject to the new charge level.
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, the Guaranteed Minimum Withdrawal
Benefit, the Guaranteed Minimum Income Benefit, the Lifetime Five Income
Benefit, the Spousal Lifetime Five Income Benefit, the Highest Daily Lifetime
Five Income Benefit, the Highest Daily Value Death Benefit, or the Dollar Cost
Averaging program if it involves transfers out of the Fixed Allocations.
We offer a program that, after a seven-year period following commencement of
the program (we refer to the end of that period as the "maturity date")
guarantees your Account Value will not be less than your Account Value on the
effective date of your program (called the "Protected Principal Value").
The program monitors your Account Value daily and, if necessary,
systematically transfers amounts between the Sub-accounts you choose and the
Fixed Allocation used to support the Protected Principal Value. The program
may be appropriate if you wish to protect a principal amount against market
downturns as of a specific date in the future, but also wish to invest in the
Sub-accounts to participate in market performance. There is an additional
charge if you elect the Guaranteed Return Option program.
The guarantee provided by the program exists only on the applicable maturity
date. However, due to the ongoing monitoring of your Account Value and the
transfer of Account Value between the Sub-accounts and the Fixed Allocation to
support our future guarantee, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
Key Feature - Protected Principal Value
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.
59
Any amounts added to your Annuity to support our guarantee under the program
will be applied to the Fixed Allocation first and then to the Sub-accounts pro
rata, based on your most recent allocation instructions in accordance with the
allocation mechanism we use under the program. We will notify you of any
amounts added to your Annuity under the program. If our assumptions are
correct and the operations relating to the administration of the program work
properly, we do not expect that we will need to add additional amounts to an
Annuity. The Protected Principal Value is generally referred to as the
"Guaranteed Amount" in the rider we issue for this benefit.
Key Feature - Allocation of Account Value
Account Value is transferred to and maintained in a Fixed Allocation to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rate on the Fixed
Allocation, the remaining duration until the applicable maturity date and the
amount of Account Value allocated to the Fixed Allocation relative to a
"reallocation trigger", which determines whether Account Value must be
transferred to or from the Fixed Allocation. While you are not notified when
your Account Value reaches a reallocation trigger, you will receive a
confirmation statement indicating the transfer of a portion of your Account
Value either to or from the Fixed Allocation.
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain
allocated according to your most recent instructions. If a portion
of Account Value was previously allocated to the Fixed Allocation to
support the guaranteed amount, all or a portion of those amounts may
be transferred from the Fixed Allocation and re-allocated to the
Sub-accounts pro-rata according to your most recent allocation
instructions (including the model allocations under any asset
allocation program you may have elected). A Market Value Adjustment
will apply when we reallocate Account Value from the Fixed
Allocation to the Sub-accounts, which may result in a decrease or
increase in your Account Value.
. If your Account Value is less than the reallocation trigger, a
portion of your Account Value in the Sub-accounts will be
transferred from your Sub-accounts pro-rata according to your
allocations to a new Fixed Allocation to support the guaranteed
amount. The new Fixed Allocation will have a Guarantee Period equal
to the time remaining until the applicable maturity date. The
Account Value allocated to the new Fixed Allocation will be credited
with the fixed interest rate then being credited to a new Fixed
Allocation maturing on the applicable maturity date (rounded to the
next highest yearly duration). The Account Value will remain
invested in the Fixed Allocation until the maturity date unless, at
an earlier date, your Account Value is greater than or equal to the
reallocation trigger and, therefore, amounts can be transferred to
the Sub-accounts while maintaining the guaranteed protection under
the program (as described above).
If a significant amount of your Account Value is systematically transferred to
the Fixed Allocation to support the Protected Principal Value during periods
of market declines, low interest rates, and/or as the program nears its
maturity date, less of your Account Value may be available to participate in
the investment experience of the Sub-accounts if there is a subsequent market
recovery. During periods closer to the maturity date of the guarantee a
significant portion of your Account Value may be allocated to the Fixed
Allocation to support any applicable guaranteed amount. If your Account Value
is less than the reallocation trigger and a new Fixed Allocation must be
established during periods where the interest rate being credited to such
Fixed Allocation is low, a larger portion of your Account Value may need to be
transferred to the Fixed Allocation to support the guaranteed amount, causing
less of your Account Value to be available to participate in the investment
experience of the Sub-accounts.
American Skandia uses an allocation mechanism based on assumptions of expected
and maximum market volatility, interest rates and time left to the maturity of
the program to determine the reallocation trigger. The allocation mechanism is
used to determine the allocation of Account Value between the Fixed Allocation
and the Sub-accounts you choose. American Skandia reserves the right to change
the allocation mechanism and the reallocation trigger at its discretion,
subject to regulatory approval where required. Changes to the allocation
mechanism and/or the reallocation trigger may be applied to existing programs
where allowed by law.
Election of the Program
The Guaranteed Return Option can be elected at the time that you purchase your
Annuity, or on any Valuation Day thereafter (prior to annuitization). If you
elect the program after the Issue Date of your Annuity, the program will be
effective as of the Valuation Day that we receive the required documentation
in good order at our home office, and the Protected Principal Value will be
based on your Account Value as of that date.
Restart of the Program
Once each Annuity Year you may request to restart the Program. Such a request
is an election by you to terminate the existing Program and start a new one.
Restarts only take effect on anniversaries of the Issue Date. To make such a
request for a restart, you must notify us. If we accept your request, we then
terminate the existing Program as of that valuation period, if it is an
anniversary
60
of the Issue Date, or, if not, as of the next following anniversary of the
Issue Date. The new Program starts at that time. The initial Protected
Principal Value for the new Program is the Account Value as of the effective
date of the new Program. Unless you tell us otherwise, the duration of the new
Program will be the same as that for the existing Program. However, if we do
not then make that duration available, you must elect from those we make
available at that time.
As part of terminating the existing Program, we transfer any amounts in Fixed
Allocations, subject to a Market Value Adjustment, to the Sub-accounts on a
pro-rata basis. If your entire Account Value was then in Fixed Allocations,
you must first provide us instructions as to how to allocate the transferred
Account Value among the Sub-accounts.
Termination of the Program
The Annuity Owner also can terminate the Guaranteed Return Option program.
Upon termination, any Account Value in the Fixed Allocation will be
transferred to the Sub-accounts pro-rata based on the Account Values in such
Sub-accounts, or in accordance with any effective asset allocation program. A
Market Value Adjustment will apply.
The program will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of your
Annuity. If you elect to terminate the program, the Guaranteed Return Option
will no longer provide any guarantees. If the surviving spouse assumes your
Annuity, he/she may re-elect the benefit on any anniversary of the Issue Date
of the Annuity or, if the deceased Owner had not previously elected the
benefit, may elect the benefit at any time. The surviving spouse's election
will be effective on the Valuation Day that we receive the required
documentation in good order at our home office, and the Account Value on that
Valuation Day will be the Protected Principal Value.
The charge for the Guaranteed Return Option program will no longer be deducted
from your Account Value upon termination of the program.
Special Considerations under the Guaranteed Return Option
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 100% of your Account Value must be allocated
to the Sub-accounts. The Fixed Allocation may not be in effect as of the
date that you elect to participate in the program. However, the
reallocation trigger may transfer Account Value to the Fixed Allocation as
of the effective date of the program under some circumstances.
.. Annuity Owners cannot allocate any portion of Purchase Payments (including
any Credits applied to such Purchase Payments under XT6) or transfer
Account Value to or from the Fixed Allocation while participating in the
program; however, all or a portion of any Purchase Payments (including any
Credits applied to such Purchase Payments under XT6) may be allocated by us
to the Fixed Allocation to support the amount guaranteed. You cannot
participate in any dollar cost averaging program that transfers Account
Value from a Fixed Allocation to a Sub-account.
.. Transfers from the Fixed Allocation made as a result of the allocation
mechanism under the program will be subject to the Market Value Adjustment
formula under an Annuity; however, the 0.10% liquidity factor in the
formula will not apply. A Market Value Adjustment may be either positive or
negative. Transfer amounts will be taken from the most recently established
Fixed Allocation.
.. Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed
Allocation to the Sub-accounts under the program will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by American Skandia on the
maturity date or any anniversary of the maturity date will not be treated
as "investment in the contract" for income tax purposes.
.. Low interest rates may require allocation to the Fixed Allocation even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to the
Fixed Allocation.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We deduct a charge equal to 0.25% of the average daily net assets of the
Sub-accounts for participation in the Guaranteed Return Option program. The
annual charge is deducted daily. The charge is deducted to compensate American
Skandia for: (a) the risk that your Account Value on the maturity date is less
than the amount guaranteed; and (b) administration of the program.
With respect to XT6 and APEX II, effective November 18, 2002, American Skandia
changed the manner in which the annual charge for the Guaranteed Return Option
is deducted to the method described above. The annual charge for the
Guaranteed Return Option for Owners who elected the benefit between
February 4, 2002 and November 15, 2002 for XT6 and APEX II and subsequent to
November 15, 2002 in those states where the daily deduction of the charge has
not been approved, is deducted
61
annually, in arrears, according to the prospectus in effect as of the date the
program was elected. Owners who terminate and then re-elect the Guaranteed
Return Option or elect to restart the Guaranteed Return Option at any time
after November 15, 2002 will be subject to the charge method described above.
Owners who purchased an ASAP III Annuity between April 1, 2003 and
September 30, 2003 or an ASL II Annuity between February 4, 2002 and
November 15, 2002 (the "Promotional Period") will not be charged the 0.25%
annual fee for the Guaranteed Return Option program (or GRO Plus if we are no
longer offering GRO) if elected at any time while their Annuity is in effect.
.. American Skandia will not charge the 0.25% annual fee for the entire period
that the program remains in effect, including any extension of the
program's maturity date resulting from the Owner's election to restart the
7-year program duration, regardless of when the Owner elects to participate
in the Guaranteed Return Option program (or GRO Plus if we are no longer
offering GRO).
.. Owners who complete the initial 7-year program duration OR terminate the
program before the program's maturity date, will not be charged the 0.25%
annual fee for participating in the program if they re-elect the Guaranteed
Return Option program (or GRO Plus if we are no longer offering GRO) at a
later date.
.. All other terms and conditions of your Annuity and the Guaranteed Return
Option program (or GRO Plus if we are no longer offering GRO) apply to
Owners who qualify for the waiver of the 0.25% annual fee.
.. Owners who purchase an Annuity after the completion of the Promotional
Period do not qualify for the 0.25% annual fee waiver.
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)
The Guaranteed Minimum Withdrawal Benefit program described below is only
being offered in those jurisdictions where we have received regulatory
approval and will be offered subsequently in other jurisdictions when we
receive regulatory approval in those jurisdictions. Certain terms and
conditions may differ between jurisdictions once approved. Currently, the
program can only be elected by new purchasers on the Issue Date of their
Annuity. We may offer the program to existing Annuity Owners in the future,
subject to our eligibility rules and restrictions. The Guaranteed Minimum
Withdrawal Benefit program is not available if you elect the Guaranteed Return
Option, Guaranteed Return Option Plus, the Guaranteed Minimum Income Benefit,
the Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit and
the Highest Daily Lifetime Five Income Benefit.
We offer a program that guarantees your ability to withdraw amounts equal to
an initial principal value (called the "Protected Value"), regardless of the
impact of market performance on your Account Value, subject to our program
rules regarding the timing and amount of withdrawals. The program may be
appropriate if you intend to make periodic withdrawals from your Annuity and
wish to ensure that market performance will not affect your ability to protect
your principal. You are not required to make withdrawals as part of the
program - the guarantee is not lost if you withdraw less than the maximum
allowable amount of principal each year under the rules of the program. There
is an additional charge if you elect the GMWB program; however, the charge may
be waived under certain circumstances described below.
Key Feature - Protected Value
The Protected Value is the total amount that we guarantee will be available to
you through withdrawals from your Annuity and/or benefit payments, regardless
of the impact of market performance on your Account Value. The Protected Value
is reduced with each withdrawal you make until the Protected Value is reduced
to zero. When the Protected Value is reduced to zero due to your withdrawals,
the GMWB program terminates. Additionally, the Protected Value is used to
determine the maximum annual amount that you can withdraw from your Annuity,
called the Protected Annual Withdrawal Amount, without triggering an
adjustment in the Protected Value on a proportional basis. The Protected Value
is referred to as the "Benefit Base" in the rider we issue for this benefit.
The Protected Value is determined as of the date you make your first
withdrawal under your Annuity following your election of the GMWB program. The
initial Protected Value is equal to the greater of (A) the Account Value on
the date you elect the GMWB program, plus any additional Purchase Payments
(plus any Credits applied to such Purchase Payments under XT6) before the date
of your first withdrawal; or (B) the Account Value as of the date of the first
withdrawal from your Annuity. The Protected Value may be enhanced by increases
in your Account Value due to market performance during the period between your
election of the GMWB program and the date of your first withdrawal.
. If you elect the GMWB program at the time you purchase your Annuity, the
Account Value will be your initial Purchase Payment (plus any Credits
applied to such Purchase Payments under XT6).
. If we offer the GMWB program to existing Annuity Owners, the Account
Value on the anniversary of the Issue Date of your Annuity following your
election of the GMWB program will be used to determine the initial
Protected Value.
. If you make additional Purchase Payments after your first withdrawal, the
Protected Value will be increased by the amount of the additional
Purchase Payment (plus any Credits applied to such Purchase Payments
under XT6).
62
You may elect to step-up your Protected Value if, due to positive market
performance, your Account Value is greater than the Protected Value. You are
eligible to step-up the Protected Value on or after the 5/th /Annuity
anniversary following the first withdrawal under the GMWB program. The
Protected Value can be stepped up again on or after the 5/th /Annuity
anniversary following the preceding step-up. If you elect to step-up the
Protected Value, you must do so during the 30-day period prior to your
eligibility date. If you elect to step-up the Protected Value under the
program, and on the date you elect to step-up, the charges under the GMWB
program have changed for new purchasers, your program may be subject to the
new charge going forward.
Upon election of the step-up, we reset the Protected Value to be equal to the
then current Account Value. For example, assume your initial Protected Value
was $100,000 and you have made cumulative withdrawals of $40,000, reducing the
Protected Value to $60,000. On the date you are eligible to step-up the
Protected Value, your Account Value is equal to $75,000. You could elect to
step-up the Protected Value to $75,000 on the date you are eligible. Upon
election of the step-up, we also reset the Protected Annual Withdrawal Amount
(discussed immediately below) to be equal to the greater of (A) the Protected
Annual Withdrawal Amount immediately prior to the reset; and (B) 7% of the
Protected Value immediately after the reset.
Key Feature - Protected Annual Withdrawal Amount
The initial Protected Annual Withdrawal Amount is equal to 7% of the Protected
Value. Under the GMWB program, if your cumulative withdrawals each Annuity
Year are less than or equal to the Protected Annual Withdrawal Amount, your
Protected Value will be reduced on a "dollar-for-dollar" basis (the Protected
Value is reduced by the actual amount of the withdrawal, including any CDSC or
MVA that may apply). Cumulative withdrawals in any Annuity Year that exceed
the Protected Annual Withdrawal Amount trigger a proportional adjustment to
both the Protected Value and the Protected Annual Withdrawal Amount, as
described in the rider for this benefit (see the examples of this calculation
below). The Protected Annual Withdrawal Amount is referred to as the "Maximum
Annual Benefit" in the rider we issue for this benefit.
The GMWB program does not affect your ability to make withdrawals under your
Annuity or limit your ability to request withdrawals that exceed the Protected
Annual Withdrawal Amount. You are not required to withdraw all or any portion
of the Protected Annual Withdrawal Amount each Annuity Year.
. If, cumulatively, you withdraw an amount less than the Protected Annual
Withdrawal Amount in any Annuity Year, you cannot carry-over the unused
portion of the Protected Annual Withdrawal Amount to subsequent Annuity
Years. However, because the Protected Value is only reduced by the actual
amount of withdrawals you make under these circumstances, any unused
Protected Annual Withdrawal Amount may extend the period of time until
the remaining Protected Value is reduced to zero.
. Additional Purchase Payments will increase the Protected Annual
Withdrawal Amount by 7% of the applicable Purchase Payment (and any
Credits we apply to such Purchase Payments under XT6).
. If the Protected Annual Withdrawal Amount after an adjustment exceeds the
Protected Value, the Protected Annual Withdrawal Amount will be set equal
to the Protected Value.
The following examples of dollar-for dollar and proportional reductions and
the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and
the effective date of the GMWB program are October 13, 2005; 2.) an initial
Purchase Payment of $250,000 (includes any Credits in the case of XT6); 3.) a
Protected Value of $250,000; and 4.) a Protected Annual Withdrawal Amount of
$17,500 (7% of $250,000). The values set forth here are purely hypothetical
and do not reflect the charge for GMWB or any other fees and charges.
Example 1. Dollar-for-dollar reduction
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Protected Annual Withdrawal Amount:
.. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000,
from $250,000 to $240,000).
.. The remaining Protected Annual Withdrawal Amount for the balance of the
first Annuity Year is also reduced by the amount withdrawn (from $17,500 to
$7,500).
Example 2. Dollar-for-dollar and proportional reductions
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$220,000. As the amount withdrawn exceeds the remaining Protected Annual
Withdrawal Amount of $7,500 from Example 1:
.. the Protected Value is first reduced by the remaining Protected Annual
Withdrawal Amount (from $240,000 to $232,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the remaining Protected Annual Withdrawal
Amount ($10,000 - $7,500, or $2,500).
-- B is the Account Value less the remaining Protected Annual Withdrawal
Amount ($220,000 - $7,500, or $212,500).
63
The resulting Protected Value is: $232,500 X (1 - $2,500/$212,500), or
$229,764.71.
.. the Protected Annual Withdrawal Amount is also reduced by the ratio of A to
B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 -
$2,500/$212,500), or $17,294.12.
-- The remaining Protected Annual Withdrawal Amount is set to zero (0) for
the balance of the first Annuity Year.
Example 3. Reset of the Maximum Annual Benefit
A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The
remaining Protected Annual Withdrawal Amount has been reset to the Protected
Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn
is less than the remaining Protected Annual Withdrawal Amount:
. the Protected Value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $229,764.71 to $219,764.71).
. the remaining Protected Annual Withdrawal Amount for the balance of the
second Annuity Year is also reduced by the amount withdrawn (from
$17,294.12 to $7,294.12).
BENEFITS UNDER THE GMWB PROGRAM
. In addition to any withdrawals you make under the GMWB program, market
performance may reduce your Account Value. If your Account Value is equal
to zero, and you have not received all of your Protected Value in the
form of withdrawals from your Annuity, we will continue to make payments
equal to the remaining Protected Value in the form of fixed, periodic
payments until the remainder of the Protected Value is paid, at which
time the rider terminates. The fixed, periodic payments will each be
equal to the Protected Annual Withdrawal Amount, except for the last
payment which may be equal to the remaining Protected Value. We will
determine the duration for which periodic payments will continue by
dividing the Protected Value by the Protected Annual Withdrawal Amount.
You will not have the right to make additional Purchase Payments or
receive the remaining Protected Value in a lump sum. You can elect the
frequency of payments, subject to our rules then in effect.
. If the death benefit under your Annuity becomes payable before you have
received all of your Protected Value in the form of withdrawals from your
Annuity, your Beneficiary has the option to elect to receive the
remaining Protected Value as an alternate death benefit payout in lieu of
the amount payable under any other death benefit provided under your
Annuity. The remaining Protected Value will be payable in the form of
fixed, periodic payments. Your beneficiary can elect the frequency of
payments, subject to our rules then in effect. We will determine the
duration for which periodic payments will continue by dividing the
Protected Value by the Protected Annual Withdrawal Amount. The Protected
Value is not equal to the Account Value for purposes of the Annuity's
other death benefit options. The GMWB program does not increase or
decrease the amount otherwise payable under the Annuity's other death
benefit options. Generally, the GMWB program would be of value to your
Beneficiary only when the Protected Value at death exceeds any other
amount available as a death benefit.
. If you elect to begin receiving annuity payments before you have received
all of your Protected Value in the form of withdrawals from your Annuity,
an additional annuity payment option will be available that makes fixed
annuity payments for a certain period, determined by dividing the
Protected Value by the Protected Annual Withdrawal Amount. If you elect
to receive annuity payments calculated in this manner, the assumed
interest rate used to calculate such payments will be 0%, which is less
than the assumed interest rate on other annuity payment options we offer.
This 0% assumed interest rate results in lower annuity payments than what
would have been paid if the assumed interest rate was higher than 0%. You
can also elect to terminate the GMWB program and begin receiving annuity
payments based on your then current Account Value (not the remaining
Protected Value) under any of the available annuity payment options.
Other Important Considerations
. Withdrawals under the GMWB program are subject to all of the terms and
conditions of your Annuity, including any CDSC and MVA that may apply.
. Withdrawals made while the GMWB program is in effect will be treated, for
tax purposes, in the same way as any other withdrawals under your Annuity.
. The GMWB program does not directly affect your Annuity's Account Value or
Surrender Value, but any withdrawal will decrease the Account Value by
the amount of the withdrawal. If you surrender your Annuity, you will
receive the current Surrender Value, not the Protected Value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the GMWB program. The GMWB program
provides a guarantee that if your Account Value declines due to market
performance, you will be able to receive your Protected Value in the form
of periodic benefit payments.
. We currently limit the Sub-accounts in which you may allocate Account
Value if you participate in this program. We reserve the right to
transfer any Account Value in a prohibited investment option to an
eligible investment option. Should we prohibit access to any investment
option, any transfers required to move Account Value to eligible
investment options will not be counted in determining the number of free
transfers during an Annuity Year. We may also require that you allocate
your Account Value according to an asset allocation model.
64
Election of the Program
Currently, the GMWB program can only be elected at the time that you purchase
your Annuity. In the future, we may offer existing Annuity Owners the option
to elect the GMWB program after the Issue Date of their Annuity, subject to
our eligibility rules and restrictions. If you elect the GMWB program after
the Issue Date of your Annuity, the program will be effective as of the next
anniversary date. Your Account Value as of such anniversary date will be used
to calculate the initial Protected Value and the initial Protected Annual
Withdrawal Amount.
We reserve the right to restrict the maximum amount of Protected Value that
may be covered under the GMWB program under this Annuity or any other
annuities that you own that are issued by American Skandia or its affiliated
companies.
Termination of the Program
The program terminates automatically when your Protected Value reaches zero
based on your withdrawals. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The
program terminates upon your surrender of your Annuity, upon due proof of
death (unless your surviving spouse elects to continue your Annuity and the
GMWB program or your Beneficiary elects to receive the amounts payable under
the GMWB program in lieu of the death benefit) or upon your election to begin
receiving annuity payments.
The charge for the GMWB program will no longer be deducted from your Account
Value upon termination of the program.
Charges under the Program
Currently, we deduct a charge equal to 0.35% of the average daily net assets
of the Sub-accounts per year to purchase the GMWB program. The annual charge
is deducted daily.
. If, during the seven years following the effective date of the program,
you do not make any withdrawals, and do not make any additional Purchase
Payments after a five-year period following the effective date of the
program, the program will remain in effect; however, we will waive the
annual charge going forward. If you make an additional Purchase Payment
following the waiver of the annual charge, we will begin charging for the
program. After year seven (7) following the effective date of the
program, withdrawals will not cause a charge to be re-imposed.
. If you elect to step-up the Protected Value under the program, and on the
date you elect to step-up, the charges under the program have changed for
new purchasers, your program may be subject to the new charge level for
the benefit.
Additional Tax Considerations for Qualified Contracts/Arrangements
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the required minimum distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Protected
Annual Withdrawal Amount, which will cause us to recalculate the Protected
Value and the Protected Annual Withdrawal Amount, resulting in a lower amount
payable in future Annuity Years. In addition, the amount and duration of
payments under the annuity payment and death benefit provisions may be
adjusted so that the payments do not trigger any penalty or excise taxes due
to tax considerations such as required minimum distribution provisions under
the tax law.
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 any other optional living benefit.
We offer a program that, after a seven-year waiting period, guarantees your
ability to begin receiving income from your Annuity in the form of annuity
payments based on a guaranteed minimum value (called the "Protected Income
Value") that increases after the waiting period begins, regardless of the
impact of market performance on your Account Value. The program may be
appropriate for you if you anticipate using your Annuity as a future source of
periodic fixed income payments for the remainder of your life and wish to
ensure that the basis upon which your income payments will be calculated will
achieve at least a minimum amount despite fluctuations in market performance.
There is an additional charge if you elect the GMIB program.
Key Feature - Protected Income Value
The Protected Income Value is the minimum amount that we guarantee will be
available (net of any applicable tax charge), after a waiting period of at
least seven years, as a basis to begin receiving fixed annuity payments. The
Protected Income Value is initially
65
established on the effective date of the GMIB program and is equal to your
Account Value on such date. Currently, since the GMIB program may only be
elected at issue, the effective date is the Issue Date of your Annuity. The
Protected Income Value is increased daily based on an annual growth rate of
5%, subject to the limitations described below. The Protected Income Value is
referred to as the "Protected Value" in the rider we issue for this benefit.
The 5% annual growth rate is referred to as the "Roll-Up Percentage" in the
rider we issue for this benefit.
The Protected Income Value is subject to a limit of 200% (2X) of the sum of
the Protected Income Value established on the effective date of the GMIB
program, or the effective date of any step-up value, plus any additional
Purchase Payments (and any Credit that is applied to such Purchase Payments in
the case of XT6) made after the waiting period begins ("Maximum Protected
Income Value"), minus the sum of any reductions in the Protected Income Value
due to withdrawals you make from your Annuity after the waiting period begins.
. Subject to the maximum age/durational limits described immediately below,
we will no longer increase the Protected Income Value by the 5% annual
growth rate once you reach the Maximum Protected Income Value. However,
we will increase the Protected Income Value by the amount of any
additional Purchase Payments after you reach the Maximum Protected Income
Value. Further, if you make withdrawals after you reach the Maximum
Protected Income Value, we will reduce the Protected Income Value and the
Maximum Protected Income Value by the proportional impact of the
withdrawal on your Account Value.
. Subject to the Maximum Protected Income Value, we will no longer increase
the Protected Income Value by the 5% annual growth rate after the later
of the anniversary date on or immediately following the Annuitant's 80/th
/birthday or the 7/th /anniversary of the later of the effective date of
the GMIB program or the effective date of the most recent step-up.
However, we will increase the Protected Income Value by the amount of any
additional Purchase Payments (and any Credit that is applied to such
Purchase Payments in the case of XT6). Further, if you make withdrawals
after the Annuitant reaches the maximum age/duration limits, we will
reduce the Protected Income Value and the Maximum Protected Income Value
by the proportional impact of the withdrawal on your Account Value.
. Subject to the Maximum Protected Income Value, if you make an additional
Purchase Payment, we will increase the Protected Income Value by the
amount of the Purchase Payment (and any Credit that is applied to such
Purchase Payment in the case of XT6) and will apply the 5% annual growth
rate on the new amount from the date the Purchase Payment is applied.
. As described below, after the waiting period begins, cumulative
withdrawals each Annuity Year that are up to 5% of the Protected Income
Value on the prior anniversary of your Annuity will reduce the Protected
Income Value by the amount of the withdrawal. Cumulative withdrawals each
Annuity Year in excess of 5% of the Protected Income Value on the prior
anniversary of your Annuity will reduce the Protected Income Value
proportionately. All withdrawals after the Maximum Protected Income Value
is reached will reduce the Protected Income Value proportionately. The 5%
annual growth rate will be applied to the reduced Protected Income Value
from the date of the withdrawal.
Stepping-Up the Protected Income Value - You may elect to "step-up" or "reset"
your Protected Income Value if your Account Value is greater than the current
Protected Income Value. Upon exercise of the step-up provision, your initial
Protected Income Value will be reset equal to your current Account Value. From
the date that you elect to step-up the Protected Income Value, we will apply
the 5% annual growth rate to the stepped-up Protected Income Value, as
described above. You can exercise the step-up provision twice while the GMIB
program is in effect, and only while the Annuitant is less than age 76.
. A new seven-year waiting period will be established upon the effective
date of your election to step-up the Protected Income Value. You cannot
exercise your right to begin receiving annuity payments under the GMIB
program until the end of the new waiting period. In light of this waiting
period upon resets, it is not recommended that you reset your GMIB if the
required beginning date under IRS minimum distribution requirements would
commence during the 7 year waiting period. See "Tax Considerations"
section in this prospectus for additional information on IRS requirements.
. The Maximum Protected Income Value will be reset as of the effective date
of any step-up. The new Maximum Protected Income Value will be equal to
200% of the sum of the Protected Income Value as of the effective date of
the step-up plus any subsequent Purchase Payments (and any Credit that is
applied to such Purchase Payments in the case of XT6), minus the impact
of any withdrawals after the date of the step-up.
. When determining the guaranteed annuity purchase rates for annuity
payments under the GMIB program, we will apply such rates based on the
number of years since the most recent step-up.
. If you elect to step-up the Protected Income Value under the program, and
on the date you elect to step-up, the charges under the GMIB program have
changed for new purchasers, your program may be subject to the new charge
going forward.
. 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
66
amount is determined on each anniversary of the Issue Date (or on the Issue
Date for the first Annuity Year) and applies to any withdrawals during the
Annuity Year. This means that the amount available for withdrawals each
Annuity Year on a "dollar-for-dollar" basis is adjusted on each Annuity
anniversary to reflect changes in the Protected Income Value during the prior
Annuity Year.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GMIB program are
October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any
Credits in the case of XT6); 3.) an initial Protected Income Value of
$250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The
values set forth here are purely hypothetical and do not reflect the charge
for GMIB or any other fees and charges.
Example 1. Dollar-for-dollar reduction
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the Protected Income Value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
. the Protected Income Value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-for-dollar and proportional reductions
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). Immediately before the withdrawal, the Account Value is
$220,000 and the Protected Income Value is $242,006.64. As the amount
withdrawn exceeds the Remaining Limit of $2,500 from Example 1:
. the Protected Income Value is first reduced by the Remaining Limit (from
$242,006.64 to $239,506.64);
. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500,
or $7,500).
-- B is the Account Value less the Remaining Limit ($220,000 - $2,500,
or $217,500).
The resulting Protected Income Value is: $239,506.64 X (1 - $7,500/$217,500),
or $231,247.79.
. The Remaining Limit is set to zero (0) for the balance of the first
Annuity Year.
Example 3. Reset of the Dollar-for-dollar Limit
A $10,000 withdrawal is made on the first anniversary of the Issue Date,
October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected
Income Value is $240,838.37. The Remaining Limit is reset to 5% of this
amount, or $12,041.92. As the amount withdrawn is less than the
dollar-for-dollar limit:
. the Protected Income Value is reduced by the amount withdrawn (i.e.,
reduced by $10,000, from $240,838.37 to $230,838.37).
. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,041.92 to $2,041.92).
Key Feature - GMIB Annuity Payments
You can elect to apply the Protected Income Value to one of the available GMIB
Annuity Payment Options on any anniversary date following the initial waiting
period, or any subsequent waiting period established upon your election to
step-up the Protected Income Value. Once you have completed the waiting
period, you will have a 30-day period each year, prior to the Annuity
anniversary, during which you may elect to begin receiving annuity payments
under one of the available GMIB Annuity Payment Options. You must elect one of
the GMIB Annuity Payment Options by the anniversary of the Annuity's Issue
Date on or immediately following the Annuitant's or your 95/th /birthday
(whichever is sooner), except for Annuities used as a funding vehicle for an
IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity
Payment Options by the anniversary of the Annuity's Issue Date on or
immediately following the Annuitant's 92/nd /birthday.
Your Annuity or state law may require you to begin receiving annuity payments
at an earlier date.
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.
67
On the date that you elect to begin receiving GMIB Annuity Payments, we
guarantee that your payments will be calculated based on your Account Value
and our then current annuity purchase rates if the payment amount calculated
on this basis would be higher than it would be based on the Protected Income
Value and the special GMIB annuity purchase rates.
GMIB Annuity Payment Option 1 - Payments for Life with a Certain Period
Under this option, monthly annuity payments will be made until the death of
the Annuitant. If the Annuitant dies before having received 120 monthly
annuity payments, the remainder of the 120 monthly annuity payments will be
made to the Beneficiary.
GMIB Annuity Payment Option 2 - Payments for Joint Lives with a Certain Period
Under this option, monthly annuity payments will be made until the death of
both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint
Annuitant die before having received 120 monthly annuity payments, the
remainder of the 120 monthly annuity payments will be made to the Beneficiary.
. If the Annuitant dies first, we will continue to make payments until the
later of the death of the Joint Annuitant and the end of the period
certain. However, if the Joint Annuitant is still receiving annuity
payments following the end of the certain period, we will reduce the
amount of each subsequent payment to 50% of the original payment amount.
. If the Joint Annuitant dies first, we will continue to make payments
until the later of the death of the Annuitant and the end of the period
certain.
You cannot withdraw your Account Value or the Protected Income Value under
either GMIB Annuity Payment Option once annuity payments have begun. We may
make other payout frequencies available, such as quarterly, semi-annually or
annually.
Other Important Considerations
.. You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event your Account Value declines
significantly due to negative investment performance. If your Account Value
is not significantly affected by negative investment performance, it is
unlikely that the purchase of the GMIB will result in your receiving larger
annuity payments than if you had not purchased GMIB. This is because the
assumptions that we use in computing the GMIB, such as the annuity purchase
rates, (which include assumptions as to age-setbacks and assumed interest
rates), are more conservative than the assumptions that we use in computing
annuity payout options outside of GMIB. Therefore, you may generate higher
income payments if you were to annuitize a lower Account Value at the
current annuity purchase rates, than if you were to annuitize under the
GMIB with a higher Protected Value than your Account Value but, at the
annuity purchase rates guaranteed under the GMIB. The GMIB program does not
directly affect an Annuity's Account Value, Surrender Value or the amount
payable under either the basic Death Benefit provision of the Annuity or
any optional Death Benefit provision. If you surrender your Annuity, you
will receive the current Surrender Value, not the Protected Income Value.
The Protected Income Value is only applicable if you elect to begin
receiving annuity payments under one of the GMIB annuity options after the
waiting period.
.. Each Annuity offers other annuity payment options that you can elect which
do not impose an additional charge, but which do not offer to guarantee a
minimum value on which to make annuity payments.
.. Where allowed by law, we reserve the right to limit subsequent Purchase
Payments if we determine, at our sole discretion, that based on the timing
of your Purchase Payments and withdrawals, your Protected Income Value is
increasing in ways we did not intend. In determining whether to limit
Purchase Payments, we will look at Purchase Payments which are
disproportionately larger than your initial Purchase Payment and other
actions that may artificially increase the Protected Income Value.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
.. If you change the Annuitant after the effective date of the GMIB program,
the period of time during which we will apply the 5% annual growth rate may
be changed based on the age of the new Annuitant. If the new Annuitant
would not be eligible to elect the GMIB program based on his or her age
at the time of the change, then the GMIB program will terminate.
.. Annuity payments made under the GMIB program are subject to the same tax
treatment as any other annuity payment.
.. At the time you elect to begin receiving annuity payments under the GMIB
program or under any other annuity payment option we make available, the
protection provided by an Annuity's basic Death Benefit or any optional
Death Benefit provision you elected will no longer apply.
Election of the Program
Currently, the GMIB program can only be elected at the time that you purchase
your Annuity. The Annuitant must be age 75 or less as of the effective date of
the GMIB program. In the future, we may offer existing Annuity Owners the
option to elect the GMIB program after the Issue Date of their Annuity,
subject to our eligibility rules and restrictions. If you elect the GMIB
program after the Issue Date of your Annuity, the program will be effective as
of the date of election. Your Account Value as of that date will be used to
calculate the Protected Income Value as of the effective date of the program.
68
Termination of the Program
The GMIB program cannot be terminated by the Owner once elected. The GMIB
program automatically terminates as of the date your Annuity is fully
surrendered, on the date the Death Benefit is payable to your Beneficiary
(unless your surviving spouse elects to continue your Annuity), or on the date
that your Account Value is transferred to begin making annuity payments. The
GMIB program may also be terminated if you designate a new Annuitant who would
not be eligible to elect the GMIB program based on his or her age at the time
of the change.
Upon termination of the GMIB program we will deduct the charge from your
Account Value for the portion of the Annuity Year since the prior anniversary
of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
Charges under the Program
Currently, we deduct a charge equal to 0.50% per year of the average Protected
Income Value for the period the charge applies. Because the charge is
calculated based on the average Protected Income Value, it does not increase
or decrease based on changes to the Annuity's Account Value due to market
performance. The dollar amount you pay each year will increase in any year the
Protected Income Value increases, and it will decrease in any year the
Protected Income Value decreases due to withdrawal, irrespective of whether
your Account Value increases or decreases.
The charge is deducted annually in arrears each Annuity Year on the
anniversary of the Issue Date of an Annuity. We deduct the amount of the
charge pro-rata from the Account Value allocated to the Sub-accounts and the
Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed
Allocation. If you surrender your Annuity, begin receiving annuity payments
under the GMIB program or any other annuity payment option we make available
during an Annuity Year, or the GMIB program terminates, we will deduct the
charge for the portion of the Annuity Year since the prior anniversary of the
Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
No charge applies after the Annuity Date.
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE)
The Lifetime Five Income Benefit program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Lifetime Five can be elected only where
the Annuitant and the Owner are the same person or, if the Annuity Owner is an
entity, where there is only one Annuitant. Currently, if you elect Lifetime
Five and subsequently terminate the benefit, there will be a restriction on
your ability to re-elect Lifetime Five and elect Spousal Lifetime Five or
Highest Daily Lifetime Five. The Annuitant must be at least 45 years old when
the program is elected. The Lifetime Five Income Benefit program is not
available if you elect any other optional living benefit. As long as your
Lifetime Five Income Benefit is in effect, you must allocate your Account
Value in accordance with the then permitted and available option(s) with this
program.
We offer a program that guarantees your ability to withdraw amounts equal to a
percentage of an initial principal value (called the "Protected Withdrawal
Value"), regardless of the impact of market performance on your Account Value,
subject to our program rules regarding the timing and amount of withdrawals.
There are two options - one is designed to provide an annual withdrawal amount
for life (the "Life Income Benefit") and the other is designed to provide a
greater annual withdrawal amount as long as there is Protected Withdrawal
Value (adjusted as described below) (the "Withdrawal Benefit"). If there is no
Protected Withdrawal Value, the withdrawal benefit will be zero. You do not
choose between these two options; each option will continue to be available as
long as your Annuity has an Account Value and the Lifetime Five is in effect.
Certain benefits under Lifetime Five may remain in effect even if the Account
Value of your Annuity is zero. The program may be appropriate if you intend to
make periodic withdrawals from your Annuity and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the program - the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the program.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your Annuity following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Lifetime Five, plus any additional Purchase
Payments, as applicable, each growing at 5% per year from the date of your
election of the program, or application of the Purchase Payment to your
Annuity until the date of your first withdrawal or the 10/th /anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10/th/ anniversary of the
benefit effective date, if earlier. With respect to (A) and (C) above, after
the 10/th/ anniversary of the benefit effective date, each value is increased
by the amount of any subsequent Purchase Payments. With respect to XT6,
Credits are added to Purchase Payments for purposes of calculating the
69
Protected Withdrawal Value, the Annual Income Amount and the Annual Withdrawal
Amount (see below for a description of Annual Income Amount and Annual
Withdrawal Amount).
. If you elect the Lifetime Five program at the time you purchase your
Annuity, the Account Value will be your initial Purchase Payment.
. For existing Owners who are electing the Lifetime Five benefit, the
Account Value on the date of your election of the Lifetime Five program
will be used to determine the initial Protected Withdrawal Value.
. If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment.
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).
Step-Up of the Protected Withdrawal Value
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Account Value is greater than the Protected
Withdrawal Value.
If you elected the Lifetime Five program on or after March 20, 2006:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 1st anniversary of the first withdrawal under the Lifetime Five
program
. the Protected Withdrawal Value can be stepped up again on or after the
1st anniversary of the preceding step-up
If you elected the Lifetime Five program prior to March 20, 2006 and that
original election remains in effect:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 5th anniversary of the first withdrawal under the Lifetime Five
program
. the Protected Withdrawal Value can be stepped up again on or after the
5th anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the program, and on the
date you elect to step-up, the charges under the Lifetime Five program have
changed for new purchasers, your program may be subject to the new charge at
the time of step-up. Upon election of the step-up, we increase the Protected
Withdrawal Value to be equal to the then current Account Value. For example,
assume your initial Protected Withdrawal Value was $100,000 and you have made
cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to
$60,000. On the date you are eligible to step-up the Protected Withdrawal
Value, your Account Value is equal to $75,000. You could elect to step-up the
Protected Withdrawal Value to $75,000 on the date you are eligible. If your
current Annual Income Amount and Annual Withdrawal Amount are less than they
would be if we did not reflect the step-up in Protected Withdrawal Value, then
we will increase these amounts to reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
If you elected the Lifetime Five program on or after March 20, 2006 and have
also elected the Auto Step-Up feature:
. the first Auto Step-Up opportunity will occur on the 1st Annuity
Anniversary that is at least one year after the later of (1) the date of
the first withdrawal under the Lifetime Five program or (2) the most
recent step-up
. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by any amount
. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a
step-up occurs
. once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st Annuity Anniversary that is at least one year after the most
recent step-up
If you elected the Lifetime Five program prior to March 20, 2006 and have also
elected the Auto Step-Up feature:
. the first Auto Step-Up opportunity will occur on the Annuity Anniversary
that is at least 5 years after the later of (1) the date of the first
withdrawal under the Lifetime Five Program benefit or (2) the most recent
step-up
. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by 5% or more
. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive Annuity Anniversary
until a step-up occurs
. once a step-up occurs, the next Auto Step-Up opportunity will occur on
the Annuity Anniversary that is at least 5 years after the most recent
step-up
70
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
Key Feature - Annual Income Amount under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under the Lifetime Five program, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Account Value immediately prior to such withdrawal (see examples
of this calculation below). Reductions include the actual amount of the
withdrawal, including any CDSC that may apply. A withdrawal can be considered
Excess Income under the Life Income Benefit even though it does not exceed the
Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a
step-up (or an auto step-up is effected), your Annual Income Amount increases
to equal 5% of your Account Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional Purchase Payments. The amount of the increase is equal to
5% of any additional Purchase Payments (and any associated Credit with respect
to XT6). 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 (or an auto step-up is effected), your Annual Withdrawal
Amount increases to equal 7% of your Account Value after the step-up if such
amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal
Amount also increases if you make additional Purchase Payments. The amount of
the increase is equal to 7% of any additional Purchase Payments (and any
associated Credit with respect to XT6). 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.
Examples of Withdrawals
The following examples of dollar-for-dollar and proportional reductions 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; and 4.) the first
withdrawal occurs on March 1, 2006 when the Account Value is equal to
$263,000. The values set forth here are purely hypothetical, and do not
reflect the charge for Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
71
(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 Protected Withdrawal Value = $246,450 - max {$6,450,
$6,503} = $239,947
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. Thus, in that scenario,
the remaining amounts
72
under the Life Income Benefit and the Withdrawal Benefit would be payable
even though your Account Value was reduced to zero. Once you make this
election we will make an additional payment for that Annuity Year equal
to either the remaining Annual Income Amount or Annual Withdrawal Amount
for the Annuity Year, if any, depending on the option you choose. In
subsequent Annuity Years we make payments that equal either the Annual
Income Amount or the Annual Withdrawal Amount as described in this
Prospectus. You will not be able to change the option after your election
and no further Purchase Payments will be accepted under your Annuity. If
you do not make an election, we will pay you annually under the Life
Income Benefit. To the extent that cumulative withdrawals in the current
Annuity Year that reduced your Account Value to zero are more than the
Annual Income Amount but less than or equal to the Annual Withdrawal
Amount and amounts are still payable under the Withdrawal Benefit, you
will receive the payments under the Withdrawal Benefit. In the year of a
withdrawal that reduced your Account Value to zero, we will make an
additional payment to equal any remaining Annual Withdrawal Amount and
make payments equal to the Annual Withdrawal Amount in each subsequent
year (until the Protected Withdrawal Value is depleted). Once your
Account Value equals zero no further Purchase Payments will be accepted
under your Annuity.
. If annuity payments are to begin under the terms of your Annuity or if
you decide to begin receiving annuity payments and there is any Annual
Income Amount due in subsequent Annuity Years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make annuity
payments each year equal to the Annual Income Amount. We make such annuity
payments until the Annuitant's death; or
(3)request that, as of the date annuity payments are to begin, we pay out any
remaining Protected Withdrawal Value as annuity payments. Each year such
annuity payments will equal the Annual Withdrawal Amount or the remaining
Protected Withdrawal Value if less. We make such annuity payments until the
earlier of the Annuitant's death or the date the Protected Withdrawal Value
is depleted.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your Annuity. The amount that
will be applied to provide such annuity payments will be the greater of:
(1)the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed annuity
rates then currently available or the single life fixed annuity rates
guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
Other Important Considerations
. Withdrawals under the Lifetime Five program are subject to all of the
terms and conditions of your Annuity, including any applicable CDSC.
. Withdrawals made while the Lifetime Five program is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under
your Annuity. The Lifetime Five program does not directly affect your
Annuity's Account Value or Surrender Value, but any withdrawal will
decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity, you will receive the
current Surrender Value, not the Protected Withdrawal Value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Lifetime Five program. The
Lifetime Five program provides a guarantee that if your Account Value
declines due to market performance, you will be able to receive your
Protected Withdrawal Value or Annual Income Amount in the form of
periodic benefit payments.
. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
elect and maintain the benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly-adopted requirements.
Subsequent to any change in requirements, transfers of Account Value and
allocation of additional Purchase Payments may be subject to the new
investment limitations.
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.
73
Currently, if you terminate the program, you will only be permitted to
re-elect Lifetime Five or elect Highest Daily Lifetime Five or the Spousal
Lifetime Five on any anniversary of the Issue Date that is at least 90
calendar days from the date the benefit was last terminated.
If you elected Lifetime Five prior to March 20, 2006, and you terminate the
program, there will be no waiting period before you can re-elect the program
or elect Highest Daily Lifetime Five or Spousal Lifetime Five provided that
you had not previously elected Lifetime Five after the Issue Date and within
the same Annuity Year that you terminate Lifetime Five. If you had previously
elected Lifetime Five after the Issue Date and within the same Annuity Year
that you terminated Lifetime Five, you will be able to re-elect the program or
elect Highest Daily Lifetime Five or Spousal Lifetime Five on any date on or
after the next anniversary of the Issue Date. However, once you choose to
re-elect/elect, the waiting period described above will apply to subsequent
re-elections. We reserve the right to limit the re-election/election frequency
in the future. Before making any such change to the re-election/election
frequency, we will provide prior notice to Owners who have an effective
Lifetime Five Income Benefit.
Termination of the Program
The program terminates automatically when your Protected Withdrawal Value and
Annual Income Amount equal zero. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. The
program terminates upon your surrender of your Annuity, upon the death of the
Annuitant (but your surviving spouse may elect a new Lifetime Five if your
spouse elects the spousal continuance option and your spouse would then be
eligible to elect the benefit if he or she was a new purchaser), upon a change
in ownership of your Annuity that changes the tax identification number of the
Owner, upon change in the Annuitant or upon your election to begin receiving
annuity payments. While you may terminate your program at any time, we may not
terminate the program other than in the circumstances listed above. However,
we may stop offering the program for new elections or re-elections at any time
in the future.
The charge for the Lifetime Five program will no longer be deducted from your
Account Value upon termination of the program.
Additional Tax Considerations
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
annuity payment and Death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as Required Minimum Distribution provisions under the tax law.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)
The Spousal Lifetime Five program described below is only being offered in
those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Currently, if you elect Spousal Lifetime
Five and subsequently terminate the benefit, there will be a restriction on
your ability to re-elect Spousal Lifetime Five or elect Highest Daily Lifetime
Five or Lifetime Five. (See "Election of and Designations under the Program"
below for details). Spousal Lifetime Five must be elected based on two
Designated Lives, as described below. Each Designated Life must be at least 55
years old when the benefit is elected. The Spousal Lifetime Five program is
not available if you elect any other optional living benefit or optional death
benefit. As long as your Spousal Lifetime Five Income Benefit is in effect,
you must allocate your Account Value in accordance with the then permitted and
available option(s) with this program.
We offer a program that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount ("Spousal
Life Income Benefit") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The Spousal Life Income Benefit may remain in effect
even if the Account Value of the Annuity is zero. The program may be
appropriate if you intend to make periodic withdrawals from your Annuity, wish
to ensure
74
that market performance will not affect your ability to receive annual
payments, and wish either spouse to be able to continue the Spousal Life
Income Benefit after the death of the first. You are not required to make
withdrawals as part of the program - the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the program.
Key Feature - Initial Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under the Annuity following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Spousal Lifetime Five, plus any additional
Purchase Payments as applicable, each growing at 5% per year from the date of
your election of the program, or application of the Purchase Payment to your
Annuity, until the date of your first withdrawal or the 10/th /anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10/th/ anniversary of the
benefit effective date, if earlier. With respect to (A) and (C) above, after
the 10/th/ anniversary of the benefit effective date, each value is increased
by the amount of any subsequent Purchase Payments. With respect to XT6,
Credits are added to Purchase Payments for purposes of calculating the
Protected Withdrawal Value and the Annual Income Amount (see below for a
description of Annual Income Amount).
. If you elect the Spousal Lifetime Five program at the time you purchase
your Annuity, the Account Value will be your initial Purchase Payment.
. For existing Owners who are electing the Spousal Lifetime Five benefit,
the Account Value on the date of your election of the Spousal Lifetime
Five program will be used to determine the initial Protected Withdrawal
Value.
Key Feature - Annual Income Amount under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw
an amount less than the Annual Income Amount under the Spousal Life Income
Benefit in any Annuity Year, you cannot carry-over the unused portion of the
Annual Income Amount to subsequent Annuity Years. 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. The Spousal Lifetime Five
program does not affect your ability to make withdrawals under your Annuity or
limit your ability to request withdrawals that exceed the Annual Income Amount.
Step-Up of Annual Income Amount
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Account Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1st anniversary of the first withdrawal under the Spousal Lifetime Five
program. The Annual Income Amount can be stepped up again on or after the 1st
anniversary of the preceding step-up. If you elect to step-up the Annual
Income Amount under the program, and on the date you elect to step-up, the
charges under the Spousal Lifetime Five program have changed for new
purchasers, your program may be subject to the new charge at the time of such
step-up. When you elect a step-up, your Annual Income Amount increases to
equal 5% of your Account Value after the step-up. Your Annual Income Amount
also increases if you make additional Purchase Payments. The amount of the
increase is equal to 5% of any additional Purchase Payments (plus any Credit
with respect to XT6). Any increase will be added to your Annual Income Amount
beginning on the day that the step-up is effective or the Purchase Payment is
made. A determination of whether you have exceeded your Annual Income Amount
is made at the time of each withdrawal; therefore a subsequent increase in the
Annual Income Amount will not offset the effect of a withdrawal that exceeded
the Annual Income Amount at the time the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1st Annuity Anniversary that is at
least one year after the later of (1) the date of the first withdrawal under
the Spousal Lifetime Five program or (2) the most recent step-up. At this
time, your Annual Income Amount will be stepped-up if 5% of your Account Value
is greater than the Annual Income Amount by any amount. If 5% of the Account
Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st Annuity Anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Examples of withdrawals and step-up
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume: 1.) the Issue Date and the
Effective Date of the Spousal Lifetime Five program are February 1, 2005; 2.)
an initial Purchase Payment of
75
$250,000; 3.) the Account Value on February 1, 2006 is equal to $265,000; 4.)
the first withdrawal occurs on March 1, 2006 when the Account Value is equal
to $263,000; and 5.) the Account Value on February 1, 2010 is equal to
$280,000. The values set forth here are purely hypothetical, and do not
reflect the charge for the Spousal Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
Example 1. Dollar-for-dollar reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current Annuity Year = $13,250 - $10,000
= $3,250
Annual Income Amount for future Annuity Years remains at $13,250
Example 2. Dollar-for-dollar and proportional reductions
If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
.. Remaining Annual Income Amount for current Annuity Year = $0
Excess of withdrawal over the Annual Income Amount ($15,000 - $13,250 =
$1,750) reduces
Annual Income Amount for future Annuity Years.
.. Reduction to Annual Income Amount = Excess Income/Account Value before
Excess Income X Annual Income Amount = $1,750/($263,000 - $13,250) X
$13,250 = $93 Annual Income Amount for future Annuity Years = $13,250 - $93
= $13,157
Example 3. Step-up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Account Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM
To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income Amount
and amounts are still payable under the Spousal Life Income Benefit, we will
make an additional payment for that Annuity Year equal to the remaining Annual
Income Amount for the Annuity Year, if any. Thus, in that scenario, the
remaining Annual Income Amount would be payable even though your Account Value
was reduced to zero. In subsequent Annuity Years we make payments that equal
the Annual Income Amount as described in this Prospectus. No further Purchase
Payments will be accepted under your Annuity. We will make payments until the
first of the Designated Lives to die, and will continue to make payments until
the death of the second Designated Life as long as the Designated Lives were
spouses at the time of the first death. To the extent that cumulative
withdrawals in the current Annuity Year that reduced your Account Value to
zero are more than the Annual Income Amount, the Spousal Life Income Benefit
terminates and no additional payments will be made.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The
amount that will be applied to provide such annuity payments will be the
greater of:
(1)the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates then currently
available or the single life fixed annuity rates guaranteed in your
Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
76
Other Important Considerations
. Withdrawals under the Spousal Lifetime Five program are subject to all of
the terms and conditions of the Annuity, including any CDSC.
. Withdrawals made while the Spousal Lifetime Five program is in effect
will be treated, for tax purposes, in the same way as any other
withdrawals under the Annuity. The Spousal Lifetime Five program does not
directly affect the Annuity's Account Value or Surrender Value, but any
withdrawal will decrease the Account Value by the amount of the
withdrawal (plus any applicable CDSC). If you surrender your Annuity, you
will receive the current Surrender Value, not the Protected Withdrawal
Value.
. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Lifetime Five program.
The Spousal Lifetime Five program provides a guarantee that if your
Account Value declines due to market performance, you will be able to
receive your Annual Income Amount in the form of periodic benefit
payments.
. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to
elect and maintain the benefit. If, subsequent to your election of the
benefit, we change our requirements for how Account Value must be
allocated under the benefit, the new requirement will apply only to new
elections of the benefit, and we will not compel you to re-allocate your
Account Value in accordance with our newly-adopted requirements.
Subsequent to any change in requirements, transfers of Account Value and
allocation of additional Purchase Payments may be subject to the new
investment limitations.
. There may be circumstances where you will continue to be charged the full
amount for the Spousal Lifetime Five program even when the benefit is
only providing a guarantee of income based on one life with no
survivorship.
. In order for the Surviving Designated Life to continue the Spousal
Lifetime Five program upon the death of an owner, the Designated Life
must elect to assume ownership of the Annuity under the spousal
continuation option. When the Annuity is owned by a Custodial Account, in
order for Spousal Lifetime Five to be continued after the death of the
first Designated Life (the Annuitant), the Custodial Account must elect
to continue the Annuity and the second Designated Life (the Contingent
Annuitant) will be named as the new Annuitant. See "Spousal
Designations", and "Spousal Assumption of Annuity" in this Prospectus.
Election of and Designations under the Program
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the program and at the death of the first of the
Designated Lives to die. Currently, the program may only be elected where the
Owner, Annuitant and Beneficiary Designations are as follows:
. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 55 years old at the time of election; or
. Co-Annuity Owners, where the Owners are each other's spouses. The
Beneficiary Designation must be the surviving spouse. The first named
Owner must be the Annuitant. Both Owners must each be at least 55 years
old at the time of election; or
. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any
successor Code section thereto) ("Custodial Account"), the Beneficiary is
the Custodial Account and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and Contingent Annuitant must each be at
least 55 years old at the time of election.
No Ownership changes or Annuitant changes will be permitted once this program
is elected. However, if the Annuity is co-owned, the Owner that is not the
Annuitant may be removed without affecting the benefit.
The Spousal Lifetime Five program can be elected at the time that you purchase
your Annuity. We also offer existing Owners the option to elect the Spousal
Lifetime Five program after the Issue Date of their Annuity, subject to our
eligibility rules and restrictions. Your Account Value as the date of election
will be used as a basis to calculate the initial Protected Withdrawal Value
and the Annual Income Amount.
Currently, if you terminate the program, you will only be permitted to
re-elect Spousal Lifetime Five or elect Highest Daily Lifetime Five or
Lifetime Five on any anniversary of the Issue Date that is at least 90
calendar days from the date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to Owners who have an effective Spousal Lifetime Five Income Benefit.
Termination of the Program
The program terminates automatically when your Annual Income Amount equals
zero. You may terminate the program at any time by notifying us. If you
terminate the program, any guarantee provided by the benefit will terminate as
of the date the termination is effective and certain restrictions on
re-election of the benefit will apply as described above. We reserve the right
to further limit the frequency election in the future. The program terminates
upon your surrender of the Annuity, upon the first Designated Life to die if
the Annuity is not continued, upon the second Designated Life to die or upon
your election to begin receiving annuity payments.
77
The charge for the Spousal Lifetime Five program will no longer be deducted
from your Account Value upon termination of the program.
Additional Tax Considerations
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
an employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and Death Benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Highest Daily Lifetime Five is offered as
an alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you
elect Highest Daily Lifetime Five and subsequently terminate the benefit, you
will not be able to re-elect Highest Daily Lifetime Five, and will have a
waiting period until you can elect Spousal Lifetime Five or Lifetime Five. See
"Election of and Designations under the Program" below for details. The income
benefit under Highest Daily Lifetime Five currently is based on a single
"designated life" who is at least 55 years old on the date that the benefit is
acquired. The Highest Daily Lifetime Five Benefit is not available if you
elect any other optional living benefit, although you may elect any optional
death benefit (other than the Highest Daily Value Death Benefit). Any DCA
program that transfers Account Value from a Fixed Allocation is also not
available as Fixed Allocations are not permitted with the benefit. As long as
your Highest Daily Lifetime Five Benefit is in effect, you must allocate your
Account Value in accordance with the then-permitted and available investment
option(s) with this program.
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Total Annual Income
Amount") equal to a percentage of an initial principal value (the "Total
Protected Withdrawal Value") regardless of the impact of market performance on
the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The 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 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 benefit. As discussed below, we require that you
participate in our asset transfer program in order to participate in Highest
Daily Lifetime Five, and in the Appendices to this prospectus, we set forth
the formula under which we make those asset transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
Account Value. Because each of the Total Protected Withdrawal Value and Total
Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for Account Value to fall to zero, even though
the Total Annual Income Amount remains. You are guaranteed to be able to
withdraw the Total Annual Income Amount for the rest of your life, provided
that you have not made "excess withdrawals." Excess withdrawals, as discussed
below, will reduce your Total Annual Income Amount. Thus, you could experience
a scenario in which your Account Value was zero, and, due to your excess
withdrawals, your Total Annual Income Amount also was reduced to zero. In that
scenario, no further amount would be payable under Highest Daily Lifetime Five.
Key Feature - Total Protected Withdrawal Value
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Account Value on the
date that you elect Highest Daily Lifetime Five. On each Valuation Day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the benefit, we
78
recalculate the Protected Withdrawal Value. Specifically, on each such
Valuation Day (the "Current Valuation Day"), the Protected Withdrawal Value is
equal to the greater of:
. the Protected Withdrawal Value for the immediately preceding Valuation
Day (the "Prior Valuation Day"), appreciated at the daily equivalent of
5% annually during the calendar day(s) between the Prior Valuation Day
and the Current Valuation Day (i.e., one day for successive Valuation
Days, but more than one calendar day for Valuation Days that are
separated by weekends and/or holidays), plus the amount of any Purchase
Payment (including any associated credit) made on the Current Valuation
Day; and
. the Account Value.
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Account Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take
a withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If so, then on or after the Tenth Anniversary up
until the date of the first withdrawal, the Enhanced Protected Withdrawal
Value is equal to the sum of:
(a)200% of the Account Value on the date you elected Highest Daily Lifetime
Five;
(b)200% of all Purchase Payments (and any associated Credits) made during the
one-year period after the date you elected Highest Daily Lifetime Five; and
(c)100% of all Purchase Payments (and any associated Credits) made more than
one year after the date you elected Highest Daily Lifetime Five, but prior
to the date of your first withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments (and any associated Credits) will increase
the Total Annual Income Amount, while "excess" withdrawals (as described
below) may decrease the Total Annual Income Amount.
Key Feature - Total Annual Income Amount under the Highest Daily Lifetime Five
Benefit
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value. For purposes of the asset transfer formula described below,
we also calculate a Highest Daily Annual Income Amount, which is initially
equal to 5% of the Protected Withdrawal Value. Under the Highest Daily
Lifetime Five benefit, if your cumulative withdrawals in an Annuity Year are
less than or equal to the Total Annual Income Amount, they will not reduce
your Total Annual Income Amount in subsequent Annuity Years, but any such
withdrawals will reduce the Total Annual Income Amount on a dollar-for-dollar
basis in that Annuity Year. If your cumulative withdrawals are in excess of
the Total Annual Income Amount ("Excess Income"), your Total 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 Purchase Payment that you make will
increase the then-existing Total Annual Income Amount and Highest Daily Annual
Income Amount by an amount equal to 5% of the Purchase Payment (including the
amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary, we identify the Account Value on the
Valuation Days corresponding to the end of each quarter that (i) is based on
your Annuity Year, rather than a calendar year; (ii) is subsequent to the
first withdrawal; and (iii) falls within the immediately preceding Annuity
Year. If the end of any such quarter falls on a holiday or a weekend, we use
the next Valuation Day. We multiply each of those quarterly Account Values by
5%, adjust each such quarterly value for subsequent withdrawals and Purchase
Payments, and then select the highest of those values. If the highest of those
values exceeds the existing Total Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Total Annual Income Amount intact. In later years, (i.e., after the first
Annuity Anniversary after the first withdrawal) we determine whether an
automatic step-up should occur on each Annuity Anniversary, by performing a
similar examination of the Account Values on the end of the four immediately
preceding quarters. If, on the date that we implement a Highest Quarterly Auto
Step-Up to your Total Annual Income Amount, the charge for Highest Daily
Lifetime Five has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime Five upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
79
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in an Annuity Year are less than or equal to
the Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Annuity Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Five benefit or any other fees and charges. Assume the following for
all three examples:
. The Issue Date is December 1, 2006
. The Highest Daily Lifetime Five benefit is elected on March 5, 2007.
Dollar-for-dollar reductions
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Annuity on this date, the remaining Total Annual Income
Amount for that Annuity Year (up to and including December 1, 2007) is $3,500.
This is the result of a dollar-for-dollar reduction of the Total Annual Income
Amount - $6,000 less $2,500 = $3,500.
Proportional reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Annuity Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Annuity Years on a
proportional basis based on the ratio of the excess withdrawal to the Account
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Annuity Year, each would result in another
proportional reduction to the Total Annual Income Amount).
Here is the calculation:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal -$ 3,500.00
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% -$ 84.51
Total Annual Income Amount for future Annuity Years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Annuity Anniversary date, the Total Annual Income Amount is stepped-up
if 5% of the highest quarterly value since your first withdrawal (or last
Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Total Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments (plus any
Credit with respect to XT6).
Continuing the same example as above, the Total Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Annuity
Year, the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Account Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the
June 1 value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
Highest Quarterly Value
(adjusted with Adjusted Total Annual
withdrawal and Purchase Income Amount (5% of the
Date* Account value Payments)** Highest Quarterly Value)
- ----- ------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $120,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
80
* In this example, the Annuity Anniversary date is December 1. The quarterly
valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do not
use the March 1 date as the first withdrawal took place after March 1. The
Annuity Anniversary Date of December 1 is considered the fourth and final
quarterly valuation date for the year.
** In this example, the first quarterly value after the first withdrawal is
$118,000 on June 1, yielding an adjusted Total Annual Income Amount of
$5,900.00. This amount is adjusted on August 6 to reflect the $5,000
withdrawal. The calculations for the adjustments are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a Highest
Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Account Value on September 1. Since the June 1 adjusted
Total Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Total Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Annuity Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
Benefits Under the Highest Daily Lifetime Five Program
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual
Income Amount and amounts are still payable under Highest Daily Lifetime
Five, we will make an additional payment, if any, for that Annuity Year
equal to the remaining Total Annual Income Amount for the Annuity Year.
Thus, in that scenario, the remaining Total Annual Income Amount would be
payable even though your Account Value was reduced to zero. In subsequent
Annuity Years we make payments that equal the Total Annual Income Amount as
described in this section. We will make payments until the death of the
single designated life. To the extent that cumulative withdrawals in the
current Annuity Year that reduced your Account Value to zero are more than
the Total Annual Income Amount, the Highest Daily Lifetime Five benefit
terminates, and no additional payments will be made.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Total Annual
Income Amount due in subsequent Annuity Years, you can elect one of the
following two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Total Annual Income Amount.
We will make payments until the death of the single designated life.
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 in the form of a single life fixed
annuity with ten payments certain, by applying 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 the future Total 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 calculate the Total Annual Income
Amount as if you made your first withdrawal on the date the annuity
payments are to begin.
.. Please note that if your Annuity has a maximum Annuity Date requirement,
payments that we make under this benefit as of that date will be treated as
annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Highest Daily Lifetime Five Benefit does not
directly affect the Account Value or surrender value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity you will receive the
current surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee that
if your Account Value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic benefit
payments.
81
.. upon inception of the benefit, 100% of your Account Value must be allocated
to the permitted sub-accounts. However, the asset transfer component of the
benefit as described below may transfer Account Value to the Benefit Fixed
Rate Account as of the effective date of the benefit in some circumstances.
.. you cannot allocate Purchase Payments or transfer Account Value to a Fixed
Allocation if you elect this benefit.
.. transfers to and from the Sub-accounts and the Benefit Fixed Rate Option
triggered by the asset transfer component of the benefit will not count
toward the maximum number of free transfers allowable under an Annuity.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the Highest Daily Lifetime Five benefit. If, subsequent to
your election of the benefit, we change our requirements for how Account
Value must be allocated under the benefit, the new requirement will apply
only to new elections of the benefit, and we will not compel you to
re-allocate your Account Value in accordance with our newly-adopted
requirements. Subsequent to any change in requirements, transfers of
Account Value and allocation of additional Purchase Payments may be subject
to the new investment limitations.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. However, with respect to XT6, you may elect this benefit at the time
you purchase your Annuity only if the CDSC schedule for XT6 Annuities issued
on or after November 20, 2006 applies. (See "Summary of Contract Fees and
Charges" section of the Prospectus). We also offer existing owners (i.e.,
those who have already acquired their Annuity) the option to elect Highest
Daily Lifetime Five after the Issue Date, subject to our eligibility rules and
restrictions. However, for existing Owners of XT6 whose Annuities are subject
to the CDSC schedule for Annuities issued prior to November 20, 2006, this
benefit may only be elected on or after the first anniversary of the Issue
Date.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right
to further limit the election frequency in the future. Before making any such
change to the election frequency, we will provide prior notice to Owners who
have an effective Highest Daily Lifetime Five Benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Annuity (iii) upon
your election to begin receiving annuity payments (iv) upon the death of the
Annuitant (v) if both the Account Value and Total Annual Income Amount equal
zero or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options). Upon termination, we may limit or prohibit investment in
the Fixed Allocations.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set
forth in this paragraph are met. On the Tenth Anniversary, we add:
(a)your Account Value on the day that you elected Highest Daily Lifetime Five;
and
(b)the sum of each Purchase Payment you made (including any Credits with
respect to XT6) during the one-year period after you elected the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
82
provision will be allocated to each of your variable investment options and
the Benefit Fixed Rate Account (described below), in the same proportion that
each such investment option bears to your total Account Value, immediately
prior to the application of the amount. Any such amount will not be considered
a Purchase Payment when calculating your Total Protected Withdrawal Value,
your death benefit, or the amount of any other or optional benefit that you
may have selected, and therefore will have no direct impact on any such values
at the time we add this amount. This potential addition to Account Value is
available only if you have elected Highest Daily Lifetime Five and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer Account Value between the Permitted
Sub-accounts and a fixed interest rate account that is part of our general
account (the "Benefit Fixed Rate Account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The Benefit Fixed Rate Account is available only with this
benefit, and thus you may not allocate Purchase Payments to the Benefit Fixed
Rate Account. The interest rate that we pay with respect to the Benefit Fixed
Rate Account is reduced by an amount that corresponds generally to the charge
that we assess against your variable Sub-accounts for Highest Daily Lifetime
Five. The Benefit Fixed Rate Account is not subject to the Investment Company
Act of 1940 or the Securities Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any transfer would be made in accordance with a formula, which is set
forth in the schedule supplement to the endorsement for this benefit (and also
appears in the Appendices to this prospectus). Speaking generally, the
formula, which we apply each Valuation Day, operates as follows. The formula
starts by identifying your Protected Withdrawal Value for that day and then
multiplies that figure by 5%, to produce a projected (i.e., hypothetical)
Highest Daily Annual Income Amount. Then, using our actuarial tables, we
produce an estimate of the total amount we would target in our allocation
model, based on the projected Highest Daily Annual Income Amount each year for
the rest of your life. In the formula, we refer to that value as the "Target
Value" or "L". If you have already made a withdrawal, your projected Highest
Daily Annual Income Amount (and thus your Target Value) would take into
account any automatic step-up that was scheduled to occur according to the
step-up formula described above. Next, the formula subtracts from the Target
Value the amount held within the Benefit Fixed Rate Account on that day, and
divides that difference by the amount held within the Permitted Sub-accounts.
That ratio, which essentially isolates the amount of your Target Value that is
not offset by amounts held within the Benefit Fixed Rate Account, is called
the "Target Ratio" or "r". If the Target Ratio exceeds a certain percentage
(currently 83%) it means essentially that too much Target Value is not offset
by assets within the Benefit Fixed Rate Account, and therefore we will
transfer an amount from your Permitted Sub-accounts to the Benefit Fixed Rate
Account. Conversely, if the Target Ratio falls below a certain percentage
(currently 77%), then a transfer from the Benefit Fixed Rate Account to the
Permitted Sub-accounts would occur. Note that the formula is calculated with
reference to the Highest Daily Annual Income Amount, rather than with
reference to the Annual Income Amount.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Target Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For newly issued annuities that elect Highest
Daily Lifetime Five and existing annuities that elect Highest Daily Lifetime
Five, however, we reserve the right to change the ratios.
While you are not notified when your Annuity 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 Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts to
the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the Benefit Fixed Rate Account
will be withdrawn for this purpose on a last-in, first-out basis (an
amount renewed into a new guarantee period under the Benefit Fixed Rate
Account will be deemed a new investment for purposes of this last-in,
first-out rule); or
83
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual rate
that we have set for that day, and we will credit the daily equivalent of
that annual interest until the earlier of one year from the date of the
transfer or the date that such amount in the Benefit Fixed Rate Account
is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that over time a significant portion, and under certain
circumstances all, of your Account Value may be allocated to the Benefit Fixed
Rate Account. Note that if your entire Account Value is transferred to the
Benefit Fixed Rate Account, then based on the way the formula operates, that
value would remain in the Benefit Fixed Rate Account unless you made
additional Purchase Payments to the Permitted Sub-Accounts, which could cause
Account Value to transfer out of the Benefit Fixed Rate Account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Total
Annual Income Amount, which will cause us to increase the Total Annual Income
Amount in any Annuity Year that Required Minimum Distributions due from your
Annuity that are greater than such amounts. In addition, the amount and
duration of payments under the annuity payment and death benefit provisions
may be adjusted so that the payments do not trigger any penalty or excise
taxes due to tax considerations such as Required Minimum Distribution
provisions under the tax law. Please note, however, that any withdrawal you
take prior to the Tenth Anniversary, even if withdrawn to satisfy required
minimum distribution rules, will cause you to lose the ability to receive
Enhanced Protected Withdrawal Value and an amount under the Return of
Principal Guarantee.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit
here. However, we do note that if you participate in Highest Daily Lifetime
Five through a non-qualified annuity, and your annuity has received Enhanced
Protected Withdrawal Value and/or an additional amount under the Return of
Principal Guarantee, as with all withdrawals, once all Purchase Payments are
returned under the Annuity, all subsequent withdrawal amounts will be taxed as
ordinary income.
84
DEATH BENEFIT
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
Each Annuity provides a Death Benefit during its accumulation period. If an
Annuity is owned by one or more natural persons, the Death Benefit is payable
upon the first death of an Owner. If an Annuity is owned by an entity, the
Death Benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. Generally, if a Contingent Annuitant was designated before the
Annuitant's death and the Annuitant dies, then the Contingent Annuitant
becomes the Annuitant and a Death Benefit will not be paid at that time. The
person upon whose death the Death Benefit is paid is referred to below as the
"decedent."
BASIC DEATH BENEFIT
Each Annuity provides a basic Death Benefit at no additional charge. The
Insurance Charge we deduct daily from your Account Value allocated to the
Sub-accounts is used, in part, to pay us for the risk we assume in providing
the basic Death Benefit guarantee under an Annuity. Each Annuity also offers
four different optional Death Benefits that can be purchased for an additional
charge. The additional charge is deducted to compensate American Skandia for
providing increased insurance protection under the optional Death Benefits.
Notwithstanding the additional protection provided under the optional Death
Benefits, the additional cost has the impact of reducing the net performance
of the investment options. In addition, with respect to XT6, under certain
circumstances, your Death Benefit may be reduced by the amount of any Credits
we applied to your Purchase Payments. (See "How are Credits Applied to My
Account Value".)
Except as noted below for ASL II, where death occurs after the decedent's age
85, or older, the basic Death Benefit is the greater of:
. The sum of all Purchase Payments (not including any Credits) less the sum
of all proportional withdrawals.
. The sum of your Account Value in the Sub-accounts and your Interim Value
in the Fixed Allocations (less the amount of any Credits applied within
12-months prior to the date of death, with respect to XT6).
With respect to ASL II, if death occurs after the decedent's age 85 or older:
the Death Benefit is your Account Value in the Sub-accounts and your Interim
Value in the Fixed Allocations.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments for purposes of calculating the basic Death
Benefit.
OPTIONAL DEATH BENEFITS
Four optional Death Benefits are offered for purchase with your Annuity to
provide an enhanced level of protection for your beneficiaries.
Currently, these benefits are only offered in those jurisdictions where we
have received regulatory approval and must be elected at the time that you
purchase your Annuity. We may, at a later date, allow existing Annuity Owners
to purchase an optional Death Benefit subject to our rules and any changes or
restrictions in the benefits. Certain terms and conditions may differ between
jurisdictions once approved and if you purchase your Annuity as part of an
exchange, replacement or transfer, in whole or in part, from any other Annuity
we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death
Benefit may only be elected individually, and cannot be elected in combination
with any other optional Death Benefit. If you elect Spousal Lifetime Five, you
are not permitted to elect an optional Death Benefit. With respect to XT6,
under certain circumstances, each Optional Death Benefit that you elect may be
reduced by the amount of Credits applied to your Purchase Payments.
Investment Restrictions may apply if you elect certain optional death
benefits. See the chart in the "Investment Options" section of the Prospectus
for a list of investment options available and permitted with each 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.
85
The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit
that is payable in addition to the basic Death Benefit and certain other
optional death benefits you may elect in conjunction with this benefit. If the
Annuity has one Owner, the Owner must be age 75 or less at the time the
benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be
age 75 or less. If an Annuity is owned by an entity, the Annuitant must be age
75 or less.
Calculation of Enhanced Beneficiary Protection Optional Death Benefit
If you purchase the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the basic Death Benefit described above;
PLUS
2. 40% of your "Growth" under an Annuity, as defined below.
"Growth" means the sum of your Account Value in the Sub-accounts and your
Interim Value in the Fixed Allocations, minus the total of all Purchase
Payments (less the amount of any Credits applied within 12-months prior to the
date of death, with respect to XT6) reduced by the sum of all proportional
withdrawals.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments.
The Enhanced Beneficiary Protection Optional Death Benefit is subject to a
maximum of 100% of all Purchase Payments applied to an Annuity at least 12
months prior to the death of the decedent that triggers the payment of the
Death Benefit.
The Enhanced Beneficiary Protection Optional Death Benefit is being offered in
those jurisdictions where we have received regulatory approval. Certain terms
and conditions may differ between jurisdictions once approved. With respect to
XT6, APEX II and ASL II, please see Appendix E for a description of the
Enhanced Beneficiary Protection Optional Death Benefit offered before
November 18, 2002 in those jurisdictions where we received regulatory
approval. Please refer to the section entitled "Tax Considerations" for a
discussion of special tax considerations for purchasers of this benefit. The
Enhanced Beneficiary Protection Death Benefit is not available if you elect
the "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit or
the Spousal Lifetime Five Income Benefit.
See Appendix B for examples of how the Enhanced Beneficiary Protection
Optional Death Benefit is calculated.
Highest Anniversary Value Death Benefit ("HAV")
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Highest Anniversary Value Optional Death Benefit is purchased. If an Annuity
has joint Owners, the oldest Owner must be age 79 or less. If an Annuity is
owned by an entity, the Annuitant must be age 79 or less.
Certain of the Portfolios offered as Sub-accounts under the Annuity are not
available if you elect the Highest Anniversary Value Death Benefit. In
addition, we reserve the right to require you to use certain asset allocation
model(s) if you elect this death benefit.
Calculation of Highest Anniversary Value Death Benefit
The HAV Death Benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value as of the Owner's date of death.
If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value on the Death Benefit Target Date plus
the sum of all Purchase Payments (including any Credits applied to
such Purchase Payments more than twelve (12) months prior to date of
death in the case of XT6) less the sum of all proportional
withdrawals since the Death Benefit Target Date.
86
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. It is
also not available with Spousal Lifetime Five. With respect to XT6, APEX
II and ASL II, please see Appendix E for a description of the Guaranteed
Minimum Death Benefit offered before November 18, 2002 in those
jurisdictions where we received regulatory approval.
Please refer to the definition of Death Benefit Target Date below. This death
benefit may not be an appropriate feature where the Owner's age is near the
age specified in the Death Benefit Target Date. This is because the benefit
may not have the same potential for growth as it otherwise would, since there
will be fewer contract anniversaries before the death benefit target date is
reached. The death benefit target date under this death benefit is earlier
than the death benefit target date under the Combination 5% Roll-up and
Highest Anniversary Value Death Benefit for Owners who are age 76 or older
when an Annuity is issued, which may result in a lower value on the death
benefit, since there will be fewer contract anniversaries before the death
benefit target date is reached.
See Appendix B for examples of how the Highest Anniversary Value Death Benefit
is calculated.
Combination 5% Roll-up and Highest Anniversary Value Death Benefit
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If an
Annuity has joint Owners, the oldest Owner must be age 79 or less. If the
Annuity is owned by an entity, the Annuitant must be age 79 or less.
Certain of the Portfolios offered as Sub-accounts under an Annuity are not
available if you elect the Combination 5% Roll-up and HAV Death Benefit. If
you elect this benefit, you must allocate your Account Value in accordance
with the then permitted and available option(s). In addition, we reserve the
right to require you to use certain asset allocation model(s) if you elect
this Death Benefit.
Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death
Benefit
The Combination 5% Roll-up and HAV Death Benefit equals the greatest of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value Death Benefit described above; and
3. 5% Roll-up described below.
The calculation of the 5% Roll-up depends on whether death occurs before
or after the Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date the 5% Roll up is
equal to:
. all Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to date of
death in the case of XT6) increasing at an annual effective interest
rate of 5% starting on the date that each Purchase Payment is made
and ending on the Owner's date of death;
MINUS
. the sum of all withdrawals, dollar for dollar up to 5% of the Death
Benefit's value as of the prior contract anniversary (or Issue Date
if the withdrawal is in the first contract year). Any withdrawals in
excess of the 5% dollar for dollar limit are proportional.
If the Owner dies on or after the Death Benefit Target Date the 5%
Roll-up is equal to:
. the 5% Roll-up value as of the Death Benefit Target Date increased
by total Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to date of
death in the case of XT6) made after the Death Benefit Target Date;
MINUS
. the sum of all withdrawals which reduce the 5% Roll-up
proportionally.
87
In the case of XT6, as indicated, the amounts calculated in Items 1, 2 and 3
above (before, on or after the Death Benefit Target Date) may be reduced by
any Credits under certain circumstances. Please refer to the definitions of
Death Benefit Target Date below. This Death Benefit may not be an appropriate
feature where the Owner's age is near the age specified in the Death Benefit
Target Date. This is because the benefit may not have the same potential for
growth as it otherwise would, since there will be fewer Annuity anniversaries
before the Death Benefit Target Date is reached.
The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit
described above is currently being offered in those jurisdictions where we
have received regulatory approval. Certain terms and conditions may differ
between jurisdictions once approved. The "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is not available if you elect any other
optional Death Benefit or elect Spousal Lifetime Five. In the case of XT6,
APEX II and ASL II, please see Appendix E for a description of the Guaranteed
Minimum Death Benefit offered before November 18, 2002 in those jurisdictions
where we received regulatory approval.
See Appendix B for examples of how the "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is calculated.
Key Terms Used with the Highest Anniversary Value Death Benefit and the
Combination 5% Roll-up and Highest Anniversary Value Death Benefit:
.. The Death Benefit Target Date for the Highest Anniversary Value Death
Benefit is the contract anniversary on or after the 80/th /birthday of the
current Owner, the oldest of either joint Owner or the Annuitant, if entity
owned.
.. The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death
Benefit is the later of the contract anniversary on or after the 80/th
/birthday of the current Owner, the oldest of either joint Owner or the
Annuitant, if entity owned, or five years after the Issue Date of an
Annuity.
.. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" less proportional withdrawals since such anniversary
and plus any Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to the date of death
in the case of XT6) since such anniversary.
.. The Anniversary Value is the Account Value as of each anniversary of the
Issue Date of an Annuity. The Anniversary Value on the Issue Date is equal
to your Purchase Payment. (including any Credits applied to such Purchase
Payments more than twelve (12) months prior to the date of death in the
case of XT6)
.. Proportional withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Anniversary
Value or 5% Roll-up value by reducing such value in the same proportion as
the Account Value was reduced by the withdrawal as of the date the
withdrawal occurred. For example, if your Highest Anniversary Value or 5%
Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time
when your Account Value is equal to $100,000 (a 10% reduction), when
calculating the optional Death Benefit we will reduce your Highest
Anniversary Value ($ 125,000) by 10% or $12,500.
Highest Daily Value Death Benefit ("HDV")
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Highest Daily Value Death Benefit is elected. If an Annuity has joint Owners,
the older Owner must be age 79 or less. If there are joint Owners, death of
the Owner refers to the first to die of the joint Owners. If an Annuity is
owned by an entity, the Annuitant must be age 79 or less and death of the
Owner refers to the death of the Annuitant.
If you elect this benefit, you must allocate your Account Value in accordance
with the then permitted and available option(s) with this benefit. If,
subsequent to your election of the benefit, we change our requirements for how
Account Value must be allocated under the benefit, the new requirement will
apply only to new elections of the benefit, and we will not compel you to
re-allocate your Account Value in accordance with our newly-adopted
requirements. Subsequent to any change in requirements, transfers of Account
Value and allocation of additional Purchase Payments may be subject to the new
investment limitations.
The HDV Death Benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above (including any Credits
applied to such Purchase Payments more than twelve (12) months prior
to the date of death in the case of XT6); and
2. the HDV as of the Owner's date of death.
88
If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the HDV on the Death Benefit Target Date plus the sum of all Purchase
Payments (including any Credits applied to such Purchase Payments
more than twelve (12) months prior to the date of death in the case
of XT6) less the sum of all proportional withdrawals since the Death
Benefit Target Date.
The amount determined by this calculation is increased by any Purchase
Payments received after the Owner's date of death and decreased by any
proportional withdrawals since such date.
The Highest Daily Value Death Benefit described above is currently being
offered in those jurisdictions where we have received regulatory approval.
Certain terms and conditions may differ between jurisdictions once approved.
The Highest Daily Value Death Benefit is not available if you elect the
Guaranteed Return Option, Guaranteed Return Option Plus, Spousal Lifetime
Five, Highest Daily Lifetime Five, "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit, or the Highest Anniversary Value Death
Benefit.
Key Terms Used with the Highest Daily Value Death Benefit:
.. The Death Benefit Target Date for the Highest Daily Value Death Benefit is
the later of an Annuity anniversary on or after the 80/th /birthday of the
current Owner, or the older of either the joint Owner or the Annuitant, if
entity owned, or five years after the Issue Date of an Annuity.
.. The Highest Daily Value equals the highest of all previous "Daily Values"
less proportional withdrawals since such date and plus any Purchase
Payments (plus associated Credits in the case of XT6) since such date.
.. The Daily Value is the Account Value as of the end of each Valuation Day.
The Daily Value on the Issue Date is equal to your Purchase Payment (plus
associated Credits applied more than twelve (12) months prior to the date
of death in the case of XT6).
.. Proportional withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Daily Value
by reducing such value in the same proportion as the Account Value was
reduced by the withdrawal as of the date the withdrawal occurred. For
example, if your Highest Daily Value is $125,000 and you subsequently
withdraw $10,000 at a time when your Account Value is equal to $100,000 (a
10% reduction), when calculating the optional Death Benefit we will reduce
your Highest Daily Value ($125,000) by 10% or $12,500.
Please see Appendix B to this prospectus for a hypothetical example of how the
HDV Death Benefit is calculated.
Annuities with Joint Owners
For Annuities with Joint Owners, the Death Benefits are calculated as shown
above except that the age of the oldest of the joint Owners is used to
determine the Death Benefit Target Date. NOTE: If you and your spouse own your
Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole
primary Beneficiary is the surviving spouse, then the surviving spouse can
elect to assume ownership of your Annuity and continue the Annuity instead of
receiving the Death Benefit.
Annuities Owned by Entities
For Annuities owned by an entity, the Death Benefits are calculated as shown
above except that the age of the Annuitant is used to determine the Death
Benefit Target Date. Payment of the Death Benefit is based on the death of the
Annuitant (or Contingent Annuitant, if applicable).
Can I terminate the optional Death Benefits? Do the optional Death Benefits
terminate under other circumstances?
You can terminate the Enhanced Beneficiary Protection Death Benefit and the
Highest Anniversary Value Death Benefit at any time. The "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated
once elected. The optional Death Benefits will terminate automatically on the
Annuity Date. We may also terminate any optional Death Benefit if necessary to
comply with our interpretation of the Code and applicable regulations.
What are the charges for the optional Death Benefits?
We deduct a charge equal to 0.25% per year of the average daily net assets of
the Sub-accounts for each of the Highest Anniversary Value Death Benefit and
the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the
average daily net assets of the Sub-accounts for each of the "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge
for each of these benefits to compensate American Skandia for providing
increased insurance protection under the optional Death Benefits. The
additional annual charge is deducted daily against your Account Value
allocated to the Sub-accounts.
Please refer to the section entitled "Tax Considerations" for additional
considerations in relation to the optional Death Benefit.
89
AMERICAN SKANDIA'S ANNUITY REWARDS
What is the Annuity Rewards Benefit in ASAP III, APEX II and XT6?
The Annuity Rewards Benefit offers Owners the ability to capture any market
gains since the Issue Date of their Annuity as an enhancement to their current
Death Benefit so their Beneficiaries will not receive less than an Annuity's
value as of the effective date of the benefit. Under the Annuity Rewards
Benefit, American Skandia guarantees that the Death Benefit will not be less
than:
. your Account Value in the Sub-accounts plus the Interim Value in any
Fixed Allocations as of the effective date of the benefit
. MINUS any proportional withdrawals following the effective date of
the benefit
. PLUS any additional Purchase Payments applied to your Annuity
following the effective date of the benefit.
The Annuity Rewards Death Benefit enhancement does not affect the calculation
of the basic Death Benefit or any Optional Death Benefits available under an
Annuity. If the Death Benefit amount payable under your Annuity's basic Death
Benefit or any Optional Death Benefits you purchase is greater than the
enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death
Benefit is calculated, your Beneficiary will receive the higher amount.
Annuity Rewards is not available under ASL II.
Who is eligible for the Annuity Rewards benefit?
Owners can elect the Annuity Rewards Death Benefit enhancement when there is
no longer a CDSC associated with your Annuity. However, the Account Value on
the date that the Annuity Rewards benefit is effective, must be greater than
the amount that would be payable to the Beneficiary under the Death Benefit
(including any amounts payable under any Optional Death Benefit then in
effect). The effective date must occur before annuity payments begin. There
can only be one effective date for the Annuity Rewards Death Benefit
enhancement. There is no additional charge for electing the Annuity Rewards
Death Benefit enhancement.
PAYMENT OF DEATH BENEFITS
Alternative Death Benefit Payment Options - Annuities owned by Individuals
(not associated with Tax-Favored Plans)
Except in the case of a spousal assumption as described below, 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.
In the event of your death before the Annuity Date, the Death Benefit must be
distributed:
. within five (5) years of the date of death; or
. as a series of 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 under the
Beneficiary Continuation Option as described below in the section entitled
"Beneficiary Continuation Option," as a series of annuity payments.
Upon our receipt of proof of death, we will send to the beneficiary materials
that list these payment options.
Alternative Death Benefit Payment Options - Annuities Held by Tax-Favored Plans
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 your death under an IRA, 403(b) or other
"qualified investment", the designated Beneficiary may generally elect to
continue the Annuity and receive Required Minimum Distributions under the
Annuity instead of receiving the death benefit in a single payment. The
available payment options will depend on whether you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the Beneficiary is your surviving
spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life expectancy of
90
the designated beneficiary (provided such payments begin by
December 31/st/ of the year following the year of death). However, if
your surviving spouse is the beneficiary, the death benefit can be paid
out over the life expectancy of your spouse with such payments beginning
no later than December 31/st/ of the year following the year of death or
December 31/st/ of the year in which you would have reached age 70 1/2,
which ever is later. Additionally, 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.
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out within five years from the date of death. For
contracts where multiple beneficiaries have been named and at least one
of the beneficiaries does not qualify as a designated beneficiary and the
account has not been divided into separate accounts by December 31/st/ of
the year following the year of death, such contract is deemed to have no
designated beneficiary.
. If you die before a designated beneficiary is named and after the date
required 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. For contracts where multiple beneficiaries have been named and at
least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the required 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 Required Minimum Distribution
rules, are subject to tax. You may wish to consult a professional tax advisor
for tax advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
Beneficiary Continuation Option
Instead of receiving the death benefit in a single payment, or under an
Annuity Option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code and described above
under the sections entitled "Payment of Death Benefits" and "Alternative Death
Benefit Payment Options - Annuities Held by Tax-Favored Plans." This
"Beneficiary Continuation Option" is described below and is available for both
qualified Annuities (i.e. annuities sold to an IRA, Roth IRA, SEP IRA, or
403(b)) and non-qualified Annuities.
Under the Beneficiary Continuation Option:
. The Owner's Annuity will be continued in the Owner's name, for the
benefit of the beneficiary.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur a Settlement Service Charge which is an annual charge assessed on a
daily basis against the average assets allocated to the Sub-accounts. For
non-qualified Annuities the charge is 1.00% per year, and for qualified
Annuities the charge is 1.40% per year.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur an annual maintenance fee equal to the lesser of $30 or 2% of
Account Value. For non-qualified annuities, the fee will only apply if
the Account Value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender
request.
. The initial Account Value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the
beneficiary if the beneficiary had taken a lump sum distribution.
. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers in
excess of 20 per year will incur a $10 transfer fee.
. No Fixed Allocations or fixed interest rate options will be offered for
the non-qualified Beneficiary Continuation Options. However, for
qualified Annuities, the Fixed Allocations will be those offered at the
time the Beneficiary Continuation Option is elected.
. No additional Purchase Payments can be applied to the Annuity.
. The basic death benefit and any optional 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, unless the Beneficiary Continuation Option was
the payout predetermined by the Owner and the Owner restricted the
beneficiary's withdrawal rights.
91
. Withdrawals are not subject to 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 (successor),
unless the successor chooses to continue receiving payments.
Currently only Investment Options corresponding to Portfolios of the Advanced
Series Trust and the ProFund VP are available under the Beneficiary
Continuation Option.
In addition to the materials referenced above, the Beneficiary will be
provided with a prospectus and a settlement agreement describing the
Beneficiary Continuation Option. We may pay compensation to the broker-dealer
of record on the Annuity based on amounts held in the Beneficiary Continuation
Option. Please contact us for additional information on the availability,
restrictions and limitations that will apply to a beneficiary under the
Beneficiary Continuation Option.
Spousal Assumption of Annuity
You may name your spouse as your Beneficiary. If you and your spouse own your
Annuity jointly, we assume that the sole primary Beneficiary will be the
surviving spouse unless you elect an alternative Beneficiary Designation.
Unless you elect an alternative Beneficiary Designation, the spouse
Beneficiary may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. Any Death Benefit (including any optional Death
Benefits) that would have been payable to the Beneficiary will become the new
Account Value as of the date we receive due proof of death and any required
proof of a spousal relationship. As of the date the assumption is effective,
the surviving spouse will have all the rights and benefits that would be
available under the Annuity to a new purchaser of the same attained age. For
purposes of determining any future Death Benefit for the surviving spouse, the
new Account Value will be considered as the initial Purchase Payment. No CDSC
will apply to the new Account Value. However, any additional Purchase Payments
applied after the date the assumption is effective will be subject to all
provisions of the Annuity, including any CDSC that may apply to the additional
Purchase Payments.
See the section entitled "Managing Your Annuity" - "Spousal Designations" and
"Contingent Annuitant" for a discussion of the treatment of a spousal
Contingent Annuitant in the case of the death of the Annuitant in an Annuity
owned by a Custodial Account.
Are there any exceptions to these rules for paying the Death Benefit?
Yes, there are exceptions that apply no matter how your Death Benefit is
calculated. There are exceptions to the Death Benefit if the decedent was not
the Owner or Annuitant as of the Issue Date (or within 60 days thereafter) and
did not become the Owner or Annuitant due to the prior Owner's or Annuitant's
death. Any Death Benefit (including any optional Death Benefit) that applies
will be suspended for a two-year period from the date he or she first became
Owner or Annuitant. After the two-year suspension period is completed, the
Death Benefit is the same as if this person had been an Owner or Annuitant on
the Issue Date.
When do you determine the Death Benefit?
We determine the amount of the Death Benefit as of the date we receive "due
proof of death" (and in certain limited circumstances as of the date of
death), any instructions we require to determine the method of payment and any
other written representations we require to determine the proper payment of
the Death Benefit to all Beneficiaries. "Due proof of death" may include a
certified copy of a death certificate, a certified copy of a decree of a court
of competent jurisdiction as to the finding of death or other satisfactory
proof of death. Upon our receipt of "due proof of death" we automatically
transfer the Death Benefit to the AST Money Market Sub-account until we
further determine the universe of eligible Beneficiaries. Once the universe of
eligible Beneficiaries has been determined each eligible Beneficiary may
allocate his or her eligible share of the Death Benefit to an eligible annuity
payment option.
Each Beneficiary must make an election as to the method they wish to receive
their portion of the Death Benefit. Absent an election of a Death Benefit
payment method, no Death Benefit can be paid to the Beneficiary. We may
require written acknowledgment of all named Beneficiaries before we can pay
the Death Benefit. During the period from the date of death until we receive
all required paper work, the amount of the Death Benefit may be subject to
market fluctuations.
92
VALUING YOUR INVESTMENT
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, your Annuity has an Account Value. The Account
Value is determined separately for each Sub-account allocation and for each
Fixed Allocation. The Account Value is the sum of the values of each
Sub-account allocation and the value of each Fixed Allocation. For Annuities
with a Highest Daily Lifetime Five election, Account Value also includes the
value of any allocation to the Benefit Fixed Rate Account. See the "Living
Benefit Programs - Highest Daily Lifetime Five" section of the Prospectus for
a description of the Benefit Fixed Rate Account. The Account Value does not
reflect any CDSC that may apply to a withdrawal or surrender. With respect to
ASAP III and APEX II, the Account Value includes any Loyalty Credit we apply.
With respect to XT6, the Account Value includes any Credits we applied to your
Purchase Payments which we are entitled to take back under certain
circumstances. When determining the Account Value on a day more than 30 days
prior to a Fixed Allocation's Maturity Date, the Account Value may include any
Market Value Adjustment that would apply to a Fixed Allocation (if withdrawn
or transferred) on that day.
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?
The Surrender Value of your Annuity is the value available to you on any day
during the accumulation period. The Surrender Value is defined under "Glossary
of Terms" above.
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?
When you allocate Account Value to a Sub-account, you are purchasing units of
the Sub-account. Each Sub-account invests exclusively in shares of an
underlying Portfolio. The value of the Units fluctuates with the market
fluctuations of the Portfolios. The value of the Units also reflects the daily
accrual for the Insurance Charge, the Distribution Charge (if applicable), and
if you elected one or more optional benefits whose annual charge is deducted
daily, the additional charge made for such benefits. There may be several
different Unit Prices for each Sub-account to reflect the Insurance Charge,
any Distribution Charge and the charges for any optional benefits. The Unit
Price for the Units you purchase will be based on the total charges for the
benefits that apply to your Annuity. See the section entitled "What Happens to
My Units When There is a Change in Daily Asset-Based Charges?" for a detailed
discussion of how Units are purchased and redeemed to reflect changes in the
daily charges that apply to your Annuity.
Each Valuation Day, we determine the price for a Unit of each Sub-account,
called the "Unit Price." The Unit Price is used for determining the value of
transactions involving Units of the Sub-accounts. We determine the number of
Units involved in any transaction by dividing the dollar value of the
transaction by the Unit Price of the Sub-account as of the Valuation Day.
Example
Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the
allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the
Sub-account. Assume that later, you wish to transfer $3,000 of your Account
Value out of that Sub-account and into another Sub-account. On the Valuation
Day you request the transfer, the Unit Price of the original Sub-account has
increased to $16.79 and the Unit Price of the new Sub-account is $17.83. 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).
Generally, 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-Valuation 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.
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.
93
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) Valuation Days after we receive all
of our requirements at our office to issue an Annuity. If we do not have all
the required information to allow us to issue your Annuity, we may retain the
Purchase Payment while we try to reach you or your representative to obtain
all of our requirements. If we are unable to obtain all of our required
information within five (5) Valuation 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
any associated Credits with respect to XT6) and issue an Annuity within two
(2) Valuation Days. With respect to both your initial Purchase Payment and any
subsequent Purchase Payment that is pending investment in our separate
account, we may hold the amount temporarily in our general account and may
earn interest on such amount. You will not be credited with interest during
that period.
Additional Purchase Payments: We will apply any additional Purchase Payments
(and any associated Credit with respect to XT6) on the Valuation Day that we
receive the Purchase Payment at our office with satisfactory allocation
instructions.
Scheduled Transactions: Scheduled transactions include transfers made in
connection with dollar cost averaging, the asset allocation program,
auto-rebalancing, systematic withdrawals, systematic investments, required
minimum distributions, substantially equal periodic payments under
Section 72(t) of the Code, or annuity payments. Scheduled transactions are
processed and valued as of the date they are scheduled, unless the scheduled
day is not a Valuation Day. In that case, the transaction will be processed
and valued on the next Valuation Day, unless (with respect to required minimum
distributions, substantially equal periodic payments under Section 72(t) of
the Code, systematic withdrawals and annuity payments only), 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
transfer request involving the ProFunds VP Sub-accounts must be received by us
no later than one hour prior to any announced closing of the applicable
securities exchange (generally, 3:00 p.m. Eastern time) to be processed on the
current Valuation Day. The "cut-off" time for such financial transactions
involving a ProFunds VP Sub-account will be extended to /1//\\2 \\hour prior
to any announced closing (generally, 3:30 p.m. Eastern time) for transactions
submitted electronically through American Skandia's Internet website
(www.americans-kandia.prudential.com). You cannot request a transaction
involving the 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 Applicable to ASAP III and XT6: At the end of the Period
during which the Distribution Charge applies, your Annuity will become subject
to a different daily asset-based charge. We will process a transaction where
your Account Value allocated to the Sub-accounts will be used to purchase new
Units of the Sub-accounts that reflect the Insurance Charge (and the charge
for any optional benefits you have elected) but not the Distribution Charge.
The number of Units attributed to your Annuity will be decreased and the Unit
Price of each unit of the Sub-accounts in which you invested will be
increased. The adjustment in the number of Units and Unit Price will not
affect your Account Value. Beginning on that date, your Account Value will be
determined based on the change in the value of Units that reflect the
Insurance Charge and any other optional benefits that you have elected.
Termination of Optional Benefits: Except for the Guaranteed Minimum Income
Benefit, the "Combination 5% Roll-up and Highest Anniversary Value Death
Benefit" and the Highest Daily Value Death Benefit, which generally 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).
94
TAX CONSIDERATIONS
The tax considerations associated with each Annuity vary depending on whether
the contract is (i) owned by an individual and not associated with a
tax-favored retirement plan (including contracts held by a non-natural person,
such as a trust acting as an agent for a natural person), or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. The discussion
includes a description of certain spousal rights under the contract and under
tax-qualified plans. Our administration of such spousal rights and related tax
reporting accords with our understanding of the Defense of Marriage Act (which
defines a "marriage" as a legal union between a man and a woman and a "spouse"
as a person of the opposite sex). The information provided is not intended as
tax advice. You should consult with a qualified tax advisor for complete
information and advice. References to Purchase Payments below relates to your
cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
Each Annuity may also be purchased as a non-qualified annuity by a 401(a)
trust or custodial IRA or Roth IRA account, which can hold other permissible
assets other than the annuity. The terms and administration of the trust or
custodial account in accordance with the laws and regulations for 401(a)
plans, IRAs or Roth IRAs, as applicable, are the responsibility of the
applicable trustee or custodian.
Contracts Owned by Individuals (Not Associated with Tax-Favored Retirement
Plans)
Taxes Payable by You
We believe each Annuity is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under
the contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Charges for investment advisory fees that are taken from the contract are
treated as a partial withdrawal from the contract and will be reported as such
to the contract owner.
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.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of Purchase Payments until all Purchase Payments have been returned.
After all Purchase Payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefit programs or as a
systematic payment are taxed under these rules.
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.
95
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.
Tax Penalty on Withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
. the amount is paid on or after you reach age 59 1/2 or die;
. the amount received is attributable to your becoming disabled;
. generally the amount paid or received is in the form of substantially
equal payments not less frequently than annually (Please note that
substantially equal payments must continue until the later of reaching
age 59 1/2 or 5 years. Modification of payments during that time period
will result in retroactive application of the 10% tax penalty.); or
. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Special Rules in Relation to Tax-Free Exchanges Under Section 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If an Annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to
August 14, 1982, then any Purchase Payments made to the original contract
prior to August 14, 1982 will be treated as made to the new contract prior to
that date. (See Federal Tax Status section in the Statement of Additional
Information.)
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as
ineligible for this favorable partial 1035 exchange treatment. We do not know
what transactions may be considered abusive. For example we do not know how
the IRS may view early withdrawals or annuitizations after a partial exchange.
In addition, it is unclear how the IRS will treat a partial exchange from a
life insurance, endowment, or annuity contract into an immediate annuity. As
of the date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting
and withholding agent, believe that we would be expected to deem the
transaction to be abusive. However, some insurance companies may not recognize
these partial surrenders as tax-free exchanges and may report them as taxable
distributions to the extent of any gain distributed as well as subjecting the
taxable portion of the distribution to the 10% tax penalty. We strongly urge
you to discuss any transaction of this type with your tax advisor before
proceeding with the transaction.
Taxes Payable by Beneficiaries
The Death Benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the Death
Benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum Death
Benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the Death Benefit payment
options.
. Choice 1: the beneficiary is taxed on earnings in the contract.
. Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
. Choice 3: the beneficiary is taxed on each payment (part will be treated
as earnings and part as return of Purchase Payments).
Considerations for Contingent Annuitants: There may be adverse tax
consequences if a Contingent Annuitant succeeds an Annuitant when an Annuity
is owned by a trust that is neither tax exempt nor qualifies for preferred
treatment under certain sections of the Code. In general, the Code is designed
to prevent indefinite deferral of tax. Continuing the benefit of tax deferral
by naming one or more Contingent Annuitants when an Annuity is owned by a
non-qualified trust might be deemed an attempt to extend the tax deferral for
an indefinite period. Therefore, adverse tax treatment may depend on the terms
of the trust, who is named as Contingent Annuitant, as well as the particular
facts and circumstances. You should consult your tax advisor before naming a
Contingent Annuitant if you expect to use an Annuity in such a fashion.
96
Reporting and Withholding on Distributions
Taxable amounts distributed from an annuity contract are subject to federal
and state income tax reporting and withholding. In general, we will withhold
federal income tax from the taxable portion of such distribution based on the
type of distribution. In the case of an annuity or similar periodic payment,
we will withhold as if you are a married individual with 3 exemptions unless
you designate a different withholding status. In the case of 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.
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.
Where a contract is issued to a trust, and such trust is characterized as a
grantor trust under the Internal Revenue Code, such contract shall not be
considered to be held by a non-natural person and will be subject to the tax
reporting and withholding requirements for contracts not held by tax favored
plans.
Annuity Qualification
Diversification and Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an Annuity must be diversified, according to certain rules
under the Internal Revenue Code.
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, where applicable. We believe
the portfolios underlying the variable investment options of the Annuities
meet these diversification requirements.
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 reserve the right
to take any action, including modifications to your Annuity or the investment
options, required to comply with such guidelines if promulgated. Any such
changes will apply uniformly to affected owners and will be made with such
notice to affected owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Annuities Owned by Individuals (Not
Associated with Tax-Favored Plans). 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 five (5) years after the date of death, or as periodic
payments over a period not extending beyond the life or life expectancy of
such designated beneficiary (provided such payments begin within one year of
your death). 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.
97
Additionally, if the Annuity is payable to (or for the benefit of) your
surviving spouse, that portion of the contract may be continued with your
spouse as the owner.
Changes in Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your Annuity qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
Additional Information
You should refer to the Statement of Additional Information if:
.. Your contract was issued in exchange for a contract containing Purchase
Payments made before August 14, 1982.
.. You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
Contracts Held by Tax-Favored Plans
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, an Annuity may be purchased for use in connection with individual
retirement accounts and annuities (IRAs) which are subject to Sections 408(a)
and 408(b) of the Code and Roth IRAs under Section 408A of the Code. In
addition, each Annuity may be purchased for use in connection with a corporate
Pension or Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans
(also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered
Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities
or TDAs), and Section 457 plans (subject to 457 of the Code). This description
assumes that you have satisfied the requirements for eligibility for these
products.
Each Annuity may also be purchased as a non-qualified annuity by a 401(a)
trust or custodial IRA or Roth IRA account, which can hold other permissible
assets other than the annuity. The terms and administration of the trust or
custodial account in accordance with the laws and regulations for 401(a)
plans, IRAs or Roth IRAs, as applicable, are the responsibility of the
applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in annuity contracts.
This means that when a tax favored plan invests in an annuity contract, it
generally does not result in any additional tax benefits (such as income tax
deferral and income tax free transfers).
Types of Tax-Favored Plans
IRAs. If you buy an Annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" contains
information about eligibility, contribution limits, tax particulars, and other
IRA information. In addition to this information (some of which is summarized
below), the IRS requires that you have a "free look" after making an initial
contribution to the contract. During this time, you can cancel the Annuity by
notifying us in writing, and we will refund all of the Purchase Payments under
the Annuity (or, if provided by applicable state law, the amount credited
under the Annuity, if greater), less any applicable federal and state income
tax withholding.
Contributions Limits/Rollovers. Because of the way each Annuity is designed,
you may purchase an Annuity for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or as a transfer from another IRA, as
a current contribution in the case of ASAP III, or if you are age 50 or older
by making a single contribution consisting of your IRA contributions and
catch-up contributions attributable to the prior year and the current year
from January 1 to April 15 of the current year in the case of XT6 and APEX II.
For 2007, the contribution limit is $4,000; increasing to $5,000 in 2008.
After 2008 the contribution amount will be indexed for inflation. The tax law
also provides for a catch-up provision for individuals who are age 50 and
above, permitting them to contribute an additional $1,000 each year.
The "rollover" rules under the Code are fairly technical; however, an
individual (or his or her surviving spouse) may generally "roll over" certain
distributions from tax favored retirement plans (either directly or within 60
days from the date of these distributions) if he or she meets the requirements
for distribution. Once you buy an Annuity, you can make regular IRA
contributions under the Annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA.
Required Provisions. Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
.. You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a decree
of divorce);
.. Your rights as owner are non-forfeitable;
.. You cannot sell, assign or pledge the contract;
98
.. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which does
not include any rollover amounts);
.. The date on which required minimum distributions must begin cannot be later
than April 1st of the calendar year after the calendar year you turn age
70 1/2; and
.. Death and annuity payments must meet "minimum distribution requirements"
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier. In addition to this normal tax liability, you may
also be liable for the following, depending on your actions:
.. A 10% "early distribution penalty" described below;
.. Liability for "prohibited transactions" if you, for example, borrow against
the value of an IRA; or
.. Failure to take a minimum distribution also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
.. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $45,000 in 2007 ($44,000 in 2006) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as "compensation" for these purposes). However,
for these purposes, compensation in excess of certain limits established by
the IRS will not be considered. In 2007, this limit is $225,000 ($220,000
for 2006);
.. SEPs must satisfy certain participation and nondiscrimination requirements
not generally applicable to IRAs; and
.. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $15,500 in 2007 with the employer making
these contributions to the SEP. However, no new "salary reduction" or
"SARSEPs" can be established after 1996. Individuals participating in a
SARSEP who are age 50 or above by the end of the year will be permitted to
contribute an additional $5,000 in 2007. Thereafter, the amount is indexed
for inflation. These Annuities are not available for SARSEPs.
You will also be provided the same information, and have the same "free look"
period, as you would have if you purchased the contract for a standard IRA.
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. Like standard IRAs, income within a Roth IRA accumulates
tax-free, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
. Contributions to a Roth IRA cannot be deducted from your gross income;
. "Qualified distributions" from a Roth IRA are excludable from gross
income. A "qualified distribution" is a distribution that satisfies two
requirements: (1) the distribution must be made (a) after the owner of
the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the
owner's disability; or (d) for a qualified first time homebuyer
distribution within the meaning of Section 72(t)(2)(F) of the Code; and
(2) the distribution must be made in the year that is at least five tax
years after the first year for which a contribution was made to any Roth
IRA established for the owner or five years after a rollover, transfer,
or conversion was made from a traditional IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will
be treated as made first from contributions and then from earnings, and
earnings will be taxed generally in the same manner as distributions from
a traditional IRA.
. If eligible (including meeting income limitations and earnings
requirements), you may make contributions to a Roth IRA after attaining
age 70 1/2, and distributions are not required to begin upon attaining
such age or at any time thereafter.
Because of the way each Annuity is designed, if you meet certain income
limitations you may purchase an Annuity for a Roth IRA, as a current
contribution in the case of ASAP III, or if you are age 50 or older by making
a single contribution consisting of your Roth IRA contributions and catch-up
contributions attributable to the prior year and the current year from
January 1 to April 15 of the current year in the case of XT6 and APEX II. The
Code permits persons who meet certain income limitations (generally, adjusted
gross income under $100,000), who are not married filing a separate return and
who receive certain qualifying distributions from such non-Roth IRAs, to
directly rollover or make, within 60 days, a "rollover" of all or any part of
the amount of such distribution to a Roth IRA which they establish. Beginning
January 2008, an individual receiving an eligible rollover distribution from a
Qualified plan can directly roll over contributions to a Roth IRA, subject to
the same income limits. This conversion triggers current taxation (but is not
subject to a 10% early distribution penalty). Once an Annuity has been
purchased, regular Roth IRA contributions will be accepted to the extent
permitted by law. As of January 1, 2006, an individual receiving an eligible
rollover distribution from a designated Roth account under an employer plan
may roll over the distribution to a Roth IRA even if the individual is not
eligible to make regular or conversion contributions to a Roth IRA. If you are
considering rolling over funds from your Roth account under an employer plan,
please contact your Financial Professional prior to purchase to confirm
whether such rollovers are being accepted.
TDAs. You may own a TDA generally if you are either an employer or employee of
a tax-exempt organization (as defined under Code Section 501(c)(3)) or a
public educational organization, and you may make contributions to a TDA so
long as the employee's
99
rights to the annuity are nonforfeitable. Contributions to a TDA, and any
earnings, are not taxable until distribution. You may also make contributions
to a TDA under a salary reduction agreement, generally up to a maximum of
$15,500 in 2007. Individuals participating in a TDA who are age 50 or above by
the end of the year will be permitted to contribute an additional $5,000 in
2007. This 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, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1/st /of the calendar year after the calendar year you turn age 70 1/2
or retire, whichever is later.
These distribution limits do not apply either to transfers or exchanges of
investments under the contract, or to any "direct transfer" of your interest
in the contract to another TDA or to a mutual fund "custodial account"
described under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Required Minimum Distributions and Payment Options
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that generally
payments must start by April 1 of the year after the year you reach age 70 1/2
and must be made for each year thereafter. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount of the payment must at least equal the minimum
required under the IRS rules. Several choices are available for calculating
the minimum amount. More information on the mechanics of this calculation is
available on request. Please contact us at a reasonable time before the IRS
deadline so that a timely distribution is made. Please note that there is a
50% tax penalty on the amount of any minimum distribution not made in a timely
manner.
Effective in 2006, in accordance with recent changes in laws and regulations,
required minimum distributions will be calculated based on the sum of the
Account 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 Account Value only, which may in turn result in
an earlier (but not before the required beginning date) distribution of
amounts under the Annuity and an increased amount of taxable income
distributed to the Annuity owner, and a reduction of death benefits and the
benefits of any optional riders.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for an Annuity without either beginning annuity
payments or surrendering the Annuity. We will distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during
the year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you.
If you own more than one IRA, you can choose to satisfy your minimum
distribution requirement for each of your IRAs by withdrawing that amount from
any of your IRAs. If you inherit more than one Roth IRA from the same owner,
similar rules apply.
Required Distributions Upon Your Death for Qualified Contracts Held by
Tax-Favored Plans
Upon your death under an IRA, 403(b) or other "qualified investment", the
designated beneficiary may generally elect to continue the contract and
receive required minimum distributions under the contract instead of receiving
the death benefit in a single payment. The available payment options will
depend on whether you die before the date required minimum distributions under
the Code were required to begin, whether you have named a designated
beneficiary and whether that beneficiary is your surviving spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life expectancy of the designated beneficiary (as
long as payments begin by December 31/st/ of the year following the year
of death). However, if your surviving spouse is the beneficiary, the
death benefit can be paid out over the life expectancy of your spouse
with such payments beginning no later than December 31/st/ of the year
following the year of death or December 31/st/ of the year in which you
would have reached age 70 1/2, which ever is later. Additionally, 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.
100
. If you die before a designated beneficiary is named and before the date
required minimum distributions must begin under the Code, the death
benefit must be paid out by December 31/st/ of the year including the
five year anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following
the year of death, such contract is deemed to have no designated
beneficiary,
. If you die before a designated beneficiary is named and after the date
required 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. For contracts where multiple beneficiaries have been named and at
least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary,
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the minimum distribution rules, are
subject to tax. You may wish to consult a professional tax advisor for tax
advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
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 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.
101
Information about sales representatives and commissions may be found in the
sections of this Prospectus addressing distribution of the Annuities.
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
Spousal Consent Rules for Retirement Plans - Qualified Contracts
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a Death Benefit to your spouse if you are married and die before you
begin receiving your benefit. This benefit must be available in the form of an
annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
beneficiaries, you may elect to have a beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election
and waives his or her right to receive the QPSA. If your spouse consents to
the alternate beneficiary, your spouse will receive no benefits from the plan
upon your death. Any QPSA waiver prior to your attaining age 35 will become
null and void on the first day of the calendar year in which you attain age
35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated beneficiary.
Additional Information
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the "IRA Disclosure Statement" or "Roth IRA Disclosure
Statement", as applicable.
102
GENERAL INFORMATION
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law
or regulation to you through our Internet Website at
www.americanskandia.prudential.com or any other electronic means, including
diskettes or CD ROMs. We send a confirmation statement to you each time a
transaction is made affecting Account Value, such as making additional
Purchase Payments, transfers, exchanges or withdrawals. We may also send
quarterly statements detailing the activity affecting your Annuity during the
calendar quarter. We may confirm regularly scheduled transactions, including,
but not limited to, the Annual Maintenance Fee, Systematic Withdrawals
(including 72(t) payments and required minimum distributions), electronic
funds transfer, Dollar Cost Averaging, and static rebalancing, in quarterly
statements instead of confirming them immediately. You should review the
information in these statements carefully. You may request additional reports.
We reserve the right to charge up to $50 for each such additional report. We
may also send an annual report and a semi-annual report containing applicable
financial statements for the Separate Account and the Portfolios, as of
December 31 and June 30, respectively, to Owners or, with your prior consent,
make such documents available electronically through our Internet Website or
other electronic means.
WHO IS AMERICAN SKANDIA?
American Skandia Life Assurance Corporation, a Prudential Financial Company,
("American Skandia") is a stock life insurance company domiciled in
Connecticut with licenses in all 50 states, the District of Columbia and
Puerto Rico. American Skandia is a wholly-owned subsidiary of Prudential
Annuities, Inc. (formerly, American Skandia, Inc.), whose ultimate parent is
Prudential Financial, Inc. American Skandia markets its products to
broker-dealers and financial planners through an internal field marketing
staff. In addition, American Skandia markets through and in conjunction with
financial institutions such as banks that are permitted directly, or through
affiliates, to sell annuities.
American Skandia offers a wide array of annuities, including (1) deferred
variable annuities that are registered with the SEC, including fixed interest
rate annuities that are offered as a companion to certain of our variable
annuities and are registered because of their market value adjustment feature
and (2) fixed annuities that are not registered with the SEC. In addition,
American Skandia has in force a relatively small block of variable life
insurance policies and immediate variable annuities, but it no longer actively
sells such policies.
Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of Prudential
Annuities, Inc., which is the parent of American Skandia, was purchased by
Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey
insurance holding company whose subsidiary companies serve individual and
institutional customers worldwide and include The Prudential Insurance Company
of America, one of the largest life insurance companies in the U.S. These
companies offer a variety of products and services, including life insurance,
mutual funds, annuities, pension and retirement related services and
administration, asset management, securities brokerage, banking and trust
services, real estate brokerage franchises, and relocation services. Under the
terms of the above-referenced acquisition, Prudential Financial, Inc. may not
use the "American Skandia" name in any context after May 1, 2008. Therefore,
Prudential Financial has begun a "rebranding" project that involves renaming
certain American Skandia legal entities. As pertinent to this annuity: 1)
American Skandia Life Assurance Corporation will be renamed Prudential
Annuities Life Assurance Corporation; 2) American Skandia Marketing, Inc. will
be renamed Prudential Annuities Distributors, Inc.; 3) American Skandia
Investment Services, Inc. has been renamed AST Investment Services, Inc.; and
4) American Skandia Trust has been renamed Advanced Series Trust. These name
changes will not impact the manner in which customers do business with
Prudential.
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.
103
Separate Account B
During the accumulation period, the assets supporting obligations based on
allocations to the Sub-accounts are held in Sub-accounts of American Skandia
Life Assurance Corporation Variable Account B, also referred to as "Separate
Account B".
Separate Account B was established by us pursuant to Connecticut law on
November 25, 1987. Separate Account B also holds assets of other annuities
issued by us with values and benefits that vary according to the investment
performance of Separate Account B.
Separate Account B consists of multiple Sub-accounts. Each Sub-account invests
only in a single mutual fund or mutual fund portfolio. The name of each
Sub-account generally corresponds to the name of the underlying Portfolio.
Each Sub-account in Separate Account B may have several different Unit Prices
to reflect the Insurance Charge, Distribution Charge (when applicable) and the
charges for any optional benefits that are offered under the Annuities issued
by us through Separate Account B. Separate Account B is registered with the
SEC under the Investment Company Act of 1940 ("Investment Company Act") as a
unit investment trust, which is a type of investment company. The SEC does not
supervise investment policies, management or practices of Separate Account B.
We reserve the right to make changes to the Sub-accounts available under the
Annuities as we determine appropriate. We may offer new Sub-accounts,
eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may
also close Sub-accounts to additional Purchase Payments on existing Annuities
or close Sub-accounts for Annuities purchased on or after specified dates. We
may also substitute an underlying mutual fund or portfolio of an underlying
mutual fund for another underlying mutual fund or portfolio of an underlying
mutual fund, subject to our receipt of any exemptive relief that we are
required to obtain under the Investment Company Act. We will notify Owners of
changes we make to the Sub-accounts available under their Annuity.
Values and benefits based on allocations to the Sub-accounts will vary with
the investment performance of the underlying mutual funds or fund portfolios,
as applicable. We do not guarantee the investment results of any Sub-account.
Your Account Value allocated to the Sub-accounts may increase or decrease. You
bear the entire investment risk. There is no assurance that the Account Value
of your Annuity will equal or be greater than the total of the Purchase
Payments you make to us.
Separate Account D
During the accumulation period, assets supporting our obligations based on
Fixed Allocations are held in American Skandia Life Assurance Corporation
Separate Account D, also referred to as "Separate Account D". Such obligations
are based on the fixed interest rates we credit to Fixed Allocations and the
terms of the Annuities. These obligations do not depend on the investment
performance of the assets in Separate Account D. Separate Account D was
established by us pursuant to Connecticut law.
There are no units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment
gain or loss on assets maintained in Separate Account D. Such gain or loss
accrues solely to us. We retain the risk that the value of the assets in
Separate Account D may drop below the reserves and other liabilities we must
maintain. Should the value of the assets in Separate Account D drop below the
reserve and other liabilities we must maintain in relation to the annuities
supported by such assets, we will transfer assets from our general account to
Separate Account D to make up the difference. We have the right to transfer to
our general account any assets of Separate Account D in excess of such
reserves and other liabilities. We maintain assets in Separate Account D
supporting a number of annuities we offer.
We may employ investment managers to manage the assets maintained in Separate
Account D. Each manager we employ is responsible for investment management of
a different portion of Separate Account D. From time to time additional
investment managers may be employed or investment managers may cease being
employed. We are under no obligation to employ or continue to employ any
investment manager(s) and have sole discretion over the investment managers we
retain.
We are not obligated to invest according to specific guidelines or strategies
except as may be required by Connecticut and other state insurance laws.
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
104
not receive voting instructions in relation to certain shares, we will vote
those shares in the same manner and proportion as the shares for which we have
received instructions. This voting procedure is sometimes referred to as
"mirror voting" because, as indicated in the immediately preceding sentence,
we mirror the votes that are actually cast, rather than decide on our own how
to vote. In addition, because all the shares of a given mutual fund held
within our separate account are legally owned by us, we intend to vote all of
such shares when that underlying fund seeks a vote of its shareholders. As
such, all such shares will be counted towards whether there is a quorum at the
underlying fund's shareholder meeting and towards the ultimate outcome of the
vote. Thus, under "mirror voting," it is possible that the votes of a small
percentage of contractholders who actually vote will determine the ultimate
outcome. We will furnish those Owners who have Account Value allocated to a
Sub-account whose underlying mutual fund portfolio has requested a "proxy"
vote with proxy materials and the necessary forms to provide us with their
voting instructions. Generally, you will be asked to provide instructions for
us to vote on matters such as changes in a fundamental investment strategy,
adoption of a new investment advisory agreement, or matters relating to the
structure of the underlying mutual fund that require a vote of shareholders.
Advanced Series Trust (the "Trust") has obtained an exemption from the
Securities and Exchange Commission that permits its co-investment advisers,
AST Investment Services, Inc. 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 AST Investment Services,
Inc., 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, or our affiliates may provide
administrative and support services to the Portfolios for which it receives a
fee of up to 0.75% (currently) of the average assets allocated to the
Portfolios under each Annuity from the investment adviser, distributor and/or
the fund. These agreements may be different for each underlying mutual fund
whose portfolios are offered as Sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying Portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the Annuity. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying Portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributor and the amounts of such payments may vary between
and among each adviser, sub-adviser and distributor depending on their
respective participation.
During 2006, with regard to amounts that were paid under these kinds of
arrangements, the amounts ranged from approximately $53 to approximately
$190,514. These amounts may have been paid to one or more
Prudential-affiliated insurers issuing individual variable annuities.
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of
Prudential Annuities, 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
Advanced Series Trust.
105
ASM's principal business address is One Corporate Drive, Shelton, Connecticut
06484. ASM is registered as broker-dealer under the Securities Exchange Act of
1934 ("Exchange Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD").
Each Annuity is offered on a continuous basis. ASM enters into distribution
agreements with broker-dealers who are registered under the Exchange Act and
with entities that may offer the Annuities but are exempt from registration
("firms"). Applications for each Annuity are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, ASM may
offer the Annuities directly to potential purchasers.
Commissions are paid to firms on sales of the Annuities according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her firm. Commissions are
generally based on a percentage of Purchase Payments made, up to a maximum of
7.0% for ASAP III, 6.0% for XT6, 5.5% for APEX II and 2.0% for ASL II.
Alternative compensation schedules are available that provide a lower initial
commission plus ongoing annual compensation based on all or a portion of the
Account Value. We may also provide compensation to the distributing firm for
providing ongoing service to you in relation to your Annuity. Commissions and
other compensation paid in relation to your Annuity do not result in any
additional charge to you or to the Separate Account.
In addition, in an effort to promote the sale of our products (which may
include the placement of American Skandia and/or the Annuities on a preferred
or recommended company or product list and/or access to the firm's registered
representatives), we or ASM may enter into compensation arrangements with
certain broker-dealer firms with respect to certain or all registered
representatives of such firms under which such firms may receive separate
compensation or reimbursement for, among other things, training of sales
personnel and/or marketing and/or administrative services and/or other
services they provide. These services may include, but are not limited to:
educating customers of the firm on the Annuitys' features; conducting due
diligence and analysis, providing office access, operations and systems
support; holding seminars intended to educate the firm's registered
representatives and make them more knowledgeable about the Annuities;
providing a dedicated marketing coordinator; providing priority sales desk
support; and providing expedited marketing compliance approval. To the extent
permitted by NASD rules and other applicable laws and regulations, ASM may pay
or allow other promotional incentives or payments in the form of cash or
non-cash compensation. These arrangements may not be offered to all firms and
the terms of such arrangements may differ between firms. A list of the firms
to whom American Skandia pays an amount of greater than $10,000 under these
arrangements is provided in the Statement of Additional Information, which is
available upon request. You should note that firms and individual registered
representatives and branch managers within some firms participating in one of
these compensation arrangements might receive greater compensation for selling
the Annuities than for selling a different annuity that is not eligible for
these compensation arrangements. While compensation is generally taken into
account as an expense in considering the charges applicable to an annuity
product, any such compensation will be paid by us or ASM and will not result
in any additional charge to you. Overall compensation paid to the distributing
firm does not exceed, based on actuarial assumptions, 8.5% of the total
Purchase Payments made. Your registered representative can provide you with
more information about the compensation arrangements that apply upon the sale
of the Annuity. Further information about the firms that are part of these
compensation arrangements appears in the Statement of Additional Information,
which is available without charge upon request.
On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia") and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. Prudential Financial has a
38% ownership interest in the joint venture, while Wachovia owns the remaining
62%.
Wachovia and Wachovia Securities are key distribution partners for certain
products of Prudential Financial affiliates, including mutual funds and
individual annuities that are distributed through their financial advisors,
bank channel and independent channel. In addition, Prudential Financial is a
service provider to the managed account platform and certain wrap-fee programs
offered by Wachovia Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
American Skandia publishes annual and quarterly reports that are filed with
the SEC. These reports contain financial information about American Skandia
that is annually audited by an independent registered public accounting firm.
American Skandia's annual report for the year ended December 31, 2006,
together with subsequent periodic reports that American Skandia files with the
SEC, are incorporated by reference into this prospectus. You can obtain
copies, at no cost, of any and all of this information, including the American
Skandia annual report that is not ordinarily mailed to contract owners, the
more current reports and any subsequently filed documents at no cost by
contacting us at American Skandia - Variable Annuities; P.O. Box 7960,
Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for
American Skandia is 33-44202. You may read and copy any filings made by
American Skandia with the SEC at the SEC's Public Reference Room at 100 F
Street, N.E. Washington, D.C. 20549. You can obtain information on the
operation of the Public Reference Room by calling (202) 551-8090. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
106
FINANCIAL STATEMENTS
The financial statements of the separate account and American Skandia Life
Assurance Corporation are included in the Statement of Additional Information.
HOW TO CONTACT US
You can contact us by:
. calling our Customer Service Team at 1-800-752-6342 during our normal
business hours, Monday through Friday, or Skandia's telephone automated
response system at 1-800-766-4530.
. writing to us via regular mail at American Skandia - Variable Annuities,
P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American
Skandia - Variable Annuities, 2101 Welsh Road, Dresher, PA 19025. NOTE:
Failure to send mail to the proper address may result in a delay in our
receiving and processing your request.
. accessing information about your Annuity through our Internet Website at
www.americanskandia.prudential.com.
You can obtain account information by calling our automated response system
and at www.americanskandia.prudential.com, our Internet Website. Our Customer
Service representatives are also available during business hours to provide
you with information about your account. You can request certain transactions
through our telephone voice response system, our Internet Website or through a
customer service representative. You can provide authorization for a third
party, including your attorney-in-fact acting pursuant to a power of attorney
or your Financial Professional, to access your account information and perform
certain transactions on your account. You will need to complete a form
provided by us which identifies those transactions that you wish to authorize
via telephonic and electronic means and whether you wish to authorize a third
party to perform any such transactions. Please note that unless you tell us
otherwise, we deem that all transactions that are directed by your Financial
Professional with respect to your Annuity have been authorized by you. We
require that you or your representative provide proper identification before
performing transactions over the telephone or through our Internet Website.
This may include a Personal Identification Number (PIN) that will be provided
to you upon issue of your Annuity or you may establish or change your PIN by
calling our automated response system and at
www.americanskandia.prudential.com, our Internet Website. Any third party that
you authorize to perform financial transactions on your account will be
assigned a PIN for your account.
Transactions requested via telephone are recorded. To the extent permitted by
law, we will not be responsible for any claims, loss, liability or expense in
connection with a transaction requested by telephone or other electronic means
if we acted on such transaction instructions after following reasonable
procedures to identify those persons authorized to perform transactions on
your Annuity using verification methods which may include a request for your
Social Security number, PIN or other form of electronic identification. We may
be liable for losses due to unauthorized or fraudulent instructions if we did
not follow such procedures.
American Skandia does not guarantee access to telephonic, facsimile, Internet
or any other electronic information or that we will be able to accept
transaction instructions via such means at all times. Regular and/or express
mail will be the only means by which we will accept transaction instructions
when telephonic, facsimile, Internet or any other electronic means are
unavailable or delayed. American Skandia reserves the right to limit, restrict
or terminate telephonic, facsimile, Internet or any other electronic
transaction privileges at any time.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
LEGAL PROCEEDINGS
American Skandia is subject to legal and regulatory actions in the ordinary
course of its businesses, including class action lawsuits. American Skandia's
pending legal and regulatory actions include proceedings specific to the
company and proceedings generally applicable to business practices in the
industry in which we operate. American Skandia is subject to class action
lawsuits and other litigation alleging, among other things, that we made
improper or inadequate disclosures in connection with the sale of annuity
products or charged excessive or impermissible fees on these products,
recommended unsuitable products to customers, mishandled customer accounts or
breached fiduciary duties to customers. American Skandia also is subject to
litigation arising out of its general business activities, such as its
investments, contracts, leases and labor and employment relationships,
including claims of discrimination and harassment, and could be exposed to
claims or litigation concerning certain business or process patents. In some
of American Skandia's pending legal and regulatory actions, parties are
seeking large and/or indeterminate amounts, including punitive or exemplary
damages. Finally, American Skandia is periodically subject to examinations and
audits by federal and state regulators, and also on occasion, receives and
addresses complaints from customers. The following is a summary of certain
pending proceedings.
107
American Skandia commenced a remediation program to correct errors in the
administration of approximately 11,000 annuity contracts issued by the
company. The owners of these contracts did not receive notification that the
contracts were approaching or past their designated annuitization date or
default annuitization date (both dates referred to as the "contractual annuity
date") and the contracts were not annuitized at their contractual annuity
dates. Some of these contracts also were affected by data integrity errors
resulting in incorrect contractual annuity dates. The lack of notice and the
data integrity errors, as reflected on the annuities administrative system,
all occurred before the acquisition of American Skandia by Prudential
Financial, Inc. The remediation and administrative costs of the remediation
program are subject to the indemnification provisions of the agreement
pursuant to which Prudential Financial, Inc. acquired American Skandia (the
"Acquisition Agreement") from Skandia Insurance Company Ltd. (publ).
Commencing in 2003, American Skandia received formal requests for information
from the SEC and the New York Attorney General ("NYAG") relating to market
timing in variable annuities by American Skandia and certain affiliated
companies. In connection with these investigations, with the approval of
Skandia Insurance Company Ltd. (publ), an offer was made by American Skandia
to the authorities investigating its companies, the SEC and NYAG, to settle
these matters by paying restitution and a civil penalty of $95 million in the
aggregate. While not assured, American Skandia believes these discussions are
likely to lead to settlements with these authorities. Any regulatory
settlement involving American Skandia and certain affiliates would be subject
to the indemnification provisions of the Acquisition Agreement. If achieved,
settlement of the matters relating to American Skandia and certain affiliates
also could involve continuing monitoring, changes to and/or supervision of
business practices, findings that may adversely affect existing or cause
additional litigation, adverse publicity and other adverse impacts to American
Skandia's businesses.
During the third quarter of 2004, American Skandia identified a
system-generated calculation error in its annuity contract administration
system that existed prior to the acquisition of American Skandia by Prudential
Financial, Inc. This error related to the calculation of amounts due to
customers for certain transactions subject to a market value adjustment upon
the surrender or transfer of monies out of their annuity contract's fixed
allocation options. The error resulted in an underpayment to policyholders, as
well as additional anticipated costs to American Skandia associated with
remediation, breakage and other costs. Recently, American Skandia retained a
consultant to assist it with the systems modifications needed to implement the
remediation plan currently in place. American Skandia has advised Skandia
Insurance Company Ltd. (publ) that a portion of the remediation and related
administrative costs are subject to the indemnification provisions of the
Acquisition Agreement.
American Skandia's litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, the outcomes cannot be
predicted. It is possible that the results of operations or the cash flow of
American Skandia in a particular quarterly or annual period could be
materially affected by an ultimate unfavorable resolution of pending
litigation and regulatory matters depending, in part, upon the results of
operations or cash flow for such period. Management believes, however, that
the ultimate outcome of all pending litigation and regulatory matters, after
consideration of applicable reserves and rights to indemnification, should not
have a material adverse effect on American Skandia's financial position.
It should be noted that the judgments, settlements and expenses associated
with many of these lawsuits, administrative and regulatory matters, and
contingencies, including certain claims described above, may, in whole or in
part, after satisfaction of certain retention requirements, fall within the
indemnification obligations of Skandia Insurance Company Ltd. (publ) to
Prudential Financial, Inc. and its subsidiaries under the terms of the
Acquisition Agreement. Those obligations of Skandia Insurance Company Ltd.
(publ) provide for indemnification of certain judgments, settlements, and
costs and expenses associated with lawsuits and other claims against American
Skandia ("matters"), and apply only to matters, or groups of related matters,
for which the costs and expenses exceed $25,000 individually. Additionally,
those obligations only apply to such otherwise indemnifiable losses that
exceed $10 million in the aggregate, subject to reduction for insurance
proceeds, certain accruals and any realized tax benefit applicable to such
amounts, and those obligations do not apply to the extent that such aggregate
exceeds $1 billion. American Skandia is in discussions with Skandia Insurance
Company Ltd. (publ) regarding the satisfaction of the $10 million deductible.
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
108
Principal Underwriter/Distributor - American Skandia Marketing, Incorporated
How the Unit Price is Determined
Additional Information on Fixed Allocations
. How We Calculate the Market Value Adjustment
Other Tax Rules
General Information
. Voting Rights
. Modification
. Deferral of Transactions
. Misstatement of Age or Sex
. Ending the Offer
Annuitization
Experts
Legal Experts
Financial Statements
109
AMERICAN SKANDIA ANNUITIES PROSPECTUS
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B
Separate Account B consists of multiple Sub-accounts that are available as
investment options for the American Skandia Annuities. Each Sub-account
invests only in a single mutual fund or mutual fund portfolio. All or some of
these Sub-accounts are available as investment options for other variable
annuities we offer pursuant to different prospectuses.
Unit Prices And Numbers Of Units: The following tables show for each Annuity:
(a) the historical Unit Price, corresponding to the Annuity features bearing
the highest and lowest combinations of asset-based charges*, as of the dates
shown, for Units in each of the Sub-accounts of Separate Account B that are
being offered pursuant to this Prospectus**; and (b) the number of Units
outstanding for each such Sub-account as of the dates shown. In the tables,
"BOP" refers to Beginning of Period and "EOP" refers to End of Period. The
period for each year begins on January 1 and ends on December 31. Since
November 18, 2002, we have been determining, on a daily basis, multiple Unit
Prices for each Sub-account of Separate Account B. We compute multiple Unit
Prices because several of our variable annuities invest in the same
Sub-accounts, and these annuities deduct varying charges that correspond to
each combination of the applicable Insurance Charge, Distribution Charge (when
applicable) and the charges for each optional benefit. Where an asset-based
charge corresponding to a particular Sub-account within a new annuity product
is identical to that in the same Sub-account within an existing annuity, the
Unit Price for the new annuity will be identical to that of the existing
annuity. In such cases, we will for reference purposes depict, in the
condensed financial information for the new annuity, Unit Prices of the
existing annuity. The year in which operations commenced in each such
Sub-account is noted in parentheses. To the extent a Sub-account commenced
operations during a particular calendar year, the Unit Price as of the end of
the period reflects only the partial year results from the commencement of
operations until December 31/st /of the applicable year. When a Unit Price was
first calculated for a particular Sub-account, we set the price of that Unit
at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance.
Unit Prices and Units are provided for Sub-accounts that commenced operations
prior to January 1, 2007.
* Note: While a unit price is reflected for the maximum combination of asset
based charges for each Sub-account, not all Sub-accounts are available if
you elect certain optional benefits.
** The remaining unit values appear in the Statement of Additional
Information, which you may obtain free of charge by sending in the request
form at the end of the Prospectus or contacting us at 1-800-752-6342.
ASAP III - Prospectus
- -----------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
With No Optional Benefits
BOP Unit Value $9.04 8.24 7.13 5.53 6.86 8.99
EOP Unit Value $10.96 9.04 8.24 7.13 5.53 6.86 8.99
Number of Units 1,002,727 1,051,557 553,542 362,254 153,652 136,976 33,897
With LT5, HDV and EBP
BOP Unit Value $10.57 - - - - -
EOP Unit Value $12.64 10.57 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair International
Growth (1997)
With No Optional Benefits
BOP Unit Value $18.90 16.42 14.32 10.35 14.1 18.68
EOP Unit Value $22.58 18.90 16.42 14.32 10.35 14.1 18.68
Number of Units 1,664,525 2,113,594 1,953,908 1,166,396 7,064 5,277 6,782
With LT5, HDV and EBP
BOP Unit Value $11.20 - - - - -
EOP Unit Value $13.19 11.20 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International Value
With No Optional Benefits
BOP Unit Value $7.87 7.01 5.86 4.43 5.41 8.08
EOP Unit Value $9.90 7.87 7.01 5.86 4.43 5.41 8.08
Number of Units 593,098 402,497 233,045 91,736 32,967 29,954 20,311
With LT5, HDV and EBP
BOP Unit Value $10.62 - - - - -
EOP Unit Value $13.19 10.62 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------------------------------
AST MFS Global Equity (1999)
With No Optional Benefits
BOP Unit Value $11.67 10.98 9.40 7.48 8.64 9.72
EOP Unit Value $14.32 11.67 10.98 9.40 7.48 8.64 9.72
Number of Units 349,460 218,705 213,485 123,219 46,925 49,536 23,151
With LT5, HDV and EBP
BOP Unit Value $10.39 - - - - -
EOP Unit Value $12.59 10.39 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $16.00 15.97 17.38 12.12 18.7 20.25
EOP Unit Value $17.80 16.00 15.97 17.38 12.12 18.7 20.25
Number of Units 111,114 126,824 107,136 145,364 6,331 2,439 978
With LT5, HDV and EBP
BOP Unit Value $10.35 - - - - -
EOP Unit Value $11.35 10.35 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth (1999)
With No Optional Benefits
BOP Unit Value $7.35 7.41 6.86 4.71 6.48 9.17
EOP Unit Value $7.82 7.35 7.41 6.86 4.71 6.48 9.17
Number of Units 344,893 267,925 293,384 258,089 44,611 41,602 35,743
With LT5, HDV and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $10.74 10.23 - - - - -
Number of Units - - - - - - -
A-1
- -------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth (2000)
With No Optional Benefits
BOP Unit Value $10.94 10.12 8.33 4.98 7.12 9.08
EOP Unit Value $12.20 10.94 10.12 8.33 4.98 7.12 9.08
Number of Units 1,165,926 1,386,930 1,169,995 859,909 25,040 10,912 243
With LT5, HDV and EBP
BOP Unit Value $10.87 - - - - -
EOP Unit Value $11.96 10.87 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $17.52 16.64 14.47 10.79 12.06 11.41
EOP Unit Value $20.77 17.52 16.64 14.47 10.79 12.06 11.41
Number of Units 1,198,255 1,484,712 1,293,786 962,965 66,744 33,608 15,339
With LT5, HDV and EBP
BOP Unit Value $10.56 - - - - -
EOP Unit Value $12.35 10.56 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST DeAM Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $13.12 13.13 10.89 7.69 - -
EOP Unit Value $15.54 13.12 13.13 10.89 7.69 - -
Number of Units 201,904 187,206 138,078 131,066 124 - -
With LT5, HDV and EBP
BOP Unit Value $9.94 - - - - -
EOP Unit Value $11.61 9.94 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $4.60 4.44 3.87 2.98 4.15 7.03
EOP Unit Value $4.83 4.60 4.44 3.87 2.98 4.15 7.03
Number of Units 2,231,991 2,666,933 2,232,502 1,535,565 28,812 17,882 2,473
With LT5, HDV and EBP
BOP Unit Value $10.49 - - - - -
EOP Unit Value $10.86 10.49 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth (1994)
With No Optional Benefits
BOP Unit Value $8.00 7.14 6.23 4.83 7.11 9.71
EOP Unit Value $9.01 8.00 7.14 6.23 4.83 7.11 9.71
Number of Units 697,877 771,461 555,160 371,267 56,712 51,711 36,882
With LT5, HDV and EBP
BOP Unit Value $11.25 - - - - -
EOP Unit Value $12.49 11.25 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value (1993)
With No Optional Benefits
BOP Unit Value $18.55 16.76 13.82 10.26 11.62 12.13
EOP Unit Value $20.28 18.55 16.76 13.82 10.26 11.62 12.13
Number of Units 1,086,861 1,303,740 1,116,503 781,348 69,657 56,219 16,574
With LT5, HDV and EBP
BOP Unit Value $10.80 - - - - -
EOP Unit Value $11.65 10.80 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $7.48 6.49 6.06 4.53 7.14 8.68
EOP Unit Value - $7.48 6.49 6.06 4.53 7.14 8.68
Number of Units - - 214,092 200,264 61,001 56,649 30,915
With LT5, HDV and EBP
BOP Unit Value $11.63 - - - - -
EOP Unit Value - $11.63 - - - - -
Number of Units - - - - - - -
A-2
- ------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------
AST Mid-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $12.11 11.63 10.21 7.61 9.72 10.07
EOP Unit Value $13.66 12.11 11.63 10.21 7.61 9.72 10.07
Number of Units 174,411 192,419 256,401 140,873 38,982 26,857 12,895
With LT5, HDV and EBP
BOP Unit Value $10.27 - - - - -
EOP Unit Value $11.43 10.27 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources (1995)
With No Optional Benefits
BOP Unit Value $23.11 17.81 13.75 10.42 11.18 11.24
EOP Unit Value $26.44 23.11 17.81 13.75 10.42 11.18 11.24
Number of Units 291,510 254,041 192,336 75,013 4,994 1,879 -0-
With LT5, HDV and EBP
BOP Unit Value $11.65 - - - - -
EOP Unit Value $13.14 11.65 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
With No Optional Benefits
BOP Unit Value $7.12 6.19 5.93 4.86 7.12 8.46
EOP Unit Value $7.43 7.12 6.19 5.93 4.86 7.12 8.46
Number of Units 608,747 512,012 326,194 263,698 106,056 106,762 97,356
With LT5, HDV and EBP
BOP Unit Value $12.02 - - - - -
EOP Unit Value $12.37 12.02 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $7.39 7.04 6.44 5.31 7.48 9.68
EOP Unit Value $8.01 7.39 7.04 6.44 5.31 7.48 9.68
Number of Units 758,550 1,025,239 791,823 893,170 112,701 47,656 3,089
With LT5, HDV and EBP
BOP Unit Value $10.67 - - - - -
EOP Unit Value $11.40 10.67 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Marsico Capital Growth (1997)
With No Optional Benefits
BOP Unit Value $10.20 9.67 8.46 6.50 7.8 10.09
EOP Unit Value $10.80 10.20 9.67 8.46 6.5 7.8 10.09
Number of Units 5,983,458 7,048,021 5,717,404 4,075,719 228,033 182,904 114,992
With LT5, HDV and EBP
BOP Unit Value $10.82 - - - - -
EOP Unit Value $11.30 10.82 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth (1992)
With No Optional Benefits
BOP Unit Value $4.77 4.68 4.57 3.69 5.33 7.9
EOP Unit Value $5.18 4.77 4.68 4.57 3.69 5.33 7.9
Number of Units 791,152 657,833 733,920 604,491 405,437 404,404 235,747
With LT5, HDV and EBP
BOP Unit Value $10.67 - - - - -
EOP Unit Value $11.44 10.67 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST DeAM Large-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $12.07 11.18 9.58 7.67 9.17 9.83
EOP Unit Value $14.51 12.07 11.18 9.58 7.67 9.17 9.83
Number of Units 524,592 242,789 191,637 85,554 7,126 1,696 442
With LT5, HDV and EBP
BOP Unit Value $10.63 - - - - -
EOP Unit Value $12.60 10.63 - - - - -
Number of Units - - - - - - -
A-3
- -------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value (2001)
With No Optional Benefits
BOP Unit Value $10.72 9.66 8.89 7.14 9.64 -
EOP Unit Value - $10.72 9.66 8.89 7.14 9.64 -
Number of Units - - 194,363 137,293 37,810 -0- -
With LT5, HDV and EBP
BOP Unit Value $11.24 - - - - -
EOP Unit Value - $11.24 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST AllianceBernstein Core Value (2001)
With No Optional Benefits
BOP Unit Value $12.79 12.28 10.91 8.61 10.05 -
EOP Unit Value $15.33 12.79 12.28 10.91 8.61 10.05 -
Number of Units 815,109 635,232 603,508 453,569 82,054 18,453 -
With LT5, HDV and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $12.09 10.23 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate (1998)
With No Optional Benefits
BOP Unit Value $24.98 22.03 16.17 11.91 11.75 11.57
EOP Unit Value $33.72 24.98 22.03 16.17 11.91 11.75 11.57
Number of Units 265,912 223,264 281,181 149,582 25,464 16,487 16,557
With LT5, HDV and EBP
BOP Unit Value $11.92 - - - - -
EOP Unit Value $15.88 11.92 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST AllianceBernstein Managed Index 500 (1998)
With No Optional Benefits
BOP Unit Value $9.20 8.99 8.28 6.59 8.41 9.46
EOP Unit Value $10.23 9.20 8.99 8.28 6.59 8.41 9.46
Number of Units 842,745 851,019 642,882 554,156 90,506 39,414 9,941
With LT5, HDV and EBP
BOP Unit Value $10.32 - - - - -
EOP Unit Value $11.32 10.32 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST American Century Income & Growth (1997)
With No Optional Benefits
BOP Unit Value $9.79 9.48 8.52 6.70 8.47 9.36
EOP Unit Value $11.30 9.79 9.48 8.52 6.7 8.47 9.36
Number of Units 579,491 626,417 613,910 339,653 124,168 113,372 70,887
With LT5, HDV and EBP
BOP Unit Value $10.25 - - - - -
EOP Unit Value $11.67 10.25 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth & Income (1992)
With No Optional Benefits
BOP Unit Value $11.63 11.24 10.25 7.84 10.35 10.53
EOP Unit Value $13.46 11.63 11.24 10.25 7.84 10.35 10.53
Number of Units 3,863,961 5,200,126 4,119,501 3,076,626 142,152 205,232 34,439
With LT5, HDV and EBP
BOP Unit Value $10.18 - - - - -
EOP Unit Value $11.63 10.18 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $10.77 10.25 8.99 7.59 9.31 10.32
EOP Unit Value $12.60 10.77 10.25 8.99 7.59 9.31 10.32
Number of Units 680,203 694,885 417,314 204,589 44,419 44,212 8,596
With LT5, HDV and EBP
BOP Unit Value $10.47 - - - - -
EOP Unit Value $12.08 10.47 - - - - -
Number of Units - - - - - - -
A-4
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation (1993)
With No Optional Benefits
BOP Unit Value $10.09 9.55 8.71 7.38 8.84 10.14
EOP Unit Value $11.07 10.09 9.55 8.71 7.38 8.84 10.14
Number of Units 97,906 80,896 78,619 61,801 34,451 38,208 30,678
With LT5, HDV and EBP
BOP Unit Value $10.54 - - - - -
EOP Unit Value $11.41 10.54 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic
Balanced (1997)
With No Optional Benefits
BOP Unit Value $10.91 10.56 9.81 8.36 9.38 9.87
EOP Unit Value $11.82 10.91 10.56 9.81 8.36 9.38 9.87
Number of Units 174,226 173,191 146,721 115,095 5,490 4,905 1,725
With LT5, HDV and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $10.93 10.23 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation (1994)
With No Optional Benefits
BOP Unit Value $11.77 11.39 10.37 8.47 9.52 10.12
EOP Unit Value $13.08 11.77 11.39 10.37 8.47 9.52 10.12
Number of Units 665,726 558,395 357,085 222,150 13,799 13,152 2,412
With LT5, HDV and EBP
BOP Unit Value $10.27 - - - - -
EOP Unit Value $11.26 10.27 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond (1994)
With No Optional Benefits
BOP Unit Value $13.89 14.73 13.73 12.32 10.84 10.7
EOP Unit Value $14.58 13.89 14.73 13.73 12.32 10.84 10.7
Number of Units 836,914 938,585 657,913 289,862 36,987 16,390 -0-
With LT5, HDV and EBP
BOP Unit Value $9.37 - - - - -
EOP Unit Value $9.70 9.37 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------------------
AST High Yield
formerly, AST High Yield Bond
With No Optional Benefits
BOP Unit Value $12.04 12.06 10.99 9.16 9.27 9.37
EOP Unit Value $13.12 12.04 12.06 10.99 9.16 9.27 9.37
Number of Units 1,019,726 873,440 957,756 906,947 73,614 45,297 12,929
With LT5, HDV and EBP
BOP Unit Value $9.78 - - - - -
EOP Unit Value $10.51 9.78 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.69 12.71 11.98 10.22 10.3 10.13
EOP Unit Value $13.76 12.69 12.71 11.98 10.22 10.3 10.13
Number of Units 1,196,608 1,294,706 1,012,739 814,135 43,077 16,628 425
With LT5, HDV and EBP
BOP Unit Value $9.87 - - - - -
EOP Unit Value $10.56 9.87 - - - - -
Number of Units - - - - - - -
A-5
- ------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond (1994)
With No Optional Benefits
BOP Unit Value $13.88 13.72 13.23 12.72 11.8 10.97
EOP Unit Value $14.22 13.88 13.72 13.23 12.72 11.8 10.97
Number of Units 2,004,498 1,924,370 3,074,732 2,301,863 362,294 275,317 37,918
With LT5, HDV and EBP
BOP Unit Value $10.07 - - - - -
EOP Unit Value $10.17 10.07 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond (1995)
With No Optional Benefits
BOP Unit Value $12.22 12.18 12.08 10.09 11.29 10.59
EOP Unit Value $12.53 12.22 12.18 12.08 10.09 11.29 10.59
Number of Units 2,687,532 2,996,257 2,189,975 956,856 38,260 112,948 1,940
With LT5, HDV and EBP
BOP Unit Value $9.98 - - - - -
EOP Unit Value $10.09 9.98 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $10.62 10.46 10.51 10.57 10.57 10.32
EOP Unit Value $10.96 10.62 10.46 10.51 10.57 10.57 10.32
Number of Units 3,505,960 3,179,376 1,663,940 1,245,396 403,604 179,509 29,567
With LT5, HDV and EBP
BOP Unit Value $10.02 - - - - -
EOP Unit Value $10.21 10.02 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - - - -
EOP Unit Value $11.42 10.00 - - - - -
Number of Units 1,094,157 171,403 - - - - -
With LT5, HDV and EBP
BOP Unit Value $9.99 - - - - -
EOP Unit Value $11.26 9.99 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.01 - - - - -
EOP Unit Value $11.24 10.01 - - - - -
Number of Units 4,226,992 403,183 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.00 - - - - -
EOP Unit Value $11.07 10.00 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.02 - - - - -
EOP Unit Value $11.06 10.02 - - - - -
Number of Units 3,716,970 405,782 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.01 - - - - -
EOP Unit Value $10.90 10.01 - - - - -
Number of Units 0 - - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.03 - - - - -
EOP Unit Value $10.95 10.03 - - - - -
Number of Units 1,008,771 53,897 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.02 - - - - -
EOP Unit Value $10.79 10.02 - - - - -
Number of Units - - - - - - -
A-6
- ------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.04 - - - - -
EOP Unit Value $10.70 10.04 - - - - -
Number of Units 443,968 215,279 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.03 - - - - -
EOP Unit Value $10.55 10.03 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
Gartmore Variable Investment Trust - GVIT
Developing Markets (1996)
With No Optional Benefits
BOP Unit Value $16.26 12.52 10.59 6.71 7.53 8.19
EOP Unit Value $21.61 16.26 12.52 10.59 6.71 7.53 8.19
Number of Units 316,324 351,335 264,541 122,136 6,530 6,555 3,293
With LT5, HDV and EBP
BOP Unit Value $11.97 - - - - -
EOP Unit Value $15.69 11.97 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income (1999)
With No Optional Benefits
BOP Unit Value $18.02 17.32 15.79 12.67 15.89 17.01
EOP Unit Value $21.10 18.02 17.32 15.79 12.67 15.89 17.01
Number of Units 23,739 23,574 19,612 10,586 1,063 1,992 -0-
With LT5, HDV and EBP
BOP Unit Value $10.12 - - - - -
EOP Unit Value $11.68 10.12 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
AIM V.I. - Dynamics (1999)
With No Optional Benefits
BOP Unit Value $7.61 6.96 6.22 4.57 6.8 9.99
EOP Unit Value $8.73 7.61 6.96 6.22 4.57 6.8 9.99
Number of Units 124,196 135,001 188,184 137,600 18,808 15,825 22,264
With LT5, HDV and EBP
BOP Unit Value $10.83 - - - - -
EOP Unit Value $12.25 10.83 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
AIM V.I. - Technology (1999)
With No Optional Benefits
BOP Unit Value $3.35 3.32 3.21 2.24 4.27 7.98
EOP Unit Value $3.65 3.35 3.32 3.21 2.24 4.27 7.98
Number of Units 254,798 77,941 78,567 42,720 30,448 35,767 25,984
With LT5, HDV and EBP
BOP Unit Value $10.64 - - - - -
EOP Unit Value $11.45 10.64 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
AIM V.I. - Health Sciences (1999)
With No Optional Benefits
BOP Unit Value $12.12 11.34 10.68 8.46 11.35 13.14
EOP Unit Value $12.59 12.12 11.34 10.68 8.46 11.35 13.14
Number of Units 110,470 106,295 92,506 59,116 19,405 27,104 32,969
With LT5, HDV and EBP
BOP Unit Value $11.08 - - - - -
EOP Unit Value $11.36 11.08 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------
AIM V.I. - Financial Services (1999)
With No Optional Benefits
BOP Unit Value $13.30 12.72 11.85 9.26 11.02 12.38
EOP Unit Value $15.30 13.30 12.72 11.85 9.26 11.02 12.38
Number of Units 89,614 48,007 44,091 48,538 7,204 8,536 9,786
With LT5, HDV and EBP
BOP Unit Value $10.66 - - - - -
EOP Unit Value $12.09 10.66 - - - - -
Number of Units - - - - - - -
A-7
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------
Evergreen VA - International Equity (2000)
With No Optional Benefits
BOP Unit Value $14.10 12.31 10.46 - - -
EOP Unit Value $17.15 14.10 12.31 10.46 - - -
Number of Units 182,002 130,750 62,400 24,847 - - -
With LT5, HDV and EBP
BOP Unit Value $10.92 - - - - -
EOP Unit Value $13.09 10.92 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Special Equity (1999)
With No Optional Benefits
BOP Unit Value $8.53 9.57 9.16 6.10 8.49 9.35
EOP Unit Value - $8.53 9.57 9.16 6.1 8.49 9.35
Number of Units - - 92,559 69,344 5,427 5,085 -0-
With LT5, HDV and EBP
BOP Unit Value $9.26 - - - - -
EOP Unit Value - $9.26 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $10.00 9.75 9.21 - 9.04 -
EOP Unit Value $10.47 10.00 9.75 9.21 - 9.04 -
Number of Units 19,700 18,356 26,849 15,743 - - -
With LT5, HDV and EBP
BOP Unit Value $10.53 - - - - -
EOP Unit Value $10.87 10.53 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
With No Optional Benefits
BOP Unit Value $11.47 -
EOP Unit Value $12.58 11.47 - - - - -
Number of Units 72,371 64,775 - - - - -
With LT5, HDV and EBP
BOP Unit Value $11.36 - - - - -
EOP Unit Value $12.29 11.36 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Europe 30 (1999)
With No Optional Benefits
BOP Unit Value $8.43 7.90 7.00 5.11 6.97 9.3
EOP Unit Value $9.79 8.43 7.90 7.00 5.11 6.97 9.3
Number of Units 370,628 76,381 201,444 75,543 2,539 7,317 -0-
With LT5, HDV and EBP
BOP Unit Value $10.45 - - - - -
EOP Unit Value $11.96 10.45 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Asia 30 (2002)
With No Optional Benefits
BOP Unit Value $14.67 12.43 12.66 - - -
EOP Unit Value $20.18 14.67 12.43 12.66 - - -
Number of Units 235,779 83,233 63,254 47,272 - - -
With LT5, HDV and EBP
BOP Unit Value $11.13 - - - - -
EOP Unit Value $15.11 11.13 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Japan (2002)
With No Optional Benefits
BOP Unit Value $13.51 9.65 9.09 - - -
EOP Unit Value $14.79 13.51 9.65 9.09 - - -
Number of Units 117,156 165,707 87,251 28,579 - - -
With LT5, HDV and EBP
BOP Unit Value $13.42 - - - - -
EOP Unit Value $14.49 13.42 - - - - -
Number of Units - - - - - - -
A-8
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------
ProFund VP - Banks (2002)
With No Optional Benefits
BOP Unit Value $11.94 12.11 10.97 - - -
EOP Unit Value $13.61 11.94 12.11 10.97 - - -
Number of Units 35,707 44,665 12,480 8,886 - - -
With LT5, HDV and EBP
BOP Unit Value $10.13 - - - - -
EOP Unit Value $11.39 10.13 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Basic Materials (2002)
With No Optional Benefits
BOP Unit Value $12.13 12.00 11.02 - - -
EOP Unit Value $13.84 12.13 12.00 11.02 - - -
Number of Units 67,645 53,592 42,597 53,759 - - -
With LT5, HDV and EBP
BOP Unit Value $9.51 - - - - -
EOP Unit Value $10.70 9.51 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Biotechnology (2001)
With No Optional Benefits
BOP Unit Value $9.11 7.73 7.14 5.17 8.38 -
EOP Unit Value $8.63 9.11 7.73 7.14 5.17 8.38 -
Number of Units 56,416 73,804 32,726 20,329 460 3,279 -
With LT5, HDV and EBP
BOP Unit Value $13.53 - - - - -
EOP Unit Value $12.64 13.53 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Services (2002)
With No Optional Benefits
BOP Unit Value $9.10 9.67 9.10 - - -
EOP Unit Value $10.06 9.10 9.67 9.10 - - -
Number of Units 15,819 3,866 20,288 13,935 - - -
With LT5, HDV and EBP
BOP Unit Value $9.70 - - - - -
EOP Unit Value $10.58 9.70 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Goods (2002)
With No Optional Benefits
BOP Unit Value $10.31 10.47 9.71 - - -
EOP Unit Value $11.46 10.31 10.47 9.71 - - -
Number of Units 39,408 6,876 7,578 3,821 - - -
With LT5, HDV and EBP
BOP Unit Value $9.76 - - - - -
EOP Unit Value $10.71 9.76 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Oil & Gas (2001)
With No Optional Benefits
BOP Unit Value $15.07 11.62 9.10 - 9.2 -
EOP Unit Value $17.96 15.07 11.62 9.10 - 9.2 -
Number of Units 226,319 278,771 186,654 50,155 - -0- -
With LT5, HDV and EBP
BOP Unit Value $10.96 - - - - -
EOP Unit Value $12.88 10.96 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Financial (2001)
With No Optional Benefits
BOP Unit Value $11.06 10.77 9.88 7.76 9.23 -
EOP Unit Value $12.81 11.06 10.77 9.88 7.76 9.23 -
Number of Units 108,064 43,105 70,662 32,283 3,258 8,154 -
With LT5, HDV and EBP
BOP Unit Value $10.56 - - - - -
EOP Unit Value $12.07 10.56 - - - - -
Number of Units - - - - - - -
A-9
- -----------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -----------------------------------------------------------------------------------
ProFund VP - Healthcare (2001)
With No Optional Benefits
BOP Unit Value $8.77 8.38 8.29 7.15 9.37 -
EOP Unit Value $9.12 8.77 8.38 8.29 7.15 9.37 -
Number of Units 179,877 83,943 91,641 23,591 1,235 2,564 -
With LT5, HDV and EBP
BOP Unit Value $10.49 - - - - -
EOP Unit Value $10.76 10.49 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Industrial (2002)
With No Optional Benefits
BOP Unit Value $11.40 11.27 10.08 - - -
EOP Unit Value $12.57 11.40 11.27 10.08 - - -
Number of Units 21,635 9,851 22,333 11,186 - - -
With LT5, HDV and EBP
BOP Unit Value $10.10 - - - - -
EOP Unit Value $10.98 10.10 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Internet (2002)
With No Optional Benefits
BOP Unit Value $19.18 18.08 15.10 - - -
EOP Unit Value $19.20 19.18 18.08 15.10 - - -
Number of Units 6,326 46,724 20,851 8,287 - - -
With LT5, HDV and EBP
BOP Unit Value $12.76 - - - - -
EOP Unit Value $12.59 12.76 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Pharmaceuticals (2002)
With No Optional Benefits
BOP Unit Value $7.62 8.02 8.95 - - -
EOP Unit Value $8.44 7.62 8.02 8.95 - - -
Number of Units 116,086 36,753 27,913 24,743 - - -
With LT5, HDV and EBP
BOP Unit Value $9.47 - - - - -
EOP Unit Value $10.35 9.47 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Precious Metals (2002)
With No Optional Benefits
BOP Unit Value $14.84 11.90 13.38 9.73 - -
EOP Unit Value $15.74 14.84 11.90 13.38 9.73 - -
Number of Units 233,772 200,315 102,230 89,687 1,179 - -
With LT5, HDV and EBP
BOP Unit Value $12.04 - - - - -
EOP Unit Value $12.59 12.04 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Real Estate (2001)
With No Optional Benefits
BOP Unit Value $18.54 17.58 14.00 10.65 10.78 -
EOP Unit Value $24.25 18.54 17.58 14.00 10.65 10.78 -
Number of Units 61,873 31,980 53,006 18,355 2,230 2,306 -
With LT5, HDV and EBP
BOP Unit Value $11.21 - - - - -
EOP Unit Value $14.47 11.21 - - - - -
Number of Units - - - - - - -
- -----------------------------------------------------------------------------------
ProFund VP - Semiconductor (2002)
With No Optional Benefits
BOP Unit Value $7.76 7.23 9.58 - - -
EOP Unit Value $7.12 7.76 7.23 9.58 - - -
Number of Units 9,658 68,309 52,485 17,621 - - -
With LT5, HDV and EBP
BOP Unit Value $10.68 - - - - -
EOP Unit Value $9.67 10.68 - - - - -
Number of Units - - - - - - -
A-10
- ----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ----------------------------------------------------------------------------------------
ProFund VP - Technology (2001)
With No Optional Benefits
BOP Unit Value $4.91 4.91 5.00 - 5.92 -
EOP Unit Value $5.24 4.91 4.91 5.00 - 5.92 -
Number of Units 74,232 109,698 88,720 74,180 - 12,704 -
With LT5, HDV and EBP
BOP Unit Value $10.57 - - - - -
EOP Unit Value $11.13 10.57 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Telecommunications (2001)
With No Optional Benefits
BOP Unit Value $4.64 5.04 4.41 - 7.11 -
EOP Unit Value $6.16 4.64 5.04 4.41 - 7.11 -
Number of Units 207,252 45,279 118,731 30,179 - -0- -
With LT5, HDV and EBP
BOP Unit Value $9.77 - - - - -
EOP Unit Value $12.78 9.77 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Utilities (2001)
With No Optional Benefits
BOP Unit Value $9.77 8.75 7.32 6.11 8.13 -
EOP Unit Value $11.51 9.77 8.75 7.32 6.11 8.13 -
Number of Units 237,712 213,813 79,702 18,902 491 -0- -
With LT5, HDV and EBP
BOP Unit Value $10.64 - - - - -
EOP Unit Value $12.35 10.64 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bull (2002)
With No Optional Benefits
BOP Unit Value $10.80 10.65 9.91 - - -
EOP Unit Value $12.12 10.80 10.65 9.91 - - -
Number of Units 306,353 384,503 412,259 394,427 - - -
With LT5, HDV and EBP
BOP Unit Value $10.15 - - - - -
EOP Unit Value $11.24 10.15 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bear (2001)
With No Optional Benefits
BOP Unit Value $8.86 9.09 10.26 13.78 11.55 -
EOP Unit Value $8.09 8.86 9.09 10.26 13.78 11.55 -
Number of Units 56,286 35,612 16,155 28,299 2,012 -0- -
With LT5, HDV and EBP
BOP Unit Value $9.57 - - - - -
EOP Unit Value $8.63 9.57 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Ultra Bull (2001)
With No Optional Benefits
BOP Unit Value $8.36 8.25 7.13 4.72 7.48 -
EOP Unit Value $10.16 8.36 8.25 7.13 4.72 7.48 -
Number of Units 91,153 82,031 305,666 56,257 2,988 -0- -
With LT5, HDV and EBP
BOP Unit Value $10.28 - - - - -
EOP Unit Value $12.32 10.28 - - - - -
Number of Units - - - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - OTC (2001)
With No Optional Benefits
BOP Unit Value $5.38 5.44 5.07 - 5.77 -
EOP Unit Value $5.60 5.38 5.44 5.07 - 5.77 -
Number of Units 266,020 234,956 293,311 257,947 - -0- -
With LT5, HDV and EBP
BOP Unit Value $10.59 - - - - -
EOP Unit Value $10.88 10.59 - - - - -
Number of Units - - - - - - -
A-11
- ---------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------
ProFund VP - Short OTC (2002)
With No Optional Benefits
BOP Unit Value $5.97 5.99 6.83 11.03 - -
EOP Unit Value $5.81 5.97 5.99 6.83 11.03 - -
Number of Units 53,401 77,757 77,280 40,617 934 - -
With LT5, HDV and EBP
BOP Unit Value $9.17 - - - - -
EOP Unit Value $8.81 9.17 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - UltraOTC (1999)
With No Optional Benefits
BOP Unit Value $0.82 0.87 0.77 - 1.25 4.06
EOP Unit Value $0.85 0.82 0.87 0.77 - 1.25 4.06
Number of Units 6,941,343 7,044,313 6,405,048 890,270 - 58,556 3,787
With LT5, HDV and EBP
BOP Unit Value $11.08 - - - - -
EOP Unit Value $11.32 11.08 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.68 11.80 10.30 - - -
EOP Unit Value $14.06 12.68 11.80 10.30 - - -
Number of Units 216,242 86,401 87,968 59,964 - - -
With LT5, HDV and EBP
BOP Unit Value $10.63 - - - - -
EOP Unit Value $11.63 10.63 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $11.75 10.70 9.75 - - -
EOP Unit Value $12.06 11.75 10.70 9.75 - - -
Number of Units 55,706 181,173 80,520 24,107 - - -
With LT5, HDV and EBP
BOP Unit Value $10.79 - - - - -
EOP Unit Value $10.93 10.79 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - UltraMid-Cap (2002)
With No Optional Benefits
BOP Unit Value $14.12 12.13 9.62 - - -
EOP Unit Value $15.42 14.12 12.13 9.62 - - -
Number of Units 133,297 150,869 115,073 34,556 - - -
With LT5, HDV and EBP
BOP Unit Value $11.42 - - - - -
EOP Unit Value $12.31 11.42 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $11.52 11.22 9.46 - - -
EOP Unit Value $13.36 11.52 11.22 9.46 - - -
Number of Units 181,265 53,564 123,988 105,751 - - -
With LT5, HDV and EBP
BOP Unit Value $10.33 - - - - -
EOP Unit Value $11.82 10.33 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
ProFund VP - Small-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $12.86 12.11 10.23 - - -
EOP Unit Value $13.79 12.86 12.11 10.23 - - -
Number of Units 103,542 341,834 237,000 65,882 - - -
With LT5, HDV and EBP
BOP Unit Value $10.51 - - - - -
EOP Unit Value $11.13 10.51 - - - - -
Number of Units - - - - - - -
A-12
- --------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------
ProFund VP - UltraSmall-Cap (1999)
With No Optional Benefits
BOP Unit Value $12.10 12.28 9.49 4.82 8.5 9.32
EOP Unit Value $15.06 12.10 12.28 9.49 4.82 8.5 9.32
Number of Units 56,197 52,922 143,175 60,051 953 -0- 3,174
With LT5, HDV and EBP
BOP Unit Value $10.69 - - - - -
EOP Unit Value $13.13 10.69 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP - U.S. Government Plus (2002)
With No Optional Benefits
BOP Unit Value $12.83 11.91 11.15 11.59 - -
EOP Unit Value $12.09 12.83 11.91 11.15 11.59 - -
Number of Units 50,469 119,421 42,782 20,058 1,005 - -
With LT5, HDV and EBP
BOP Unit Value $10.58 - - - - -
EOP Unit Value $9.84 10.58 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP - Rising Rates Opportunity (2002)
With No Optional Benefits
BOP Unit Value $6.09 6.70 7.61 - - -
EOP Unit Value $6.63 6.09 6.70 7.61 - - -
Number of Units 268,688 302,975 266,169 78,428 - - -
With LT5, HDV and EBP
BOP Unit Value $9.11 - - - - -
EOP Unit Value $9.78 9.11 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.35 - - - - -
EOP Unit Value $11.14 10.35 - - - - -
Number of Units 87,853 98,334 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.02 - - - - -
EOP Unit Value $10.64 10.02 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
With No Optional Benefits
BOP Unit Value $10.55 10.37 - - - -
EOP Unit Value $12.37 10.55 10.37 - - - -
Number of Units 296,094 131,175 3,839 - - - -
With LT5, HDV and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $11.83 10.23 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
With No Optional Benefits
BOP Unit Value $8.67 9.70 - - - -
EOP Unit Value $8.26 8.67 9.70 - - - -
Number of Units 4,948 975 571 - - - -
With LT5, HDV and EBP
BOP Unit Value $8.97 - - - - -
EOP Unit Value $8.42 8.97 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
With No Optional Benefits
BOP Unit Value $9.15 9.55 - - - -
EOP Unit Value $7.97 9.15 9.55 - - - -
Number of Units 6,984 11,578 7,859 - - - -
With LT5, HDV and EBP
BOP Unit Value $9.20 - - - - -
EOP Unit Value $7.90 9.20 - - - - -
Number of Units - - - - - - -
A-13
- ---------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------
ProFund Access VP High Yield
With No Optional Benefits
BOP Unit Value $10.59 - - - - -
EOP Unit Value $11.46 10.59 - - - - -
Number of Units 27,550 299,437 - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.49 - - - - -
EOP Unit Value $11.20 10.49 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust(R) 10 Uncommon Values (2000)
With No Optional Benefits
BOP Unit Value $4.35 4.38 3.99 2.95 4.73 7.44
EOP Unit Value $4.47 4.35 4.38 3.99 2.95 4.73 7.44
Number of Units 19,492 14,496 33,075 22,064 23,080 31,543 32,451
With LT5, HDV and EBP
BOP Unit Value $9.77 - - - - -
EOP Unit Value $9.90 9.77 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust Managed VIP
With No Optional Benefits
BOP Unit Value $15.50 14.64 13.20 - - -
EOP Unit Value $17.07 15.50 14.64 13.20 - - -
Number of Units 751,781 732,182 695,591 476,951 - - -
With LT5, HDV and EBP
BOP Unit Value $10.47 - - - - -
EOP Unit Value $11.37 10.47 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust The Dow Target 10
With No Optional Benefits
BOP Unit Value $11.81 12.35 12.05 - - -
EOP Unit Value $14.64 11.81 12.35 12.05 - - -
Number of Units 50,230 25,001 24,245 10,069 - - -
With LT5, HDV and EBP
BOP Unit Value $9.56 - - - - -
EOP Unit Value $11.70 9.56 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust Dow Target Dividend
With No Optional Benefits
BOP Unit Value $9.79 - - - - -
EOP Unit Value $11.42 9.79 - - - - -
Number of Units 415,893 290,982 - - - - -
With LT5, HDV and EBP
BOP Unit Value $9.70 - - - - -
EOP Unit Value $11.16 9.70 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
With No Optional Benefits
BOP Unit Value $17.46 16.05 12.96 - - -
EOP Unit Value $23.87 17.46 16.05 12.96 - - -
Number of Units 152,515 52,338 22,405 8,569 - - -
With LT5, HDV and EBP
BOP Unit Value $10.86 - - - - -
EOP Unit Value $14.65 10.86 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------
First Trust S&P Target 24
With No Optional Benefits
BOP Unit Value $13.72 13.34 11.89 - - -
EOP Unit Value $13.94 13.72 13.34 11.89 - - -
Number of Units 45,207 46,537 43,536 5,532 - - -
With LT5, HDV and EBP
BOP Unit Value $10.51 - - - - -
EOP Unit Value $10.54 10.51 - - - - -
Number of Units - - - - - - -
A-14
- -------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- -------------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
With No Optional Benefits
BOP Unit Value $12.79 12.54 - - - -
EOP Unit Value $13.76 12.79 12.54 - - - -
Number of Units 15,488 10,385 7,266 - - - -
With LT5, HDV and EBP
BOP Unit Value $10.78 - - - - -
EOP Unit Value $11.44 10.78 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------
First Trust Value Line Target 25
With No Optional Benefits
BOP Unit Value $19.64 16.61 - - - -
EOP Unit Value $19.95 19.64 16.61 - - - -
Number of Units 178,140 130,528 33,213 - - - -
With LT5, HDV and EBP
BOP Unit Value $11.14 - - - - -
EOP Unit Value $11.17 11.14 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------
SP International Growth
formerly, SP William Blair International Growth
With No Optional Benefits
BOP Unit Value $12.10 10.53 - - - -
EOP Unit Value $14.47 12.10 10.53 - - - -
Number of Units 100,114 32,119 18,568 - - - -
With LT5, HDV and EBP
BOP Unit Value $11.21 - - - - -
EOP Unit Value $13.22 11.21 - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.69 - - - - - -
Number of Units 795,953 - - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.58 - - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.61 - - - - - -
Number of Units 563,523 - - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.50 - - - - - -
Number of Units - - - - - - -
- -------------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.52 - - - - - -
Number of Units 510,953 - - - - - -
With LT5, HDV and EBP
BOP Unit Value $10.00 - - - - -
EOP Unit Value $10.40 - - - - - -
Number of Units - - - - - - -
A-15
APEX II - Prospectus
- ------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
With No Optional Benefits
BOP Unit Value $13.84 12.67 11.00 8.56
EOP Unit Value $16.71 13.84 12.67 11.00 8.56
Number of Units 4,715,269 5,621,836 3,227,381 2,415,394 2,569,506
With LT5, HDV, and EBP
BOP Unit Value $10.53 9.91 - -
EOP Unit Value $12.55 10.53 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair International Growth (1997)
With No Optional Benefits
BOP Unit Value $17.54 15.30 13.39 9.72
EOP Unit Value $20.87 17.54 15.30 13.39 9.72
Number of Units 9,628,446 12,141,522 11,265,469 5,547,558 835,523
With LT5, HDV, and EBP
BOP Unit Value $11.16 9.92 - -
EOP Unit Value $13.10 11.16 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International Value
With No Optional Benefits
BOP Unit Value $14.36 12.84 10.79 8.19
EOP Unit Value $18.00 14.36 12.84 10.79 8.19
Number of Units 3,305,620 2,013,544 1,897,469 1,201,268 269,995
With LT5, HDV, and EBP
BOP Unit Value $10.59 9.92 - -
EOP Unit Value $13.09 10.59 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST MFS Global Equity (1999)
With No Optional Benefits
BOP Unit Value $13.92 13.16 11.30 9.04
EOP Unit Value $17.02 13.92 13.16 11.30 9.04
Number of Units 2,905,252 1,907,776 2,276,801 1,393,001 969,509
With LT5, HDV, and EBP
BOP Unit Value $10.36 9.96 - -
EOP Unit Value $12.49 10.36 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $9.04 9.05 9.89 6.92
EOP Unit Value $10.01 9.04 9.05 9.89 6.92
Number of Units 1,867,490 2,134,730 2,242,129 3,292,593 1,970,250
With LT5, HDV, and EBP
BOP Unit Value $10.31 10.04 - -
EOP Unit Value $11.27 10.31 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth (1999)
With No Optional Benefits
BOP Unit Value $11.83 11.98 11.13 7.67
EOP Unit Value $12.53 11.83 11.98 11.13 7.67
Number of Units 1,174,654 1,385,430 1,618,719 1,682,193 639,695
With LT5, HDV, and EBP
BOP Unit Value $10.20 10.01 - -
EOP Unit Value $10.66 10.20 - - -
Number of Units - - - - -
A-16
- -----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------
AST Federated Aggressive Growth (2000)
With No Optional Benefits
BOP Unit Value $16.60 15.42 12.74 7.64
EOP Unit Value $18.43 16.60 15.42 12.74 7.64
Number of Units 4,641,175 5,464,856 4,808,453 3,085,373 1,255,415
With LT5, HDV, and EBP
BOP Unit Value $10.84 10.00 - -
EOP Unit Value $11.87 10.84 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $15.68 15.19 12.85 9.26
EOP Unit Value $18.08 15.68 15.19 12.85 9.26
Number of Units 1,000,596 1,243,642 1,541,896 1,504,296 1,492,775
With LT5, HDV, and EBP
BOP Unit Value $10.44 10.05 - -
EOP Unit Value $11.87 10.44 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $14.91 14.22 12.42 9.30
EOP Unit Value $17.61 14.91 14.22 12.42 9.30
Number of Units 9,098,178 11,285,282 10,785,030 10,183,346 6,141,523
With LT5, HDV, and EBP
BOP Unit Value $10.53 10.05 - -
EOP Unit Value $12.26 10.53 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST DeAM Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.92 12.99 10.81 7.66
EOP Unit Value $15.25 12.92 12.99 10.81 7.66
Number of Units 1,874,276 2,106,236 2,143,020 1,134,865 423,387
With LT5, HDV, and EBP
BOP Unit Value $9.90 10.04 - -
EOP Unit Value $11.53 9.90 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $12.16 11.80 10.31 7.97
EOP Unit Value $12.71 12.16 11.80 10.31 7.97
Number of Units 4,189,111 5,391,424 4,375,813 3,027,057 1,273,118
With LT5, HDV, and EBP
BOP Unit Value $10.46 10.00 - -
EOP Unit Value $10.78 10.46 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth (1994)
With No Optional Benefits
BOP Unit Value $12.12 10.86 9.51 7.41
EOP Unit Value $13.59 12.12 10.86 9.51 7.41
Number of Units 5,378,198 5,728,446 4,715,301 3,415,318 2,175,250
With LT5, HDV, and EBP
BOP Unit Value $11.21 10.05 - -
EOP Unit Value $12.40 11.21 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value (1993)
With No Optional Benefits
BOP Unit Value $15.99 14.51 12.01 8.96
EOP Unit Value $17.42 15.99 14.51 12.01 8.96
Number of Units 9,574,218 12,260,007 11,461,684 8,530,129 5,118,558
With LT5, HDV, and EBP
BOP Unit Value $10.76 10.02 - -
EOP Unit Value $11.56 10.76 - - -
Number of Units - - - - -
A-17
- ---------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $11.10 9.67 9.07 6.80
EOP Unit Value - $11.10 9.67 9.07 6.80
Number of Units - - 1,798,457 2,002,166 658,419
With LT5, HDV, and EBP
BOP Unit Value $11.59 10.09 - -
EOP Unit Value - $11.59 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Mid-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $12.83 12.38 10.91 8.17
EOP Unit Value $14.42 12.83 12.38 10.91 8.17
Number of Units 1,907,063 1,988,252 2,587,064 2,513,413 1,200,225
With LT5, HDV, and EBP
BOP Unit Value $10.24 10.06 - -
EOP Unit Value $11.34 10.24 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources (1995)
With No Optional Benefits
BOP Unit Value $21.00 16.25 12.59 9.59
EOP Unit Value $23.93 21.00 16.25 12.59 9.59
Number of Units 2,942,718 3,677,614 2,040,188 2,011,627 724,670
With LT5, HDV, and EBP
BOP Unit Value $11.61 10.00 - -
EOP Unit Value $13.05 11.61 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.81 9.44 9.08 7.46
EOP Unit Value $11.23 10.81 9.44 9.08 7.46
Number of Units 4,132,529 3,925,740 2,378,881 2,098,873 1,869,353
With LT5, HDV, and EBP
BOP Unit Value $11.98 10.02 - -
EOP Unit Value $12.28 11.98 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $10.43 9.97 9.16 7.58
EOP Unit Value $11.25 10.43 9.97 9.16 7.58
Number of Units 4,572,301 5,915,443 4,529,834 4,784,269 2,930,432
With LT5, HDV, and EBP
BOP Unit Value $10.64 10.04 - -
EOP Unit Value $11.32 10.64 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Marsico Capital Growth (1997)
With No Optional Benefits
BOP Unit Value $12.88 12.26 10.78 8.32
EOP Unit Value $13.59 12.88 12.26 10.78 8.32
Number of Units 26,497,526 32,140,125 28,117,310 20,138,164 10,144,317
With LT5, HDV, and EBP
BOP Unit Value $10.78 10.12 - -
EOP Unit Value $11.21 10.78 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth (1992)
With No Optional Benefits
BOP Unit Value $9.80 9.64 9.45 7.67
EOP Unit Value $10.60 9.80 9.64 9.45 7.67
Number of Units 2,498,654 2,531,900 2,785,100 2,053,023 1,349,939
With LT5, HDV, and EBP
BOP Unit Value $10.64 10.03 - -
EOP Unit Value $11.35 10.64 - - -
Number of Units - - - - -
A-18
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST DeAM Large-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $13.47 12.53 10.78 8.66
EOP Unit Value $16.13 13.47 12.53 10.78 8.66
Number of Units 4,397,725 2,585,881 2,351,197 1,072,256 664,649
With LT5, HDV, and EBP
BOP Unit Value $10.59 10.08 - -
EOP Unit Value $12.51 10.59 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value (2001)
With No Optional Benefits
BOP Unit Value $11.86 10.72 9.91 7.99
EOP Unit Value - $11.86 10.72 9.91 7.99
Number of Units - - 1,620,391 1,387,072 965,912
With LT5, HDV, and EBP
BOP Unit Value $11.21 10.05 - -
EOP Unit Value - $11.21 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Core Value (2001)
With No Optional Benefits
BOP Unit Value $12.86 12.39 11.06 8.76
EOP Unit Value $15.34 12.86 12.39 11.06 8.76
Number of Units 5,318,094 4,311,857 4,643,022 3,621,862 6,005,922
With LT5, HDV, and EBP
BOP Unit Value $10.20 10.08 - -
EOP Unit Value $12.00 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate (1998)
With No Optional Benefits
BOP Unit Value $20.88 18.49 13.63 10.08
EOP Unit Value $28.08 20.88 18.49 13.63 10.08
Number of Units 3,925,105 3,749,124 4,080,179 3,097,315 1,563,489
With LT5, HDV, and EBP
BOP Unit Value $11.88 10.15 - -
EOP Unit Value $15.76 11.88 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Managed Index 500 (1998)
With No Optional Benefits
BOP Unit Value $11.27 11.07 10.23 8.17
EOP Unit Value $12.48 11.27 11.07 10.23 8.17
Number of Units 6,255,253 6,774,078 6,845,369 5,442,511 3,662,406
With LT5, HDV, and EBP
BOP Unit Value $10.28 10.05 - -
EOP Unit Value $11.23 10.28 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST American Century Income & Growth (1997)
With No Optional Benefits
BOP Unit Value $11.90 11.57 10.45 8.25
EOP Unit Value $13.68 11.90 11.57 10.45 8.25
Number of Units 3,984,557 4,205,655 4,670,846 2,115,438 1,751,136
With LT5, HDV, and EBP
BOP Unit Value $10.22 10.07 - -
EOP Unit Value $11.58 10.22 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth & Income (1992)
With No Optional Benefits
BOP Unit Value $11.81 11.46 10.50 8.06
EOP Unit Value $13.62 11.81 11.46 10.50 8.06
Number of Units 23,350,650 31,190,346 25,850,506 21,264,670 6,667,373
With LT5, HDV, and EBP
BOP Unit Value $10.15 10.05 - -
EOP Unit Value $11.55 10.15 - - -
Number of Units - - - - -
A-19
- -------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $11.69 11.17 9.83 8.34
EOP Unit Value $13.62 11.69 11.17 9.83 8.34
Number of Units 5,568,043 5,245,455 3,717,848 2,647,064 2,110,071
With LT5, HDV, and EBP
BOP Unit Value $10.44 10.08 - -
EOP Unit Value $11.99 10.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation (1993)
With No Optional Benefits
BOP Unit Value $11.77 11.19 10.24 8.71
EOP Unit Value $12.86 11.77 11.19 10.24 8.71
Number of Units 1,120,866 1,055,033 1,061,887 898,161 847,517
With LT5, HDV, and EBP
BOP Unit Value - 3/14/2005 $10.50 10.01 - -
EOP Unit Value $11.32 10.50 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic Balanced (1997)
With No Optional Benefits
BOP Unit Value $11.79 11.46 10.69 9.14
EOP Unit Value $12.72 11.79 11.46 10.69 9.14
Number of Units 2,165,859 2,294,531 2,335,598 2,045,205 1,126,058
With LT5, HDV, and EBP
BOP Unit Value $10.20 10.04 - -
EOP Unit Value $10.85 10.20 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation (1994)
With No Optional Benefits
BOP Unit Value $12.49 12.13 11.09 9.09
EOP Unit Value $13.82 12.49 12.13 11.09 9.09
Number of Units 4,776,442 4,192,626 3,551,315 2,243,566 921,329
With LT5, HDV, and EBP
BOP Unit Value $10.24 10.03 - -
EOP Unit Value $11.17 10.24 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond (1994)
With No Optional Benefits
BOP Unit Value $12.64 13.45 12.59 11.34
EOP Unit Value $13.21 12.64 13.45 12.59 11.34
Number of Units 6,093,700 6,261,824 4,717,822 2,962,471 1,739,313
With LT5, HDV, and EBP
BOP Unit Value $9.34 9.95 - -
EOP Unit Value $9.63 9.34 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST High Yield
formerly, AST High Yield Bond
With No Optional Benefits
BOP Unit Value $12.62 12.69 11.61 9.71
EOP Unit Value $13.70 12.62 12.69 11.61 9.71
Number of Units 9,653,937 9,658,908 13,717,128 12,201,163 5,592,940
With LT5, HDV, and EBP
BOP Unit Value $9.75 9.98 - -
EOP Unit Value $10.43 9.75 - - -
Number of Units - - - - -
A-20
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.20 12.26 11.61 9.94
EOP Unit Value $13.17 12.20 12.26 11.61 9.94
Number of Units 10,147,675 12,427,806 8,369,008 7,751,236 4,146,530
With LT5, HDV, and EBP
BOP Unit Value $9.84 10.00 - -
EOP Unit Value $10.48 9.84 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond (1994)
With No Optional Benefits
BOP Unit Value $11.40 11.31 10.95 10.57
EOP Unit Value $11.63 11.40 11.31 10.95 10.57
Number of Units 21,700,661 22,436,395 33,208,757 26,287,388 20,544,075
With LT5, HDV, and EBP
BOP Unit Value $10.04 9.99 - -
EOP Unit Value $10.10 10.04 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond (1995)
With No Optional Benefits
BOP Unit Value $10.54 10.55 10.51 10.34
EOP Unit Value $10.76 10.54 10.55 10.51 10.34
Number of Units 22,394,558 28,031,653 21,299,789 15,242,856 11,274,642
With LT5, HDV, and EBP
BOP Unit Value $9.94 10.00 - -
EOP Unit Value $10.01 9.94 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $9.88 9.78 9.86 9.96
EOP Unit Value $10.16 9.88 9.78 9.86 9.96
Number of Units 46,325,237 42,442,274 29,870,585 32,730,501 36,255,772
With LT5, HDV, and EBP
BOP Unit Value $9.99 10.00 - -
EOP Unit Value $10.13 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $11.38 10.00 - - -
Number of Units 5,212,589 649,829 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.99 10.00 - -
EOP Unit Value $11.21 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.01 - - -
EOP Unit Value $11.19 10.01 - - -
Number of Units 23,048,850 2,586,012 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 10.00 - -
EOP Unit Value $11.02 10.00 - - -
Number of Units 2,672 - - - -
- ----------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.02 - - -
EOP Unit Value $11.01 10.02 - - -
Number of Units 21,829,919 2,726,484 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.01 10.00 - -
EOP Unit Value $10.85 10.01 - - -
Number of Units 18,249 - - - -
A-21
- -------------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.03 - - -
EOP Unit Value $10.90 10.03 - - -
Number of Units 7,315,279 685,724 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.02 10.00 - -
EOP Unit Value $10.74 10.02 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.04 - - -
EOP Unit Value $10.66 10.04 - - -
Number of Units 3,303,256 115,215 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.03 10.00 - -
EOP Unit Value $10.50 10.03 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
Gartmore Variable Investment Trust - GVIT Developing Markets (1996)
With No Optional Benefits
BOP Unit Value $20.72 16.02 13.60 8.66
EOP Unit Value $27.43 20.72 16.02 13.60 8.66
Number of Units 2,835,328 3,395,891 2,103,950 1,763,660 283,466
With LT5, HDV, and EBP
BOP Unit Value $11.93 9.88 - -
EOP Unit Value $15.57 11.93 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income (1999)
With No Optional Benefits
BOP Unit Value $11.59 11.18 10.23 8.25
EOP Unit Value $13.51 11.59 11.18 10.23 8.25
Number of Units 582,613 534,649 590,808 314,757 196,720
With LT5, HDV, and EBP
BOP Unit Value $10.08 10.07 - -
EOP Unit Value $11.60 10.08 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Dynamics (1999)
With No Optional Benefits
BOP Unit Value $11.67 10.72 9.61 7.09
EOP Unit Value $13.33 11.67 10.72 9.61 7.09
Number of Units 605,730 602,064 668,032 889,464 543,762
With LT5, HDV, and EBP
BOP Unit Value $10.80 10.05 - -
EOP Unit Value $12.16 10.80 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Technology (1999)
With No Optional Benefits
BOP Unit Value $8.13 8.09 7.87 5.50
EOP Unit Value $8.84 8.13 8.09 7.87 5.50
Number of Units 513,442 453,391 512,424 578,651 293,307
With LT5, HDV, and EBP
BOP Unit Value $10.60 10.00 - -
EOP Unit Value $11.36 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Health Sciences (1999)
With No Optional Benefits
BOP Unit Value $11.31 10.64 10.05 8.00
EOP Unit Value $11.71 11.31 10.64 10.05 8.00
Number of Units 1,250,782 1,131,375 937,586 698,364 475,873
With LT5, HDV, and EBP
BOP Unit Value $11.04 10.06 - -
EOP Unit Value $11.27 11.04 - - -
Number of Units - - - - -
A-22
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------
AIM V.I. - Financial Services (1999)
With No Optional Benefits
BOP Unit Value $12.43 11.94 11.17 8.76
EOP Unit Value $14.24 12.43 11.94 11.17 8.76
Number of Units 778,674 1,042,992 585,185 607,265 366,258
With LT5, HDV, and EBP
BOP Unit Value $10.62 10.06 - -
EOP Unit Value $12.00 10.62 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - International Equity (2000)
With No Optional Benefits
BOP Unit Value $15.59 13.66 11.65 8.15
EOP Unit Value $18.88 15.59 13.66 11.65 8.15
Number of Units 1,081,552 689,816 414,631 189,143 113,389
With LT5, HDV, and EBP
BOP Unit Value $10.88 9.90 - -
EOP Unit Value $13.00 10.88 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Special Equity (1999)
With No Optional Benefits
BOP Unit Value $10.31 11.58 11.12 7.44
EOP Unit Value - 10.31 11.58 11.12 7.44
Number of Units - - 702,642 815,621 127,728
With LT5, HDV, and EBP
BOP Unit Value $9.26 10.02 - -
EOP Unit Value - 9.26 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $11.53 11.29 10.71 7.78
EOP Unit Value $12.03 11.53 11.29 10.71 7.78
Number of Units 241,307 281,775 570,123 404,789 39,943
With LT5, HDV, and EBP
BOP Unit Value $10.50 10.02 - -
EOP Unit Value $10.79 10.50 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
With No Optional Benefits
BOP Unit Value $11.44 -
EOP Unit Value $12.49 11.44 -
Number of Units 553,827 606,614 -
With LT5, HDV, and EBP
BOP Unit Value $11.33 - - -
EOP Unit Value $12.20 11.33 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Europe 30 (1999)
With No Optional Benefits
BOP Unit Value $12.94 12.17 10.83 7.93
EOP Unit Value $14.95 12.94 12.17 10.83 7.93
Number of Units 2,790,577 1,133,421 1,812,435 2,116,400 292,396
With LT5, HDV, and EBP
BOP Unit Value $10.41 9.99 - -
EOP Unit Value $11.87 10.41 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Asia 30 (2002)
With No Optional Benefits
BOP Unit Value $14.45 12.30 12.57 7.75
EOP Unit Value $19.80 14.45 12.30 12.57 7.75
Number of Units 3,073,769 1,723,105 896,010 942,605 281,993
With LT5, HDV, and EBP
BOP Unit Value $11.10 9.99 - -
EOP Unit Value $14.99 11.10 - - -
Number of Units - - - - -
A-23
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Japan (2002)
With No Optional Benefits
BOP Unit Value $13.31 9.55 9.03 7.24
EOP Unit Value $14.51 13.31 9.55 9.03 7.24
Number of Units 1,650,266 3,413,955 710,879 426,718 65,845
With LT5, HDV, and EBP
BOP Unit Value $13.38 9.95 - -
EOP Unit Value $14.38 13.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Banks (2002)
With No Optional Benefits
BOP Unit Value $11.77 11.98 10.90 8.56
EOP Unit Value $13.35 11.77 11.98 10.90 8.56
Number of Units 402,883 351,876 229,711 93,067 101,136
With LT5, HDV, and EBP
BOP Unit Value $10.10 10.08 - -
EOP Unit Value $11.31 10.10 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Basic Materials (2002)
With No Optional Benefits
BOP Unit Value $11.96 11.87 10.95 8.46
EOP Unit Value $13.58 11.96 11.87 10.95 8.46
Number of Units 779,466 681,692 529,237 1,512,864 76,331
With LT5, HDV, and EBP
BOP Unit Value $9.48 9.98 - -
EOP Unit Value $10.62 9.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Biotechnology (2001)
With No Optional Benefits
BOP Unit Value $12.34 10.52 9.75 7.09
EOP Unit Value $11.64 12.34 10.52 9.75 7.09
Number of Units 393,923 697,686 757,678 208,971 130,082
With LT5, HDV, and EBP
BOP Unit Value $13.48 10.48 - -
EOP Unit Value $12.55 13.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Services (2002)
With No Optional Benefits
BOP Unit Value $8.97 9.56 9.04 7.25
EOP Unit Value $9.88 8.97 9.56 9.04 7.25
Number of Units 192,639 86,431 430,620 136,269 128,022
With LT5, HDV, and EBP
BOP Unit Value $9.66 10.04 - -
EOP Unit Value $10.50 9.66 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Goods (2002)
With No Optional Benefits
BOP Unit Value $10.15 10.36 9.64 8.28
EOP Unit Value $11.25 10.15 10.36 9.64 8.28
Number of Units 548,567 161,037 369,007 58,425 148,446
With LT5, HDV, and EBP
BOP Unit Value $9.73 10.03 - -
EOP Unit Value $10.63 9.73 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Oil & Gas (2001)
With No Optional Benefits
BOP Unit Value $17.22 13.33 10.48 8.71
EOP Unit Value $20.43 17.22 13.33 10.48 8.71
Number of Units 2,251,126 2,573,776 1,856,882 1,225,844 299,833
With LT5, HDV, and EBP
BOP Unit Value $10.92 10.07 - -
EOP Unit Value $12.78 10.92 - - -
Number of Units - - - - -
A-24
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Financial (2001)
With No Optional Benefits
BOP Unit Value $12.46 12.19 11.23 8.85
EOP Unit Value $14.38 12.46 12.19 11.23 8.85
Number of Units 913,872 616,873 553,342 398,159 221,377
With LT5, HDV, and EBP
BOP Unit Value $10.53 10.08 - -
EOP Unit Value $11.98 10.53 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Healthcare (2001)
With No Optional Benefits
BOP Unit Value $9.63 9.23 9.17 7.94
EOP Unit Value $9.96 9.63 9.23 9.17 7.94
Number of Units 2,106,409 2,175,821 1,318,525 707,449 388,508
With LT5, HDV, and EBP
BOP Unit Value $10.46 10.09 - -
EOP Unit Value $10.68 10.46 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Industrial (2002)
With No Optional Benefits
BOP Unit Value $11.23 11.15 10.01 7.93
EOP Unit Value $12.33 11.23 11.15 10.01 7.93
Number of Units 242,684 211,677 253,411 318,339 12,642
With LT5, HDV, and EBP
BOP Unit Value $10.06 10.06 - -
EOP Unit Value $10.90 10.06 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Internet (2002)
With No Optional Benefits
BOP Unit Value $18.90 17.89 15.00 8.57
EOP Unit Value $18.84 18.90 17.89 15.00 8.57
Number of Units 200,072 467,320 992,879 206,876 306,572
With LT5, HDV, and EBP
BOP Unit Value $12.71 9.94 - -
EOP Unit Value $12.50 12.71 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Pharmaceuticals (2002)
With No Optional Benefits
BOP Unit Value $7.51 7.93 8.89 8.56
EOP Unit Value $8.28 7.51 7.93 8.89 8.56
Number of Units 716,678 515,768 527,336 266,978 136,559
With LT5, HDV, and EBP
BOP Unit Value $9.44 10.02 - -
EOP Unit Value $10.27 9.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Precious Metals (2002)
With No Optional Benefits
BOP Unit Value $14.62 11.77 13.29 9.70
EOP Unit Value $15.44 14.62 11.77 13.29 9.70
Number of Units 2,487,596 2,426,530 1,479,384 1,329,806 1,175,651
With LT5, HDV, and EBP
BOP Unit Value $12.00 9.89 - -
EOP Unit Value $12.49 12.00 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Real Estate (2001)
With No Optional Benefits
BOP Unit Value $16.96 16.15 12.91 9.86
EOP Unit Value $22.10 16.96 16.15 12.91 9.86
Number of Units 926,728 501,989 1,816,706 462,906 441,318
With LT5, HDV, and EBP
BOP Unit Value $11.17 10.15 - -
EOP Unit Value $14.36 11.17 - - -
Number of Units - - - - -
A-25
- ----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------
ProFund VP - Semiconductor (2002)
With No Optional Benefits
BOP Unit Value $7.64 7.15 9.51 5.14
EOP Unit Value $6.98 7.64 7.15 9.51 5.14
Number of Units 339,250 746,085 694,352 423,958 93,241
With LT5, HDV, and EBP
BOP Unit Value $10.65 10.04 - -
EOP Unit Value $9.60 10.65 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Technology (2001)
With No Optional Benefits
BOP Unit Value $8.45 8.48 8.66 6.03
EOP Unit Value $8.98 8.45 8.48 8.66 6.03
Number of Units 673,628 577,739 727,580 497,972 254,131
With LT5, HDV, and EBP
BOP Unit Value $10.54 10.03 - -
EOP Unit Value $11.05 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Telecommunications (2001)
With No Optional Benefits
BOP Unit Value $7.52 8.19 7.21 7.15
EOP Unit Value $9.93 7.52 8.19 7.21 7.15
Number of Units 1,277,316 456,586 460,848 398,350 272,408
With LT5, HDV, and EBP
BOP Unit Value $9.74 10.03 - -
EOP Unit Value $12.68 9.74 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Utilities (2001)
With No Optional Benefits
BOP Unit Value $12.37 11.13 9.34 7.83
EOP Unit Value $14.51 12.37 11.13 9.34 7.83
Number of Units 2,195,309 1,996,877 1,060,939 618,427 521,419
With LT5, HDV, and EBP
BOP Unit Value $10.60 10.17 - -
EOP Unit Value $12.26 10.60 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bull (2002)
With No Optional Benefits
BOP Unit Value $10.64 10.53 9.84 7.97
EOP Unit Value $11.90 10.64 10.53 9.84 7.97
Number of Units 7,031,661 7,846,866 8,215,357 3,563,562 954,792
With LT5, HDV, and EBP
BOP Unit Value $10.12 10.05 - -
EOP Unit Value $11.16 10.12 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bear (2001)
With No Optional Benefits
BOP Unit Value $7.23 7.45 8.44 11.38
EOP Unit Value $6.57 7.23 7.45 8.44 11.38
Number of Units 1,868,606 2,169,662 1,202,243 1,886,515 1,532,543
With LT5, HDV, and EBP
BOP Unit Value $9.54 9.94 - -
EOP Unit Value $8.56 9.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Ultra Bull (2001)
With No Optional Benefits
BOP Unit Value $11.87 11.76 10.20 6.78
EOP Unit Value $14.36 11.87 11.76 10.20 6.78
Number of Units 1,596,920 1,158,025 2,817,803 1,431,345 297,435
With LT5, HDV, and EBP
BOP Unit Value $10.25 10.11 - -
EOP Unit Value $12.23 10.25 - - -
Number of Units - - - - -
A-26
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - OTC (2001)
With No Optional Benefits
BOP Unit Value $9.80 9.94 9.32 6.45
EOP Unit Value $10.16 9.80 9.94 9.32 6.45
Number of Units 1,764,614 2,467,486 4,885,351 4,445,234 1,346,852
With LT5, HDV, and EBP
BOP Unit Value $10.55 10.06 - -
EOP Unit Value $10.79 10.55 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Short OTC (2002)
With No Optional Benefits
BOP Unit Value $5.88 5.93 6.78 11.00
EOP Unit Value $5.70 5.88 5.93 6.78 11.00
Number of Units 1,891,265 2,494,112 908,064 1,535,439 433,181
With LT5, HDV, and EBP
BOP Unit Value $9.14 9.94 - -
EOP Unit Value $8.75 9.14 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraOTC (1999)
With No Optional Benefits
BOP Unit Value $7.47 7.89 7.03 3.53
EOP Unit Value $7.70 7.47 7.89 7.03 3.53
Number of Units 2,319,572 4,740,165 6,592,447 3,410,589 1,003,123
With LT5, HDV, and EBP
BOP Unit Value $11.04 10.15 - -
EOP Unit Value $11.23 11.04 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.49 11.67 10.23 7.66
EOP Unit Value $13.80 12.49 11.67 10.23 7.66
Number of Units 1,978,580 2,164,543 2,632,869 1,455,513 438,387
With LT5, HDV, and EBP
BOP Unit Value $10.60 10.09 - -
EOP Unit Value $11.55 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $11.58 10.58 9.69 7.70
EOP Unit Value $11.84 11.58 10.58 9.69 7.70
Number of Units 1,594,539 5,059,311 2,220,901 1,009,867 439,054
With LT5, HDV, and EBP
BOP Unit Value $10.76 10.06 - -
EOP Unit Value $10.85 10.76 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraMid-Cap (2002)
With No Optional Benefits
BOP Unit Value $13.91 11.99 9.55 5.71
EOP Unit Value $15.14 13.91 11.99 9.55 5.71
Number of Units 1,588,771 1,935,487 3,106,849 1,112,311 477,953
With LT5, HDV, and EBP
BOP Unit Value $11.38 10.15 - -
EOP Unit Value $12.22 11.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $11.35 11.10 9.39 7.09
EOP Unit Value $13.11 11.35 11.10 9.39 7.09
Number of Units 2,446,357 1,398,442 4,088,760 5,144,632 994,778
With LT5, HDV, and EBP
BOP Unit Value $10.30 10.04 - -
EOP Unit Value $11.73 10.30 - - -
Number of Units - - - - -
A-27
- ----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------
ProFund VP - Small-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $12.67 11.98 10.16 7.69
EOP Unit Value $13.54 12.67 11.98 10.16 7.69
Number of Units 1,643,633 4,579,887 4,677,820 3,868,951 772,260
With LT5, HDV, and EBP
BOP Unit Value $10.48 10.04 - -
EOP Unit Value $11.05 10.48 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - UltraSmall-Cap (1999)
With No Optional Benefits
BOP Unit Value $15.23 15.52 12.04 6.14
EOP Unit Value $18.87 15.23 15.52 12.04 6.14
Number of Units 1,580,595 816,755 5,098,565 1,702,558 212,085
With LT5, HDV, and EBP
BOP Unit Value $10.66 10.11 - -
EOP Unit Value $13.03 10.66 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - U.S. Government Plus (2002)
With No Optional Benefits
BOP Unit Value $12.64 11.79 11.08 11.56
EOP Unit Value $11.86 12.64 11.79 11.08 11.56
Number of Units 821,668 2,312,868 1,051,158 731,470 2,486,854
With LT5, HDV, and EBP
BOP Unit Value $10.54 10.08 - -
EOP Unit Value $9.76 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - Rising Rates Opportunity (2002)
With No Optional Benefits
BOP Unit Value $6.00 6.63 7.56 8.02
EOP Unit Value $6.50 6.00 6.63 7.56 8.02
Number of Units 4,567,551 3,415,324 5,314,528 1,817,924 165,792
With LT5, HDV, and EBP
BOP Unit Value $9.08 9.91 - -
EOP Unit Value $9.71 9.08 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.30 10.37 - -
EOP Unit Value $11.05 10.30 10.37 - -
Number of Units 2,181,106 2,620,751 72,725 - -
With LT5, HDV, and EBP
BOP Unit Value $9.98 10.03 - -
EOP Unit Value $10.56 9.98 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
With No Optional Benefits
BOP Unit Value $10.51 10.37 - -
EOP Unit Value $12.26 10.51 10.37 - -
Number of Units 4,023,312 2,141,308 159,605 - -
With LT5, HDV, and EBP
BOP Unit Value $10.20 10.07 - -
EOP Unit Value $11.74 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
With No Optional Benefits
BOP Unit Value $8.64 9.70 - -
EOP Unit Value $8.18 8.64 9.70 - -
Number of Units 254,207 364,782 39,360 - -
With LT5, HDV, and EBP
BOP Unit Value $8.94 9.93 - -
EOP Unit Value $8.36 8.94 - - -
Number of Units - - - - -
A-28
- ------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
With No Optional Benefits
BOP Unit Value $9.11 9.54 - -
EOP Unit Value $7.90 9.11 9.54 - -
Number of Units 560,897 220,843 136,809 - -
With LT5, HDV, and EBP
BOP Unit Value $9.17 9.95 - -
EOP Unit Value $7.84 9.17 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
Access VP High Yield
With No Optional Benefits
BOP Unit Value $10.56 -
EOP Unit Value $11.38 10.56 -
Number of Units 1,207,864 899,141
With LT5, HDV, and EBP
BOP Unit Value $10.47 - - -
EOP Unit Value $11.12 10.47 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust(R) 10 Uncommon Values (2000)
With No Optional Benefits
BOP Unit Value $9.92 10.03 9.16 6.80
EOP Unit Value $10.15 9.92 10.03 9.16 6.80
Number of Units 100,227 87,726 91,924 66,435 19,826
With LT5, HDV, and EBP
BOP Unit Value $9.74 10.00 - -
EOP Unit Value $9.83 9.74 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
With No Optional Benefits
BOP Unit Value $12.84 11.85 - -
EOP Unit Value $17.48 12.84 11.85 - -
Number of Units 1,507,757 590,605 311,233 - -
With LT5, HDV, and EBP
BOP Unit Value $10.83 10.03 - -
EOP Unit Value $14.54 10.83 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Managed VIP
With No Optional Benefits
BOP Unit Value $11.94 11.32 - -
EOP Unit Value $13.10 11.94 11.32 - -
Number of Units 2,772,210 2,420,873 1,777,316 - -
With LT5, HDV, and EBP
BOP Unit Value $10.43 10.02 - -
EOP Unit Value $11.29 10.43 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
With No Optional Benefits
BOP Unit Value $10.83 10.66 - -
EOP Unit Value $11.60 10.83 10.66 - -
Number of Units 199,508 134,177 82,809 - -
With LT5, HDV, and EBP
BOP Unit Value $10.75 10.06 - -
EOP Unit Value $11.35 10.75 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust S&P Target 24
With No Optional Benefits
BOP Unit Value $11.01 10.75 - -
EOP Unit Value $11.14 11.01 10.75 - -
Number of Units 290,152 304,840 173,851 - -
With LT5, HDV, and EBP
BOP Unit Value $10.48 10.10 - -
EOP Unit Value $10.46 10.48 - - -
Number of Units - - - - -
A-29
- --------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------
First Trust The Dow Target 10
With No Optional Benefits
BOP Unit Value $9.98 10.48 - -
EOP Unit Value $12.32 9.98 10.48 - -
Number of Units 481,064 194,864 155,695 - -
With LT5, HDV, and EBP
BOP Unit Value $9.53 10.03 - -
EOP Unit Value $11.61 9.53 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Dow Target Dividend
With No Optional Benefits
BOP Unit Value $9.76 - - -
EOP Unit Value $11.34 9.76 - - -
Number of Units 2,310,768 1,240,527 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.67 - - -
EOP Unit Value $11.08 9.67 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Value Line Target 25
With No Optional Benefits
BOP Unit Value $14.82 12.59 - -
EOP Unit Value $15.00 14.82 12.59 - -
Number of Units 1,119,827 1,068,339 389,792 - -
With LT5, HDV, and EBP
BOP Unit Value $11.11 10.00 - -
EOP Unit Value $11.08 11.11 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
SP International Growth
formerly, SP William Blair International Growth
With No Optional Benefits
BOP Unit Value $12.05 10.53 - -
EOP Unit Value $14.35 12.05 10.53 - -
Number of Units 742,865 672,243 269,671 - -
With LT5, HDV, and EBP
BOP Unit Value $11.18 9.93 - -
EOP Unit Value $13.12 11.18 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.66 - - - -
Number of Units 5,258,474 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.54 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.58 - - - -
Number of Units 3,781,525 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.47 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.48 - - - -
Number of Units 3,795,562 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.37 - - - -
Number of Units - - - - -
A-30
ASXT Six - Prospectus
- ------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
With No Optional Benefits
BOP Unit Value $13.84 12.67 11.00 8.56
EOP Unit Value $16.71 13.84 12.67 11.00 8.56
Number of Units 4,715,269 5,621,836 3,227,381 2,415,394 2,569,506
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.55 10.53 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair International Growth (1997)
With No Optional Benefits
BOP Unit Value $17.54 15.30 13.39 9.72
EOP Unit Value $20.87 17.54 15.30 13.39 9.72
Number of Units 9,628,446 12,141,522 11,265,469 5,547,558 835,523
With LT5, HDV, and EBP
BOP Unit Value $11.16 - - -
EOP Unit Value $13.10 11.16 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International Value
With No Optional Benefits
BOP Unit Value $14.36 12.84 10.79 8.19
EOP Unit Value $18.00 14.36 12.84 10.79 8.19
Number of Units 3,305,620 2,013,544 1,897,469 1,201,268 269,995
With LT5, HDV, and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $13.09 10.59 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST MFS Global Equity (1999)
With No Optional Benefits
BOP Unit Value $13.92 13.16 11.30 9.04
EOP Unit Value $17.02 13.92 13.16 11.30 9.04
Number of Units 2,905,252 1,907,776 2,276,801 1,393,001 969,509
With LT5, HDV, and EBP
BOP Unit Value $10.36 - - -
EOP Unit Value $12.49 10.36 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $9.04 9.05 9.89 6.92
EOP Unit Value $10.01 9.04 9.05 9.89 6.92
Number of Units 1,867,490 2,134,730 2,242,129 3,292,593 1,970,250
With LT5, HDV, and EBP
BOP Unit Value $10.31 - - -
EOP Unit Value $11.27 10.31 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth (1999)
With No Optional Benefits
BOP Unit Value $11.83 11.98 11.13 7.67
EOP Unit Value $12.53 11.83 11.98 11.13 7.67
Number of Units 1,174,654 1,385,430 1,618,719 1,682,193 639,695
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.66 10.20 - - -
Number of Units - - - - -
A-31
- -----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------
AST Federated Aggressive Growth (2000)
With No Optional Benefits
BOP Unit Value $16.60 15.42 12.74 7.64
EOP Unit Value $18.43 16.60 15.42 12.74 7.64
Number of Units 4,641,175 5,464,856 4,808,453 3,085,373 1,255,415
With LT5, HDV, and EBP
BOP Unit Value $10.84 - - -
EOP Unit Value $11.87 10.84 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $15.68 15.19 12.85 9.26
EOP Unit Value $18.08 15.68 15.19 12.85 9.26
Number of Units 1,000,596 1,243,642 1,541,896 1,504,296 1,492,775
With LT5, HDV, and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.87 10.44 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $14.91 14.22 12.42 9.30
EOP Unit Value $17.61 14.91 14.22 12.42 9.30
Number of Units 9,098,178 11,285,282 10,785,030 10,183,346 6,141,523
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.26 10.53 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST DeAM Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.92 12.99 10.81 7.66
EOP Unit Value $15.25 12.92 12.99 10.81 7.66
Number of Units 1,874,276 2,106,236 2,143,020 1,134,865 423,387
With LT5, HDV, and EBP
BOP Unit Value $9.90 - - -
EOP Unit Value $11.53 9.90 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $12.16 11.80 10.31 7.97
EOP Unit Value $12.71 12.16 11.80 10.31 7.97
Number of Units 4,189,111 5,391,424 4,375,813 3,027,057 1,273,118
With LT5, HDV, and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.78 10.46 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth (1994)
With No Optional Benefits
BOP Unit Value $12.12 10.86 9.51 7.41
EOP Unit Value $13.59 12.12 10.86 9.51 7.41
Number of Units 5,378,198 5,728,446 4,715,301 3,415,318 2,175,250
With LT5, HDV, and EBP
BOP Unit Value $11.21 - - -
EOP Unit Value $12.40 11.21 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value (1993)
With No Optional Benefits
BOP Unit Value $15.99 14.51 12.01 8.96
EOP Unit Value $17.42 15.99 14.51 12.01 8.96
Number of Units 9,574,218 12,260,007 11,461,684 8,530,129 5,118,558
With LT5, HDV, and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $11.56 10.76 - - -
Number of Units - - - - -
A-32
- ---------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $11.10 9.67 9.07 6.80
EOP Unit Value - $11.10 9.67 9.07 6.80
Number of Units - - 1,798,457 2,002,166 658,419
With LT5, HDV, and EBP
BOP Unit Value $11.59 - - -
EOP Unit Value - $11.59 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Mid-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $12.83 12.38 10.91 8.17
EOP Unit Value $14.42 12.83 12.38 10.91 8.17
Number of Units 1,907,063 1,988,252 2,587,064 2,513,413 1,200,225
With LT5, HDV, and EBP
BOP Unit Value $10.24 - - -
EOP Unit Value $11.34 10.24 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources (1995)
With No Optional Benefits
BOP Unit Value $21.00 16.25 12.59 9.59
EOP Unit Value $23.93 21.00 16.25 12.59 9.59
Number of Units 2,942,718 3,677,614 2,040,188 2,011,627 724,670
With LT5, HDV, and EBP
BOP Unit Value $11.61 - - -
EOP Unit Value $13.05 11.61 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.81 9.44 9.08 7.46
EOP Unit Value $11.23 10.81 9.44 9.08 7.46
Number of Units 4,132,529 3,925,740 2,378,881 2,098,873 1,869,353
With LT5, HDV, and EBP
BOP Unit Value $11.98 - - -
EOP Unit Value $12.28 11.98 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $10.43 9.97 9.16 7.58
EOP Unit Value $11.25 10.43 9.97 9.16 7.58
Number of Units 4,572,301 5,915,443 4,529,834 4,784,269 2,930,432
With LT5, HDV, and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.32 10.64 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Marsico Capital Growth (1997)
With No Optional Benefits
BOP Unit Value $12.88 12.26 10.78 8.32
EOP Unit Value $13.59 12.88 12.26 10.78 8.32
Number of Units 26,497,526 32,140,125 28,117,310 20,138,164 10,144,317
With LT5, HDV, and EBP
BOP Unit Value $10.78 - - -
EOP Unit Value $11.21 10.78 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth (1992)
With No Optional Benefits
BOP Unit Value $9.80 9.64 9.45 7.67
EOP Unit Value $10.60 9.80 9.64 9.45 7.67
Number of Units 2,498,654 2,531,900 2,785,100 2,053,023 1,349,939
With LT5, HDV, and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.35 10.64 - - -
Number of Units - - - - -
A-33
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST DeAM Large-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $13.47 12.53 10.78 8.66
EOP Unit Value $16.13 13.47 12.53 10.78 8.66
Number of Units 4,397,725 2,585,881 2,351,197 1,072,256 664,649
With LT5, HDV, and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $12.51 10.59 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value (2001)
With No Optional Benefits
BOP Unit Value $11.86 10.72 9.91 7.99
EOP Unit Value - $11.86 10.72 9.91 7.99
Number of Units - - 1,620,391 1,387,072 965,912
With LT5, HDV, and EBP
BOP Unit Value $11.21 - - -
EOP Unit Value - $11.21 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Core Value (2001)
With No Optional Benefits
BOP Unit Value $12.86 12.39 11.06 8.76
EOP Unit Value $15.34 12.86 12.39 11.06 8.76
Number of Units 5,318,094 4,311,857 4,643,022 3,621,862 6,005,922
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $12.00 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate (1998)
With No Optional Benefits
BOP Unit Value $20.88 18.49 13.63 10.08
EOP Unit Value $28.08 20.88 18.49 13.63 10.08
Number of Units 3,925,105 3,749,124 4,080,179 3,097,315 1,563,489
With LT5, HDV, and EBP
BOP Unit Value $11.88 - - -
EOP Unit Value $15.76 11.88 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Managed Index 500 (1998)
With No Optional Benefits
BOP Unit Value $11.27 11.07 10.23 8.17
EOP Unit Value $12.48 11.27 11.07 10.23 8.17
Number of Units 6,255,253 6,774,078 6,845,369 5,442,511 3,662,406
With LT5, HDV, and EBP
BOP Unit Value $10.28 - - -
EOP Unit Value $11.23 10.28 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST American Century Income & Growth (1997)
With No Optional Benefits
BOP Unit Value $11.90 11.57 10.45 8.25
EOP Unit Value $13.68 11.90 11.57 10.45 8.25
Number of Units 3,984,557 4,205,655 4,670,846 2,115,438 1,751,136
With LT5, HDV, and EBP
BOP Unit Value $10.22 - - -
EOP Unit Value $11.58 10.22 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth & Income (1992)
With No Optional Benefits
BOP Unit Value $11.81 11.46 10.50 8.06
EOP Unit Value $13.62 11.81 11.46 10.50 8.06
Number of Units 23,350,650 31,190,346 25,850,506 21,264,670 6,667,373
With LT5, HDV, and EBP
BOP Unit Value $10.15 - - -
EOP Unit Value $11.55 10.15 - - -
Number of Units - - - - -
A-34
- -------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $11.69 11.17 9.83 8.34
EOP Unit Value $13.62 11.69 11.17 9.83 8.34
Number of Units 5,568,043 5,245,455 3,717,848 2,647,064 2,110,071
With LT5, HDV, and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.99 10.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation (1993)
With No Optional Benefits
BOP Unit Value $11.77 11.19 10.24 8.71
EOP Unit Value $12.86 11.77 11.19 10.24 8.71
Number of Units 1,120,866 1,055,033 1,061,887 898,161 847,517
With LT5, HDV, and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $11.32 10.50 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic Balanced (1997)
With No Optional Benefits
BOP Unit Value $11.79 11.46 10.69 9.14
EOP Unit Value $12.72 11.79 11.46 10.69 9.14
Number of Units 2,165,859 2,294,531 2,335,598 2,045,205 1,126,058
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.85 10.20 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation (1994)
With No Optional Benefits
BOP Unit Value $12.49 12.13 11.09 9.09
EOP Unit Value $13.82 12.49 12.13 11.09 9.09
Number of Units 4,776,442 4,192,626 3,551,315 2,243,566 921,329
With LT5, HDV, and EBP
BOP Unit Value $10.24 - - -
EOP Unit Value $11.17 10.24 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond (1994)
With No Optional Benefits
BOP Unit Value $12.64 13.45 12.59 11.34
EOP Unit Value $13.21 12.64 13.45 12.59 11.34
Number of Units 6,093,700 6,261,824 4,717,822 2,962,471 1,739,313
With LT5, HDV, and EBP
BOP Unit Value $9.34 - - -
EOP Unit Value $9.63 9.34 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST High Yield
formerly, AST High Yield Bond
With No Optional Benefits
BOP Unit Value $12.62 12.69 11.61 9.71
EOP Unit Value $13.70 12.62 12.69 11.61 9.71
Number of Units 9,653,937 9,658,908 13,717,128 12,201,163 5,592,940
With LT5, HDV, and EBP
BOP Unit Value $9.75 - - -
EOP Unit Value $10.43 9.75 - - -
Number of Units - - - - -
A-35
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.20 12.26 11.61 9.94
EOP Unit Value $13.17 12.20 12.26 11.61 9.94
Number of Units 10,147,675 12,427,806 8,369,008 7,751,236 4,146,530
With LT5, HDV, and EBP
BOP Unit Value $9.84 - - -
EOP Unit Value $10.48 9.84 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond (1994)
With No Optional Benefits
BOP Unit Value $11.40 11.31 10.95 10.57
EOP Unit Value $11.63 11.40 11.31 10.95 10.57
Number of Units 21,700,661 22,436,395 33,208,757 26,287,388 20,544,075
With LT5, HDV, and EBP
BOP Unit Value $10.04 - - -
EOP Unit Value $10.10 10.04 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond (1995)
With No Optional Benefits
BOP Unit Value $10.54 10.55 10.51 10.34
EOP Unit Value $10.76 10.54 10.55 10.51 10.34
Number of Units 22,394,558 28,031,653 21,299,789 15,242,856 11,274,642
With LT5, HDV, and EBP
BOP Unit Value $9.94 - - -
EOP Unit Value $10.01 9.94 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $9.88 9.78 9.86 9.96
EOP Unit Value $10.16 9.88 9.78 9.86 9.96
Number of Units 46,325,237 42,442,274 29,870,585 32,730,501 36,255,772
With LT5, HDV, and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $10.13 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $11.38 10.00 - - -
Number of Units 5,212,589 649,829 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $11.21 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.01 - - -
EOP Unit Value $11.19 10.01 - - -
Number of Units 23,048,850 2,586,012 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $11.02 10.00 - - -
Number of Units 2,672 - - - -
- ----------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.02 - - -
EOP Unit Value $11.01 10.02 - - -
Number of Units 21,829,919 2,726,484 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.01 - - -
EOP Unit Value $10.85 10.01 - - -
Number of Units 18,249 - - - -
A-36
- -------------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.03 - - -
EOP Unit Value $10.90 10.03 - - -
Number of Units 7,315,279 685,724 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.02 - - -
EOP Unit Value $10.74 10.02 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.04 - - -
EOP Unit Value $10.66 10.04 - - -
Number of Units 3,303,256 115,215 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.03 - - -
EOP Unit Value $10.50 10.03 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
Gartmore Variable Investment Trust - GVIT Developing Markets (1996)
With No Optional Benefits
BOP Unit Value $20.72 16.02 13.60 8.66
EOP Unit Value $27.43 20.72 16.02 13.60 8.66
Number of Units 2,835,328 3,395,891 2,103,950 1,763,660 283,466
With LT5, HDV, and EBP
BOP Unit Value $11.93 - - -
EOP Unit Value $15.57 11.93 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income (1999)
With No Optional Benefits
BOP Unit Value $11.59 11.18 10.23 8.25
EOP Unit Value $13.51 11.59 11.18 10.23 8.25
Number of Units 582,613 534,649 590,808 314,757 196,720
With LT5, HDV, and EBP
BOP Unit Value $10.08 - - -
EOP Unit Value $11.60 10.08 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Dynamics (1999)
With No Optional Benefits
BOP Unit Value $11.67 10.72 9.61 7.09
EOP Unit Value $13.33 11.67 10.72 9.61 7.09
Number of Units 605,730 602,064 668,032 889,464 543,762
With LT5, HDV, and EBP
BOP Unit Value $10.80 - - -
EOP Unit Value $12.16 10.80 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Technology (1999)
With No Optional Benefits
BOP Unit Value $8.13 8.09 7.87 5.50
EOP Unit Value $8.84 8.13 8.09 7.87 5.50
Number of Units 513,442 453,391 512,424 578,651 293,307
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $11.36 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Health Sciences (1999)
With No Optional Benefits
BOP Unit Value $11.31 10.64 10.05 8.00
EOP Unit Value $11.71 11.31 10.64 10.05 8.00
Number of Units 1,250,782 1,131,375 937,586 698,364 475,873
With LT5, HDV, and EBP
BOP Unit Value $11.04 - - -
EOP Unit Value $11.27 11.04 - - -
Number of Units - - - - -
A-37
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------
AIM V.I. - Financial Services (1999)
With No Optional Benefits
BOP Unit Value $12.43 11.94 11.17 8.76
EOP Unit Value $14.24 12.43 11.94 11.17 8.76
Number of Units 778,674 1,042,992 585,185 607,265 366,258
With LT5, HDV, and EBP
BOP Unit Value $10.62 - - -
EOP Unit Value $12.00 10.62 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - International Equity (2000)
With No Optional Benefits
BOP Unit Value $15.59 13.66 11.65 8.15
EOP Unit Value $18.88 15.59 13.66 11.65 8.15
Number of Units 1,081,552 689,816 414,631 189,143 113,389
With LT5, HDV, and EBP
BOP Unit Value $10.88 - - -
EOP Unit Value $13.00 10.88 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Special Equity (1999)
With No Optional Benefits
BOP Unit Value $10.31 11.58 11.12 7.44
EOP Unit Value - $10.31 11.58 11.12 7.44
Number of Units - - 702,642 815,621 127,728
With LT5, HDV, and EBP
BOP Unit Value $9.26 - - -
EOP Unit Value - $9.26 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $11.53 11.29 10.71 7.78
EOP Unit Value $12.03 11.53 11.29 10.71 7.78
Number of Units 241,307 281,775 570,123 404,789 39,943
With LT5, HDV, and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $10.79 10.50 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
With No Optional Benefits
BOP Unit Value $11.44 - - - -
EOP Unit Value $12.49 11.44 - - -
Number of Units 553,827 606,614 - - -
With LT5, HDV, and EBP
BOP Unit Value $11.33 - - -
EOP Unit Value $12.20 11.33 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Europe 30 (1999)
With No Optional Benefits
BOP Unit Value $12.94 12.17 10.83 7.93
EOP Unit Value $14.95 12.94 12.17 10.83 7.93
Number of Units 2,790,577 1,133,421 1,812,435 2,116,400 292,396
With LT5, HDV, and EBP
BOP Unit Value $10.41 - - -
EOP Unit Value $11.87 10.41 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Asia 30 (2002)
With No Optional Benefits
BOP Unit Value $14.45 12.30 12.57 7.75
EOP Unit Value $19.80 14.45 12.30 12.57 7.75
Number of Units 3,073,769 1,723,105 896,010 942,605 281,993
With LT5, HDV, and EBP
BOP Unit Value $11.10 - - -
EOP Unit Value $14.99 11.10 - - -
Number of Units - - - - -
A-38
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Japan (2002)
With No Optional Benefits
BOP Unit Value $13.31 9.55 9.03 7.24
EOP Unit Value $14.51 13.31 9.55 9.03 7.24
Number of Units 1,650,266 3,413,955 710,879 426,718 65,845
With LT5, HDV, and EBP
BOP Unit Value $13.38 - - -
EOP Unit Value $14.38 13.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Banks (2002)
With No Optional Benefits
BOP Unit Value $11.77 11.98 10.90 8.56
EOP Unit Value $13.35 11.77 11.98 10.90 8.56
Number of Units 402,883 351,876 229,711 93,067 101,136
With LT5, HDV, and EBP
BOP Unit Value $10.10 - - -
EOP Unit Value $11.31 10.10 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Basic Materials (2002)
With No Optional Benefits
BOP Unit Value $11.96 11.87 10.95 8.46
EOP Unit Value $13.58 11.96 11.87 10.95 8.46
Number of Units 779,466 681,692 529,237 1,512,864 76,331
With LT5, HDV, and EBP
BOP Unit Value $9.48 - - -
EOP Unit Value $10.62 9.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Biotechnology (2001)
With No Optional Benefits
BOP Unit Value $12.34 10.52 9.75 7.09
EOP Unit Value $11.64 12.34 10.52 9.75 7.09
Number of Units 393,923 697,686 757,678 208,971 130,082
With LT5, HDV, and EBP
BOP Unit Value $13.48 - - -
EOP Unit Value $12.55 13.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Services (2002)
With No Optional Benefits
BOP Unit Value $8.97 9.56 9.04 7.25
EOP Unit Value $9.88 8.97 9.56 9.04 7.25
Number of Units 192,639 86,431 430,620 136,269 128,022
With LT5, HDV, and EBP
BOP Unit Value $9.66 - - -
EOP Unit Value $10.50 9.66 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Goods (2002)
With No Optional Benefits
BOP Unit Value $10.15 10.36 9.64 8.28
EOP Unit Value $11.25 10.15 10.36 9.64 8.28
Number of Units 548,567 161,037 369,007 58,425 148,446
With LT5, HDV, and EBP
BOP Unit Value $9.73 - - -
EOP Unit Value $10.63 9.73 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Oil & Gas (2001)
With No Optional Benefits
BOP Unit Value $17.22 13.33 10.48 8.71
EOP Unit Value $20.43 17.22 13.33 10.48 8.71
Number of Units 2,251,126 2,573,776 1,856,882 1,225,844 299,833
With LT5, HDV, and EBP
BOP Unit Value $10.92 - - -
EOP Unit Value $12.78 10.92 - - -
Number of Units - - - - -
A-39
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Financial (2001)
With No Optional Benefits
BOP Unit Value $12.46 12.19 11.23 8.85
EOP Unit Value $14.38 12.46 12.19 11.23 8.85
Number of Units 913,872 616,873 553,342 398,159 221,377
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $11.98 10.53 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Healthcare (2001)
With No Optional Benefits
BOP Unit Value $9.63 9.23 9.17 7.94
EOP Unit Value $9.96 9.63 9.23 9.17 7.94
Number of Units 2,106,409 2,175,821 1,318,525 707,449 388,508
With LT5, HDV, and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.68 10.46 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Industrial (2002)
With No Optional Benefits
BOP Unit Value $11.23 11.15 10.01 7.93
EOP Unit Value $12.33 11.23 11.15 10.01 7.93
Number of Units 242,684 211,677 253,411 318,339 12,642
With LT5, HDV, and EBP
BOP Unit Value $10.06 - - -
EOP Unit Value $10.90 10.06 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Internet (2002)
With No Optional Benefits
BOP Unit Value $18.90 17.89 15.00 8.57
EOP Unit Value $18.84 18.90 17.89 15.00 8.57
Number of Units 200,072 467,320 992,879 206,876 306,572
With LT5, HDV, and EBP
BOP Unit Value $12.71 - - -
EOP Unit Value $12.50 12.71 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Pharmaceuticals (2002)
With No Optional Benefits
BOP Unit Value $7.51 7.93 8.89 8.56
EOP Unit Value $8.28 7.51 7.93 8.89 8.56
Number of Units 716,678 515,768 527,336 266,978 136,559
With LT5, HDV, and EBP
BOP Unit Value $9.44 - - -
EOP Unit Value $10.27 9.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Precious Metals (2002)
With No Optional Benefits
BOP Unit Value $14.62 11.77 13.29 9.70
EOP Unit Value $15.44 14.62 11.77 13.29 9.70
Number of Units 2,487,596 2,426,530 1,479,384 1,329,806 1,175,651
With LT5, HDV, and EBP
BOP Unit Value $12.00 - - -
EOP Unit Value $12.49 12.00 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Real Estate (2001)
With No Optional Benefits
BOP Unit Value $16.96 16.15 12.91 9.86
EOP Unit Value $22.10 16.96 16.15 12.91 9.86
Number of Units 926,728 501,989 1,816,706 462,906 441,318
With LT5, HDV, and EBP
BOP Unit Value $11.17 - - -
EOP Unit Value $14.36 11.17 - - -
Number of Units - - - - -
A-40
- ----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------
ProFund VP - Semiconductor (2002)
With No Optional Benefits
BOP Unit Value $7.64 7.15 9.51 5.14
EOP Unit Value $6.98 7.64 7.15 9.51 5.14
Number of Units 339,250 746,085 694,352 423,958 93,241
With LT5, HDV, and EBP
BOP Unit Value $10.65 - - -
EOP Unit Value $9.60 10.65 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Technology (2001)
With No Optional Benefits
BOP Unit Value $8.45 8.48 8.66 6.03
EOP Unit Value $8.98 8.45 8.48 8.66 6.03
Number of Units 673,628 577,739 727,580 497,972 254,131
With LT5, HDV, and EBP
BOP Unit Value $10.54 - - -
EOP Unit Value $11.05 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Telecommunications (2001)
With No Optional Benefits
BOP Unit Value $7.52 8.19 7.21 7.15
EOP Unit Value $9.93 7.52 8.19 7.21 7.15
Number of Units 1,277,316 456,586 460,848 398,350 272,408
With LT5, HDV, and EBP
BOP Unit Value $9.74 - - -
EOP Unit Value $12.68 9.74 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Utilities (2001)
With No Optional Benefits
BOP Unit Value $12.37 11.13 9.34 7.83
EOP Unit Value $14.51 12.37 11.13 9.34 7.83
Number of Units 2,195,309 1,996,877 1,060,939 618,427 521,419
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $12.26 10.60 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bull (2002)
With No Optional Benefits
BOP Unit Value $10.64 10.53 9.84 7.97
EOP Unit Value $11.90 10.64 10.53 9.84 7.97
Number of Units 7,031,661 7,846,866 8,215,357 3,563,562 954,792
With LT5, HDV, and EBP
BOP Unit Value $10.12 - - -
EOP Unit Value $11.16 10.12 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bear (2001)
With No Optional Benefits
BOP Unit Value $7.23 7.45 8.44 11.38
EOP Unit Value $6.57 7.23 7.45 8.44 11.38
Number of Units 1,868,606 2,169,662 1,202,243 1,886,515 1,532,543
With LT5, HDV, and EBP
BOP Unit Value $9.54 - - -
EOP Unit Value $8.56 9.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Ultra Bull (2001)
With No Optional Benefits
BOP Unit Value $11.87 11.76 10.20 6.78
EOP Unit Value $14.36 11.87 11.76 10.20 6.78
Number of Units 1,596,920 1,158,025 2,817,803 1,431,345 297,435
With LT5, HDV, and EBP
BOP Unit Value $10.25 - - -
EOP Unit Value $12.23 10.25 - - -
Number of Units - - - - -
A-41
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - OTC (2001)
With No Optional Benefits
BOP Unit Value $9.80 9.94 9.32 6.45
EOP Unit Value $10.16 9.80 9.94 9.32 6.45
Number of Units 1,764,614 2,467,486 4,885,351 4,445,234 1,346,852
With LT5, HDV, and EBP
BOP Unit Value $10.55 - - -
EOP Unit Value $10.79 10.55 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Short OTC (2002)
With No Optional Benefits
BOP Unit Value $5.88 5.93 6.78 11.00
EOP Unit Value $5.70 5.88 5.93 6.78 11.00
Number of Units 1,891,265 2,494,112 908,064 1,535,439 433,181
With LT5, HDV, and EBP
BOP Unit Value $9.14 - - -
EOP Unit Value $8.75 9.14 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraOTC (1999)
With No Optional Benefits
BOP Unit Value $7.47 7.89 7.03 3.53
EOP Unit Value $7.70 7.47 7.89 7.03 3.53
Number of Units 2,319,572 4,740,165 6,592,447 3,410,589 1,003,123
With LT5, HDV, and EBP
BOP Unit Value $11.04 - - -
EOP Unit Value $11.23 11.04 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.49 11.67 10.23 7.66
EOP Unit Value $13.80 12.49 11.67 10.23 7.66
Number of Units 1,978,580 2,164,543 2,632,869 1,455,513 438,387
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $11.55 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $11.58 10.58 9.69 7.70
EOP Unit Value $11.84 11.58 10.58 9.69 7.70
Number of Units 1,594,539 5,059,311 2,220,901 1,009,867 439,054
With LT5, HDV, and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $10.85 10.76 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraMid-Cap (2002)
With No Optional Benefits
BOP Unit Value $13.91 11.99 9.55 5.71
EOP Unit Value $15.14 13.91 11.99 9.55 5.71
Number of Units 1,588,771 1,935,487 3,106,849 1,112,311 477,953
With LT5, HDV, and EBP
BOP Unit Value $11.38 - - -
EOP Unit Value $12.22 11.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $11.35 11.10 9.39 7.09
EOP Unit Value $13.11 11.35 11.10 9.39 7.09
Number of Units 2,446,357 1,398,442 4,088,760 5,144,632 994,778
With LT5, HDV, and EBP
BOP Unit Value $10.30 - - -
EOP Unit Value $11.73 10.30 - - -
Number of Units - - - - -
A-42
- ----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------
ProFund VP - Small-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $12.67 11.98 10.16 7.69
EOP Unit Value $13.54 12.67 11.98 10.16 7.69
Number of Units 1,643,633 4,579,887 4,677,820 3,868,951 772,260
With LT5, HDV, and EBP
BOP Unit Value $10.48 - - -
EOP Unit Value $11.05 10.48 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - UltraSmall-Cap (1999)
With No Optional Benefits
BOP Unit Value $15.23 15.52 12.04 6.14
EOP Unit Value $18.87 15.23 15.52 12.04 6.14
Number of Units 1,580,595 816,755 5,098,565 1,702,558 212,085
With LT5, HDV, and EBP
BOP Unit Value $10.66 - - -
EOP Unit Value $13.03 10.66 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - U.S. Government Plus (2002)
With No Optional Benefits
BOP Unit Value $12.64 11.79 11.08 11.56
EOP Unit Value $11.86 12.64 11.79 11.08 11.56
Number of Units 821,668 2,312,868 1,051,158 731,470 2,486,854
With LT5, HDV, and EBP
BOP Unit Value $10.54 - - -
EOP Unit Value $9.76 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - Rising Rates Opportunity (2002)
With No Optional Benefits
BOP Unit Value $6.00 6.63 7.56 8.02
EOP Unit Value $6.50 6.00 6.63 7.56 8.02
Number of Units 4,567,551 3,415,324 5,314,528 1,817,924 165,792
With LT5, HDV, and EBP
BOP Unit Value $9.08 - - -
EOP Unit Value $9.71 9.08 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.30 10.37 - -
EOP Unit Value $11.05 10.30 10.37 - -
Number of Units 2,181,106 2,620,751 72,725 - -
With LT5, HDV, and EBP
BOP Unit Value $9.98 - - -
EOP Unit Value $10.56 9.98 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
With No Optional Benefits
BOP Unit Value $10.51 10.37 - -
EOP Unit Value $12.26 10.51 10.37 - -
Number of Units 4,023,312 2,141,308 159,605 - -
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $11.74 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
With No Optional Benefits
BOP Unit Value $8.64 9.70 - -
EOP Unit Value $8.18 8.64 9.70 - -
Number of Units 254,207 364,782 39,360 - -
With LT5, HDV, and EBP
BOP Unit Value $8.94 - - -
EOP Unit Value $8.36 8.94 - - -
Number of Units - - - - -
A-43
- ------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
With No Optional Benefits
BOP Unit Value $9.11 9.54 - -
EOP Unit Value $7.90 9.11 9.54 - -
Number of Units 560,897 220,843 136,809 - -
With LT5, HDV, and EBP
BOP Unit Value $9.17 - - -
EOP Unit Value $7.84 9.17 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
Access VP High Yield
With No Optional Benefits
BOP Unit Value $10.56 - - - -
EOP Unit Value $11.38 10.56 - - -
Number of Units 1,207,864 899,141 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.47 - - -
EOP Unit Value $11.12 10.47 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust(R) 10 Uncommon Values (2000)
With No Optional Benefits
BOP Unit Value $9.92 10.03 9.16 6.80
EOP Unit Value $10.15 9.92 10.03 9.16 6.80
Number of Units 100,227 87,726 91,924 66,435 19,826
With LT5, HDV, and EBP
BOP Unit Value $9.74 - - -
EOP Unit Value $9.83 9.74 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
With No Optional Benefits
BOP Unit Value $12.84 11.85 - -
EOP Unit Value $17.48 12.84 11.85 - -
Number of Units 1,507,757 590,605 311,233 - -
With LT5, HDV, and EBP
BOP Unit Value $10.83 - - -
EOP Unit Value $14.54 10.83 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Managed VIP
With No Optional Benefits
BOP Unit Value $11.94 11.32 - -
EOP Unit Value $13.10 11.94 11.32 - -
Number of Units 2,772,210 2,420,873 1,777,316 - -
With LT5, HDV, and EBP
BOP Unit Value $10.43 - - -
EOP Unit Value $11.29 10.43 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
With No Optional Benefits
BOP Unit Value $10.83 10.66 - -
EOP Unit Value $11.60 10.83 10.66 - -
Number of Units 199,508 134,177 82,809 - -
With LT5, HDV, and EBP
BOP Unit Value $10.75 - - -
EOP Unit Value $11.35 10.75 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust S&P Target 24
With No Optional Benefits
BOP Unit Value $11.01 10.75 - -
EOP Unit Value $11.14 11.01 10.75 - -
Number of Units 290,152 304,840 173,851 - -
With LT5, HDV, and EBP
BOP Unit Value $10.48 - - -
EOP Unit Value $10.46 10.48 - - -
Number of Units - - - - -
A-44
- --------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------
First Trust The Dow Target 10
With No Optional Benefits
BOP Unit Value $9.98 10.48 - -
EOP Unit Value $12.32 9.98 10.48 - -
Number of Units 481,064 194,864 155,695 - -
With LT5, HDV, and EBP
BOP Unit Value $9.53 - - -
EOP Unit Value $11.61 9.53 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Dow Target Dividend
With No Optional Benefits
BOP Unit Value $9.76 - - -
EOP Unit Value $11.34 9.76 - - -
Number of Units 2,310,768 1,240,527 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.67 - - -
EOP Unit Value $11.08 9.67 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Value Line Target 25
With No Optional Benefits
BOP Unit Value $14.82 12.59 - -
EOP Unit Value $15.00 14.82 12.59 - -
Number of Units 1,119,827 1,068,339 389,792 - -
With LT5, HDV, and EBP
BOP Unit Value $11.11 - - -
EOP Unit Value $11.08 11.11 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
SP International Growth
formerly, SP William Blair International Growth
With No Optional Benefits
BOP Unit Value $12.05 10.53 - -
EOP Unit Value $14.35 12.05 10.53 - -
Number of Units 742,865 672,243 269,671 - -
With LT5, HDV, and EBP
BOP Unit Value $11.18 - - -
EOP Unit Value $13.12 11.18 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.66 - - - -
Number of Units 5,258,474 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.54 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.58 - - - -
Number of Units 3,781,525 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.47 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.48 - - - -
Number of Units 3,795,562 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.37 - - - -
Number of Units - - - - -
A-45
ASL II - Prospectus
- ------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
AST JP Morgan International Equity Portfolio
With No Optional Benefits
BOP Unit Value $13.84 12.67 11.00 8.56
EOP Unit Value $16.71 13.84 12.67 11.00 8.56
Number of Units 4,715,269 5,621,836 3,227,381 2,415,394 2,569,506
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.55 10.53 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair International Growth (1997)
With No Optional Benefits
BOP Unit Value $17.54 15.30 13.39 9.72
EOP Unit Value $20.87 17.54 15.30 13.39 9.72
Number of Units 9,628,446 12,141,522 11,265,469 5,547,558 835,523
With LT5, HDV, and EBP
BOP Unit Value $11.16 - - -
EOP Unit Value $13.10 11.16 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International Value
With No Optional Benefits
BOP Unit Value $14.36 12.84 10.79 8.19
EOP Unit Value $18.00 14.36 12.84 10.79 8.19
Number of Units 3,305,620 2,013,544 1,897,469 1,201,268 269,995
With LT5, HDV, and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $13.09 10.59 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST MFS Global Equity (1999)
With No Optional Benefits
BOP Unit Value $13.92 13.16 11.30 9.04
EOP Unit Value $17.02 13.92 13.16 11.30 9.04
Number of Units 2,905,252 1,907,776 2,276,801 1,393,001 969,509
With LT5, HDV, and EBP
BOP Unit Value $10.36 - - -
EOP Unit Value $12.49 10.36 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $9.04 9.05 9.89 6.92
EOP Unit Value $10.01 9.04 9.05 9.89 6.92
Number of Units 1,867,490 2,134,730 2,242,129 3,292,593 1,970,250
With LT5, HDV, and EBP
BOP Unit Value $10.31 - - -
EOP Unit Value $11.27 10.31 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap Growth
formerly, AST DeAM Small-Cap Growth (1999)
With No Optional Benefits
BOP Unit Value $11.83 11.98 11.13 7.67
EOP Unit Value $12.53 11.83 11.98 11.13 7.67
Number of Units 1,174,654 1,385,430 1,618,719 1,682,193 639,695
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.66 10.20 - - -
Number of Units - - - - -
A-46
- -----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------------
AST Federated Aggressive Growth (2000)
With No Optional Benefits
BOP Unit Value $16.60 15.42 12.74 7.64
EOP Unit Value $18.43 16.60 15.42 12.74 7.64
Number of Units 4,641,175 5,464,856 4,808,453 3,085,373 1,255,415
With LT5, HDV, and EBP
BOP Unit Value $10.84 - - -
EOP Unit Value $11.87 10.84 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $15.68 15.19 12.85 9.26
EOP Unit Value $18.08 15.68 15.19 12.85 9.26
Number of Units 1,000,596 1,243,642 1,541,896 1,504,296 1,492,775
With LT5, HDV, and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.87 10.44 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $14.91 14.22 12.42 9.30
EOP Unit Value $17.61 14.91 14.22 12.42 9.30
Number of Units 9,098,178 11,285,282 10,785,030 10,183,346 6,141,523
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.26 10.53 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST DeAM Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.92 12.99 10.81 7.66
EOP Unit Value $15.25 12.92 12.99 10.81 7.66
Number of Units 1,874,276 2,106,236 2,143,020 1,134,865 423,387
With LT5, HDV, and EBP
BOP Unit Value $9.90 - - -
EOP Unit Value $11.53 9.90 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $12.16 11.80 10.31 7.97
EOP Unit Value $12.71 12.16 11.80 10.31 7.97
Number of Units 4,189,111 5,391,424 4,375,813 3,027,057 1,273,118
With LT5, HDV, and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.78 10.46 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Growth (1994)
With No Optional Benefits
BOP Unit Value $12.12 10.86 9.51 7.41
EOP Unit Value $13.59 12.12 10.86 9.51 7.41
Number of Units 5,378,198 5,728,446 4,715,301 3,415,318 2,175,250
With LT5, HDV, and EBP
BOP Unit Value $11.21 - - -
EOP Unit Value $12.40 11.21 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value (1993)
With No Optional Benefits
BOP Unit Value $15.99 14.51 12.01 8.96
EOP Unit Value $17.42 15.99 14.51 12.01 8.96
Number of Units 9,574,218 12,260,007 11,461,684 8,530,129 5,118,558
With LT5, HDV, and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $11.56 10.76 - - -
Number of Units - - - - -
A-47
- ---------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------
AST Alger All-Cap Growth (2000)
With No Optional Benefits
BOP Unit Value $11.10 9.67 9.07 6.80
EOP Unit Value - $11.10 9.67 9.07 6.80
Number of Units - - 1,798,457 2,002,166 658,419
With LT5, HDV, and EBP
BOP Unit Value $11.59 - - -
EOP Unit Value - $11.59 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Mid-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $12.83 12.38 10.91 8.17
EOP Unit Value $14.42 12.83 12.38 10.91 8.17
Number of Units 1,907,063 1,988,252 2,587,064 2,513,413 1,200,225
With LT5, HDV, and EBP
BOP Unit Value $10.24 - - -
EOP Unit Value $11.34 10.24 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Natural Resources (1995)
With No Optional Benefits
BOP Unit Value $21.00 16.25 12.59 9.59
EOP Unit Value $23.93 21.00 16.25 12.59 9.59
Number of Units 2,942,718 3,677,614 2,040,188 2,011,627 724,670
With LT5, HDV, and EBP
BOP Unit Value $11.61 - - -
EOP Unit Value $13.05 11.61 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.81 9.44 9.08 7.46
EOP Unit Value $11.23 10.81 9.44 9.08 7.46
Number of Units 4,132,529 3,925,740 2,378,881 2,098,873 1,869,353
With LT5, HDV, and EBP
BOP Unit Value $11.98 - - -
EOP Unit Value $12.28 11.98 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $10.43 9.97 9.16 7.58
EOP Unit Value $11.25 10.43 9.97 9.16 7.58
Number of Units 4,572,301 5,915,443 4,529,834 4,784,269 2,930,432
With LT5, HDV, and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.32 10.64 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Marsico Capital Growth (1997)
With No Optional Benefits
BOP Unit Value $12.88 12.26 10.78 8.32
EOP Unit Value $13.59 12.88 12.26 10.78 8.32
Number of Units 26,497,526 32,140,125 28,117,310 20,138,164 10,144,317
With LT5, HDV, and EBP
BOP Unit Value $10.78 - - -
EOP Unit Value $11.21 10.78 - - -
Number of Units - - - - -
- ---------------------------------------------------------------------------------------------------
AST Goldman Sachs Concentrated Growth (1992)
With No Optional Benefits
BOP Unit Value $9.80 9.64 9.45 7.67
EOP Unit Value $10.60 9.80 9.64 9.45 7.67
Number of Units 2,498,654 2,531,900 2,785,100 2,053,023 1,349,939
With LT5, HDV, and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.35 10.64 - - -
Number of Units - - - - -
A-48
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST DeAM Large-Cap Value (2000)
With No Optional Benefits
BOP Unit Value $13.47 12.53 10.78 8.66
EOP Unit Value $16.13 13.47 12.53 10.78 8.66
Number of Units 4,397,725 2,585,881 2,351,197 1,072,256 664,649
With LT5, HDV, and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $12.51 10.59 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth + Value (2001)
With No Optional Benefits
BOP Unit Value $11.86 10.72 9.91 7.99
EOP Unit Value - $11.86 10.72 9.91 7.99
Number of Units - - 1,620,391 1,387,072 965,912
With LT5, HDV, and EBP
BOP Unit Value $11.21 - - -
EOP Unit Value - $11.21 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Core Value (2001)
With No Optional Benefits
BOP Unit Value $12.86 12.39 11.06 8.76
EOP Unit Value $15.34 12.86 12.39 11.06 8.76
Number of Units 5,318,094 4,311,857 4,643,022 3,621,862 6,005,922
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $12.00 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Cohen & Steers Real Estate (1998)
With No Optional Benefits
BOP Unit Value $20.88 18.49 13.63 10.08
EOP Unit Value $28.08 20.88 18.49 13.63 10.08
Number of Units 3,925,105 3,749,124 4,080,179 3,097,315 1,563,489
With LT5, HDV, and EBP
BOP Unit Value $11.88 - - -
EOP Unit Value $15.76 11.88 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Managed Index 500 (1998)
With No Optional Benefits
BOP Unit Value $11.27 11.07 10.23 8.17
EOP Unit Value $12.48 11.27 11.07 10.23 8.17
Number of Units 6,255,253 6,774,078 6,845,369 5,442,511 3,662,406
With LT5, HDV, and EBP
BOP Unit Value $10.28 - - -
EOP Unit Value $11.23 10.28 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST American Century Income & Growth (1997)
With No Optional Benefits
BOP Unit Value $11.90 11.57 10.45 8.25
EOP Unit Value $13.68 11.90 11.57 10.45 8.25
Number of Units 3,984,557 4,205,655 4,670,846 2,115,438 1,751,136
With LT5, HDV, and EBP
BOP Unit Value $10.22 - - -
EOP Unit Value $11.58 10.22 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth & Income (1992)
With No Optional Benefits
BOP Unit Value $11.81 11.46 10.50 8.06
EOP Unit Value $13.62 11.81 11.46 10.50 8.06
Number of Units 23,350,650 31,190,346 25,850,506 21,264,670 6,667,373
With LT5, HDV, and EBP
BOP Unit Value $10.15 - - -
EOP Unit Value $11.55 10.15 - - -
Number of Units - - - - -
A-49
- -------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $11.69 11.17 9.83 8.34
EOP Unit Value $13.62 11.69 11.17 9.83 8.34
Number of Units 5,568,043 5,245,455 3,717,848 2,647,064 2,110,071
With LT5, HDV, and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.99 10.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST UBS Dynamic Alpha
formerly, AST Global Allocation (1993)
With No Optional Benefits
BOP Unit Value $11.77 11.19 10.24 8.71
EOP Unit Value $12.86 11.77 11.19 10.24 8.71
Number of Units 1,120,866 1,055,033 1,061,887 898,161 847,517
With LT5, HDV, and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $11.32 10.50 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST American Century Strategic Allocation
formerly, AST American Century Strategic Balanced (1997)
With No Optional Benefits
BOP Unit Value $11.79 11.46 10.69 9.14
EOP Unit Value $12.72 11.79 11.46 10.69 9.14
Number of Units 2,165,859 2,294,531 2,335,598 2,045,205 1,126,058
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.85 10.20 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Asset Allocation (1994)
With No Optional Benefits
BOP Unit Value $12.49 12.13 11.09 9.09
EOP Unit Value $13.82 12.49 12.13 11.09 9.09
Number of Units 4,776,442 4,192,626 3,551,315 2,243,566 921,329
With LT5, HDV, and EBP
BOP Unit Value $10.24 - - -
EOP Unit Value $11.17 10.24 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond (1994)
With No Optional Benefits
BOP Unit Value $12.64 13.45 12.59 11.34
EOP Unit Value $13.21 12.64 13.45 12.59 11.34
Number of Units 6,093,700 6,261,824 4,717,822 2,962,471 1,739,313
With LT5, HDV, and EBP
BOP Unit Value $9.34 - - -
EOP Unit Value $9.63 9.34 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------
AST High Yield
formerly, AST High Yield Bond
With No Optional Benefits
BOP Unit Value $12.62 12.69 11.61 9.71
EOP Unit Value $13.70 12.62 12.69 11.61 9.71
Number of Units 9,653,937 9,658,908 13,717,128 12,201,163 5,592,940
With LT5, HDV, and EBP
BOP Unit Value $9.75 - - -
EOP Unit Value $10.43 9.75 - - -
Number of Units - - - - -
A-50
- ----------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.20 12.26 11.61 9.94
EOP Unit Value $13.17 12.20 12.26 11.61 9.94
Number of Units 10,147,675 12,427,806 8,369,008 7,751,236 4,146,530
With LT5, HDV, and EBP
BOP Unit Value $9.84 - - -
EOP Unit Value $10.48 9.84 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond (1994)
With No Optional Benefits
BOP Unit Value $11.40 11.31 10.95 10.57
EOP Unit Value $11.63 11.40 11.31 10.95 10.57
Number of Units 21,700,661 22,436,395 33,208,757 26,287,388 20,544,075
With LT5, HDV, and EBP
BOP Unit Value $10.04 - - -
EOP Unit Value $10.10 10.04 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond (1995)
With No Optional Benefits
BOP Unit Value $10.54 10.55 10.51 10.34
EOP Unit Value $10.76 10.54 10.55 10.51 10.34
Number of Units 22,394,558 28,031,653 21,299,789 15,242,856 11,274,642
With LT5, HDV, and EBP
BOP Unit Value $9.94 - - -
EOP Unit Value $10.01 9.94 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $9.88 9.78 9.86 9.96
EOP Unit Value $10.16 9.88 9.78 9.86 9.96
Number of Units 46,325,237 42,442,274 29,870,585 32,730,501 36,255,772
With LT5, HDV, and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $10.13 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Aggressive Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $11.38 10.00 - - -
Number of Units 5,212,589 649,829 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $11.21 9.99 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------------
AST Capital Growth Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.01 - - -
EOP Unit Value $11.19 10.01 - - -
Number of Units 23,048,850 2,586,012 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $11.02 10.00 - - -
Number of Units 2,672 - - - -
- ----------------------------------------------------------------------------------------------------
AST Balanced Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.02 - - -
EOP Unit Value $11.01 10.02 - - -
Number of Units 21,829,919 2,726,484 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.01 - - -
EOP Unit Value $10.85 10.01 - - -
Number of Units 18,249 - - - -
A-51
- -------------------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------------------------------------
AST Conservative Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.03 - - -
EOP Unit Value $10.90 10.03 - - -
Number of Units 7,315,279 685,724 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.02 - - -
EOP Unit Value $10.74 10.02 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AST Preservation Asset Allocation Portfolio
With No Optional Benefits
BOP Unit Value $10.04 - - -
EOP Unit Value $10.66 10.04 - - -
Number of Units 3,303,256 115,215 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.03 - - -
EOP Unit Value $10.50 10.03 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
Gartmore Variable Investment Trust - GVIT Developing Markets (1996)
With No Optional Benefits
BOP Unit Value $20.72 16.02 13.60 8.66
EOP Unit Value $27.43 20.72 16.02 13.60 8.66
Number of Units 2,835,328 3,395,891 2,103,950 1,763,660 283,466
With LT5, HDV, and EBP
BOP Unit Value $11.93 - - -
EOP Unit Value $15.57 11.93 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
WFVT Advantage Equity Income (1999)
With No Optional Benefits
BOP Unit Value $11.59 11.18 10.23 8.25
EOP Unit Value $13.51 11.59 11.18 10.23 8.25
Number of Units 582,613 534,649 590,808 314,757 196,720
With LT5, HDV, and EBP
BOP Unit Value $10.08 - - -
EOP Unit Value $11.60 10.08 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Dynamics (1999)
With No Optional Benefits
BOP Unit Value $11.67 10.72 9.61 7.09
EOP Unit Value $13.33 11.67 10.72 9.61 7.09
Number of Units 605,730 602,064 668,032 889,464 543,762
With LT5, HDV, and EBP
BOP Unit Value $10.80 - - -
EOP Unit Value $12.16 10.80 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Technology (1999)
With No Optional Benefits
BOP Unit Value $8.13 8.09 7.87 5.50
EOP Unit Value $8.84 8.13 8.09 7.87 5.50
Number of Units 513,442 453,391 512,424 578,651 293,307
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $11.36 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------------------------------------
AIM V.I. - Health Sciences (1999)
With No Optional Benefits
BOP Unit Value $11.31 10.64 10.05 8.00
EOP Unit Value $11.71 11.31 10.64 10.05 8.00
Number of Units 1,250,782 1,131,375 937,586 698,364 475,873
With LT5, HDV, and EBP
BOP Unit Value $11.04 - - -
EOP Unit Value $11.27 11.04 - - -
Number of Units - - - - -
A-52
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------
AIM V.I. - Financial Services (1999)
With No Optional Benefits
BOP Unit Value $12.43 11.94 11.17 8.76
EOP Unit Value $14.24 12.43 11.94 11.17 8.76
Number of Units 778,674 1,042,992 585,185 607,265 366,258
With LT5, HDV, and EBP
BOP Unit Value $10.62 - - -
EOP Unit Value $12.00 10.62 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - International Equity (2000)
With No Optional Benefits
BOP Unit Value $15.59 13.66 11.65 8.15
EOP Unit Value $18.88 15.59 13.66 11.65 8.15
Number of Units 1,081,552 689,816 414,631 189,143 113,389
With LT5, HDV, and EBP
BOP Unit Value $10.88 - - -
EOP Unit Value $13.00 10.88 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Special Equity (1999)
With No Optional Benefits
BOP Unit Value $10.31 11.58 11.12 7.44
EOP Unit Value - $10.31 11.58 11.12 7.44
Number of Units - - 702,642 815,621 127,728
With LT5, HDV, and EBP
BOP Unit Value $9.26 - - -
EOP Unit Value - $9.26 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $11.53 11.29 10.71 7.78
EOP Unit Value $12.03 11.53 11.29 10.71 7.78
Number of Units 241,307 281,775 570,123 404,789 39,943
With LT5, HDV, and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $10.79 10.50 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
Evergreen VA Growth Fund
With No Optional Benefits
BOP Unit Value $11.44 - - - -
EOP Unit Value $12.49 11.44 - - -
Number of Units 553,827 606,614 - - -
With LT5, HDV, and EBP
BOP Unit Value $11.33 - - -
EOP Unit Value $12.20 11.33 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Europe 30 (1999)
With No Optional Benefits
BOP Unit Value $12.94 12.17 10.83 7.93
EOP Unit Value $14.95 12.94 12.17 10.83 7.93
Number of Units 2,790,577 1,133,421 1,812,435 2,116,400 292,396
With LT5, HDV, and EBP
BOP Unit Value $10.41 - - -
EOP Unit Value $11.87 10.41 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
ProFund VP - Asia 30 (2002)
With No Optional Benefits
BOP Unit Value $14.45 12.30 12.57 7.75
EOP Unit Value $19.80 14.45 12.30 12.57 7.75
Number of Units 3,073,769 1,723,105 896,010 942,605 281,993
With LT5, HDV, and EBP
BOP Unit Value $11.10 - - -
EOP Unit Value $14.99 11.10 - - -
Number of Units - - - - -
A-53
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Japan (2002)
With No Optional Benefits
BOP Unit Value $13.31 9.55 9.03 7.24
EOP Unit Value $14.51 13.31 9.55 9.03 7.24
Number of Units 1,650,266 3,413,955 710,879 426,718 65,845
With LT5, HDV, and EBP
BOP Unit Value $13.38 - - -
EOP Unit Value $14.38 13.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Banks (2002)
With No Optional Benefits
BOP Unit Value $11.77 11.98 10.90 8.56
EOP Unit Value $13.35 11.77 11.98 10.90 8.56
Number of Units 402,883 351,876 229,711 93,067 101,136
With LT5, HDV, and EBP
BOP Unit Value $10.10 - - -
EOP Unit Value $11.31 10.10 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Basic Materials (2002)
With No Optional Benefits
BOP Unit Value $11.96 11.87 10.95 8.46
EOP Unit Value $13.58 11.96 11.87 10.95 8.46
Number of Units 779,466 681,692 529,237 1,512,864 76,331
With LT5, HDV, and EBP
BOP Unit Value $9.48 - - -
EOP Unit Value $10.62 9.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Biotechnology (2001)
With No Optional Benefits
BOP Unit Value $12.34 10.52 9.75 7.09
EOP Unit Value $11.64 12.34 10.52 9.75 7.09
Number of Units 393,923 697,686 757,678 208,971 130,082
With LT5, HDV, and EBP
BOP Unit Value $13.48 - - -
EOP Unit Value $12.55 13.48 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Services (2002)
With No Optional Benefits
BOP Unit Value $8.97 9.56 9.04 7.25
EOP Unit Value $9.88 8.97 9.56 9.04 7.25
Number of Units 192,639 86,431 430,620 136,269 128,022
With LT5, HDV, and EBP
BOP Unit Value $9.66 - - -
EOP Unit Value $10.50 9.66 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Consumer Goods (2002)
With No Optional Benefits
BOP Unit Value $10.15 10.36 9.64 8.28
EOP Unit Value $11.25 10.15 10.36 9.64 8.28
Number of Units 548,567 161,037 369,007 58,425 148,446
With LT5, HDV, and EBP
BOP Unit Value $9.73 - - -
EOP Unit Value $10.63 9.73 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Oil & Gas (2001)
With No Optional Benefits
BOP Unit Value $17.22 13.33 10.48 8.71
EOP Unit Value $20.43 17.22 13.33 10.48 8.71
Number of Units 2,251,126 2,573,776 1,856,882 1,225,844 299,833
With LT5, HDV, and EBP
BOP Unit Value $10.92 - - -
EOP Unit Value $12.78 10.92 - - -
Number of Units - - - - -
A-54
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - Financial (2001)
With No Optional Benefits
BOP Unit Value $12.46 12.19 11.23 8.85
EOP Unit Value $14.38 12.46 12.19 11.23 8.85
Number of Units 913,872 616,873 553,342 398,159 221,377
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $11.98 10.53 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Healthcare (2001)
With No Optional Benefits
BOP Unit Value $9.63 9.23 9.17 7.94
EOP Unit Value $9.96 9.63 9.23 9.17 7.94
Number of Units 2,106,409 2,175,821 1,318,525 707,449 388,508
With LT5, HDV, and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.68 10.46 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Industrial (2002)
With No Optional Benefits
BOP Unit Value $11.23 11.15 10.01 7.93
EOP Unit Value $12.33 11.23 11.15 10.01 7.93
Number of Units 242,684 211,677 253,411 318,339 12,642
With LT5, HDV, and EBP
BOP Unit Value $10.06 - - -
EOP Unit Value $10.90 10.06 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Internet (2002)
With No Optional Benefits
BOP Unit Value $18.90 17.89 15.00 8.57
EOP Unit Value $18.84 18.90 17.89 15.00 8.57
Number of Units 200,072 467,320 992,879 206,876 306,572
With LT5, HDV, and EBP
BOP Unit Value $12.71 - - -
EOP Unit Value $12.50 12.71 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Pharmaceuticals (2002)
With No Optional Benefits
BOP Unit Value $7.51 7.93 8.89 8.56
EOP Unit Value $8.28 7.51 7.93 8.89 8.56
Number of Units 716,678 515,768 527,336 266,978 136,559
With LT5, HDV, and EBP
BOP Unit Value $9.44 - - -
EOP Unit Value $10.27 9.44 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Precious Metals (2002)
With No Optional Benefits
BOP Unit Value $14.62 11.77 13.29 9.70
EOP Unit Value $15.44 14.62 11.77 13.29 9.70
Number of Units 2,487,596 2,426,530 1,479,384 1,329,806 1,175,651
With LT5, HDV, and EBP
BOP Unit Value $12.00 - - -
EOP Unit Value $12.49 12.00 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Real Estate (2001)
With No Optional Benefits
BOP Unit Value $16.96 16.15 12.91 9.86
EOP Unit Value $22.10 16.96 16.15 12.91 9.86
Number of Units 926,728 501,989 1,816,706 462,906 441,318
With LT5, HDV, and EBP
BOP Unit Value $11.17 - - -
EOP Unit Value $14.36 11.17 - - -
Number of Units - - - - -
A-55
- ----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------
ProFund VP - Semiconductor (2002)
With No Optional Benefits
BOP Unit Value $7.64 7.15 9.51 5.14
EOP Unit Value $6.98 7.64 7.15 9.51 5.14
Number of Units 339,250 746,085 694,352 423,958 93,241
With LT5, HDV, and EBP
BOP Unit Value $10.65 - - -
EOP Unit Value $9.60 10.65 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Technology (2001)
With No Optional Benefits
BOP Unit Value $8.45 8.48 8.66 6.03
EOP Unit Value $8.98 8.45 8.48 8.66 6.03
Number of Units 673,628 577,739 727,580 497,972 254,131
With LT5, HDV, and EBP
BOP Unit Value $10.54 - - -
EOP Unit Value $11.05 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Telecommunications (2001)
With No Optional Benefits
BOP Unit Value $7.52 8.19 7.21 7.15
EOP Unit Value $9.93 7.52 8.19 7.21 7.15
Number of Units 1,277,316 456,586 460,848 398,350 272,408
With LT5, HDV, and EBP
BOP Unit Value $9.74 - - -
EOP Unit Value $12.68 9.74 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Utilities (2001)
With No Optional Benefits
BOP Unit Value $12.37 11.13 9.34 7.83
EOP Unit Value $14.51 12.37 11.13 9.34 7.83
Number of Units 2,195,309 1,996,877 1,060,939 618,427 521,419
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $12.26 10.60 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bull (2002)
With No Optional Benefits
BOP Unit Value $10.64 10.53 9.84 7.97
EOP Unit Value $11.90 10.64 10.53 9.84 7.97
Number of Units 7,031,661 7,846,866 8,215,357 3,563,562 954,792
With LT5, HDV, and EBP
BOP Unit Value $10.12 - - -
EOP Unit Value $11.16 10.12 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Bear (2001)
With No Optional Benefits
BOP Unit Value $7.23 7.45 8.44 11.38
EOP Unit Value $6.57 7.23 7.45 8.44 11.38
Number of Units 1,868,606 2,169,662 1,202,243 1,886,515 1,532,543
With LT5, HDV, and EBP
BOP Unit Value $9.54 - - -
EOP Unit Value $8.56 9.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------
ProFund VP - Ultra Bull (2001)
With No Optional Benefits
BOP Unit Value $11.87 11.76 10.20 6.78
EOP Unit Value $14.36 11.87 11.76 10.20 6.78
Number of Units 1,596,920 1,158,025 2,817,803 1,431,345 297,435
With LT5, HDV, and EBP
BOP Unit Value $10.25 - - -
EOP Unit Value $12.23 10.25 - - -
Number of Units - - - - -
A-56
- -------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -------------------------------------------------------------------------------------
ProFund VP - OTC (2001)
With No Optional Benefits
BOP Unit Value $9.80 9.94 9.32 6.45
EOP Unit Value $10.16 9.80 9.94 9.32 6.45
Number of Units 1,764,614 2,467,486 4,885,351 4,445,234 1,346,852
With LT5, HDV, and EBP
BOP Unit Value $10.55 - - -
EOP Unit Value $10.79 10.55 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Short OTC (2002)
With No Optional Benefits
BOP Unit Value $5.88 5.93 6.78 11.00
EOP Unit Value $5.70 5.88 5.93 6.78 11.00
Number of Units 1,891,265 2,494,112 908,064 1,535,439 433,181
With LT5, HDV, and EBP
BOP Unit Value $9.14 - - -
EOP Unit Value $8.75 9.14 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraOTC (1999)
With No Optional Benefits
BOP Unit Value $7.47 7.89 7.03 3.53
EOP Unit Value $7.70 7.47 7.89 7.03 3.53
Number of Units 2,319,572 4,740,165 6,592,447 3,410,589 1,003,123
With LT5, HDV, and EBP
BOP Unit Value $11.04 - - -
EOP Unit Value $11.23 11.04 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $12.49 11.67 10.23 7.66
EOP Unit Value $13.80 12.49 11.67 10.23 7.66
Number of Units 1,978,580 2,164,543 2,632,869 1,455,513 438,387
With LT5, HDV, and EBP
BOP Unit Value $10.60 - - -
EOP Unit Value $11.55 10.60 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Mid-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $11.58 10.58 9.69 7.70
EOP Unit Value $11.84 11.58 10.58 9.69 7.70
Number of Units 1,594,539 5,059,311 2,220,901 1,009,867 439,054
With LT5, HDV, and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $10.85 10.76 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - UltraMid-Cap (2002)
With No Optional Benefits
BOP Unit Value $13.91 11.99 9.55 5.71
EOP Unit Value $15.14 13.91 11.99 9.55 5.71
Number of Units 1,588,771 1,935,487 3,106,849 1,112,311 477,953
With LT5, HDV, and EBP
BOP Unit Value $11.38 - - -
EOP Unit Value $12.22 11.38 - - -
Number of Units - - - - -
- -------------------------------------------------------------------------------------
ProFund VP - Small-Cap Value (2002)
With No Optional Benefits
BOP Unit Value $11.35 11.10 9.39 7.09
EOP Unit Value $13.11 11.35 11.10 9.39 7.09
Number of Units 2,446,357 1,398,442 4,088,760 5,144,632 994,778
With LT5, HDV, and EBP
BOP Unit Value $10.30 - - -
EOP Unit Value $11.73 10.30 - - -
Number of Units - - - - -
A-57
- ----------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ----------------------------------------------------------------------------------------------
ProFund VP - Small-Cap Growth (2002)
With No Optional Benefits
BOP Unit Value $12.67 11.98 10.16 7.69
EOP Unit Value $13.54 12.67 11.98 10.16 7.69
Number of Units 1,643,633 4,579,887 4,677,820 3,868,951 772,260
With LT5, HDV, and EBP
BOP Unit Value $10.48 - - -
EOP Unit Value $11.05 10.48 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - UltraSmall-Cap (1999)
With No Optional Benefits
BOP Unit Value $15.23 15.52 12.04 6.14
EOP Unit Value $18.87 15.23 15.52 12.04 6.14
Number of Units 1,580,595 816,755 5,098,565 1,702,558 212,085
With LT5, HDV, and EBP
BOP Unit Value $10.66 - - -
EOP Unit Value $13.03 10.66 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - U.S. Government Plus (2002)
With No Optional Benefits
BOP Unit Value $12.64 11.79 11.08 11.56
EOP Unit Value $11.86 12.64 11.79 11.08 11.56
Number of Units 821,668 2,312,868 1,051,158 731,470 2,486,854
With LT5, HDV, and EBP
BOP Unit Value $10.54 - - -
EOP Unit Value $9.76 10.54 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP - Rising Rates Opportunity (2002)
With No Optional Benefits
BOP Unit Value $6.00 6.63 7.56 8.02
EOP Unit Value $6.50 6.00 6.63 7.56 8.02
Number of Units 4,567,551 3,415,324 5,314,528 1,817,924 165,792
With LT5, HDV, and EBP
BOP Unit Value $9.08 - - -
EOP Unit Value $9.71 9.08 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Growth
With No Optional Benefits
BOP Unit Value $10.30 10.37 - -
EOP Unit Value $11.05 10.30 10.37 - -
Number of Units 2,181,106 2,620,751 72,725 - -
With LT5, HDV, and EBP
BOP Unit Value $9.98 - - -
EOP Unit Value $10.56 9.98 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Large-Cap Value
With No Optional Benefits
BOP Unit Value $10.51 10.37 - -
EOP Unit Value $12.26 10.51 10.37 - -
Number of Units 4,023,312 2,141,308 159,605 - -
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $11.74 10.20 - - -
Number of Units - - - - -
- ----------------------------------------------------------------------------------------------
ProFund VP Short Mid Cap
With No Optional Benefits
BOP Unit Value $8.64 9.70 - -
EOP Unit Value $8.18 8.64 9.70 - -
Number of Units 254,207 364,782 39,360 - -
With LT5, HDV, and EBP
BOP Unit Value $8.94 - - -
EOP Unit Value $8.36 8.94 - - -
Number of Units - - - - -
A-58
- ------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------
ProFund VP Short Small-Cap
With No Optional Benefits
BOP Unit Value $9.11 9.54 - -
EOP Unit Value $7.90 9.11 9.54 - -
Number of Units 560,897 220,843 136,809 - -
With LT5, HDV, and EBP
BOP Unit Value $9.17 - - -
EOP Unit Value $7.84 9.17 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
Access VP High Yield
With No Optional Benefits
BOP Unit Value $10.56 - - - -
EOP Unit Value $11.38 10.56 - - -
Number of Units 1,207,864 899,141 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.47 - - -
EOP Unit Value $11.12 10.47 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust(R) 10 Uncommon Values (2000)
With No Optional Benefits
BOP Unit Value $9.92 10.03 9.16 6.80
EOP Unit Value $10.15 9.92 10.03 9.16 6.80
Number of Units 100,227 87,726 91,924 66,435 19,826
With LT5, HDV, and EBP
BOP Unit Value $9.74 - - -
EOP Unit Value $9.83 9.74 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Global Dividend Target 15
With No Optional Benefits
BOP Unit Value $12.84 11.85 - -
EOP Unit Value $17.48 12.84 11.85 - -
Number of Units 1,507,757 590,605 311,233 - -
With LT5, HDV, and EBP
BOP Unit Value $10.83 - - -
EOP Unit Value $14.54 10.83 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust Managed VIP
With No Optional Benefits
BOP Unit Value $11.94 11.32 - -
EOP Unit Value $13.10 11.94 11.32 - -
Number of Units 2,772,210 2,420,873 1,777,316 - -
With LT5, HDV, and EBP
BOP Unit Value $10.43 - - -
EOP Unit Value $11.29 10.43 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust NASDAQ Target 15
With No Optional Benefits
BOP Unit Value $10.83 10.66 - -
EOP Unit Value $11.60 10.83 10.66 - -
Number of Units 199,508 134,177 82,809 - -
With LT5, HDV, and EBP
BOP Unit Value $10.75 - - -
EOP Unit Value $11.35 10.75 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------
First Trust S&P Target 24
With No Optional Benefits
BOP Unit Value $11.01 10.75 - -
EOP Unit Value $11.14 11.01 10.75 - -
Number of Units 290,152 304,840 173,851 - -
With LT5, HDV, and EBP
BOP Unit Value $10.48 - - -
EOP Unit Value $10.46 10.48 - - -
Number of Units - - - - -
A-59
- --------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------
First Trust The Dow Target 10
With No Optional Benefits
BOP Unit Value $9.98 10.48 - -
EOP Unit Value $12.32 9.98 10.48 - -
Number of Units 481,064 194,864 155,695 - -
With LT5, HDV, and EBP
BOP Unit Value $9.53 - - -
EOP Unit Value $11.61 9.53 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Dow Target Dividend
With No Optional Benefits
BOP Unit Value $9.76 - - -
EOP Unit Value $11.34 9.76 - - -
Number of Units 2,310,768 1,240,527 - - -
With LT5, HDV, and EBP
BOP Unit Value $9.67 - - -
EOP Unit Value $11.08 9.67 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
First Trust Value Line Target 25
With No Optional Benefits
BOP Unit Value $14.82 12.59 - -
EOP Unit Value $15.00 14.82 12.59 - -
Number of Units 1,119,827 1,068,339 389,792 - -
With LT5, HDV, and EBP
BOP Unit Value $11.11 - - -
EOP Unit Value $11.08 11.11 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
SP International Growth
formerly, SP William Blair International Growth
With No Optional Benefits
BOP Unit Value $12.05 10.53 - -
EOP Unit Value $14.35 12.05 10.53 - -
Number of Units 742,865 672,243 269,671 - -
With LT5, HDV, and EBP
BOP Unit Value $11.18 - - -
EOP Unit Value $13.12 11.18 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST Advanced Strategies Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.66 - - - -
Number of Units 5,258,474 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.54 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Balanced Target Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.58 - - - -
Number of Units 3,781,525 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.47 - - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------
AST First Trust Capital Appreciation Portfolio
With No Optional Benefits
BOP Unit Value $10.00 - - -
EOP Unit Value $10.48 - - - -
Number of Units 3,795,562 - - - -
With LT5, HDV, and EBP
BOP Unit Value $10.00 - - -
EOP Unit Value $10.37 - - - -
Number of Units - - - - -
A-60
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS
Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation
The following are examples of how the Enhanced Beneficiary Protection Optional
Death Benefit is calculated. Each example assumes that a $50,000 initial
Purchase Payment is made. Each example assumes that there is one Owner who is
age 50 on the Issue Date and that all Account Value is maintained in the
variable investment options. The formula for determining the Enhanced
Beneficiary Protection Optional Death Benefit is as follows:
Growth = Account Value of variable minus Purchase Payments -
investment options plus Interim proportional withdrawals
Value of Fixed Allocations
(no MVA applies)
Example with market increase
Assume that the Owner has made no withdrawals and that the Account Value has
been increasing due to positive market performance. On the date we receive due
proof of death, the Account Value is $75,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the
"Growth" under the Annuity.
Growth =$75,000 - [$50,000 - $0]
=$25,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
=$25,000 * 0.40
=$10,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$85,000
Examples with market decline
Assume that the Owner has made no withdrawals and that the Account Value has
been decreasing due to declines in market performance. On the date we receive
due proof of death, the Account Value is $45,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($50,000) PLUS the
"Growth" under the Annuity.
Growth =$45,000 - [$50,000 - $0]
=$-5,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
NO BENEFIT IS PAYABLE
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$50,000
In this example you would receive no additional benefit from purchasing the
Enhanced Beneficiary Protection Optional Death Benefit.
B-1
Example with market increase and withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $90,000. The basic Death Benefit is calculated as Purchase
Payments minus proportional withdrawals, or Account Value, which ever is
greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced
Beneficiary Protection Optional Death Benefit is equal to the amount payable
under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the
Annuity.
Growth =$90,000 - [$50,000 - ($50,000 * $15,000/$75,000)]
=$90,000 - [$50,000 - $10,000]
=$90,000 - $40,000
=$50,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
=$50,000 * 0.40
=$20,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$110,000
Examples of Highest Anniversary Value Death Benefit Calculation
The following are examples of how the Highest Anniversary Value Death Benefit
is calculated. Each example assumes an initial Purchase Payment of $50,000.
Each example assumes that there is one Owner who is age 70 on the Issue Date
and that all Account Value is maintained in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
date we receive due proof of death, the Account Value is $75,000; however, the
Anniversary Value on the 5/th /anniversary of the Issue Date was $90,000.
Assume as well that the Owner has died before the Death Benefit Target Date.
The Death Benefit is equal to the greater of the Highest Anniversary Value or
the basic Death Benefit. The Death Benefit would be the Highest Anniversary
Value ($90,000) because it is greater than the amount that would have been
payable under the basic Death Benefit ($75,000).
Example with withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $80,000; however, the Anniversary Value on the 5/th
/anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Death Benefit is equal to the
greater of the Highest Anniversary Value or the basic Death Benefit.
Highest Anniversary Value =$90,000 - [$90,000 * $15,000/$75,000]
=$90,000 - $18,000
=$72,000
Basic Death Benefit =max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
=max [$80,000, $40,000]
=$80,000
The Death Benefit therefore is $80,000.
B-2
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) * $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) * $5,000/$70,000}]
=max [$75,000, $60,357]
=$75,000
The Death Benefit therefore is $88,214.
Examples of Combination 5% Roll-Up and Highest Anniversary Value Death Benefit
Calculation
The following are examples of how the Combination 5% Roll-Up and Highest
Anniversary Value Death Benefit are calculated. Each example assumes an
initial Purchase Payment of $50,000. Each example assumes that there is one
Owner who is age 70 on the Issue Date and that all Account Value is maintained
in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
7/th /anniversary of the Issue Date we receive due proof of death, at which
time the Account Value is $75,000; however, the Anniversary Value on the 5/th
/anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Roll-Up Value is equal to
initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit. The Death Benefit would be the Highest
Anniversary Value ($90,000) because it is greater than both the Roll-Up Value
($67,005) and the amount that would have been payable under the basic Death
Benefit ($75,000).
Example with withdrawals
Assume that the Owner made a withdrawal of $5,000 on the 6/th /anniversary of
the Issue Date when the Account Value was $45,000. The Roll-Up Value on the
6/th /anniversary of the Issue Date is equal to initial Purchase Payment
accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal
Limit for the 7/th /annuity year is equal to 5% of the Roll-Up Value as of the
6/th /anniversary of the Issue Date, or $3,350. Therefore, the remaining
$1,650 of the withdrawal results in a proportional reduction to the Roll-Up
Value. On the 7/th /anniversary of the Issue Date we receive due proof of
death, at which time the Account Value is $43,000; however, the Anniversary
Value on the 2/nd /anniversary of the Issue Date was $70,000. Assume as well
that the Owner has died before the Death Benefit Target Date. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit.
Roll-Up Value ={(67,005 - $3,350) - [($67,005 - $3,350) * $1,650/($45,000 - $3,350)]} * 1.05
=($63,655 - $2,522) * 1.05
=$64,190
Highest Anniversary Value =$70,000 - [$70,000 * $5,000/$45,000]
=$70,000 - $7,778
=$62,222
Basic Death Benefit =max [$43,000, $50,000 - ($50,000 * $5,000/$45,000)]
=max [$43,000, $44,444]
=$44,444
The Death Benefit therefore is $64,190.
B-3
Example with death after Death Benefit Target Date
Assume that the Owner has not made any withdrawals prior to the Death Benefit
Target Date. Further assume that the Owner dies after the Death Benefit Target
Date, when the Account Value is $75,000. The Roll-Up Value on the Death
Benefit Target Date (the contract anniversary on or following the Owner's
80/th /birthday) is equal to initial Purchase Payment accumulated at 5% for 10
years, or $81,445. The Highest Anniversary Value on the Death Benefit Target
Date was $85,000; however, following the Death Benefit Target Date, the Owner
made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000
when the Account Value was $70,000. The Death Benefit is equal to the greatest
of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as
of the Death Benefit Target Date; each increased by subsequent Purchase
Payments and reduced proportionally for subsequent withdrawals.
Roll-Up Value =$81,445 + $15,000 - [($81,445 + 15,000) * $5,000/$70,000]
=$81,445 + $15,000 - $6,889
=$89,556
Highest Anniversary Value =$85,000 + $15,000 - [($85,000 + 15,000) * $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) * $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 * $15,000/$75,000]
=$90,000 - $18,000
=$72,000
Basic Death Benefit =max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
=max [$80,000, $40,000]
=$80,000
The Death Benefit therefore is $80,000.
B-4
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) * $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) * $5,000/$70,000}]
=max [$75,000, $60,357]
=$75,000
The Death Benefit therefore is $88,214.
B-5
APPENDIX C - PLUS40(TM) OPTIONAL LIFE INSURANCE RIDER
American Skandia's Plus40(TM) Optional Life Insurance Rider was offered, in
those states where approved, between November 18, 2002 for ASAP III,
January 17, 2002 for ASL II and APEX II, and January 23, 2002 for XT6 and
May 1, 2003. The description below of the Plus40(TM) benefit applies to those
Contract Owners who purchased an Annuity during that time period and elected
the Plus40(TM) benefit.
The life insurance coverage provided under the Plus40/(TM) /Optional Life
Insurance Rider ("Plus40/(TM) /rider" or the "Rider") is supported by American
Skandia's general account and is not subject to, or registered as a security
under, either the Securities Act of 1933 or the Investment Company Act of
1940. Information about the Plus40/(TM) /rider is included as an Appendix to
this Prospectus to help you understand the Rider and the relationship between
the Rider and the value of your Annuity. It is also included because you can
elect to pay for the Rider with taxable withdrawals from your Annuity. The
staff of the Securities and Exchange Commission has not reviewed this
information. However, the information may be subject to certain generally
applicable provisions of the Federal securities laws regarding accuracy and
completeness.
The income tax-free life insurance payable to your Beneficiary(ies) under the
Plus40/(TM) /rider is equal to 40% of the Account Value of your Annuity as of
the date we receive due proof of death, subject to certain adjustments,
restrictions and limitations described below.
ELIGIBILITY
The Plus40(TM) rider may be purchased as a rider on your Annuity. The Rider
must cover those persons upon whose death the Annuity's death benefit becomes
payable - the Annuity's owner or owners, or the Annuitant (in the case of an
entity owned Annuity). If the Annuity has two Owners, the Rider's death
benefit is payable upon the first death of such persons. If the Annuity is
owned by an entity, the Rider's death benefit is payable upon the death of the
Annuitant, even if a Contingent Annuitant is named.
The minimum allowable age to purchase the Plus40(TM) rider is 40; the maximum
allowable age is 75. If the Rider is purchased on two lives, both persons must
meet the age eligibility requirements. The Plus40(TM) rider is not available
to purchasers who use their Annuity as a funding vehicle for a Tax Sheltered
Annuity (or 403(b)) or as a funding vehicle for a qualified plan under
Section 401 of the Internal Revenue Code ("Code").
ADJUSTMENTS, RESTRICTIONS & LIMITATIONS
. If you die during the first 24 months following the effective date of the
Plus40(TM) rider (generally, the Issue Date of your Annuity), the death
benefit will be limited to the amount of any charges paid for the Rider
while it was in effect. While we will return the charges you have paid
during the applicable period as the death benefit, your Beneficiary(ies)
will receive no additional life insurance benefit from the Plus40(TM)
rider if you die within 24 months of its effective date.
. If you make a Purchase Payment within 24 months prior to the date of
death, the Account Value used to determine the amount of the death
benefit will be reduced by the amount of such Purchase Payment(s). If we
reduce the death benefit payable under the Plus40(TM) rider based on this
provision, we will return 50% of any charges paid for the Rider based on
those Purchase Payments as an additional amount included in the death
benefit under the Rider.
. If we apply Credits to your Annuity based on Purchase Payments, such
Credits are treated as Account Value for purposes of determining the
death benefit payable under the Plus40(TM) rider. However, if Credits
were applied to Purchase Payments made within 24 months prior to the date
of death, the Account Value used to determine the amount of the death
benefit will be reduced by the amount of such Credits. If we reduce the
death benefit payable under the Plus40(TM) rider based on this provision,
we will return 50% of any charges paid for the Rider based on such
Credits as an additional amount included in the death benefit under the
Rider.
. If you become terminally ill (as defined in the Rider) and elect to
receive a portion of the Plus40(TM) rider's death benefit under the
Accelerated Death Benefit provision, the amount that will be payable
under the Rider upon your death will be reduced. Please refer to the
Accelerated Death Benefit provision described below.
. If charges for the Plus40(TM) rider are due and are unpaid as of the date
the death benefit is being determined, such charges will be deducted from
the amount paid to your Beneficiary(ies).
. If the age of any person covered under the Plus40(TM) rider is misstated,
we will adjust any coverage under the Rider to conform to the facts. For
example, if, due to the misstatement, we overcharged you for coverage
under the Rider, we will add any additional charges paid to the amount
payable to your Beneficiary(ies). If, due to the misstatement, we
undercharged you for coverage under the Rider, we will reduce the death
benefit in proportion to the charges not paid as compared to the charges
that would have been paid had there been no misstatement.
C-1
. On or after an Owner reaches the expiry date of the Rider (the
anniversary of the Annuity's Issue Date on or immediately after the 95/th
/birthday), coverage will terminate. No charge will be made for an Owner
following the expiry date. If there are two Owners, the expiry date
applies separately to each Owner; therefore, coverage may continue for
one Owner and terminate as to the other Owner.
MAXIMUM BENEFIT
The Plus40(TM) rider is subject to a Maximum Death Benefit Amount based on the
Purchase Payments applied to your Annuity. The Plus40(TM) rider may also be
subject to a Per Life Maximum Benefit that is based on all amounts paid under
any annuity contract we issue to you under which you have elected the
Plus40(TM) rider or similar life insurance coverage.
. The Maximum Death Benefit Amount is 100% of the Purchase Payments
increasing at 5% per year following the date each Purchase Payment is
applied to the Annuity until the date of death. If Purchase Payments are
applied to the Annuity within 24 months prior to the date of death, the
Maximum Death Benefit Amount is decreased by the amount of such Purchase
Payments.
. The Per Life Maximum Benefit applies to Purchase Payments applied to any
such annuity contracts more than 24 months from the date of death that
exceed $1,000,000. If you make Purchase Payments in excess of $1,000,000,
we will reduce the aggregate death benefit payable under all Plus40(TM)
riders, or similar riders issued by us, based on the combined amount of
Purchase Payments in excess of $1,000,000 multiplied by 40%. If the Per
Life Maximum Benefit applies, we will reduce the amount payable under
each applicable Plus40(TM) rider on a pro-rata basis. If the Per Life
Maximum Benefit applies upon your death, we will return any excess
charges that you paid on the portion of your Account Value on which no
benefit is payable. The Per Life Maximum Benefit does not limit the
amount of Purchase Payments that you may apply to your Annuity.
ACCELERATED DEATH BENEFIT PROVISION
If you become terminally ill, you may request that a portion of the death
benefit payable under the Plus40(TM) rider be prepaid instead of being paid to
your Beneficiary(ies) upon your death. Subject to our requirements and where
allowed by law, we will make a one time, lump sum payment. Our requirements
include proof satisfactory to us, in writing, of terminal illness after the
Rider's Effective Date.
The maximum we will pay, before any reduction, is the lesser of 50% of the
Rider's death benefit or $100,000. If you elect to accelerate payment of a
portion of the death benefit under the Plus40(TM) rider, the amount of the
remaining death benefit is reduced by the prepaid amount accumulating at an
annualized interest rate of 6.0%. Eligibility for an accelerated payout of a
portion of your Plus40(TM) rider death benefit may be more restrictive than
any medically-related surrender provision that may be applicable to you under
the Annuity.
CHARGES FOR THE PLUS40(TM) RIDER
The Plus40(TM) rider has a current charge and a guaranteed maximum charge. The
current charge for the Plus40(TM) rider is based on a percentage of your
Account Value as of the anniversary of the Issue Date of your Annuity. The
applicable percentages differ based on the attained age, last birthday of the
Owner(s) or Annuitant (in the case of an entity owned Annuity) as of the date
the charge is due. We reserve the right to change the current charge, at any
time, subject to regulatory approval where required. If there are two Owners,
we calculate the current charge that applies to each Owner individually and
deduct the combined amount as the charge for the Rider. There is no charge
based on a person's life after coverage expires as to that person. However, a
charge will still apply to the second of two Owners (and coverage will
continue for such Owner) if such Owner has not reached the expiry date.
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%
C-2
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.
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-3
APPENDIX D - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS
PROGRAM RULES
. Prior to December 5, 2005, you could elect an asset allocation program
where the Sub-accounts for each asset class in each model portfolio were
designated based on an evaluation of available Sub-accounts. Effective
December 5, 2005, you can no longer enroll in an asset allocation
program, but you will be permitted to remain in the program if you
enrolled prior to the date. These Program Rules reflect how the asset
allocation program will be administered as of December 5, 2005 for those
Owners who have chosen to remain in their program. Asset allocation is a
sophisticated method of diversification that allocates assets among asset
classes in order to manage investment risk and potentially enhance
returns over the long term. However, asset allocation does not guarantee
a profit or protect against a loss.
HOW THE ASSET ALLOCATION PROGRAM WORKS
. Amounts will automatically be allocated in accordance with the
percentages and to Sub-accounts indicated for the model portfolio that
you previously chose. If you allocate your Account Value or transfer your
Account Value among any Sub-accounts that are outside of your model
portfolio, we will allocate these amounts according to the allocation
percentages of the applicable model portfolio upon the next rebalancing.
You will not be permitted to change from one model portfolio to another.
Upon each rebalance, 100% of your Account Value allocated to the variable
Sub-accounts will be allocated to the asset allocation program. Any
Account Value not invested in the Sub-accounts will not be part of the
program.
. Additional Purchase Payments: Unless otherwise requested, any additional
Purchase Payments applied to the variable Sub-accounts in the Annuity
will be allocated to the Sub-accounts according to the allocation
percentages for the model portfolio you chose. Allocation of additional
Purchase Payments outside of your model portfolio but into a Sub-account,
will be reallocated according to the allocation percentages of the
applicable model portfolio upon the next rebalancing.
. Rebalancing Your Model Portfolio: Changes in the value of the Sub-account
will cause your Account Value allocated to the Sub-accounts to vary from
the percentage allocations of the model portfolio you select. By
selecting the asset allocation program, you have directed us to
periodically (e.g., quarterly) rebalance your Account Value allocated to
the Sub-accounts in accordance with the percentage allocations assigned
to each Sub-account within your model portfolio at the time you elected
the program or had later been modified with your consent. Some asset
allocation programs will only require that a rebalancing occur when the
percent of your Account Value allocated to the Sub-accounts are outside
of the acceptable range permitted under such asset allocation program.
Note - Any Account Value not invested in the Sub-accounts will not be
affected by any rebalance.
. Sub-account Changes Within the Model Portfolios: From time to time there
may be a change in a Sub-account within your model portfolio. Unless
directed by you or your Financial Professional to reallocate to the new
Sub-account, rebalancing will continue in accordance with your unchanged
model portfolio, unless the Sub-account is no longer available under your
Annuity. If the Sub-account is no longer available we will notify you. If
you do not consent to the new Sub-account, your lack of consent will be
deemed a request to terminate the asset allocation program and the
provisions under "Termination or Modification of the Asset Allocation
Program" will apply.
. Owner Changes in Choice of Model Portfolio: You may not change from the
model portfolio that you have elected to any other model portfolio.
TERMINATION OR MODIFICATION OF THE ASSET ALLOCATION PROGRAM:
. You may request to terminate your asset allocation program at any time.
Once you terminate your asset allocation program, you will not be
permitted to re-enroll in the program. Any termination will be effective
on the date that American Skandia receives your termination request in
good order. If you are enrolled in HDV or LT5, termination of your asset
allocation program must coincide with (i) the enrollment in a then
currently available and approved asset allocation program or other
approved option, or (ii) the allocation of your entire account value to
the then required investment option(s) available with these benefits.
However, if you are enrolled in LT5 you may terminate the LT5 benefit in
order to then terminate your asset allocation program. American Skandia
reserves the right to terminate or modify the asset allocation program at
any time with respect to any programs.
RESTRICTIONS ON ELECTING THE ASSET ALLOCATION:
. You cannot participate in auto-rebalancing or a DCA program while
enrolled in an asset allocation program and Systematic Withdrawals can
only be made as flat dollar amounts.
D-1
APPENDIX E - DESCRIPTION AND CALCULATION OF PREVIOUSLY OFFERED OPTIONAL DEATH
BENEFITS (THIS APPLIES SOLELY TO APEX II, ASL II, AND XT6)
If you purchased your Annuity before November 18, 2002 and were not a resident
of the State of New York, the following optional death benefits were offered:
ENHANCED BENEFICIARY PROTECTION OPTIONAL DEATH BENEFIT
The Enhanced Beneficiary Protection Optional Death Benefit can provide
additional amounts to your Beneficiary that may be used to offset federal and
state taxes payable on any taxable gains in your Annuity at the time of your
death. Whether this benefit is appropriate for you may depend on your
particular circumstances, including other financial resources that may be
available to your Beneficiary to pay taxes on your Annuity should you die
during the accumulation period. No benefit is payable if death occurs on or
after the Annuity Date.
The Enhanced Beneficiary Protection Optional Death Benefit provides a benefit
that is payable in addition to the basic Death Benefit. If the Annuity has one
Owner, the Owner must be age 75 or less at the time the benefit is purchased.
If the Annuity has joint Owners, the oldest Owner must be age 75 or less. If
the Annuity is owned by an entity, the Annuitant must be age 75 or less.
Calculation of Enhanced Beneficiary Protection Optional Death Benefit
If you purchase the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the basic Death Benefit described above
PLUS
2. 50% of the "Death Benefit Amount" less Purchase Payments reduced by
proportional withdrawals.
"Death Benefit Amount" includes your Account Value and any amounts added to
your Account Value under the Annuity's basic Death Benefit when the Death
Benefit is calculated. Under the basic Death Benefit, amounts are added to
your Account Value when the Account Value is less than Purchase Payments minus
proportional withdrawals.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
The amount calculated in Items 1 & 2 above may be reduced by any Credits
under certain circumstances.
The Enhanced Beneficiary Protection Optional Death Benefit is subject to a
maximum of 50% of all Purchase Payments applied to the Annuity at least 12
months prior to the death of the decedent that triggers the payment of the
Death Benefit.
Please refer to the section entitled "Tax Considerations" for a discussion of
special tax considerations for purchasers of this benefit.
NOTE: You may not elect the Enhanced Beneficiary Protection Optional Death
Benefit if you have elected any other Optional Death Benefit.
Guaranteed Minimum Death Benefit
If the Annuity has one Owner, the Owner must be age 80 or less at the time the
optional Death Benefit is purchased. If the Annuity has joint Owners, the
oldest Owner must be age 80 or less. If the Annuity is owned by an entity, the
Annuitant must be age 80 or less.
Key Terms Used with the Guaranteed Minimum Death Benefit
. The Death Benefit Target Date is the contract anniversary on or after the
80/th/ birthday of the current Owner, the oldest of either joint Owner or
the Annuitant, if entity owned.
. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" on or before the earlier of the Owner's date of
death and the "Death Benefit Target Date".
. 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%.
E-1
Calculation of Guaranteed Minimum Death Benefit
The Guaranteed Minimum Death Benefit depends on whether death occurs before or
after the Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death Benefit
equals the greatest of:
1. the Account Value in the Sub-accounts plus the Interim Value of any Fixed
Allocations (no MVA) as of the date we receive in writing "due proof of
death"; and
2. the sum of all Purchase Payments minus the sum of all Proportional
Reductions, each increasing daily until the Owner's date of death at a rate
of 5.0%, subject to a limit of 200% of the difference between the sum of
all Purchase Payments and the sum of all withdrawals as of the Owner's date
of death; and
3. the "Highest Anniversary Value" on or immediately preceding the Owner's
date of death.
The amount determined by this calculation is increased by any Purchase
Payments received after the Owner's date of death and decreased by any
Proportional Reductions since such date. The amount calculated in Items 1 & 3
above may be reduced by any Credits under certain circumstances.
If the Owner dies on or after the Death Benefit Target Date, the Death Benefit
equals the greater of:
1. the Account Value as of the date we receive in writing "due proof of death"
(an MVA may be applicable to amounts in any Fixed Allocations); and
2. the greater of Item 2 & 3 above on the Death Benefit Target Date plus the
sum of all Purchase Payments less the sum of all Proportional Reductions
since the Death Benefit Target Date.
The amount calculated in Item 1 above may be reduced by any Credits under
certain circumstances.
Annuities with joint Owners
For Annuities with Joint Owners, the Death Benefit is calculated as shown
above except that the age of the oldest of the Joint Owners is used to
determine the Death Benefit Target Date. NOTE: If you and your spouse own the
Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole
primary Beneficiary is the surviving spouse, then the surviving spouse can
elect to assume ownership of the Annuity and continue the contract instead of
receiving the Death Benefit.
Annuities owned by entities
For Annuities owned by an entity, the Death Benefit is calculated as shown
above except that the age of the Annuitant is used to determine the Death
Benefit Target Date. Payment of the Death Benefit is based on the death of the
Annuitant (or Contingent Annuitant, if applicable).
Can I terminate the optional Death Benefits? Do the optional Death Benefits
terminate under other circumstances?
You can terminate the Enhanced Beneficiary Protection Optional Death Benefit
and the Guaranteed Minimum Death Benefit at any time. Upon termination, you
will be required to pay a pro-rata portion of the annual charge for the
benefit. Both optional Death Benefits will terminate automatically on the
Annuity Date. We may also terminate any optional Death Benefit if necessary to
comply with our interpretation of the Code and applicable regulations.
What Are The Charges For The Optional Death Benefits?
We deduct a charge from your Account Value if you elect to purchase either
optional Death Benefit. The Enhanced Beneficiary Protection Death Benefit
costs 0.25% of Account Value. The Guaranteed Minimum Death Benefit costs 0.30%
of the current Death Benefit. The charges for these death benefits are
deducted in arrears each Annuity Year. No charge applies after the Annuity
Date. We deduct the charge:
1. on each anniversary of the Issue Date;
2. when Account Value is transferred to our general account prior to the
Annuity Date;
3. if you surrender your Annuity; and
4. if you choose to terminate the benefit (Enhanced Beneficiary Protection
Optional Death Benefit only)
If you surrender the Annuity, elect to begin receiving annuity payments or
terminate the benefit on a date other than an anniversary of the Issue Date,
the charge will be prorated. During the first year after the Issue Date, the
charge will be prorated from the Issue Date. In all subsequent years, it would
be prorated from the last anniversary of the Issue Date.
E-2
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.
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.
E-3
Example of market increase
Assume that the Owner's Account Value has generally been increasing due to
positive market performance. On the date we receive due proof of death, the
Account Value is $90,000. The Highest Anniversary Value at the end of any
previous period is $72,000. The Death Benefit would be the Account Value
($90,000) because it is greater than the Highest Anniversary Value ($72,000)
or the sum of prior Purchase Payments increased by 5.0% annually ($73,872.77).
Example of market decrease
Assume that the Owner's Account Value generally increased until the fifth
anniversary but generally has been decreasing since the fifth contract
anniversary. On the date we receive due proof of death, the Account Value is
$48,000. The Highest Anniversary Value at the end of any previous period is
$54,000. The Death Benefit would be the sum of prior Purchase Payments
increased by 5.0% annually ($73,872.77) because it is greater than the Highest
Anniversary Value ($54,000) or the Account Value ($48,000).
Example of market increase followed by decrease
Assume that the Owner's Account Value increased significantly during the first
six years following the Issue Date. On the sixth anniversary date the Account
Value is $90,000. During the seventh Annuity Year, the Account Value increases
to as high as $100,000 but then subsequently falls to $80,000 on the date we
receive due proof of death. The Death Benefit would be the Highest Anniversary
Value at the end of any previous period ($90,000), which occurred on the sixth
anniversary, although the Account Value was higher during the subsequent
period. The Account Value on the date we receive due proof of death ($80,000)
is lower, as is the sum of all prior Purchase Payments increased by 5.0%
annually ($73,872.77).
E-4
APPENDIX F - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
American Skandia Life Assurance Corporation offers several deferred variable
annuity products. Each annuity has different features and benefits that may be
appropriate for you based on your individual financial situation and how you
intend to use the annuity. Not all of these annuities may be available to you,
depending on your state of residence and/or the broker-dealer through which
your annuity was sold. You can verify which of these annuities is available to
you by speaking to your Financial Professional or calling 1-800-752-6342.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay to stay in the contract.
Additionally, differences may exist on various optional benefits such as
guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity, and the timing thereof;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected,
.. The value of being able to "lock-in" growth in your annuity after the
initial withdrawal charge period for purposes of calculating the death
benefit payable from the annuity; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart outlines some of the different features for each actively
sold American Skandia Annuity. The availability of optional features, such as
those noted in the chart, may increase the cost of the annuity. Therefore you
should carefully consider which features you plan to use when selecting your
annuity. You should also consider the investment objectives, risks, charges
and expenses of an investment carefully before investing.
In addition, the hypothetical illustrations below reflect the account value
and surrender value of each variable annuity over a variety of holding
periods. These charts are meant to reflect how your annuities can grow or
decrease depending on market conditions and the comparable value of each of
the annuities (which reflects the charges associated with the annuities) under
the assumptions noted.
American Skandia Annuity Product Comparison Below is a summary of American
Skandia's actively sold annuity products. ASL II refers to American Skandia
Lifevest(R) II, APEX II refers to American Skandia APEX(R) II, ASAP III refers
to American Skandia Advisor Plan/SM/ III, and XTra Credit SIX refers to
American Skandia XTra Credit/SM/ SIX. You should consider the investment
objectives, risks, charges and expenses of an investment in any Annuity
carefully before investing. The prospectus for the Annuities as well as the
underlying portfolio prospectuses contain this and other information about the
variable annuities and underlying investment options. Your registered
Financial Professional can provide you with prospectuses for the Annuities and
the underlying portfolios and can guide you through Selecting the Variable
Annuity That's Right for you, and help you decide upon the Annuity that would
be most advantageous for you given your individual needs. Please read the
prospectuses carefully before investing.
F-1
- ----------------------------------------------------------------------------------------------------------
ASL II APEX II ASAP III XTra Credit SIX
- ----------------------------------------------------------------------------------------------------------
Minimum Investment $15,000 $10,000 $1,000 $10,000
- ----------------------------------------------------------------------------------------------------------
Maximum Issue Age No Maximum 85 80 75
Age
- ----------------------------------------------------------------------------------------------------------
Contingent Deferred None 4 Years 8 Years 10 Years
Sales Charge (8.5%, 8%, 7%, (7.5%, 7%, 6.5%, (9%, 9%, 8%, 7%,
Schedule 6%) 6%, 5%, 4%, 3%, 6%, 5%, 4%, 3%,
2%) 2%, 1%)
- ----------------------------------------------------------------------------------------------------------
Insurance and 1.65% 1.65% 1.25% years 1-8; 1.65% years 1-10;
Distribution Charge 0.65% years 9+ 0.65% years 11+
- ----------------------------------------------------------------------------------------------------------
Annual Maintenance Lesser of $35 or Lesser of $35 or Lesser of $35 or Lesser of $35 or
Fee 2% of Account 2% of Account 2% of Account 2% of Account
Value* Value* Value* Value
- ----------------------------------------------------------------------------------------------------------
Contract Credit No Yes. Generally, Yes. Generally, Yes. The amount
we apply a we apply a of the credit
Loyalty Credit to Loyalty Credit to applied to a
your Annuity's your Annuity's Purchase Payment
Account Value at Account Value at is based on the
the end of your the end of your year the Purchase
fifth contract year fifth contract year Payment is
(i.e., on your fifth (i.e., on your fifth received, for the
Contract Contract first 6 years of the
Anniversary). The Anniversary). The contract as
Loyalty Credit is Loyalty Credit is follows:
equal to 2.75% of equal to 0.50% of the credit
total Purchase total Purchase percentages for
Payments made Payments made each year, starting
during the first during the first with the first, are
four contract four contract 6.50%, 5.00%,
years less the years less the 4.00%, 3.00%,
cumulative cumulative 2.00%, and
amount of amount of 1.00%.
withdrawals made withdrawals made Recaptured in
(including the (including the certain
deduction of any deduction of any circumstances
CDSC amounts) CDSC amounts)
through the fifth through the fifth
Contract Contract
Anniversary Anniversary
- ----------------------------------------------------------------------------------------------------------
Fixed Allocation (early Fixed Allocation Fixed Allocation Fixed Allocation Fixed Allocation
withdrawals are Available Available Available Available
subject to a Market (currently offering (currently offering (currently offering (currently offering
Value Adjustment) durations of: durations of: durations of: durations of:
1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years)
- ----------------------------------------------------------------------------------------------------------
Variable Investment See "Investment See "Investment See "Investment See "Investment
Options Options" section Options" section Options" section Options" section
of Prospectus. Not of Prospectus. Not of Prospectus. Not of Prospectus. Not
all options all options all options all options
available with available with available with available with
certain optional certain optional certain optional certain optional
benefits. benefits. benefits. benefits.
F-2
- --------------------------------------------------------------------------------------------------
ASL II APEX II ASAP III XTra Credit SIX
- --------------------------------------------------------------------------------------------------
Basic Death Benefit Prior to age 85: The greater of: The greater of: The greater of:
The greater of: Purchase Purchase Purchase
Purchase Payments less Payments less Payments less
Payments less proportional proportional proportional
proportional withdrawals or withdrawals or withdrawals or
withdrawals or account value (no account value (no account value (no
account value (no MVA Applied). MVA Applied). MVA Applied)
MVA Applied). less an amount
On or after age equal to the
85: account value credits applied
within the 12
months prior to
date of death.
- --------------------------------------------------------------------------------------------------
Optional Death Benefits Enhanced EBP II, EBP II, EBP II,
(for an additional Beneficiary HDV, HDV, HDV,
cost)/1/ Protection HAV, HAV, HAV,
(EBPII) Combo 5% Roll- Combo 5% Roll- Combo 5% Roll-
Highest Daily up /HAV up/HAV up /HAV
Value (HDV)
Highest
Anniversary
Value (HAV)
Combo 5% Roll
Up/HAV
- --------------------------------------------------------------------------------------------------
Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus,
additional cost)/2/ Guaranteed GMWB, GMWB, GMWB,
Minimum GMIB, GMIB, GMIB,
Withdrawal Lifetime Five, Lifetime Five, Lifetime Five,
Benefit (GMWB), Spousal Lifetime Spousal Lifetime Spousal Lifetime
Guaranteed Five Five Five
Minimum Income Highest Daily Highest Daily Highest Daily
Benefit (GMIB), Lifetime Five Lifetime Five Lifetime Five
Lifetime Five,
Spousal Lifetime
Five
Highest Daily
Lifetime Five
- --------------------------------------------------------------------------------------------------
Annuity Rewards/3/ Not Available Available after Available after Available after
initial withdrawal initial withdrawal initial withdrawal
period period period
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the Annuity years specified. The values shown below are based
on the following assumptions:
An initial investment of $100,000 is made into each Annuity earning a gross
rate of return of 0% and 6% respectively.
.. No subsequent deposits or withdrawals are made from the Annuity.
.. The hypothetical gross rates of return are reduced by the arithmetic
average of the fees and expenses of the underlying portfolios and the
charges that are deducted from the Annuity at the Separate Account level as
follows/4:/
.. 1.34% based on the fees and expenses of the underlying portfolios as of
December 31, 2006. The arithmetic average of all fund expenses is computed
by adding portfolio management fees, 12b-1 fees and other expenses of all
of the underlying portfolios and then dividing by the number of portfolios.
For purposes of the illustrations, we do not reflect any expense
reimbursements or expense waivers that might apply and are described in the
prospectus fee table.
.. The Separate Account level charges include the Insurance Charge and
Distribution Charge (as applicable).
.. The Account Value and Surrender Value are further reduced by the annual
maintenance fee. For XTra Credit SIX, APEX II, and ASAP III, the Account
Value and Surrender Value also reflect the addition of any applicable
credits.
F-3
The Account Value assumes no surrender, while the Surrender Value assumes a
100% surrender two days prior to the anniversary of the Issue Date of the
Annuity ("Annuity Anniversary"), therefore reflecting the withdrawal charge
applicable to that Annuity year. Note that a withdrawal on the Annuity
Anniversary would be subject to the withdrawal charge applicable to the next
Annuity year, which usually is lower. The values that you actually experience
under an Annuity will be different than what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each Annuity reflected below will remain the same. (We will provide
you with a personalized illustration upon request). Shaded cells represent the
product with the highest customer Surrender Value for the Annuity year.
Multiple shaded cells represent a tie between two or more annuities.
0% Gross Rate of Return
-----------------------------------------------------------------------------------------
APEX II ASAP III Xtra Credit SIX ASL II
---------------------------------------------
--------------------------------------------
Net rate of return Net rate of return Net rate of return Net rate of return
-----------------------------------------------------------------------------------------
All years -2.97% Yrs 1-8 -2.57% Yrs 1-10 -2.97% All years -2.97%
-----------------------------------------------------------------------------------------
Yrs 9+ -1.98% Yrs 11+ -1.98%
-----------------------------------------------------------------------------------------
Contract Contract Surr Contract Contract Surrender
Value Surrender Value Value Value Value Surrender Value Value Value
- ---------------------------------------------------------------------------------------------
1 97,040 88,540 97,434 88,934 103,348 94,348 97,040 97,040
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
2 94,126 86,126 94,892 87,892 100,247 91,247 94,126 94,126
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
3 91,299 84,299 92,416 85,916 97,237 89,237 91,299 91,299
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
4 88,555 82,555 90,004 84,004 94,317 87,317 88,555 88,555
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
5 85,893 85,893 87,654 82,654 91,484 85,484 85,893 85,893
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
6 85,978 85,978 85,852 81,852 88,735 83,735 83,310 83,310
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
7 83,393 83,393 83,608 80,608 86,068 82,068 80,803 80,803
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
8 80,884 80,884 81,423 79,423 83,479 80,479 78,371 78,371
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
9 78,449 78,449 79,774 79,774 80,968 78,968 76,011 76,011
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
10 76,087 76,087 78,159 78,159 78,531 77,531 73,721 73,721
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
11 73,795 73,795 76,576 76,576 76,938 76,938 71,499 71,499
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
12 71,571 71,571 75,025 75,025 75,380 75,380 69,343 69,343
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
13 69,412 69,412 73,504 73,504 73,852 73,852 67,251 67,251
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
14 67,318 67,318 72,013 72,013 72,354 72,354 65,221 65,221
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
15 65,287 65,287 70,552 70,552 70,887 70,887 63,252 63,252
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
16 63,315 63,315 69,120 69,120 69,448 69,448 61,341 61,341
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
17 61,402 61,402 67,716 67,716 68,037 68,037 59,486 59,486
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
18 59,546 59,546 66,340 66,340 66,655 66,655 57,687 57,687
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
19 57,744 57,744 64,992 64,992 65,300 65,300 55,941 55,941
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
20 55,997 55,997 63,670 63,670 63,972 63,972 54,246 54,246
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
21 54,301 54,301 62,374 62,374 62,670 62,670 52,602 52,602
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
22 52,655 52,655 61,104 61,104 61,394 61,394 51,007 51,007
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
23 51,058 51,058 59,859 59,859 60,144 60,144 49,459 49,459
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
24 49,509 49,509 58,638 58,638 58,918 58,918 47,958 47,958
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
25 48,006 48,006 57,442 57,442 57,716 57,716 46,500 46,500
- ---------------------------------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 1.34%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days prior to Annuity anniversary
F-4
6% Gross Rate of Return
---------------------------------------------------------------------------
APEX II ASAP III Xtra Credit SIX ASL II
---------------------------------------------------------------------------
Net rate of return Net rate of return
Net rate of return Yrs 1-8 3.27% Yrs 1-10 2.85% Net rate of return
All years 2.85% Yrs 9+ 3.90% Yrs 11+ 3.90% All years 2.85%
---------------------------------------------------------------------------
Contract Surrender Contract Surrender Contract Surrender Contract Surrender
Value Value Value Value Value Value Value Value
- -------------------------------------------------------------------------------
1 102,846 94,346 103,263 94,763 109,531 100,531 102,846 102,846
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
2 105,781 97,781 106,642 99,642 112,621 103,621 105,781 105,781
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
3 108,800 101,800 110,132 103,632 115,799 107,799 108,800 108,800
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4 111,906 105,906 113,736 107,736 119,068 112,068 111,906 111,906
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5 115,099 115,099 117,458 112,458 122,431 116,431 115,099 115,099
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
6 121,213 121,213 121,818 117,818 125,889 120,889 118,384 118,384
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7 124,672 124,672 125,804 122,804 129,446 125,446 121,763 121,763
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
8 128,230 128,230 129,921 127,921 133,104 130,104 125,238 125,238
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
9 131,890 131,890 134,985 134,985 136,867 134,867 128,813 128,813
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
10 135,654 135,654 140,250 140,250 140,737 139,737 132,489 132,489
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11 139,526 139,526 145,719 145,719 146,185 146,185 136,270 136,270
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
12 143,508 143,508 151,402 151,402 151,850 151,850 140,160 140,160
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
13 147,604 147,604 157,306 157,306 157,736 157,736 144,160 144,160
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
14 151,816 151,816 163,441 163,441 163,851 163,851 148,274 148,274
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
15 156,149 156,149 169,815 169,815 170,204 170,204 152,506 152,506
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
16 160,606 160,606 176,437 176,437 176,805 176,805 156,858 156,858
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
17 165,190 165,190 183,318 183,318 183,664 183,664 161,335 161,335
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
18 169,904 169,904 190,467 190,467 190,790 190,790 165,940 165,940
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
19 174,753 174,753 197,895 197,895 198,195 198,195 170,676 170,676
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
20 179,741 179,741 205,613 205,613 205,888 205,888 175,547 175,547
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
21 184,871 184,871 213,631 213,631 213,880 213,880 180,557 180,557
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
22 190,147 190,147 221,963 221,963 222,185 222,185 185,710 185,710
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
23 195,574 195,574 230,619 230,619 230,814 230,814 191,011 191,011
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
24 201,156 201,156 239,612 239,612 239,779 239,779 196,462 196,462
- -------------------------------------------------------------------------------
25 206,897 206,897 248,957 248,957 249,093 249,093 202,069 202,069
- -------------------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 1.34%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days prior to Annuity anniversary
In addition, the following charts indicate the days (measured from the Issue
Date) in which each annuity product would have the highest Surrender Value
amongst the products listed given the above assumptions.
0% Gross Rate of Return
Over 30 Years, days won Year Actual Days
Total Days
------------------------------------------------------
APEX II 1459 4 1460
5 1461-1824
6-8 1826-2919
------------------------------------------------------
ASAP III 623 9 2943-3284
10 3369-3649
------------------------------------------------------
XT6 7409 5 1825
8 2920
9 2921-2942, 3285
10 3286-3368, 3650
11-30 3651-10950
------------------------------------------------------
ASL II 1824 1-5 1-1824
------------------------------------------------------
F-5
Gross Return 6.00%
Over 30 Years, days won Year Actual Days
Total Days
------------------------------------------------------
APEX II 364 6 1826-2189
------------------------------------------------------
ASAP III 534 9 3252-3284
10 3515-3649
29 10585
30 10586-10950
------------------------------------------------------
XT6 8892 4-5 1161-1825
6 2190
7-9 2191-3251
9 3285
10 3286-3514, 3650
11-29 3651-10584
------------------------------------------------------
ASL II 1160 1-4 1-1160
------------------------------------------------------
Days listed assume 365 days per year and do not account for Leap Years.
* Annual Maintenance Fee is waived for account values of $100,000 or more.
1) For more information on these benefits, refer to the "Death Benefit"
section in the Prospectus.
2) For more information on these benefits, refer to the "Living Benefit
Programs" section in the Prospectus.
3) The Annuity Rewards benefit offers Owners an ability to increase the
guaranteed death benefit so that the death benefit will at least equal the
Annuity's account value on the effective date of the Annuity Rewards
benefits, if the terms of the Annuity Rewards benefit are met.
4) These reductions result in hypothetical net rates of return corresponding
to the 0% and 6% gross rates of return, respectively as follows: ASLII
-2.97% and 2.85%; APEX II -2.97% and 2.85%; ASAP III -2.57% and 3.27% in
years 1-8 and -1.98% and 3.90% in years 9+, XTra Credit SIX -2.97% and
2.85% in years 1-10 and -1.98% and 3.90% in years 11+.
F-6
APPENDIX G - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME
BENEFIT
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%
TARGET VALUE CALCULATION:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r =(L - F) / V.
. If r (greater than) C\\u,\\ assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l,\\ and there are currently assets in the
Benefit Fixed Rate Account (F (greater than) 0), assets in the
Benefit Fixed Rate Account are transferred to the Permitted
Sub-accounts.
G-1
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T = {Min(V, [L - F - V * C\\t\\] / (1 - C\\t\\))} T(greater than)0, Money moving from the Permitted Sub-accounts to the
Benefit Fixed Rate Account
T = {Min(F, [L - F - V * C\\t\\] / (1 - C\\t\\))} T(less than)0, Money moving from the Benefit Fixed Rate Account
to the Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L =I * Q * a
=5000.67 * 1 * 15.34
=76,710.28
Target Ratio:
r =(L - F) / V
=(76,710.28 - 0) / 92,300.00
=83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T ={ Min ( V, [ L - F - V * Ct] / ( 1 - Ct))}
={ Min ( 92,300.00, [ 76,710.28 - 0 - 92,300.00 * 0.80] / ( 1 - 0.80))}
={ Min ( 92,300.00, 14,351.40 )}
=14,351.40
G-2
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1... 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2... 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3... 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4... 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5... 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6... 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7... 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8... 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9... 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10.. 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11.. 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12.. 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13.. 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14.. 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15.. 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16.. 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17.. 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18.. 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19.. 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20.. 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21.. 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22.. 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23.. 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24.. 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25.. 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26.. 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27.. 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28.. 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29.. 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30.. 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31.. 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32.. 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33.. 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34.. 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35.. 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36.. 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37.. 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38.. 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39.. 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40.. 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41.. 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
G-3
APPENDIX H - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE
DEPARTMENT
- ----------------------------------------------------------------------------------------------------------
XTra Credit SIX
ASL II NY APEX II NY ASAP III NY NY
- ----------------------------------------------------------------------------------------------------------
Minimum Investment $15,000 $10,000 $1,000 $10,000
- ----------------------------------------------------------------------------------------------------------
Maximum Issue Age Annuitant 85; Annuitant 85 Annuitant 85 Annuitant 85
Owner None Oldest Owner 85 Oldest Owner 80 Oldest Owner 75
- ----------------------------------------------------------------------------------------------------------
Contingent Deferred None 4 Years 7 Years 10Years
Sales Charge (7%, 6%, 5%, 4%) (7%, 6%, 5%, 4%, (9%, 9%, 8%, 7%,
Schedule (Applied to Purchase 3%, 2%, 1%) 6%, 5%, 4%, 3%,
Payments based on (Applied to Purchase 2%, 1%)
the inception date of Payments based on (Applied to Purchase
the Annuity) the inception date of Payments based on
the Annuity) the inception date of
the Annuity)
- ----------------------------------------------------------------------------------------------------------
Insurance Charge 1.65% 1.65% 0.65% 0.65%
- ----------------------------------------------------------------------------------------------------------
Distribution Charge N/A N/A 0.60% annuity years 1.00% annuity years
1 - 7 1 - 10
0.0% annuity years 0.00% annuity years
8+ 11+
- ----------------------------------------------------------------------------------------------------------
Annual Maintenance Lesser of $30 or Lesser of $30 or Lesser of $30 or Lesser of $30 or
Fee 2% of Account 2% of Account 2% of Account 2% of Account
Value Value Value Value
Waived for Account Waived for Account Waived for Account
Values exceeding Values exceeding Values exceeding
$100,000 $100,000 $100,000
- ----------------------------------------------------------------------------------------------------------
Transfer Fee $10 after twenty in $10 after twenty $10 after twenty $10 after twenty
any annuity year. in any annuity year. in any annuity year. in any annuity year
May be increased to May be increased to
$15 after eight in $15 after eight in
any annuity year any annuity year
- ----------------------------------------------------------------------------------------------------------
Contract Credit No Yes. Effective for Yes. Effective for Yes The amount of
Contracts issued on Contracts issued on the credit applied to
or after June 20, or after July 24, a Purchase Payment
2005. Generally we 2006. Generally we is based on the year
apply a Loyalty apply a Loyalty the Purchase
Credit to your Credit to your Payment is received,
Annuity's Account Annuity's Account for the first 6 years
Value at the end of Value at the end of of the contract.
your fifth contract your fifth contract Currently the credit
year (i.e. on your year (i.e. on your percentages for each
fifth Contract fifth Contract year starting with the
Anniversary). Anniversary). first year are: 6.50%,
Currently the Currently the 5.00%, 4.00%,
Loyalty Credit is Loyalty Credit is 3.00%, 2.00%, and
equal to 2.75% of equal to 0.50% of 1.00%.
total Purchase total Purchase
Payments made Payments made
during the first four during the first four
contract years less contract years less
the cumulative the cumulative
amount of amount of
withdrawals made withdrawals made
(including the (including the
deduction of any deduction of any
CDSC amounts) CDSC amounts)
through the fifth through the fifth
Contract Contract
Anniversary Anniversary.
H-1
- ----------------------------------------------------------------------------------------------------------------------
XTra Credit SIX
ASL II NY APEX II NY ASAP III NY NY
- ----------------------------------------------------------------------------------------------------------------------
Fixed Allocation Fixed Allocations Fixed Allocations Fixed Allocations No
(If available, early Available (Currently Available (Currently Available (Currently
withdrawals are offering durations of: offering durations of: offering durations of:
subject to a Market 5, 7, and 10 years) 5, 7, and 10 years) 2, 3, 5, 7, and 10
Value Adjustment) The MVA formula The MVA formula years) The MVA
("MVA") for NY is [(1+I)/ for NY is [(1+I)/ formula for NY is
(1+J)] N/365 (1+J)] N/365 [(1+I)/(1+J)] N/365
The MVA formula The MVA formula The MVA formula
does not apply does not apply does not apply
during the 30 day during the 30 day during the 30 day
period immediately period immediately period immediately
before the end of the before the end of the before the end of the
Guarantee Period. Guarantee Period. Guarantee Period.
- ----------------------------------------------------------------------------------------------------------------------
Variable Investment All options generally All options generally All options generally All options generally
Options available except available except available except available except
where restrictions where restrictions where restrictions where restrictions
apply when certain apply when certain apply when certain apply when certain
riders are purchased. riders are purchased. riders are purchased. riders are purchased.
- ----------------------------------------------------------------------------------------------------------------------
Basic Death Prior to age 85: The The greater of: The greater of: The greater of:
Benefit greater of: Purchase Purchase Payments Purchase Payments Purchase Payments
Payments less less proportional less proportional less proportional
proportional withdrawals or withdrawals or withdrawals or
withdrawals or Account Value Account Value Account Value
Account Value (variable) plus (variable) plus (variable) (No MVA
(variable) plus Interim Value Interim Value applied) (No
Interim Value (fixed). (No MVA (fixed). (No MVA recapture of credits
(fixed). (No MVA applied) applied) applied within 12
applied) months prior to the
On or after age 85: date of death)
Account Value
(variable) plus
Interim Value (fixed)
(No MVA applied)
- ----------------------------------------------------------------------------------------------------------------------
Optional Death Benefits Highest Anniversary HAV HAV HAV
(for an additional Value (HAV)
cost) /(1)/
- ----------------------------------------------------------------------------------------------------------------------
Optional Living GRO/GRO Plus GRO/GRO Plus GRO/GRO Plus GRO/GRO Plus
Benefits (for an Guaranteed GMWB, GMWB, GMWB,
additional cost) /(2)/ Minimum GMIB, GMIB, GMIB,
Withdrawal Benefit, Lifetime Five, Lifetime Five, Lifetime Five,
(GMWB), Spousal Lifetime Spousal Lifetime Spousal Lifetime
Guaranteed Five Five Five
Minimum Income
Benefit (GMIB),
Lifetime Five,
Spousal Lifetime Five
- ----------------------------------------------------------------------------------------------------------------------
Annuity Rewards /(3)/ No Available after initial Available after initial Available after initial
CDSC period CDSC period CDSC period
H-2
- ---------------------------------------------------------------------------------------------------------
XTra Credit SIX
ASL II NY APEX II NY ASAP III NY NY
- ---------------------------------------------------------------------------------------------------------
Annuitization Options Fixed option only Fixed option only Fixed option only Fixed option only
Annuity date cannot Annuity date cannot Annuity date cannot Annuity date cannot
exceed the first day exceed the first day exceed the first day exceed the first day
of the calendar of the calendar of the calendar of the calendar
month following month following month following month following
Annuitant's 90/th/ Annuitant's 90/th/ Annuitant's 90/th/ Annuitant's 90/th/
birthday. The birthday. The birthday. The birthday. The
maximum Annuity maximum Annuity maximum Annuity maximum Annuity
Date is based on the Date is based on the Date is based on the Date is based on the
first Owner or first Owner or first Owner or first Owner or
Annuitant to reach Annuitant to reach Annuitant to reach Annuitant to reach
the maximum age, as the maximum age, as the maximum age, as the maximum age, as
indicated in your indicated in your indicated in your indicated in your
Annuity. Annuity. Annuity. Annuity.
(1)For more information on these benefits, refer to the "Death Benefit"
section in the Prospectus.
(2)For more information on these benefits, refer to the "Living Benefit
Programs" section in the Prospectus.
(3)The Annuity rewards benefit offers Owners an ability to increase the
guaranteed death benefit so that the death benefit will at least equal the
Annuity's Account Value on the effective date of the Annuity Rewards
benefits, if the terms of the Annuity Rewards benefit are met.
For more information about variations applicable to annuities approved for
sale by the New York State Insurance Department, please refer to your annuity
contract.
H-3
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN
PROSPECTUS (PLEASE CHECK ONE) ASAPIII-PROS (05/2007),
APEX2PROS (05/2007), , ASL2PROS (05/2007),
XT6PROS (05/2007).
------------------------
(print your name)
------------------------
(address)
------------------------
(city/state/zip code)
[LOGO]
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
Variable Annuity Issued by: Variable Annuity Distributed by:
AMERICAN SKANDIA LIFE ASSURANCE AMERICAN SKANDIA MARKETING,
CORPORATION 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
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
A Prudential Financial Company One Corporate Drive, Shelton, Connecticut 06484
OPTIMUM/SM/
OPTIMUM FOUR/SM/
OPTIMUM PLUS/SM/
Flexible Premium Deferred Annuities
PROSPECTUS: MAY 1, 2007
This prospectus describes three different flexible premium deferred annuities
(the "Annuities" or the "Annuity") offered by American Skandia Life Assurance
Corporation ("American Skandia", "we", "our", or "us") exclusively through
Linsco/Private Ledger, Corp. Each Annuity may be offered as an individual
annuity contract or as an interest in a group annuity. Each Annuity has
different features and benefits that may be appropriate for you based on your
financial situation, your age and how you intend to use the Annuity. This
Prospectus describes the important features of the Annuities and what you
should consider before purchasing one of the Annuities. The Prospectus also
describes differences among the Annuities which include differences in the
fees and charges you pay and variations in some product features such as the
availability of certain bonus amounts and basic death benefit protection.
These differences among the products are discussed more fully in the
Prospectus and summarized in Appendix D entitled "Selecting the Variable
Annuity That's Right for You". There may also be differences in the
compensation paid to your Financial Professional for each Annuity. In
addition, selling broker-dealer firms through which each Annuity is sold may
decline to make available to their customers certain of the optional features
and investment options offered generally under the Annuity. Alternatively,
such firms may restrict the optional benefits that they do make available to
their customers (e.g., by imposing a lower maximum issue age for certain
optional benefits than what is prescribed generally under the Annuity). Please
speak to your Financial Professional for further details. Each Annuity or
certain of its investment options and/or features may not be available in all
states. Various rights, benefits and certain fees may differ among states to
meet applicable laws and/or regulations. For more information about variations
applicable to your state, please refer to your Annuity or consult your
Financial Professional. For some of the variations specific to Annuities
approved for sale by the New York State Insurance Department, see Appendix F
Certain terms are capitalized in this Prospectus. Those terms are either
defined in the Glossary of Terms or in the context of the particular section.
THE SUB-ACCOUNTS
Each Sub-account of American Skandia Life Assurance Corporation Variable
Account B invests in an underlying mutual fund portfolio. Currently,
portfolios of the following underlying mutual funds are being offered:
Advanced Series Trust (formerly named American Skandia Trust) and Evergreen
Variable Annuity Trust. See the following page for a complete list of
Sub-accounts.
PLEASE READ THIS PROSPECTUS
Please read this Prospectus and the current prospectus for the underlying
mutual funds. Keep them for future reference. If you are purchasing one of the
Annuities as a replacement for an existing variable annuity or variable life
coverage or a fixed insurance policy, you should consider any surrender or
penalty charges you may incur when replacing your existing coverage and that
this Annuity may be subject to a contingent deferred sales charge if you elect
to surrender the Annuity or take a partial withdrawal. You should consider
your need to access the Annuity's Account Value and whether the Annuity's
liquidity features will satisfy that need.
AVAILABLE INFORMATION
We have also filed a Statement of Additional Information that is available
from us, without charge, upon your request. The contents of the Statement of
Additional Information are described on page 92. This Prospectus is part of
the registration statement we filed with the SEC regarding this offering.
Additional information on us and this offering is available in the
registration statement and the exhibits thereto. You may review and obtain
copies of these materials at the prescribed rates from the SEC's Public
Reference Section, 100 F Street N.E., Washington, D.C., 20549. (See SEC file
number 333-96577 for Optimum, 333-71654 for Optimum Four and 333-71834 for
Optimum Plus). These documents, as well as documents incorporated by
reference, may also be obtained through the SEC's Internet Website
(http://www.sec.gov) for this registration statement as well as for other
registrants that file electronically with the SEC.
These annuities are NOT deposits or obligations of, or issued, guaranteed or
endorsed by, any bank, are NOT insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board or
any other agency. An investment in an annuity involves investment risks,
including possible loss of value, even with respect to amounts allocated to
the AST Money Market Sub-account.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
OPTIMUM/SM/, OPTIMUM FOUR/SM/, OPTIMUM PLUS/SM/, ARE SERVICE MARKS OR
REGISTERED TRADEMARKS OF LINSCO/PRIVATE LEDGER, CORP.
- --------------------------------------------------------------------------------
FOR FURTHER INFORMATION CALL: 1-800-752-6342
Prospectus Dated: May 1, 2007 Statement of Additional Information Dated: May 1, 2007
OA074PROS - 0507 LPLOASAI
PLEASE SEE OUR PRIVACY POLICY AND OUR IRA, ROTH IRA AND FINANCIAL
DISCLOSURE STATEMENTS ATTACHED TO THE BACK COVER OF THIS PROSPECTUS.
INVESTMENT OPTIONS
Advanced Series Trust:
AST AllianceBernstein Core Value
AST AllianceBernstein Growth & Income
AST Federated Aggressive Growth
AST Goldman Sachs Mid-Cap Growth
AST International Growth
AST International Value
AST JPMorgan International Equity
AST Large-Cap Value
AST Lord Abbett Bond Debenture
AST Marsico Capital Growth
AST MFS Growth
AST Money Market
AST Neuberger Berman Mid-Cap Value
AST Neuberger Berman Small-Cap Growth
AST PIMCO Limited Maturity Bond
AST PIMCO Total Return Bond
AST Small-Cap Growth
AST Small-Cap Value
AST T. Rowe Price Global Bond
AST T. Rowe Price Large-Cap Growth
Evergreen Variable Annuity Trust:
International Equity
Omega
CONTENTS
INTRODUCTION........................................................................... 1
WHY WOULD I CHOOSE TO PURCHASE ONE OF THE ANNUITIES?.................................. 1
WHAT ARE SOME OF THE KEY FEATURES OF THE ANNUITIES?................................... 1
HOW DO I PURCHASE ONE OF THE ANNUITIES?............................................... 2
GLOSSARY OF TERMS...................................................................... 3
SUMMARY OF CONTRACT FEES AND CHARGES................................................... 5
EXPENSE EXAMPLES....................................................................... 10
INVESTMENT OPTIONS..................................................................... 12
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO?..................... 12
WHAT ARE THE FIXED ALLOCATIONS?....................................................... 16
FEES AND CHARGES....................................................................... 17
WHAT ARE THE CONTRACT FEES AND CHARGES?............................................... 17
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?.......................................... 19
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?............................. 19
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES............................................. 19
PURCHASING YOUR ANNUITY................................................................ 20
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?........................ 20
MANAGING YOUR ANNUITY.................................................................. 21
MAY I CHANGE THE OWNER, ANNUITANT AND BENEFICIARY DESIGNATIONS?....................... 21
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?.......................................... 21
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?.............................................. 22
MAY I MAKE SCHEDULED PAYMENTS DIRECTLY FROM MY BANK ACCOUNT?.......................... 22
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?...................... 22
MANAGING YOUR ACCOUNT VALUE............................................................ 23
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?.......................................... 23
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE OPTIMUM AND OPTIMUM FOUR ANNUITIES?....... 23
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE OPTIMUM AND OPTIMUM FOUR
ANNUITIES?.......................................................................... 23
HOW DO I RECEIVE CREDITS UNDER THE OPTIMUM PLUS ANNUITY?.............................. 24
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE OPTIMUM PLUS ANNUITY?.............. 24
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?............ 25
DO YOU OFFER DOLLAR COST AVERAGING?................................................... 26
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?...................................... 27
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?.......................................... 27
DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE DATE?... 28
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION INSTRUCTIONS?.. 28
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?............... 29
HOW DO THE FIXED ALLOCATIONS WORK?.................................................... 29
HOW DO YOU DETERMINE RATES FOR FIXED ALLOCATIONS?..................................... 30
HOW DOES THE MARKET VALUE ADJUSTMENT WORK?............................................ 30
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?........................................ 31
ACCESS TO ACCOUNT VALUE................................................................ 32
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?...................................... 32
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?......................................... 32
CAN I WITHDRAW A PORTION OF MY ANNUITY?............................................... 32
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?......................................... 32
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?....... 33
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(t) OF THE INTERNAL REVENUE
CODE?............................................................................... 33
WHAT ARE MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?.................... 33
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?............................................. 33
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?........................... 34
(i)
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?......................................... 34
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?................................. 35
HOW ARE ANNUITY PAYMENTS CALCULATED?................................................. 36
LIVING BENEFIT PROGRAMS............................................................... 37
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS WHILE THEY
ARE ALIVE.......................................................................... 37
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)..................................... 37
GUARANTEED RETURN OPTION (GRO)....................................................... 41
GUARANTEED MINIMUM WITHDRAWAL BENEFIT (GMWB)......................................... 43
GUARANTEED MINIMUM INCOME BENEFIT (GMIB)............................................. 47
LIFETIME FIVE/SM/ INCOME BENEFIT (LIFETIME FIVE)..................................... 50
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)......................... 56
HIGHEST DAILY LIFETIME FIVE/SM/ INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE)......... 59
DEATH BENEFIT......................................................................... 67
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?........................................ 67
BASIC DEATH BENEFIT.................................................................. 67
OPTIONAL DEATH BENEFITS.............................................................. 67
AMERICAN SKANDIA'S ANNUITY REWARDS................................................... 71
PAYMENT OF DEATH BENEFITS............................................................ 73
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................................................................... 86
HOW WILL I RECEIVE STATEMENTS AND REPORTS?........................................... 86
WHO IS AMERICAN SKANDIA?............................................................. 86
WHAT ARE SEPARATE ACCOUNTS?.......................................................... 86
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?................................. 87
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?............................... 88
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...................................... 89
FINANCIAL STATEMENTS................................................................. 89
HOW TO CONTACT US.................................................................... 90
INDEMNIFICATION...................................................................... 90
LEGAL PROCEEDINGS.................................................................... 90
CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION.................................. 91
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B................. A-1
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS................................... B-1
APPENDIX C - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS...................... C-1
APPENDIX D - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU...................... D-1
APPENDIX E - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT.. E-1
APPENDIX F - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE DEPARTMENT... F-1
(ii)
INTRODUCTION
WHY WOULD I CHOOSE TO PURCHASE ONE OF THE ANNUITIES?
The Annuities are frequently used for retirement planning because they allow
you to accumulate retirement savings and also offer annuity payment options
when you are ready to begin receiving income. Each Annuity also offers a
choice of different optional benefits, for an additional charge, that can
provide principal protection or guaranteed minimum income protection for
Owners while they are alive and one or more Death Benefits that can protect
your retirement savings if you die during a period of declining markets. Each
Annuity may be used as an investment vehicle for "qualified" investments,
including an IRA, SEP-IRA, Roth IRA, Section 401(a) plans (defined benefit
plans and defined contribution plans such as 401(k), profit sharing and money
purchase plans) or Tax Sheltered annuities (or 403(b)). Each Annuity may also
be used as an investment vehicle for "non-qualified" investments. Each Annuity
allows you to invest your money in a number of Sub-accounts as well as in one
or more Fixed Allocations. This Prospectus describes four different Annuities
including features that these Annuities have in common as well as differences.
For a summary of each Annuity's features, please refer to Appendix D entitled,
"Selecting the Variable Annuity That's Right for You."
When an Annuity is purchased as a "non-qualified" investment, you generally
are not taxed on any investment gains the Annuity earns until you make a
withdrawal or begin to receive annuity payments. This feature, referred to as
"tax-deferral", can be beneficial to the growth of your Account Value because
money that would otherwise be needed to pay taxes on investment gains each
year remains invested and can earn additional money. However, because the
Annuity is designed for long-term retirement savings, a 10% penalty tax may be
applied on withdrawals you make before you reach age 59 1/2. Annuities
purchased as a non-qualified investment are not subject to the maximum
contribution limits that may apply to a qualified investment, and are not
subject to required minimum distributions after age 70 1/2.
When an Annuity is purchased as a "qualified" investment, you should consider
that the Annuity does not provide any tax advantages in addition to the
preferential treatment already available through your retirement plan under
the Internal Revenue Code. In other words, you need not invest in an Annuity
to gain the preferential tax treatment provided by your retirement plan. An
Annuity, however, may offer features and benefits in addition to providing tax
deferral that other investment vehicles may not offer, including Death Benefit
protection for your beneficiaries, lifetime income options and the ability to
make transfers between numerous variable investment options offered under the
Annuity. You should consult with your Financial Professional as to whether the
overall benefits and costs of the Annuity are appropriate considering your
overall financial plan.
WHAT ARE SOME OF THE KEY FEATURES OF THE ANNUITIES?
.. Each Annuity is a "flexible premium deferred annuity." It is called
"flexible premium" because you have considerable flexibility in the timing
and amount of Purchase Payments. Generally, investors "defer" receiving
annuity payments until after an accumulation period.
.. Each Annuity offers both Sub-accounts and Fixed Allocations. If you
allocate your Account Value to Sub-accounts, the value of your Annuity will
vary daily to reflect the investment performance of the underlying
investment options. Fixed Allocations of different durations are offered
that are guaranteed by us, but may have a Market Value Adjustment if you
withdraw or transfer your Account Value before the Maturity Date.
.. Each Annuity features two distinct periods - the accumulation period and
the payout period. During the accumulation period your Account Value is
allocated to one or more investment options.
.. During the payout period, commonly called "annuitization," you can elect to
receive annuity payments (1) for life; (2) for life with a guaranteed
minimum number of payments; (3) based on joint lives; or (4) for a
guaranteed number of payments. We currently make annuity payments available
on a fixed basis only.
.. Each Annuity offers optional income benefits, for an additional charge,
that can provide principal protection or guaranteed minimum income
protection for Owners while they are alive.
.. Each Annuity offers a basic Death Benefit. It also offers optional Death
Benefits that provide an enhanced level of protection for your
beneficiary(ies) for an additional charge.
.. You are allowed to withdraw a limited amount of money from each Annuity on
an annual basis without any charges, although any optional guaranteed
benefit you elect may be reduced. Other product features allow you to
access your Account Value as necessary, although a charge may apply.
.. Transfers between investment options are tax-free. Currently, you may make
twenty transfers each year free of charge. We also offer several programs
that enable you to manage your Account Value as your financial needs and
investment performance change.
1
With Respect to Optimum Plus Only:
.. If you purchase this Annuity, we apply an additional amount (referred to as
an Optimum Plus/SM/ amount, Purchase Credit or Credit ) to your Account
Value with each Purchase Payment you make, including your initial Purchase
Payment and any additional Purchase Payments during the first six Annuity
Years.
.. Please note that during the first 10 years, the total asset-based charges
on the Optimum Plus Annuity are higher than many of our other annuities. In
addition, the Contingent Deferred Sales Charge (CDSC) on the Optimum Plus
Annuity is higher and is deducted for a longer period of time as compared
to our other annuities. The Credit is included in your Account Value.
However, American Skandia may take back all Credits if you return your
Annuity under the "free look" provision. In addition, American Skandia may
take back a Credit associated with any Purchase Payment if (a) the Credit
was applied within twelve (12) months prior to the death of the Owner (or
Annuitant if entity owned) or (b) the Credit was applied within 12 months
prior to a request to surrender the Annuity under the medically-related
surrender provision. If you qualify for the 6.5% Credit in the first year
(for annuities issued on or after February 13, 2006), only 6% of that
amount will be taken back upon death or medically-related surrender
request, both as described above. However, we will take back the entire
6.5% if you "free look" your Annuity.
.. In these situations, your Account Value could be substantially reduced. The
amount we take back will equal the Credit, without adjustment up or down
for investment performance. Therefore, any gain on the Credit will not be
taken back. But if there was a loss on the Credit, the amount we take back
will still equal that of the Credit. Additional conditions and restrictions
apply. We do not deduct a CDSC in any situation where we take back the
Credit.
.. If replacing an annuity, please consider all charges associated with that
annuity. Purchase Credits applicable to bonus products should not be viewed
as an offset of any surrender charge that applies to any Annuity you
currently own. For more information on all available annuities, please see
Appendix D of this prospectus.
With Respect to Optimum Four Only:
.. This Annuity offers a Loyalty Credit which we add to your Account Value
with respect to Purchase Payments that have been made during the first four
Annuity Years less withdrawals through the fifth Annuity Anniversary,
subject to our rules and state availability.
With Respect to Optimum Only:
.. For annuities issued on or after February 13, 2006, this Annuity offers a
Loyalty Credit which we add to your Account Value with respect to Purchase
Payments that have been made during the first four Annuity Years less
withdrawals through the fifth Annuity Anniversary, subject to our rules and
state availability.
HOW DO I PURCHASE ONE OF THE ANNUITIES?
We sell each Annuity through licensed, registered Financial Professionals.
Unless we agree otherwise and subject to our rules, each Annuity has minimum
initial Purchase Payments as follows: $1,000 for Optimum, $10,000 for Optimum
Plus and Optimum Four. We may allow you to make a lower initial Purchase
Payment provided you establish an electronic funds transfer under which
Purchase Payments received in the first Annuity Year total at least the
minimum initial Purchase Payment for the Annuity purchased. Unless we agree
otherwise and subject to our rules, if the Annuity is owned by an individual
or individuals, the oldest of those Owners must not be older than a maximum
issue age as of the Issue Date of the Annuity as follows: age 80 for Optimum,
age 75 for Optimum Plus and age 85 for Optimum Four. If the Annuity is owned
by an entity, the Annuitant must not be older than the maximum issue age, as
of the Issue Date of the Annuity unless we agree otherwise. The availability
and level of protection of certain optional benefits may vary based on the age
of the Owner or Annuitant on the Issue Date of the Annuity, on the date the
benefit is elected or the date of the Owner's death.
2
GLOSSARY OF TERMS
Many terms used within this Prospectus are described within the text where
they appear. The description of those terms are not repeated in this Glossary
of Terms.
Account Value: The value of each allocation to a Sub-account (also referred to
as a "variable investment option") or a Fixed Allocation prior to the Annuity
Date, plus any earnings, and/or less any losses, distributions and charges.
The Account Value is calculated before we assess any applicable Contingent
Deferred Sales Charge ("CDSC" or "surrender charge") and/or, other than on an
annuity anniversary, any fee that is deducted from the Annuity annually in
arrears. The Account Value is determined separately for each Sub-account and
for each Fixed Allocation, and then totaled to determine the Account Value for
your entire Annuity. The Account Value of each Fixed Allocation on other than
its Maturity Date may be calculated using a market value adjustment. With
respect to Optimum Plus, the Account Value includes any Credits we applied to
your Purchase Payments that we are entitled to take back under certain
circumstances. With respect to Optimum and Optimum Four, the Account Value
includes any Loyalty Credit we apply. With respect to Annuities with a Highest
Daily Lifetime Five Income Benefit election, Account Value includes the value
of any allocation to the Benefit Fixed Rate Account.
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 Owner to begin receiving periodic payments for life
(or joint lives), for a guaranteed minimum number of payments or for life with
a guaranteed minimum number of payments.
Annuity Date: The date you choose for annuity payments to commence. Unless we
agree otherwise, for Annuities issued on or after November 20, 2006, the
Annuity Date must be no later than the first day of the calendar month
coinciding with or next following the later of: (a) the oldest Owner's or
Annuitant's 95/th/ birthday, whichever occurs first, and (b) the fifth
anniversary of the Issue Date.
Annuity Year: A 12-month period commencing on the Issue Date of the Annuity
and each successive 12-month period thereafter.
Benefit Fixed Rate Account: An investment option offered as part of this
Annuity that is used only if you have elected the optional Highest Daily
Lifetime Five Benefit. Amounts allocated to the Benefit Fixed Rate Account
earn a fixed rate of interest, and are held within our general account. You
may not allocate Purchase Payments to the Benefit Fixed Rate Account. Rather,
Account Value is transferred to the Benefit Fixed Rate Account only under the
asset transfer feature of the Highest Daily Lifetime Five Income Benefit.
Code: The Internal Revenue Code of 1986, as amended from time to time.
Combination 5% Roll-up And HAV Death Benefit: We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing the greater of the Highest Anniversary
Value Death Benefit and a 5% annual increase on Purchase Payments adjusted for
withdrawals.
Contingent Deferred Sales Charge (CDSC): This is a sales charge that may be
deducted when you make a full or partial withdrawal under your Annuity. We
refer to this as a "contingent" charge because it is imposed only if you make
a withdrawal. The charge is a percentage of each applicable Purchase Payment
that is being withdrawn. The period during which a particular percentage
applies is measured from the Issue Date of the Annuity. The amount and
duration of the CDSC varies among the Optimum, Optimum Four and Optimum Plus.
See "Summary of Contract Fees and Charges" for details on the CDSC for each
Annuity.
Enhanced Beneficiary Protection Death Benefit: We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing amounts in addition to the basic Death
Benefit that can be used to offset federal and state taxes payable on any
taxable gains in your Annuity at the time of your death.
Fixed Allocation: An investment option that offers a fixed rate of interest
for a specified Guarantee Period during the accumulation period.
Free Look: Under state insurance laws, you have the right, during a limited
period of time, to examine your Annuity and decide if you want to keep it or
cancel it. This right is referred to as your "free look" right. The length of
this time period depends on the law of your state, and may vary depending on
whether your purchase is a replacement or not. Check your Annuity for more
details about your free look right.
Guaranteed Minimum Income Benefit (GMIB): We offer an optional benefit that,
for an additional cost, after a seven-year waiting period, guarantees your
ability to begin receiving income from your Annuity in the form of annuity
payments based on your total Purchase Payments and an annual increase of 5% on
such Purchase Payments adjusted for withdrawals (called the "Protected Income
Value"), regardless of the impact of market performance on your Account Value.
3
GLOSSARY OF TERMS continued
Guaranteed Minimum Withdrawal Benefit (GMWB): We offer an optional benefit
that, for an additional cost, guarantees your ability to withdraw amounts over
time equal to an initial principal value, regardless of the impact of market
performance on your Account Value.
Guarantee Period: A period of time during the accumulation period where we
credit a fixed rate of interest on a Fixed Allocation.
Guaranteed Return Option Plus/SM/ (GRO PLUS/SM/)/Guaranteed Return Option: We
offer an optional benefit that, for an additional cost, guarantees a "return
of premium" at a future date, while allowing you to allocate all or a portion
of your Account Value to certain Sub-accounts.
Highest Anniversary Value Death Benefit ("HAV"): We offer an optional Death
Benefit that, for an additional cost, provides an enhanced level of protection
for your beneficiary(ies) by providing a death benefit equal to the greater of
the basic Death Benefit and the Highest Anniversary Value, less proportional
withdrawals.
Highest Daily Lifetime Five Income Benefit: We offer an optional benefit that,
for an additional cost, guarantees your ability to withdraw an annual amount
equal to a percentage of a principal value called the Total Protected
Withdrawal Value. Subject to our rules regarding the timing and amount of
withdrawals, we guarantee these withdrawal amounts, regardless of the impact
of market performance on your Account Value.
Highest Daily Value Death Benefit ("HDV"): We offer an optional benefit that,
for an additional cost, provides an enhanced level of protection for your
beneficiary(ies) by providing a death benefit equal to the greater of the
basic Death Benefit and the Highest Daily Value, less proportional withdrawals.
Interim Value: The value of a Fixed Allocation on any date other than the
Maturity Date. The Interim Value is equal to the initial value allocated to
the Fixed Allocation plus all interest credited to the Fixed Allocation as of
the date calculated, less any transfers or withdrawals from the Fixed
Allocation.
Issue Date: The effective date of your Annuity.
Lifetime Five Income Benefit: We offer an optional benefit that, for an
additional cost, guarantees your ability to withdraw an annual amount equal to
a percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value.
MVA: A market value adjustment used in the determination of Account Value of
each Fixed Allocation on any day more than 30 days prior to the Maturity Date
of such Fixed Allocation.
Owner: With an Annuity issued as an individual annuity contract, the Owner is
either an eligible entity or person named as having ownership rights in
relation to the Annuity. With an Annuity issued as a certificate under a group
annuity contract, the "Owner" refers to the person or entity who has the
rights and benefits designated as to the "Participant" in the certificate.
Spousal Lifetime Five Income Benefit: We offer an optional benefit that, for
an additional cost, guarantees until the later death of two Designated Lives
(as defined in this Prospectus) the ability to withdraw an annual amount equal
to a percentage of an initial principal value called the Protected Withdrawal
Value. Subject to our rules regarding the timing and amount of withdrawals, we
guarantee these withdrawal amounts, regardless of the impact of market
performance on your Account Value.
Sub-account: We issue your Annuity through our separate account. See "What is
the Separate Account?" under the General Information section. The separate
account invests in underlying mutual fund portfolios. From an accounting
perspective, we divide the separate account into a number of sections, each of
which corresponds to a particular underlying mutual fund portfolio. We refer
to each such section of our separate account as a "Sub-account".
Surrender Value: The value of your Annuity available upon surrender prior to
the Annuity Date. It equals the Account Value as of the date we price the
surrender minus any applicable CDSC, Annual Maintenance Fee, any Tax Charge
and the charge for any optional benefits and any additional amounts we applied
to your Purchase Payments that we may be entitled to recover under certain
circumstances. The surrender value may be calculated using a MVA with respect
to amounts in any Fixed Allocation.
Unit: A measure used to calculate your Account Value in a Sub-account during
the accumulation period.
Valuation Day: Every day the New York Stock Exchange is open for trading or
any other day the Securities and Exchange Commission requires mutual funds or
unit investment trusts to be valued.
4
SUMMARY OF CONTRACT FEES AND CHARGES
Below is a summary of the fees and charges for the Annuities. Some fees and
charges are assessed against each Annuity while others are assessed against
assets allocated to the Sub-accounts. The fees and charges that are assessed
against an Annuity include any applicable Contingent Deferred Sales Charge,
Transfer Fee, Tax Charge and Annual Maintenance Fee. The charges that are
assessed against the Sub-accounts are the Mortality and Expense Risk charge,
the charge for Administration of the Annuity, any applicable Distribution
Charge and the charge for certain optional benefits you elect, other than the
Guaranteed Minimum Income Benefit, which is assessed against the Protected
Income Value. Each underlying mutual fund portfolio assesses a fee for
investment management, other expenses and, with some mutual funds, a 12b-1
fee. The prospectus for each underlying mutual fund provides more detailed
information about the expenses for the underlying mutual funds.
The following tables provide a summary of the fees and charges you will pay if
you surrender your Annuity or transfer Account Value among investment options.
These fees and charges are described in more detail within this Prospectus.
CONTINGENT DEFERRED SALES CHARGES FOR EACH ANNUITY/ 1/
OPTIMUM
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5 Yr. 6 Yr. 7 Yr. 8 Yr. 9+
------------------------------------------------------
7.5% 7.0% 6.5% 6.0% 5.0% 4.0% 3.0% 2.0% 0.0%
------------------------------------------------------
OPTIMUM FOUR
Yr. 1 Yr. 2 Yr. 3 Yr. 4 Yr. 5+
------------------------------
8.5% 8.0% 7.0% 6.0% 0.0%
------------------------------
OPTIMUM PLUS
For Annuities issued prior to November 20, 2006, the following schedule
applies:
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%
--------------------------------------------------------------------
For Annuities issued on or after November 20, 2006 (subject to state
availability), the following schedule applies/ 2/:
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% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
--------------------------------------------------------------------
1 The Contingent Deferred Sales Charges are assessed upon surrender or
withdrawal. The charge is a percentage of each applicable Purchase Payment
deducted upon surrender or withdrawal. The period during which a particular
percentage applies is measured from the Issue Date of the Annuity.
2 In jurisdictions that have not yet approved this schedule, the schedule for
Annuities issued prior to November 20, 2006 will apply.
- -------------------------------------------------------------------------------------------------------------------
OTHER TRANSACTION FEES AND CHARGES
(assessed against each Annuity)
- -------------------------------------------------------------------------------------------------------------------
FEE/CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS
- -------------------------------------------------------------------------------------------------------------------
Transfer Fee/ 1/ $15.00 maximum currently, $15.00 maximum currently, $15.00 maximum currently,
$10.00 $10.00 $10.00
- -------------------------------------------------------------------------------------------------------------------
Tax Charge/ 2/ 0% to 3.5% 0% to 3.5% 0% to 3.5%
- -------------------------------------------------------------------------------------------------------------------
1 Currently, we deduct the fee after the 20/th/ transfer each Annuity Year.
We guarantee that the number of charge free transfers per Annuity Year will
never be less than 8.
2 This charge is deducted generally at the time you annuitize your contract.
5
The following table provides a summary of the periodic fees and charges you
will pay while you own your Annuity, excluding the underlying mutual fund
Portfolio annual expenses. These fees and charges are described in more detail
within this Prospectus.
PERIODIC FEES AND CHARGES
-------------------------------------------------------------------------------
(ASSESSED AGAINST EACH ANNUITY)
FEE/CHARGE OPTIMUM OPTIMUM FOUR OPTIMUM PLUS
- ----------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee/ 1/ Lesser of $35 or 2% of Lesser of $35 or 2% of Lesser of $35 or 2% of
Account Value/ 2/ Account Value/ 2/ Account Value
- ----------------------------------------------------------------------------------------------------------------------
Beneficiary Continuation
Option Only Lesser of $30 or 2% Lesser of $30 or 2% Lesser of $30 or 2%
- ----------------------------------------------------------------------------------------------------------------------
ANNUAL FEES/CHARGES OF THE SUB-ACCOUNTS/ 3/
- ----------------------------------------------------------------------------------------------------------------------
(ASSESSED AS A PERCENTAGE OF THE DAILY NET ASSETS OF THE SUB-ACCOUNTS)
FEE/CHARGE
- ----------------------------------------------------------------------------------------------------------------------
Mortality & Expense Risk
Charge/ 4/ 0.50% 1.50% 0.50%
- ----------------------------------------------------------------------------------------------------------------------
Administration Charge/ 4/ 0.15% 0.15% 0.15%
- ----------------------------------------------------------------------------------------------------------------------
0.60% in Annuity Years 1.00% in Annuity Years 1-10
Distribution Charge/ 5/ 1-8 N/A
- ----------------------------------------------------------------------------------------------------------------------
Settlement Service Charge/ 1.40% (qualified); 1.00% 1.40% (qualified); 1.00% 1. 40% (qualified); 1.00%
6/ (non-qualified) (non-qualified) (non-qualified)
- ----------------------------------------------------------------------------------------------------------------------
Total Annual Charges of 1.25% in Annuity Years 1.65% 1.65% in Annuity
the Sub-accounts 1-8; 0.65% in Annuity Years 1-10; 0.65% in
(excluding Years 9 and later Annuity Years 11 and later
settlement service charge)
- ----------------------------------------------------------------------------------------------------------------------
1 Assessed annually on the Annuity's anniversary date or upon surrender. For
beneficiaries who elect the non-qualified Beneficiary Continuation Option,
the fee is only applicable if Account Value is less than $25,000.
2 Only applicable if Account Value is less than $100,000.
3 These charges are deducted daily and apply to the Sub-accounts only.
4 The combination of the Mortality and Expense Risk Charge and Administration
Charge is referred to as the "Insurance Charge" elsewhere in this
Prospectus.
5 The Distribution Charge is 0.00% in Annuity Years 9+ for Optimum and in
Annuity Years 11+ for Optimum Plus.
6 The Mortality & Expense Risk Charge, the Administration Charge and the
Distribution Charge (if applicable) do not apply if you are a beneficiary
under the Beneficiary Continuation Option. The Settlement Service Charge
applies only if your beneficiary elects the Beneficiary Continuation
Option. The 1.00% and 1.40% charges set forth above are annual charges that
are assessed against the Account Value in the Sub-accounts.
6
The following table sets forth the charge for each optional benefit under the
Annuity. These fees would be in addition to the periodic fees and transaction
fees set forth in the tables above.
- --------------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES
- --------------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL
CHARGE CHARGE/ 1/ for CHARGE/ 1/ for CHARGE/ 1/ for
OPTIMUM OPTIMUM OPTIMUM
FOUR PLUS
- --------------------------------------------------------------------------------------------------------
GUARANTEED RETURN OPTION Plus/SM/ 0.75% 1.50% in Annuity 1.90% 1.90% in Annuity
(GRO Plus/SM/)/GUARANTEED RETURN maximum/ 2/ Years 1-8; Years 1-10;
OPTION 0.25% current 0.90% in Annuity 0.90% in Annuity
charge Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
GUARANTEED MINIMUM WITHDRAWAL BENEFIT 1.00% 1.60% in Annuity 2.00% 2.00% in Annuity
(GMWB) maximum /2/ Years 1-8; Years 1-10;
0.35% current 1.00% in Annuity 1.00% in Annuity
charge Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
GUARANTEED MINIMUM INCOME BENEFIT 1.00% 1.25% in Annuity 1.65% PLUS 1.65% in Annuity
(GMIB) maximum /2/ Years 1-8; 0.50% of GMIB Years 1-10;
0.50% current 0.65% in Annuity Protected Income 0.65% in Annuity
charge Years 9 and later Value Years 11 and
PLUS 0.50% of later PLUS
GMIB Protected 0.50% of GMIB
Income Value Protected Income
Value
- --------------------------------------------------------------------------------------------------------
LIFETIME FIVE/SM/ INCOME BENEFIT 1.50% 1.85% in Annuity 2.25% 2.25% in Annuity
maximum /2/ Years 1-8; Years 1-10;
0.60% current 1.25% in Annuity 1.25% in Annuity
charge Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
SPOUSAL LIFETIME FIVE INCOME BENEFIT 1.50% 2.00% in Annuity 2.40% 2.40% in Annuity
maximum /2/ Years 1-8; Years 1-10;
0.75% current 1.40% in Annuity 1.40% in Annuity
charge Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
HIGHEST DAILY LIFETIME FIVE INCOME 1.50% 1.85% in Annuity 2.25% 2.25% in Annuity
BENEFIT maximum /2/ Years 1-8; Years 1-10;
0.60% current 1.25% in Annuity 1.25% in Annuity
charge Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
ENHANCED BENEFICIARY PROTECTION DEATH 0.25% 1.50% in Annuity 1.90% 1.90% in Annuity
BENEFIT Years 1-8; Years 1-10;
0.90% in Annuity 0.90% in Annuity
Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
HIGHEST ANNIVERSARY VALUE DEATH 0.25% 1.50% in Annuity 1.90% 1.90% in Annuity
BENEFIT ("HAV") Years 1-8; Years 1-10;
0.90% in Annuity 0.90% in Annuity
Years 9 and later Years 11 and
later
- --------------------------------------------------------------------------------------------------------
7
- ----------------------------------------------------------------------------------------------------
YOUR OPTIONAL BENEFIT FEES AND CHARGES
- ----------------------------------------------------------------------------------------------------
OPTIONAL BENEFIT OPTIONAL TOTAL TOTAL TOTAL
BENEFIT FEE/ ANNUAL ANNUAL ANNUAL
CHARGE CHARGE/ 1/ for CHARGE/ 1/ for CHARGE/ 1/ for
OPTIMUM OPTIMUM OPTIMUM
FOUR PLUS
- ----------------------------------------------------------------------------------------------------
COMBINATION 5% ROLL-UP AND HAV DEATH 0.50% 1.75% in Annuity 2.15% 2.15% in Annuity
BENEFIT Years 1-8; 1.15% Years 1-10;
in Annuity Years 1.15% in Annuity
9 and later Years 11 and
later
- ----------------------------------------------------------------------------------------------------
HIGHEST DAILY VALUE DEATH BENEFIT 0.50% 1.75% in Annuity 2.15% 2.15% in Annuity
("HDV") Years 1-8; 1.15% Years 1-10;
in Annuity Years 1.15% in Annuity
9 and later Years 11 and
later
- ----------------------------------------------------------------------------------------------------
Please refer to the section of this Prospectus that describes each optional benefit for a complete
description of the benefit, including any restrictions or limitations that may apply.
- ----------------------------------------------------------------------------------------------------
1. The Total Annual Charge includes the Insurance Charge and Distribution
Charge (if applicable) assessed against the average daily net assets
allocated to the Sub-accounts. If you elect more than one optional benefit,
the Total Annual Charge would be increased to include the charge for each
optional benefit. With respect to GMIB only, the 0.50% current charge is
assessed against the average GMIB Protected Income Value, and not against
the value of the Sub-accounts. These optional benefits are not available
under the Beneficiary Continuation Option.
2. We have the right to increase the charge for each benefit up to the
indicated maximum charge upon a step-up or for a new election of the
benefit, or upon a reset of the benefit, if permitted. However, we have no
present intention of increasing the charge to that maximum level.
The following table provides the range (minimum and maximum) of the total
annual expenses for the underlying mutual funds ("Portfolios") as of
December 31, 2006. 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 0.61% 1.15%
- -----------------------------------------------------------------------------------------------------------------------
8
The following are the total annual expenses for each underlying mutual fund
("Portfolio") as of December 31, 2006, except as noted. The "Total Annual
Portfolio Operating Expenses" reflect the combination of the underlying
Portfolio's investment management fee, other expenses and any 12b-1 fees. Each
figure is stated as a percentage of the underlying Portfolio's average daily
net assets. There is no guarantee that actual expenses will be the same as
those shown in the table. For certain of the underlying Portfolios, a portion
of the management fee has been waived and/or other expenses have been
partially reimbursed. The existence of any such fee waivers and/or
reimbursements have been reflected in the footnotes. The following expenses
are deducted by the underlying Portfolio before it provides American Skandia
with the daily net asset value. The underlying Portfolio information was
provided by the underlying mutual funds and has not been independently
verified by us. See the prospectuses or statements of additional information
of the underlying Portfolios for further details. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-800-752-6342.
- --------------------------------------------------------------------------------------------------------
UNDERLYING MUTUAL FUND PORTFOLIO ANNUAL EXPENSES
(as a percentage of the average net assets of the underlying Portfolios)
- --------------------------------------------------------------------------------------------------------
For the year ended December 31, 2006
- --------------------------------------------------------------------------------------------------------
UNDERLYING PORTFOLIO Total Annual
Acquired Portfolio
Management Other Portfolio Fees Operating
Fee Expenses /1/ 12b-1 Fee & Expenses Expenses
- --------------------------------------------------------------------------------------------------------
Advanced Series Trust /2/
AST AllianceBernstein Core Value 0.75% 0.14% 0.00% 0.00% 0.89%
AST AllianceBernstein Growth & Income 0.75% 0.11% 0.00% 0.00% 0.86%
AST Federated Aggressive Growth 0.95% 0.14% 0.00% 0.00% 1.09%
AST Goldman Sachs Mid-Cap Growth 1.00% 0.15% 0.00% 0.00% 1.15%
AST International Growth /3/ 1.00% 0.15% 0.00% 0.00% 1.15%
AST International Value /4/ 1.00% 0.13% 0.00% 0.00% 1.13%
AST JPMorgan International Equity 0.87% 0.16% 0.00% 0.00% 1.03%
AST Large-Cap Value 0.75% 0.11% 0.00% 0.00% 0.86%
AST Lord Abbett Bond-Debenture 0.80% 0.14% 0.00% 0.00% 0.94%
AST Marsico Capital Growth 0.90% 0.11% 0.00% 0.00% 1.01%
AST MFS Growth 0.90% 0.13% 0.00% 0.00% 1.03%
AST Money Market 0.50% 0.11% 0.00% 0.00% 0.61%
AST Neuberger Berman Mid-Cap Value 0.89% 0.11% 0.00% 0.00% 1.00%
AST Neuberger Berman Small-Cap Growth /5/ 0.95% 0.16% 0.00% 0.00% 1.11%
AST PIMCO Limited Maturity Bond 0.65% 0.12% 0.00% 0.00% 0.77%
AST PIMCO Total Return Bond 0.65% 0.12% 0.00% 0.00% 0.77%
AST Small-Cap Growth 0.90% 0.18% 0.00% 0.00% 1.08%
AST Small-Cap Value /6/ 0.90% 0.13% 0.00% 0.00% 1.03%
AST T. Rowe Price Global Bond 0.80% 0.16% 0.00% 0.00% 0.96%
AST T. Rowe Price Large-Cap Growth 0.90% 0.11% 0.00% 0.00% 1.01%
Evergreen Variable Annuity Trust
International Equity 0.40% 0.28% 0.00% 0.00% 0.68%
Omega 0.52% 0.18% 0.00% 0.01% 0.71%
1 As noted above, shares of the Portfolios generally are purchased through
variable insurance products. Many of the Portfolios and/or their investment
advisers and/or distributors have entered into arrangements with us as the
issuer of each Annuity under which they compensate us for providing ongoing
services in lieu of the Trust providing such services. Amounts paid by a
Portfolio under those arrangements are included under "Other Expenses." For
more information see the prospectus for each underlying portfolio and,
"Service Fees payable to American Skandia," later in this prospectus.
2 The total actual operating expenses for certain of the Portfolios listed
above for the year ended December 31, 2006 were less than the amounts shown
in the table above, due to fee waivers, reimbursement of expenses, and
expense offset arrangements ("Arrangements"). These Arrangements are
voluntary and may be terminated at any time. In addition, the Arrangements
may be modified periodically. For more information regarding the
Arrangements, please see the prospectus and statement of additional
information for the Portfolios.
3 Effective November 13, 2006, Marsico Capital Management, LLC became a
Sub-advisor of the Portfolio along with William Blair & Company, LLC. Prior
to November 13, 2006, William Blair & Company, LLC served as the sole
Sub-advisor of the Portfolio, then named the "AST William Blair
International Growth Portfolio."
4 Effective November 13, 2006, Thornburg Investment Management, Inc. became a
Sub-advisor of the Portfolio along with LSV Asset Management. Prior to
November 13, 2006, LSV Asset Management served as the sole Sub-advisor of
the Portfolio, then named the "AST LSV International Value Portfolio."
5 Effective May 1, 2007, Neuberger Berman Management, Inc. became sub-advisor
to the Portfolio. Prior to May 1, 2007, Deutsche Asset Management, Inc.
served as Sub-advisor of the Portfolio, then named the "AST DeAM Small-Cap
Growth Portfolio."
6 Effective December 2006, Salomon Brothers Asset Management, Inc. changed
its name to ClearBridge Advisors, LLC.
9
EXPENSE EXAMPLES
These examples are intended to help you compare the cost of investing in one
American Skandia Annuity with the cost of investing in other American Skandia
Annuities and/or other variable annuities.
Below are examples for each Annuity showing what you would pay in expenses at
the end of the stated time periods had you invested $10,000 in the Annuity and
your investment has a 5% return each year.
The examples reflect the following fees and charges for each Annuity as
described in "Summary of Contract Fees and Charges":
. Insurance Charge
. Distribution Charge (if applicable)
. Contingent Deferred Sales Charge (when and if applicable)
. Annual Maintenance Fee
. The maximum combination of optional benefit charges
The examples also assume the following for the period shown:
. You allocate all of your Account Value to the Sub-account with the
maximum total annual operating expenses, and those expenses remain the
same each year*
. For each Sub-account charge, we deduct the current charge rather than any
maximum charge
. You make no withdrawals of Account Value
. You make no transfers, or other transactions for which we charge a fee
. No tax charge applies
. You elect the Lifetime Five Income Benefit, the Highest Daily Value Death
Benefit and the Enhanced Beneficiary Protection Death Benefit (which are
the maximum combination of optional benefit charges)
. For the Optimum Plus example, the Credit applicable to the Annuity is
6.5% of the Purchase Payment**
. For the Optimum Four example, the Loyalty Credit applies to the Annuity
and is equal to 2.75% of total Purchase Payments made during the first
four Annuity years
. For the Optimum example, the Loyalty Credit applies to the Annuity and is
equal to 0.50% of total Purchase Payment made during the first four
Annuity years.
Amounts shown in the examples are rounded to the nearest dollar.
* Note: Not all portfolios offered as Sub-accounts may be available depending
on optional benefit selection, the applicable jurisdiction and selling firm.
** The Credit that is applied to Purchase Payments received after the first
Annuity Year is less than 6.5% (see "How do I Receive Credits?")
THE EXAMPLES ARE ILLUSTRATIVE ONLY - THEY SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE UNDERLYING MUTUAL FUNDS OR
THEIR PORTFOLIOS - ACTUAL EXPENSES WILL BE LESS THAN THOSE SHOWN IF YOU ELECT
A DIFFERENT COMBINATION OF OPTIONAL BENEFITS THAN INDICATED IN THE EXAMPLES OR
IF YOU ALLOCATE ACCOUNT VALUE TO ANY OTHER AVAILABLE SUB-ACCOUNTS.
Expense Examples are provided as follows: 1) if you surrender the Annuity at
the end of the stated time period; 2) if you annuitize at the end of the
stated time period; and 3) if you do not surrender your Annuity. A table of
accumulation values appears in Appendix A to this Prospectus.
If you surrender your annuity at the end of the applicable time period:
1 YR 3 YRS 5 YRS 10 YRS
--------------------------------------------
OPTIMUM $1,087 $1,832 $2,547 $4,164
--------------------------------------------
OPTIMUM FOUR $1,216 $1,990 $2,278 $4,614
--------------------------------------------
OPTIMUM PLUS /2/ $1,342 $2,210 $2,991 $4,987
--------------------------------------------
10
If you annuitize your annuity at the end of the applicable time period:/1/
1 YR 3 YRS 5 YRS 10 YRS
------------------------------------------
OPTIMUM $412 $1,247 $2,097 $4,164
------------------------------------------
OPTIMUM FOUR $451 $1,360 $2,278 $4,614
------------------------------------------
OPTIMUM PLUS/ 2/ N/A N/A $2,415 $4,891
------------------------------------------
If you do not surrender your contract at the end of the applicable time period:
1 YR 3 YRS 5 YRS 10 YRS
------------------------------------------
OPTIMUM $412 $1,247 $2,097 $4,164
------------------------------------------
OPTIMUM FOUR $451 $1,360 $2,278 $4,614
------------------------------------------
OPTIMUM PLUS/ 2/ $478 $1,442 $2,415 $4,891
------------------------------------------
1. If you own Optimum Plus, you may not annuitize in the first Three
(3) Annuity Years; if you own Optimum or Optimum Four, you may not
annuitize in the first Annuity Year.
2. Optimum Plus Annuities purchased prior to November 20, 2006 are subject to
a different CDSC schedule
11
INVESTMENT OPTIONS
WHAT ARE THE INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIO?
Each variable investment option is a Sub-account of American Skandia Life
Assurance Corporation Variable Account B (see "What are Separate Accounts" for
more detailed information). Each Sub-account invests exclusively in one
Portfolio. You should carefully read the prospectus for any Portfolio in which
you are interested. The following chart classifies each of the Portfolios
based on our assessment of their investment style (as of the date of this
Prospectus). The chart also provides a description of each Portfolio's
investment objective (in italics) and a short, summary description of their
key policies to assist you in determining which Portfolios may be of interest
to you. There is no guarantee that any underlying Portfolio will meet its
investment objective. Not all portfolios offered as Sub-accounts may be
available depending on optional benefit selection, the applicable jurisdiction
and selling firm. The Portfolios that you select are your choice - we do not
provide investment advice, and we do not recommend or endorse any particular
Portfolio.
When you purchase one of the Annuities, you will be required to participate in
LPL's asset allocation program which does not utilize all of the investment
options available under the Annuities. Unless you have elected an optional
benefit that requires you to stay in the asset allocation program, you will be
permitted to transfer Account Value out of the asset allocation program
subsequent to the Issue Date. Currently, the following optional benefits
require that you maintain your Account Value in the asset allocation program:
Lifetime Five, Spousal Lifetime Five, Highest Daily Lifetime Five and the
Highest Daily Value death benefit. The asset allocation program is offered by
LPL. We have not designed the models or the program, and we are not
responsible for them. Our role is limited to administering the model you
select. For additional information, are Appendix C--"Additional Information on
Asset Allocation Programs."
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 Advanced Series Trust (formerly, American Skandia Trust). The
investment managers for AST are AST Investment Services, Inc. (formerly,
American Skandia Investment Services, Incorporated), a Prudential Financial
Company, and Prudential Investments LLC, both of which are affiliated
companies of American Skandia. However, a sub-advisor, as noted below, is
engaged to conduct day-to-day management.
The Portfolios are not publicly traded mutual funds. They are only available
as investment options in variable annuity contracts and variable life
insurance policies issued by insurance companies, or in some cases, to
participants in certain qualified retirement plans. However, some of the
Portfolios available as Sub-accounts under the Annuities are managed by the
same portfolio advisor or sub-advisor as a retail mutual fund of the same or
similar name that the Portfolio may have been modeled after at its inception.
Certain retail mutual funds may also have been modeled after a Portfolio.
While the investment objective and policies of the retail mutual funds and the
Portfolios may be substantially similar, the actual investments will differ to
varying degrees. Differences in the performance of the funds can be expected,
and in some cases could be substantial. You should not compare the performance
of a publicly traded mutual fund with the performance of any similarly named
Portfolio offered as a Sub-account. Details about the investment objectives,
policies, risks, costs and management of the Portfolios are found in the
prospectuses for the underlying mutual funds. The current prospectus and
statement of additional information for the underlying Portfolios can be
obtained by calling 1-800-752-6342.
------------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
------------------------------------------------------------------
AST FUNDS
------------------------------------------------------------------
LARGE AST AllianceBernstein Core Value AllianceBernstein
CAP Portfolio: seeks long-term capital L.P.
VALUE growth by investing primarily in
common stocks. The subadviser expects
that the majority of the Portfolio's
assets will be invested in the common
stocks of large companies that appear
to be undervalued. Among other
things, the Portfolio seeks to
identify compelling buying
opportunities created when companies
are undervalued on the basis of
investor reactions to near-term
problems or circumstances even though
their long-term prospects remain
sound. The subadviser seeks to
identify individual companies with
earnings growth potential that may
not be recognized by the market at
large.
------------------------------------------------------------------
LARGE AST AllianceBernstein Growth & Income AllianceBernstein
CAP Portfolio: seeks long-term growth of L.P.
VALUE capital and income while attempting
to avoid excessive fluctuations in
market value. The Portfolio normally
will invest in common stocks (and
securities convertible into common
stocks). The subadviser will take a
value-oriented approach, in that it
will try to keep the Portfolio's
assets invested in securities that
are selling at reasonable valuations
in relation to their fundamental
business prospects.
------------------------------------------------------------------
12
----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
----------------------------------------------------------------
SMALL AST Federated Aggressive Growth Federated Equity
CAP Portfolio: seeks capital growth. The Management
GROWTH Portfolio pursues its investment Company of
objective by investing primarily in Pennsylvania/
the stocks of small companies that Federated Global
are traded on national security Investment
exchanges, NASDAQ stock exchange and Management
the over-the-counter-market. Small Corp./Federated
companies will be defined as MDTA LLC
companies with market capitalizations
similar to companies in the Russell
2000 Growth Index. .
----------------------------------------------------------------
MID CAP AST Goldman Sachs Mid-Cap Growth Goldman Sachs
GROWTH Portfolio: seeks long-term capital Asset
growth. The Portfolio pursues its Management, L.P.
investment objective, by investing
primarily in equity securities
selected for their growth potential,
and normally invests at least 80% of
the value of its assets in
medium-sized companies. Medium-sized
companies are those whose market
capitalizations (measured at the time
of investment) fall within the range
of companies in the Russell Mid-cap
Growth Index. The subadviser seeks to
identify individual companies with
earnings growth potential that may
not be recognized by the market at
large.
----------------------------------------------------------------
INTER- AST International Growth Portfolio Marsico Capital
NATIONAL (formerly, AST William Blair Management,
EQUITY International Growth Portfolio): LLC; William
seeks long-term capital growth. Under Blair & Company,
normal circumstances, the Portfolio L.L.C.
invests at least 80% of the value of
its assets in securities of issuers
that are economically tied to
countries other than the United
States. Although the Portfolio
intends to invest at least 80% of its
assets in the securities of issuers
located outside the United States, it
may at times invest in U.S. issuers
and it may invest all of its assets
in fewer than five countries or even
a single country. The Portfolio looks
primarily for stocks of companies
whose earnings are growing at a
faster rate than other companies or
which offer attractive growth.
----------------------------------------------------------------
INTER- AST International Value Portfolio LSV Asset
NATIONAL (formerly, known as AST LSV Management/
EQUITY International Value Portfolio): seeks Thornburg
long-term capital appreciation. The Investment
Portfolio normally invests at least Management, Inc.
80% of the Portfolio's assets in
equity securities. The Portfolio will
invest at least 65% of its net assets
in the equity securities of companies
in at least three different
countries, without limit as to the
amount of assets that may be invested
in a single country.
----------------------------------------------------------------
INTER- AST JPMorgan International Equity J.P. Morgan
NATIONAL Portfolio: seeks long-term capital Investment
EQUITY growth by investing in a diversified Management Inc.
portfolio of international equity
securities. The Portfolio seeks to
meet its objective by investing,
under normal market conditions, at
least 80% of its assets in a
diversified portfolio of equity
securities of companies located or
operating in developed non-U.S.
countries and emerging markets of the
world. The equity securities will
ordinarily be traded on a recognized
foreign securities exchange or traded
in a foreign over-the-counter market
in the country where the issuer is
principally based, but may also be
traded in other countries including
the United States.
----------------------------------------------------------------
LARGE AST Large-Cap Value Portfolio: seeks Dreman Value
CAP current income and long-term growth Management LLC/
VALUE of income, as well as capital Hotchkis and
appreciation. The Portfolio invests, Wiley Capital
under normal circumstances, at least Management LLC/
80% of its net assets in common J.P. Morgan
stocks of large capitalization Investment
companies. Large capitalization Management, Inc.
companies are those companies with
market capitalizations within the
market capitalization range of the
Russell 1000 Value Index.
----------------------------------------------------------------
13
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
FIXED AST Lord Abbett Bond-Debenture Lord, Abbett &
INCOME Portfolio: seeks high current income Co. LLC
and the opportunity for capital
appreciation to produce a high total
return. The Portfolio invests, under
normal circumstances, at least 80% of
the value of its assets in fixed
income securities. To pursue its
objective, the Portfolio normally
invests primarily in high yield and
investment grade debt securities,
securities convertible into common
stock and preferred stocks. The
Portfolio may find good value in high
yield securities, sometimes called
"lower-rated bonds" or "junk bonds,"
and frequently may have more than
half of its assets invested in those
securities. At least 20% of the
Portfolio's assets must be invested
in any combination of investment
grade debt securities, U.S.
Government securities and cash
equivalents. The Portfolio may also
make significant investments in
mortgage-backed securities. Although
the Portfolio expects to maintain a
weighted average maturity in the
range of five to twelve years, there
are no restrictions on the overall
Portfolio or on individual
securities. The Portfolio may invest
up to 20% of its net assets in equity
securities.
-----------------------------------------------------------------
LARGE AST Marsico Capital Growth Portfolio: Marsico Capital
CAP seeks capital growth. Income Management, LLC
GROWTH realization is not an investment
objective and any income realized on
the Portfolio's investments,
therefore, will be incidental to the
Portfolio's objective. The Portfolio
will pursue its objective by
investing primarily in common stocks
of large companies that are selected
for their growth potential. Large
capitalization companies are
companies with market capitalizations
within the market capitalization
range of the Russell 1000 Growth
Index. In selecting investments for
the Portfolio, the subadviser uses an
approach that combines "top down"
macroeconomic analysis with "bottom
up" stock selection. The "top down"
approach identifies sectors,
industries and companies that may
benefit from the trends the
subadviser has observed. The
subadviser then looks for individual
companies with earnings growth
potential that may not be recognized
by the market at large, utilizing a
"bottom up" stock selection process.
The Portfolio will normally hold a
core position of between 35 and 50
common stocks. The Portfolio may hold
a limited number of additional common
stocks at times when the Portfolio
manager is accumulating new
positions, phasing out existing or
responding to exceptional market
conditions.
-----------------------------------------------------------------
LARGE AST MFS Growth Portfolio: seeks Massachusetts
CAP long-term capital growth and future, Financial Services
GROWTH rather than current income. Under Company
normal market conditions, the
Portfolio invests at least 80% of its
net assets in common stocks and
related securities, such as preferred
stocks, convertible securities and
depositary receipts, of companies
that the subadviser believes offer
better than average prospects for
long-term growth. The subadviser uses
a "bottom up" as opposed to a "top
down" investment style in managing
the Portfolio.
-----------------------------------------------------------------
FIXED AST Money Market Portfolio: seeks Prudential
INCOME high current income while maintaining Investment
high levels of liquidity. The Management, Inc.
Portfolio invests in high-quality,
short-term, U.S. dollar denominated
corporate, bank and government
obligations. The Portfolio will
invest in securities which have
effective maturities of not more than
397 days.
-----------------------------------------------------------------
MID CAP AST Neuberger Berman Mid-Cap Value Neuberger Berman
VALUE Portfolio: seeks capital growth. Management Inc.
Under normal market conditions, the
Portfolio invests at least 80% of its
net assets in the common stocks of
medium capitalization companies. For
purposes of the Portfolio, companies
with market capitalizations that fall
within the range of the Russell
Midcap(R) Index at the time of
investment are considered medium
capitalization companies. Some of the
Portfolio's assets may be invested in
the securities of large-cap companies
as well as in small-cap companies.
Under the Portfolio's value-oriented
investment approach, the subadviser
looks for well-managed companies
whose stock prices are undervalued
and that may rise in price before
other investors realize their worth.
-----------------------------------------------------------------
SMALL AST Neuberger Berman Small-Cap Growth Neuberger Berman
CAP Portfolio (formerly, known as AST Management Inc.
GROWTH DeAM Small-Cap Growth Portfolio):
seeks maximum growth of investors'
capital from a portfolio of growth
stocks of smaller companies. The
Portfolio pursues its objective,
under normal circumstances, by
primarily investing at least 80% of
its total assets in the equity
securities of small-sized companies
included in the Russell 2000
Growth(R) Index.
-----------------------------------------------------------------
14
-----------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-----------------------------------------------------------------
FIXED AST PIMCO Limited Maturity Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital. The Portfolio will invest (PIMCO)
in a portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a one- to three-year
time frame based on the subadviser's
forecast for interest rates.
-----------------------------------------------------------------
FIXED AST PIMCO Total Return Bond Pacific Investment
INCOME Portfolio: seeks to maximize total Management
return consistent with preservation Company LLC
of capital. The Portfolio will invest (PIMCO)
in a portfolio of fixed-income
investment instruments of varying
maturities. The average portfolio
duration of the Portfolio generally
will vary within a three- to six-year
time frame based on the subadviser's
forecast for interest rates.
-----------------------------------------------------------------
SMALL AST Small-Cap Growth Portfolio: seeks Eagle Asset
CAP long-term capital growth. The Management/
GROWTH Portfolio pursues its objective by Neuberger Berman
investing, under normal Management Inc.
circumstances, at least 80% of the
value of its assets in
small-capitalization companies.
Small-capitalization companies are
those companies with a market
capitalization, at the time of
purchase, no larger than the largest
capitalized company included in the
Russell 2000 Index at the time of the
Portfolio's investment.
-----------------------------------------------------------------
SMALL AST Small-Cap Value Portfolio: seeks ClearBridge
CAP to provide long-term capital growth Advisors, LLC/
VALUE by investing primarily in Dreman Value
small-capitalization stocks that Management LLC/
appear to be undervalued. The J.P. Morgan
Portfolio invests, under normal Investment
circumstances, at least 80% of the Management, Inc./
value of its net assets in small Lee Munder
capitalization stocks. Small Investments, Ltd
capitalization stocks are the stocks
of companies with market
capitalization that are within the
market capitalization range of the
Russell 2000 Value Index. The
Portfolio will focus on common stocks
that appear to be undervalued.
-----------------------------------------------------------------
FIXED AST T. Rowe Price Global Bond T. Rowe Price
INCOME Portfolio: seeks to provide high International, Inc.
current income and capital growth by
investing in high-quality foreign and
U.S. dollar-denominated bonds. The
Portfolio will invest at least 80% of
its total assets in fixed income
securities. The Portfolio invests in
all types of bonds, including high
quality bonds issued or guaranteed by
U.S. or foreign governments or their
agencies and by foreign authorities,
provinces and municipalities as well
as investment grade corporate bonds
and mortgage and asset-backed
securities of U.S. and foreign
issuers. The Portfolio generally
invests in countries where the
combination of fixed-income returns
and currency exchange rates appears
attractive, or, if the currency trend
is unfavorable, where the subadviser
believes that the currency risk can
be minimized through hedging. The
Portfolio may also invest up to 20%
of its assets in the aggregate in
below investment-grade, high-risk
bonds ("junk bonds"). In addition,
the Portfolio may invest up to 30% of
its assets in mortgage-related
(including derivatives, such as
collateralized mortgage obligations
and stripped mortgage securities) and
asset-backed securities.
-----------------------------------------------------------------
LARGE AST T. Rowe Price Large-Cap Growth T. Rowe Price
CAP Portfolio: seeks long-term growth of Associates, Inc.
GROWTH capital by investing predominantly in
the equity securities of a limited
number of large, carefully selected,
high-quality U.S. companies that are
judged likely to achieve superior
earnings growth. The Portfolio takes
a growth approach to investment
selection and normally invests at
least 80% of its net assets in the
common stocks of large companies.
Large companies are those whose
market cap is larger than the median
market cap of companies in the
Russell 1000 Growth Index as of the
time of purchase.
-----------------------------------------------------------------
15
-------------------------------------------------------------
STYLE/ INVESTMENT OBJECTIVES/POLICIES PORTFOLIO
TYPE ADVISOR/
SUB-ADVISOR
-------------------------------------------------------------
INTER- Evergreen VA International Equity: Evergreen
NATIONAL seeks long-term capital growth and Investment
EQUITY secondarily, modest income. The Management
Portfolio will normally invest 80% of Company, LLC
its assets in equity securities
issued by, in the manager's opinion,
established and quality non-U.S.
companies located in countries with
developed markets. The Portfolio may
purchase securities across all market
capitalizations. The Portfolio
normally invests at least 65% of its
assets in securities of companies in
at least three countries (other than
the U.S.). The Portfolio may also
invest in emerging markets. The
Portfolio's managers seek both growth
and value opportunities For growth
investments, the Portfolio's manager
seeks, among other things, good
business models, good management and
growth in cash flows. For value
investments, the Portfolio's manager
seeks companies that are undervalued
in the marketplace compared to their
assets. The Portfolio normally
intends to seek modest income from
dividends paid by its equity
holdings. Excluding repurchase
agreements and other cash
equivalents, the Portfolio intends to
invest substantially all of its
assets in the securities of non-U.S.
issuers.
-------------------------------------------------------------
SPECIALTY Evergreen VA Omega: seeks long-term Evergreen
capital growth. The Portfolio invests Investment
primarily, and under normal Management
conditions substantially all of its Company, LLC
assets, in common stocks of U.S.
companies across all market
capitalizations. The Portfolio's
manager employs a growth style of
equity management that emphasizes
companies with cash flow growth,
sustainable competitive advantages,
returns on invested capital above
their cost of capital and the ability
to manage for profitable growth that
can create long-term value for
shareholders.
-------------------------------------------------------------
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. We may restrict your ability to allocate Account Value to Fixed
Allocations if you elect certain optional benefits. The interest rate that we
credit to the Fixed Allocations may be reduced by an amount that corresponds
to the asset-based charges assessed against the Sub-accounts.
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.
16
FEES AND CHARGES
The charges under each Annuity are designed to cover, in the aggregate, our
direct and indirect costs of selling, administering and providing benefits
under each Annuity. They are also designed, in the aggregate, to compensate us
for the risks of loss we assume. If, as we expect, the charges that we collect
from the Annuities exceed our total costs in connection with the Annuities, we
will earn a profit. Otherwise we will incur a loss. For example, American
Skandia may make a profit on the Insurance Charge if, over time, the actual
costs of providing the guaranteed insurance obligations under an Annuity are
less than the amount we deduct for the Insurance Charge. To the extent we make
a profit on the Insurance Charge, such profit may be used for any other
corporate purpose, including payment of other expenses that American Skandia
incurs in promoting, distributing, issuing and administering an Annuity and to
offset a portion of the costs associated with offering any 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 Annuity. A portion of the proceeds that American Skandia
receives from charges that apply to the Sub-accounts may include amounts based
on market appreciation of the Sub-account values including appreciation on
amounts that represent any Credits.
WHAT ARE THE CONTRACT FEES AND CHARGES?
Contingent Deferred Sales Charge: We do not deduct a sales charge from
Purchase Payments you make to your Annuity. However, we may deduct a CDSC if
you surrender your Annuity or when you make a partial withdrawal. The CDSC
reimburses us for expenses related to sales and distribution of the Annuity,
including commissions, marketing materials and other promotional expenses. The
CDSC is calculated as a percentage of your Purchase Payment being surrendered
or withdrawn during the applicable Annuity Year. For purposes of calculating
the CDSC, we consider the year following the Issue Date of your Annuity as
Year 1. The amount of the CDSC decreases over time, measured from the Issue
Date of the Annuity. The CDSC percentages for each Annuity are shown under
"Summary of Contract Fees and Charges". If you purchase Optimum Plus and make
a withdrawal that is subject to a CDSC, we may use part of that CDSC to recoup
our costs of providing the Credit. However, we do not impose any CDSC on your
withdrawal of a Credit amount.
With respect to a partial withdrawal, we calculate the CDSC by assuming that
any available free withdrawal amount is taken out first (see How Much Can I
Withdraw as a Free Withdrawal?). If the free withdrawal amount is not
sufficient, we then assume that withdrawals are taken from Purchase Payments
that have not been previously withdrawn, on a first-in, first-out basis, and
subsequently from any other Account Value in the Annuity.
For purposes of calculating any applicable CDSC on a surrender, the Purchase
Payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you
have made prior partial withdrawals or if your Account Value has declined in
value due to negative market performance. In that scenario, we would determine
the CDSC amount as the applicable percentage of the Purchase Payments being
withdrawn, rather than as a percentage of the remaining Account Value or
withdrawal request. Thus, the CDSC would be greater than if it were calculated
as a percentage of remaining Account Value or withdrawal amount.
We may waive any applicable CDSC under certain circumstances including,
certain medically-related circumstances or when taking a Minimum Distribution
from an Annuity purchased as a "qualified" investment. Free Withdrawals,
Medically-Related Surrenders and Minimum Distributions are each explained more
fully in the section entitled "Access to Your Account Value".
Transfer Fee: Currently, you may make twenty (20) free transfers between
investment options each Annuity Year. We will charge $10.00 for each transfer
after the twentieth in each Annuity Year. We do not consider transfers made as
part of a Dollar Cost Averaging, Automatic Rebalancing or asset allocation
program when we count the twenty free transfers. All transfers made on the
same day will be treated as one (1) transfer. Renewals or transfers of Account
Value from a Fixed Allocation at the end of its Guarantee Period are not
subject to the Transfer Fee and are not counted toward the twenty free
transfers. We may reduce the number of free transfers allowable each Annuity
Year (subject to a minimum of eight) without charging a Transfer Fee unless
you make use of electronic means to transmit your transfer requests. We may
eliminate the Transfer Fee for transfer requests transmitted electronically or
through other means that reduce our processing costs. If enrolled in any
program that does not permit transfer requests to be transmitted
electronically, the Transfer Fee will not be waived.
Annual Maintenance Fee: During the accumulation period we deduct an Annual
Maintenance Fee. The Annual Maintenance Fee is $35.00 or 2% of your Account
Value invested in the Sub-accounts, whichever is less. This fee will be
deducted annually on the
17
anniversary of the Issue Date of your Annuity or, if you surrender your
Annuity during the Annuity Year, the fee is deducted at the time of surrender.
With respect to Optimum and Optimum Four, currently, the Annual Maintenance
Fee is only deducted if your Account Value is less than $100,000 on the
anniversary of the Issue Date or at the time of surrender. With respect to
Optimum Plus, we deduct the Annual Maintenance Fee regardless of Account
Value. We do not impose the Annual Maintenance Fee upon annuitization, the
payment of a Death Benefit, or a medically-rated full surrender. We may
increase the Annual Maintenance Fee. However, any increase will only apply to
Annuities issued after the date of the increase. For beneficiaries that elect
the Beneficiary Continuation Option, the Annual Maintenance Fee is the lesser
of $30 or 2% of Account Value. For a non-qualified Beneficiary Continuation
Option, the fee is only applicable if the Account Value is less than $25,000
at the time the fee is assessed.
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 Purchase Payment 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 Annuity. We will periodically review the issue of
charging for these taxes and may impose a charge in the future.
In calculating our corporate income tax liability, we derive certain corporate
income tax benefits associated with the investment of company assets,
including separate account assets, which are treated as company assets under
applicable income tax law. These benefits reduce our overall corporate income
tax liability. Under current law, such benefits may include foreign tax
credits and corporate dividends received deductions. We do not pass these tax
benefits through to holders of the separate account annuity contracts because
(i) the contract owners are not the owners of the assets generating these
benefits under applicable income tax law and (ii) we do not currently include
company income taxes in the tax charges you pay under the contract.
Insurance Charge: We deduct an Insurance Charge daily. The charge is assessed
against the daily assets allocated to the Sub-accounts and is equal to the
amount indicated under "Summary of Contract Fees and Charges". The Insurance
Charge is the combination of the Mortality & Expense Risk Charge and the
Administration Charge. The Insurance Charge is intended to compensate American
Skandia for providing the insurance benefits under each Annuity, including
each Annuity's basic Death Benefit that provides guaranteed benefits to your
beneficiaries even if the market declines and the risk that persons we
guarantee annuity payments to will live longer than our assumptions. The
charge also covers administrative costs associated with providing the Annuity
benefits, including preparation of the contract and prospectus, confirmation
statements, annual account statements and annual reports, legal and accounting
fees as well as various related expenses. Finally, the charge covers the risk
that our assumptions about the mortality risks and expenses under each Annuity
are incorrect and that we have agreed not to increase these charges over time
despite our actual costs. We may increase the portion of the total Insurance
Charge that is deducted for administrative costs; however, any increase will
only apply to Annuities issued after the date of the increase.
The Insurance Charge is not deducted against assets allocated to a Fixed
Allocation. However, the amount we credit to Fixed Allocations may also
reflect similar assumptions about the insurance guarantees provided under each
Annuity.
Distribution Charge: For Optimum and Optimum Plus, we deduct a Distribution
Charge daily. The charge is assessed against the average assets allocated to
the Sub-accounts and is equal to the amount indicated under "Summary of
Contract Fees and Charges" on an annual basis. The Distribution Charge is
intended to compensate us for a portion of our acquisition expenses under the
Annuity, including promotion and distribution of the Annuity and, with respect
to Optimum Plus, the costs associated with offering Credits which are funded
through American Skandia's general account. The Distribution Charge is
deducted against your Annuity's Account Value and any increases or decreases
in your Account Value based on market fluctuations of the Sub-accounts will
affect the charge.
Optional Benefits for which we assess a charge: Generally, if you elect to
purchase certain optional benefits, we will deduct an additional charge on a
daily basis from your Account Value allocated to the Sub-accounts. The
additional charge is included in the daily calculation of the Unit Price for
each Sub-account. We may assess charges for other optional benefits on a
different basis. Please refer to the sections entitled "Summary of Contract
Fees and Charges" for the list of charges for each Optional Benefit.
Settlement Service Charge: If your beneficiary takes the death benefit under a
Beneficiary Continuation Option, we deduct a Settlement Service Charge. The
charge is assessed daily against the average assets allocated to the
Sub-accounts and is equal to an annual charge of 1.00% for non-qualified
Annuities and 1.40% for qualified Annuities.
Fees and expenses incurred by the Portfolios: Each Portfolio incurs total
annual operating expenses comprised of an investment management fee, other
expenses and any distribution and service (12b-1) fees that may apply. These
fees and expenses are
18
reflected daily by each Portfolio before it provides American Skandia with the
net asset value as of the close of business each day. More detailed
information about fees and expenses can be found in the prospectuses for the
Portfolios.
WHAT CHARGES APPLY TO THE FIXED ALLOCATIONS?
No specific fees or expenses are deducted when determining the rate we credit
to a Fixed Allocation. However, for some of the same reasons that we deduct
the Insurance Charge against Account Value allocated to the Sub-accounts, we
also take into consideration mortality, expense, administration, profit and
other factors in determining the interest rates we credit to Fixed
Allocations. Any CDSC or Tax Charge applies to amounts that are taken from the
Sub-accounts or the Fixed Allocations. A Market Value Adjustment may also
apply to transfers, certain withdrawals, surrender or annuitization from a
Fixed Allocation.
WHAT CHARGES APPLY IF I CHOOSE AN ANNUITY PAYMENT OPTION?
If you select a fixed payment option, the amount of each fixed payment will
depend on the Account Value of your Annuity when you elected to annuitize.
There is no specific charge deducted from these payments; however, the amount
of each annuity payment reflects assumptions about our insurance expenses. If
you select a variable payment option that we may offer, then the amount of
your benefits will reflect changes in the value of your Annuity and will be
subject to charges that apply under the variable immediate annuity option.
Also, a tax charge may apply (see "Tax Charge" above). Currently, we only
offer fixed payment options.
EXCEPTIONS/REDUCTIONS TO FEES AND CHARGES
We may reduce or eliminate certain fees and charges or alter the manner in
which the particular fee or charge is deducted. For example, we may reduce the
amount of any CDSC or the length of time it applies, reduce or eliminate the
amount of the Annual Maintenance Fee or reduce the portion of the total
Insurance Charge that is deducted as an Administration Charge. Generally,
these types of changes will be based on a reduction to our sales, maintenance
or administrative expenses due to the nature of the individual or group
purchasing the Annuity. Some of the factors we might consider in making such a
decision are: (a) the size and type of group; (b) the number of Annuities
purchased by an Owner; (c) the amount of Purchase Payments or likelihood of
additional Purchase Payments; (d) whether an annuity is reinstated pursuant to
our rules; and/or (e) other transactions where sales, maintenance or
administrative expenses are likely to be reduced. We will not discriminate
unfairly between Annuity purchasers if and when we reduce any fees and charges.
19
PURCHASING YOUR ANNUITY
WHAT ARE OUR REQUIREMENTS FOR PURCHASING ONE OF THE ANNUITIES?
Initial Purchase Payment: Unless we agree otherwise and subject to our rules,
you must make a minimum initial Purchase Payment as follows: $1,000 for
Optimum and $10,000 for Optimum Plus and Optimum Four. However, if you decide
to make payments under a systematic investment or an electronic funds transfer
program, we may accept a lower initial Purchase Payment provided that, within
the first Annuity Year, your subsequent Purchase Payments plus your initial
Purchase Payment total the minimum initial Purchase Payment amount required
for the Annuity purchased.
Where allowed by law, we must approve any initial and additional Purchase
Payments of $1,000,000 or more. We may apply certain limitations and/or
restrictions on an Annuity as a condition of our acceptance, including
limiting the liquidity features or the Death Benefit protection provided under
an Annuity, limiting the right to make additional Purchase Payments, changing
the number of transfers allowable under an Annuity or restricting the
Sub-accounts or Fixed Allocations that are available. Other limitations and/or
restrictions may apply. Applicable laws designed to counter terrorists and
prevent money laundering might, in certain circumstances, require us to block
a contract owner's ability to make certain transactions, and thereby refuse to
accept Purchase Payments or requests for transfers, partial withdrawals, total
withdrawals, death benefits, or income payments until instructions are
received from the appropriate regulator. We also may be required to provide
additional information about you and your Annuity to government regulators.
Except as noted below, Purchase Payments must be submitted by check drawn on a
U.S. bank, in U.S. dollars, and made payable to American Skandia. Purchase
Payments may also be submitted via 1035 exchange or direct transfer of funds.
Under certain circumstances, Purchase Payments may be transmitted to American
Skandia via wiring funds through your Financial Professional's broker-dealer
firm. Additional Purchase Payments may also be applied to your Annuity under
an electronic funds transfer arrangement where you authorize us to deduct
money directly from your bank account. We may reject any payment if it is
received in an unacceptable form. Our acceptance of a check is subject to our
ability to collect funds.
Age Restrictions: Unless we agree otherwise and subject to our rules, the
Owner (or Annuitant if entity owned) must not be older than a maximum issue
age as of the Issue Date of the Annuity as follows: age 80 for Optimum, age 75
for Optimum Plus and age 85 for Optimum Four. If an Annuity is owned jointly,
the oldest of the Owners must not be older than the maximum issue age on the
Issue Date. You should consider your need to access your Account Value and
whether the Annuity's liquidity features will satisfy that need. If you take a
distribution prior to age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. The availability and level of
protection of certain optional benefits may vary based on the age of the Owner
on the Issue Date of the Annuity or the date of the Owner's death.
Owner, Annuitant and Beneficiary Designations: We will ask you to name the
Owner(s), Annuitant and one or more Beneficiaries for your Annuity.
.. Owner: The Owner(s) holds all rights under the Annuity. You may name up to
two Owners in which case all ownership rights are held jointly. Generally,
joint owners are required to act jointly; however, if each owner provides
us with an instruction that we find acceptable, we will permit each owner
to act separately. All information and documents that we are required to
send you will be sent to the first named owner. This Annuity does not
provide a right of survivorship. Refer to the Glossary of Terms for a
complete description of the term "Owner."
.. Annuitant: The Annuitant is the person upon whose life we continue to make
annuity payments. You must name an Annuitant who is a natural person. We do
not accept a designation of joint Annuitants during the accumulation
period. In limited circumstances and where allowed by law, you may name one
or more Contingent Annuitants. Generally, a Contingent Annuitant will
become the Annuitant if the Annuitant dies before the Annuity Date. Please
refer to the discussion of "Considerations for Contingent Annuitants" in
the Tax Considerations section of the Prospectus.
.. Beneficiary: The Beneficiary is the person(s) or entity you name to receive
the Death Benefit. Your Beneficiary Designation should be the exact name of
your beneficiary, not only a reference to the beneficiary's relationship to
you. If you use a designation of "surviving spouse," we will pay the Death
Benefit to the individual that is your spouse at the time of your death (as
defined under the federal tax laws and regulations). If no beneficiary is
named the Death Benefit will be paid to you or your estate.
Your right to make certain designations may be limited if your Annuity is to
be used as an IRA or other "qualified" investment that is given beneficial tax
treatment under the Code. You should seek competent tax advice on the income,
estate and gift tax implications of your designations.
20
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 in a form acceptable to us. 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;
.. a new Annuitant if the latest Annuity Date would be earlier than prior to
the change;
.. for "non-qualified" investments, a new Annuitant prior to the Annuity Date
if the Annuity is owned by an entity; and
.. a change in Beneficiary if the Owner had previously made the designation
irrevocable.
There are also restrictions on designation changes when you have elected
certain optional benefits. See the "Living Benefit Programs" and "Death
Benefits" sections of this Prospectus for any such restrictions.
Spousal Designations
If an Annuity is co-owned by spouses, we will assume that the sole primary
Beneficiary is the surviving spouse that was named as the co-owner unless you
elect an alternative Beneficiary Designation. Unless you elect an alternative
Beneficiary Designation, upon the death of either spousal Owner, the surviving
spouse may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. The Death Benefit that would have been payable will be
the new Account Value of the Annuity as of the date of due proof of death and
any required proof of a spousal relationship. As of the date the assumption is
effective, the surviving spouse will have all the rights and benefits that
would be available under the Annuity to a new purchaser of the same attained
age. For the Spousal Lifetime Five Income Benefit, the eligible surviving
spouse will also be able to assume the benefit with the Annuity. See the
description of this benefit in the "Living Benefit Programs" section of this
Prospectus. For purposes of determining any future Death Benefit for the
beneficiary of the surviving spouse, the new Account Value will be considered
as the initial Purchase Payment. No CDSC will apply to the new Account Value.
However, any additional Purchase Payments applied after the date the
assumption is effective will be subject to all provisions of the Annuity,
including the CDSC when applicable.
Spousal assumption is also permitted, subject to our rules and regulatory
approval, if the Annuity is held by a custodial account established to hold
retirement assets for the benefit of the natural person Annuitant pursuant to
the provisions of Section 408(a) of the Internal Revenue Code ("Code") (or any
successor Code section thereto) ("Custodial Account") and, on the date of the
Annuitant's death, the spouse of the Annuitant is (1) the Contingent Annuitant
under the Annuity and (2) the beneficiary of the Custodial Account. The
ability to continue the Annuity in this manner will result in the Annuity no
longer qualifying for tax deferral under the Code. However, such tax deferral
should result from the ownership of the Annuity by the Custodial Account.
Please consult your tax or legal adviser.
We define a spouse the same as under federal tax laws and regulations.
Contingent Annuitant
Generally, if an Annuity is owned by an entity and the entity has named a
Contingent Annuitant, the Contingent Annuitant will become the Annuitant upon
the death of the Annuitant, and no Death Benefit is payable. Unless we agree
otherwise, the Annuity is only eligible to have a Contingent Annuitant
designation if the entity which owns the Annuity is (1) a plan described in
Internal Revenue Code Section 72(s)(5)(A)(i) (or any successor Code section
thereto); (2) an entity described in Code Section 72(u)(1) (or any successor
Code section thereto); or (3) a Custodial Account, as discribed in the above
section.
Where the Annuity is held by a Custodial Account, the Contingent Annuitant
will not automatically become the Annuitant upon the death of the Annuitant.
Upon the death of the Annuitant, the Custodial Account will have the choice,
subject to our rules, to either elect to receive the Death Benefit or elect to
continue the Annuity. If the Custodial Account elects to receive the Death
Benefit, the Account Value of the Annuity as of the date of due proof of death
of the Annuitant will reflect the amount that would have been payable had a
Death Benefit been paid. See the section above entitled "Spousal Designations"
for more information about how the Annuity can be continued by a Custodial
Account.
MAY I RETURN MY ANNUITY IF I CHANGE MY MIND?
If after purchasing your Annuity you change your mind and decide that you do
not want it, you may return it to us within a certain period of time known as
a right to cancel period. This is often referred to as a "free look."
Depending on the state in which you purchased your Annuity and, in some
states, if you purchased the Annuity as a replacement for a prior contract,
the right to cancel period may be ten (10) days, or longer, measured from the
time that you received your Annuity. If you return your Annuity during the
applicable period, we will refund your current Account Value plus any tax
charge deducted, less any applicable federal and
21
state income tax withholding and depending on your state's requirements, any
applicable insurance charges deducted. The amount returned to you may be
higher or lower than the Purchase Payment(s) applied during the right to
cancel period. Where required by law, we will return your Purchase Payment(s),
or the greater of your current Account Value and the amount of your Purchase
Payment(s) applied during the right to cancel period less any applicable
federal and state income tax withholding. With respect to Optimum Plus, if you
return your Annuity, we will not return any Credits we applied to your Annuity
based on your Purchase Payments.
MAY I MAKE ADDITIONAL PURCHASE PAYMENTS?
Unless we agree otherwise and subject to our rules, the minimum amount that we
accept as an additional Purchase Payment is $100 unless you participate in
American Skandia's Systematic Investment Plan or a periodic Purchase Payment
program. Purchase Payments made while you participate in an asset allocation
program will be allocated in accordance with such program. Additional Purchase
Payments may be made 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.
We call our electronic funds transfer program "American Skandia's Systematic
Investment Plan." Purchase Payments made through electronic funds transfer may
only be allocated to the Sub-accounts when applied. Different allocation
requirements may apply in connection with certain optional benefits. We may
allow you to invest in your Annuity with a lower initial Purchase Payment, as
long as you authorize payments through an electronic funds transfer that will
equal at least the minimum Purchase Payment set forth above during the first
12 months of your Annuity. We may suspend or cancel electronic funds transfer
privileges if sufficient funds are not available from the applicable financial
institution on any date that a transaction is scheduled to occur.
MAY I MAKE PURCHASE PAYMENTS THROUGH A SALARY REDUCTION PROGRAM?
These types of programs are only available with certain types of qualified
investments. If your employer sponsors such a program, we may agree to accept
periodic Purchase Payments through a salary reduction program as long as the
allocations are made only to Sub-accounts and the periodic Purchase Payments
received in the first year total at least the minimum Purchase Payment set
forth above.
22
MANAGING YOUR ACCOUNT VALUE
HOW AND WHEN ARE PURCHASE PAYMENTS INVESTED?
(See "Valuing Your Investment" for a description of our procedure for pricing
initial and subsequent Purchase Payments.)
Initial Purchase Payment: Once we accept your application, we invest your
Purchase Payment in your Annuity according to your instructions for allocating
your Account Value. The Purchase Payment is your initial Purchase Payment
minus any tax charges that may apply. You can allocate Account Value to one or
more Sub-accounts or Fixed Allocations. Investment restrictions will apply if
you elect certain optional benefits.
Subsequent Purchase Payments: Unless you participate in an asset allocation
program, or unless you have provided us with other specific allocation
instructions for one, more than one, or all subsequent Purchase Payments, we
will allocate any additional Purchase Payments you make according to your
initial Purchase Payment allocation instructions. If you so instruct us, we
will allocate subsequent Purchase Payments according to any new allocation
instructions. Unless you tell us otherwise, Purchase Payments made while you
participate in an asset allocation program will be allocated in accordance
with such program.
HOW DO I RECEIVE A LOYALTY CREDIT UNDER THE OPTIMUM AND OPTIMUM FOUR ANNUITIES?
We apply a Loyalty Credit to your Annuity's Account Value at the end of your
fifth Annuity Year ("fifth Annuity Anniversary"). With respect to Optimum, for
annuities issued on or after February 13, 2006, the Loyalty Credit is equal to
0.50% of total Purchase Payments made during the first four Annuity Years less
the cumulative amount of withdrawals made (including the deduction of any CDSC
amounts) through the fifth Annuity Anniversary. With respect to Optimum Four,
for annuities issued between June 20, 2005 and February 13, 2006, the Loyalty
Credit is equal to 2.25% of total Purchase Payments made during the first four
Annuity Years less the cumulative amount of withdrawals made (including the
deduction of any CDSC amounts) through the fifth Annuity Anniversary. For
Optimum Four Annuities issued on or after February 13, 2006, the Loyalty
Credit is equal to 2.75% of total Purchase Payments made during the first four
Annuity Years less the cumulative amount of withdrawals made (including the
deduction of any CDSC amounts) through the fifth Annuity Anniversary.
If the total Purchase Payments made during the first four Annuity Years is
less than the cumulative amount of withdrawals made on or before the fifth
Annuity Anniversary, no Loyalty Credit will be applied to your Annuity. Also,
no Loyalty Credit will be applied to your Annuity if your Account Value is
zero on the fifth Annuity Anniversary. This would include any situation where
the Annuity is still in force due to the fact that payments are being made
under an optional benefit such as Highest Daily Lifetime Five, Lifetime Five,
Spousal Lifetime Five or the Guaranteed Minimum Withdrawal Benefit. In
addition, no Loyalty Credit will be applied to your Annuity if before the
fifth Annuity Anniversary: (i) you have surrendered your Annuity; (ii) you
have annuitized your Annuity; (iii) your Beneficiary has elected our
Beneficiary Continuation Option; or (iv) we have received due proof of your
death (and there has been no spousal continuation election made). If your
spouse continues the Annuity under our spousal continuation option, we will
apply the Loyalty Credit to your Annuity only on the fifth Annuity Anniversary
measured from the date that we originally issued you the Annuity. Since the
Loyalty Credit is applied to the Account Value only, any guarantees that are
not based on Account Value will not reflect the Loyalty Credit. Similarly,
guarantees that are made against a loss in Account Value will not be triggered
in certain very limited circumstances where they otherwise would have been,
had no Loyalty Credit been applied to the Account Value.
HOW ARE LOYALTY CREDITS APPLIED TO MY ACCOUNT VALUE UNDER THE OPTIMUM AND
OPTIMUM FOUR ANNUITIES?
Any Loyalty Credit that is allocated to your Account Value on the fifth
Annuity Anniversary will be allocated to the Fixed Allocations and
Sub-accounts in the same percentages as Purchase Payments are then being
allocated to your Annuity.
Example of Applying the Loyalty Credit with respect to Optimum
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is, subject to state availability,
equal to 0.50% of $15,000 (this represents the $20,000 of Purchase Payments
made during the first four Annuity Years minus the $5,000 withdrawal made in
the fifth Annuity Year. The computation disregards the additional $10,000
Purchase Payment made in the fifth Annuity Year.) Therefore, the Loyalty
Credit amount would be equal to $75.00.
Example of Applying the Loyalty Credit with respect to Optimum Four
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. During Annuity Year four (i.e., prior to
the fourth Annuity Anniversary) you make an additional $10,000 Purchase
Payment. During the early part of Annuity Year five (i.e., prior to the fifth
Annuity Anniversary) you make a $10,000 Purchase Payment and later in the year
make a withdrawal of $5,000. The Loyalty Credit that we will apply to your
Annuity on the fifth Annuity Anniversary is,
23
subject to state availability, equal to 2.75% of $15,000 (this represents the
$20,000 of Purchase Payments made during the first four Annuity Years minus
the $5,000 withdrawal made in the fifth Annuity Year. The computation
disregards the additional $10,000 Purchase Payment made in the fifth Annuity
Year.) Therefore, the Loyalty Credit amount would be equal to $412.50.
HOW DO I RECEIVE CREDITS UNDER THE OPTIMUM PLUS ANNUITY?
We apply a "Credit" to your Annuity's Account Value each time you make a
Purchase Payment during the first six (6) Annuity Years. The amount of the
Credit is payable from our general account. The amount of the Credit depends
on the Annuity Year in which the Purchase Payment(s) is made, according to the
table below:
For annuities issued prior to February 13, 2006:
ANNUITY YEAR CREDIT
------------ ------
1 6.00%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
For annuities issued on or after February 13, 2006 (subject to state
availability):
ANNUITY YEAR CREDIT
------------ ------
1 6.50%
2 5.00%
3 4.00%
4 3.00%
5 2.00%
6 1.00%
7+ 0.00%
HOW ARE CREDITS APPLIED TO ACCOUNT VALUE UNDER THE OPTIMUM PLUS ANNUITY?
Each Credit is allocated to your Account Value at the time the Purchase
Payment is applied to your Account Value. The amount of the Credit is
allocated to the investment options in the same ratio as the applicable
Purchase Payment is applied.
Examples of Applying Credits
Initial Purchase Payment
Assume you make an initial Purchase Payment of $10,000 and your Annuity is
issued on or after February 13, 2006. We would apply a 6.5% Credit to your
Purchase Payment and allocate the amount of the Credit ($650 = $10,000 X .065)
to your Account Value in the proportion that your Purchase Payment is
allocated.
Additional Purchase Payment in Annuity Year 2
Assume that you make an additional Purchase Payment of $5,000. We would apply
a 5.0% Credit to your Purchase Payment and allocate the amount of the Credit
($250 = $5,000 X .05) to your Account Value.
Additional Purchase Payment in Annuity Year 6
Assume that you make an additional Purchase Payment of $15,000. We would apply
a 1.0% Credit to your Purchase Payment and allocate the amount of the Credit
($150 = $15,000 X .01) to your Account Value.
The amount of any Optimum Plus Credits applied to your Optimum Plus Annuity
Account Value can be taken back by American Skandia under certain
circumstances:
. any Optimum Plus Credits applied to your Account Value on Purchase
Payments made within the 12 months before the Owner's (or Annuitant's if
entity owned) date of death will be taken back;
. the amount available under the medically-related surrender portion of the
Annuity will not include the amount of any Optimum Plus Credits payable
on Purchase Payments made within 12 months prior to the date of a request
under the medically-related surrender provision; and
. if you elect to "free look" your Annuity, the amount returned to you will
not include the amount of any Optimum Plus Credits.
If you qualify for the 6.5% Optimum Plus Credit in the first year (for
annuities issued on or after February 13, 2006, subject to state
availability), only 6% of that amount will be taken back in connection with
the first two bullets described above. However, we will take back the entire
6.5% if you "free look" your Annuity.
24
The Account Value may be substantially reduced if American Skandia takes back
the Optimum Plus Credit amount under these circumstances. The amount we take
back will equal the Optimum Plus Credit amount, without adjustment up or down
for investment performance. Therefore, any gain on the Optimum Plus Credit
amount will not be taken back. But if there was a loss on the Optimum Plus
Credit amount, the amount we take back will still equal the amount of the
Optimum Plus Credit amount. We do not deduct a CDSC in any situation where we
take back the Optimum Plus Credit amount. During the first 10 Annuity Years,
the total asset-based charges on this Annuity (including the Insurance Charge
and the Distribution Charge) are higher than many of our other annuities,
including other annuities we offer that apply credits to Purchase Payments.
General Information about Credits
.. We do not consider Credits to be "investment in the contract" for income
tax purposes.
.. You may not withdraw the amount of any Credits under the Free Withdrawal
provision. The Free Withdrawal provision only applies to withdrawals of
Purchase Payments.
ARE THERE RESTRICTIONS OR CHARGES ON TRANSFERS BETWEEN INVESTMENT OPTIONS?
During the accumulation period you may transfer Account Value between
investment options subject to the restrictions outlined below. Transfers are
not subject to taxation on any gain. We may require a minimum of $500 in each
Sub-account you allocate Account Value to at the time of any allocation or
transfer. If you request a transfer and, as a result of the transfer, there
would be less than $500 in the Sub-account, we may transfer the remaining
Account Value in the Sub-account pro-rata to the other investment options to
which you transferred.
Currently, we charge $10.00 for each transfer after the twentieth
(20/th/) transfer in each Annuity Year. Transfers made as part of a Dollar
Cost Averaging, Automatic Rebalancing or asset allocation program do not count
toward the twenty free transfer limit. Renewals or transfers of Account Value
from a Fixed Allocation at the end of its Guarantee Period are not subject to
the transfer charge. We may reduce the number of free transfers allowable each
Annuity Year (subject to a minimum of eight) without charging a Transfer Fee.
We may also increase the Transfer Fee that we charge to $20.00 for each
transfer after the number of free transfers has been used up. We may eliminate
the Transfer Fee for transfer requests transmitted electronically or through
other means that reduce our processing costs. If enrolled in any program that
does not permit transfer requests to be transmitted electronically, the
Transfer Fee will not be waived.
Once you have made 20 transfers among the Sub-accounts during an Annuity Year,
we will accept any additional transfer request during that year only if the
request is submitted to us in writing with an original signature and otherwise
is in good order. For purposes of this 20 transfer limit, we (i) do not view a
facsimile transmission as a "writing", (ii) will treat multiple transfer
requests submitted on the same Valuation 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. Each
Annuity offers Sub-accounts designed for Owners who wish to engage in frequent
transfers (i.e., one or more of the Sub-accounts corresponding to the AST
Money Market Portfolio), and we encourage Owners seeking frequent transfers to
utilize those Sub-accounts.
In light of the risks posed to Owners and other investors by frequent
transfers, we reserve the right to limit the number of transfers in any
Annuity Year for all existing or new Owners and to take the other actions
discussed below. We also reserve the right to limit the number of transfers in
any Annuity Year or to refuse any transfer request for an Owner or certain
Owners if: (a) we believe that excessive transfer activity (as we define it)
or a specific transfer request or group of transfer requests may have a
detrimental effect on Unit Values or the share prices of the Portfolios; or
(b) we are informed by a Portfolio (e.g., by the Portfolio's portfolio
manager) that the purchase or redemption of shares in the Portfolio must be
restricted because the Portfolio believes the transfer activity to which such
purchase and redemption relates would have a detrimental effect on the share
prices of the affected Portfolio. Without limiting the above, the most likely
scenario where either of the above could occur would be if the aggregate
amount of a trade or trades represented a relatively large proportion of the
total assets of a particular Portfolio. In furtherance of our general
authority to restrict transfers as described above, and without limiting other
actions we may take in the future, we have adopted the following specific
restrictions:
.. With respect to each Sub-account (other than the AST Money Market
Sub-account), we track amounts exceeding a certain dollar threshold that
were transferred into the Sub-account. If you transfer such amount into a
particular Sub-account, and within 30 calendar days thereafter transfer
(the "Transfer Out") all or a portion of that amount into another
Sub-account, then upon the Transfer Out, the former Sub-account becomes
restricted (the "Restricted Sub-account"). Specifically, we will not permit
subsequent transfers into the Restricted Sub-account for 90 calendar days
after the Transfer Out if the Restricted Sub-account invests in a
non-international Portfolio, or 180 calendar days after the Transfer Out if
the Restricted Sub-account invests in an international Portfolio. For
purposes of this rule, we (i) do not count transfers made in connection
with one of our
25
systematic programs, such as asset allocation and automated withdrawals;
(ii) do not count any transfer that solely involves Sub-accounts
corresponding to the AST Money Market Portfolio; and (iii) do not
categorize as a transfer the first transfer that you make after the Issue
Date, if you make that transfer within 30 calendar days after the Issue
Date. Even if an amount becomes restricted under the foregoing rules, you
are still free to redeem the amount from your Annuity at any time.
.. We reserve the right to effect exchanges on a delayed basis for all
contracts. That is, we may price an exchange involving the Sub-accounts on
the Valuation Day subsequent to the Valuation Day on which the exchange
request was received. Before implementing such a practice, we would issue a
separate written notice to Owners that explains the practice in detail.
If we deny one or more transfer requests under the foregoing rules, we will
inform you or your Financial Professional promptly of the circumstances
concerning the denial.
There are contract owners of different variable annuity contracts that are
funded through the same Separate Account that are not subject to the
above-referenced transfer restrictions and, therefore, might make more
numerous and frequent transfers than contract owners who are subject to such
limitations. Finally, there are contract owners of other variable annuity
contracts or variable life contracts that are issued by American Skandia as
well as other insurance companies that have the same underlying mutual fund
portfolios available to them. Since some contract owners are not subject to
the same transfer restrictions, unfavorable consequences associated with such
frequent trading within the underlying mutual fund (e.g., greater portfolio
turnover, higher transaction costs, or performance or tax issues) may affect
all contract owners. Similarly, while contracts managed by a Financial
Professional or third party investment advisor are subject to the restrictions
on transfers between investment options that are discussed above, if the
advisor manages a number of contracts in the same fashion unfavorable
consequences may be associated with management activity since it may involve
the movement of a substantial portion of an underlying mutual fund's assets
which may affect all contract owners invested in the affected options. Apart
from jurisdiction- specific and contract differences in transfer restrictions,
we will apply these rules uniformly (including contracts managed by a
Financial Professional or third party investment advisor), and will not waive
a transfer restriction for any contract owner.
Although our transfer restrictions are designed to prevent excessive
transfers, they are not capable of preventing every potential occurrence of
excessive transfer activity.
The Portfolios may have adopted their own policies and procedures with respect
to excessive trading of their respective shares, and we reserve the right to
enforce these policies and procedures. The prospectuses for the Portfolios
describe any such policies and procedures, which may be more or less
restrictive than the policies and procedures we have adopted. Under SEC rules,
we are required to: (1) enter into a written agreement with each Portfolio or
its principal underwriter or its transfer agent that obligates us to provide
to the Portfolio promptly upon request certain information about the trading
activity of individual contract owners, and (2) execute instructions from the
Portfolio to restrict or prohibit further purchases or transfers by specific
contract owners who violate the excessive trading policies established by the
Portfolio. In addition, you should be aware that some Portfolios may receive
"omnibus" purchase and redemption orders from other insurance companies or
intermediaries such as retirement plans. The omnibus orders reflect the
aggregation and netting of multiple orders from individual owners of variable
insurance contracts and/or individual retirement plan participants. The
omnibus nature of these orders may limit the Portfolios in their ability to
apply their excessive trading policies and procedures. In addition, the other
insurance companies and/or retirement plans may have different policies and
procedures or may not have any such policies and procedures because of
contractual limitations. For these reasons, we cannot guarantee that the
Portfolios (and thus contract owners) will not be harmed by transfer activity
relating to other insurance companies and/or retirement plans that may invest
in the Portfolios.
A Portfolio also may assess a short term trading fee in connection with a
transfer out of the Sub-account investing in that Portfolio that occurs within
a certain number of days following the date of allocation to the Sub-account.
Each Portfolio determines the amount of the short term trading fee and when
the fee is imposed. The fee is retained by or paid to the Portfolio and is not
retained by us. The fee will be deducted from your Account Value, to the
extent allowed by law. At present, no Portfolio has adopted a short-term
trading fee.
DO YOU OFFER DOLLAR COST AVERAGING?
Yes. We offer Dollar Cost Averaging during the accumulation period. Dollar
Cost Averaging allows you to systematically transfer an amount periodically
from one investment option to one or more other investment options. You can
choose to transfer earnings only, principal plus earnings or a flat dollar
amount. You may elect a Dollar Cost Averaging program that transfers amounts
monthly, quarterly, semi-annually, or annually from Sub-accounts, or a program
that transfers amounts monthly from Fixed Allocations. By investing amounts on
a regular basis instead of investing the total amount at one time, Dollar Cost
Averaging may decrease the effect of market fluctuation on the investment of
your Purchase Payment. This may result in a lower average cost of units over
time. However, there is no guarantee that Dollar Cost Averaging will result in
a profit or protect against a loss in a declining market. There is no minimum
Account Value required to enroll in a Dollar Cost Averaging program and we do
not deduct a charge for participating in a Dollar Cost Averaging program.
26
You can Dollar Cost Average from Sub-accounts or Fixed Allocations. Dollar
Cost Averaging from Fixed Allocations is subject to a number of rules that
include, but are not limited to the following:
. You may only use Fixed Allocations with Guarantee Periods of 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 have elected an
automatic rebalancing program or an asset allocation program. Dollar Cost
Averaging from Fixed Allocations is not available if you elect the Guaranteed
Return Option Plus Guaranteed Return Option or Highest Daily Lifetime Five
Income Benefit.
American Skandia may offer Fixed Allocations with Guarantee Periods of 6
months or 12 months exclusively for use with a Dollar Cost Averaging program
("DCA Fixed Allocations"). DCA Fixed Allocations are designed to automatically
transfer Account Value in either 6 or 12 payments under a Dollar Cost
Averaging program. Dollar Cost Averaging transfers will begin on the day
following the date the DCA Fixed Allocation is established and each month
following until the entire principal amount plus earnings is transferred. DCA
Fixed Allocations may only be established with your initial Purchase Payment
or additional Purchase Payments. You may not transfer existing Account Value
to a DCA Fixed Allocation. We reserve the right to terminate offering these
special purpose Fixed Allocations at any time.
Account Value allocated to the DCA Fixed Allocation will be transferred to the
Sub-accounts you choose under the Dollar Cost Averaging program. If you
terminate the Dollar Cost Averaging program before the entire principal amount
plus earnings has been transferred to the Sub-account(s), you must transfer
all remaining Account Value to any other investment option. Unless you provide
alternate instructions at the time you terminate the Dollar Cost Averaging
program, Account Value will be transferred to the AST Money Market
Sub-account. Transfers from Fixed Allocations as part of a Dollar Cost
Averaging program are not subject to a Market Value Adjustment. However, a
Market Value Adjustment will apply if you terminate the Dollar Cost Averaging
program before the entire principal amount plus earnings has been transferred
to the Sub-account(s).
DO YOU OFFER ANY AUTOMATIC REBALANCING PROGRAMS?
Yes. During the accumulation period, we offer Automatic Rebalancing among the
Sub-accounts you choose. You can choose to have your Account Value rebalanced
monthly, quarterly, semi-annually, or annually. On the appropriate date, the
Sub-accounts you chose are rebalanced to the allocation percentages you
requested. With Automatic Rebalancing, we transfer the appropriate amount from
the "overweighted" Sub-accounts to the "underweighted" Sub-accounts to return
your allocations to the percentages you request. For example, over time the
performance of the Sub-accounts will differ, causing your percentage
allocations to shift.
Any transfer to or from any Sub-account that is not part of your Automatic
Rebalancing program, will be made; however, that Sub-account will not become
part of your rebalancing program unless we receive instructions from you
indicating that you would like such option to become part of the program.
There is no minimum Account Value required to enroll in Automatic Rebalancing.
All rebalancing transfers as part of an Automatic Rebalancing program are not
included when counting the number of transfers each year toward the maximum
number of free transfers. We do not deduct a charge for participating in an
Automatic Rebalancing program. Participation in the Automatic Rebalancing
program may be restricted if you are enrolled in certain other optional
programs. Sub-accounts that are part of a Systematic Withdrawal program or
Dollar Cost Averaging program will be excluded from an Automatic Rebalancing
program.
ARE ANY ASSET ALLOCATION PROGRAMS AVAILABLE?
Yes. Certain "static asset allocation programs" are provided by Linsco/Private
Ledger, Corp, ("LPL"), the firm selling the Annuity. Initially, you may be
required to enroll in an available asset allocation program if you purchase
one of the Annuities. Additionally, certain optional benefits require your
Account Value be maintained in a model in the asset allocation program. 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 and direction. 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. The programs are offered by
LPL. We have not designed the models or the program, and we are not
responsible for them. Our role is limited to administering the model you
select. 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
27
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. LPL reserves
the right to terminate or change the programs at any time. We reserve the
right to change the way in which we administer the program you have selected
with your LPL Financial Professional, and we reserve the right to terminate
our administration of the programs. You should consult with your LPL Financial
Professional before electing any asset allocation program.
DO YOU OFFER PROGRAMS DESIGNED TO GUARANTEE A "RETURN OF PREMIUM" AT A FUTURE
DATE?
Yes. We offer three different programs for investors who wish to invest in the
Sub-accounts but also wish to protect their principal, as of a specific date
in the future. They are the Balanced Investment Program, the Highest Daily
Lifetime Five Income Benefit and the Guaranteed Return Option Plus/SM/. (GRO
Plus/SM/). GRO Plus/SM/ is not available in all states. In some states where
GRO Plus is not available we offer the Guaranteed Return Option (GRO).)
Generally, all three programs allow you to allocate a portion of your Account
Value to the available Sub-accounts while ensuring that your Account Value
will at least equal your contributions adjusted for withdrawals and transfers
on a specified date. Under GRO Plus, Account Value is allocated to and
maintained in Fixed Allocations to the extent we, in our sole discretion, deem
it is necessary to support our guarantee under the program. Highest Daily
Lifetime Five also includes in a specialized asset transfer component under
which we may transfer Account Value between permitted Sub-accounts and a fixed
interest rate account. 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. Under Highest Daily Lifetime Five,
the "return of premium" component is only one feature of the benefit and only
applies if no withdrawals are taken for the first ten years after benefit
election. Generally, more of your Account Value will be allocated to the
Sub-accounts under the GRO Plus and Highest Daily Lifetime Five programs 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 any of these
programs if you expect to begin taking annuity payments before the program
would be completed. In addition, as with most return of premium programs,
amounts that are available to allocate to the Sub-accounts may be
substantially less than they would be if you did not elect a return of premium
program. This means that, if investment experience in the Sub-accounts were
positive, your Account Value would grow at a slower rate than if you did not
elect a return of premium program and allocated all of your Account Value to
the Sub-accounts.
There is no additional charge for participation in the Balanced Investment
Program. There is an additional charge if you elect either GRO Plus or Highest
Daily Lifetime Five. See below for a description of the Balanced Investment
Program. See the "Living Benefit Programs" section of the Prospectus for
details on GRO Plus and Highest Daily Lifetime Five. Restrictions and
limitations apply.
Balanced Investment Program
We offer a balanced investment program where a portion of your Account Value
is allocated to a Fixed Allocation and the remaining Account Value is
allocated to the Sub-accounts that you select. When you enroll in the Balanced
Investment Program, you choose the duration that you wish the program to last.
This determines the duration of the Guarantee Period for the Fixed Allocation.
Based on the fixed rate for the Guarantee Period chosen, we calculate the
portion of your Account Value that must be allocated to the Fixed Allocation
to grow to a specific "principal amount" (such as your initial Purchase
Payment). We determine the amount based on the rates then in effect for the
Guarantee Period you choose. If you continue the program until the end of the
Guarantee Period and make no withdrawals or transfers, at the end of the
Guarantee Period, the Fixed Allocation will have grown to equal the "principal
amount". Withdrawals or transfers from the Fixed Allocation before the end of
the Guarantee Period will terminate the program and may be subject to a Market
Value Adjustment. You can transfer the Account Value that is not allocated to
the Fixed Allocation between any of the Sub-accounts available under your
Annuity. Account Value you allocate to the Sub-accounts is subject to market
fluctuations and may increase or decrease in value. We do not deduct a charge
for participating in the Balanced Investment Program.
Example
Assume you invest $100,000. You choose a 10-year program and allocate a
portion of your Account Value to a Fixed Allocation with a 10-year Guarantee
Period. The rate for the 10-year Guarantee Period is 2.50%*. Based on the
fixed interest rate for the Guarantee Period chosen, the factor is 0.781198
for determining how much of your Account Value will be allocated to the Fixed
Allocation. That means that $78,120 will be allocated to the Fixed Allocation
and the remaining Account Value ($21,880) will be allocated to the
Sub-accounts. Assuming that you do not make any withdrawals or transfers from
the Fixed Allocation, it will grow to $100,000 at the end of the Guarantee
Period. Of course we cannot predict the value of the remaining Account Value
that was allocated to the Sub-accounts.
* The rate in this example is hypothetical and may not reflect the current
rate for Guarantee Periods of this duration.
MAY I GIVE MY FINANCIAL PROFESSIONAL PERMISSION TO FORWARD TRANSACTION
INSTRUCTIONS?
Yes. Subject to our rules, your Financial Professional may forward
instructions regarding the allocation of your Account Value, and request
financial transactions involving investment options. If your Financial
Professional has this authority, we deem that
28
all transactions that are directed by your Financial Professional with respect
to your Annuity have been authorized by you. You must contact us immediately
if and when you revoke such authority. We will not be responsible for acting
on instructions from your Financial Professional until we receive notification
of the revocation of such person's authority. We may also suspend, cancel or
limit these privileges at any time. We will notify you if we do.
MAY I AUTHORIZE MY THIRD PARTY INVESTMENT ADVISOR TO MANAGE MY ACCOUNT?
Yes. You may engage your own investment advisor to manage your account. These
investment advisors may be firms or persons who also are appointed by us, or
whose affiliated broker-dealers are appointed by us, as authorized sellers of
the Annuities. Even if this is the case, however, please note that the
investment advisor you engage to provide advice and/or make transfers for you,
is not acting on our behalf, but rather is acting on your behalf. We do not
offer advice about how to allocate your Account Value under any circumstance.
As such, we are not responsible for any recommendations such investment
advisors make, any investment models or asset allocation programs they choose
to follow or any specific transfers they make on your behalf.
Any fee that is charged by your investment advisor is in addition to the fees
and expenses that apply under your Annuity. If you authorize your investment
advisor to withdraw amounts from your Annuity (to the extent permitted) to pay
for the investment advisor's fee, as with any other withdrawal from your
Annuity, you may incur adverse tax consequences, a CDSC and/or a market value
adjustment. Withdrawals to pay your investment advisor generally will also
reduce the level of various living and death benefit guarantees provided (e.g.
the withdrawals will reduce proportionately your Annuity's guaranteed minimum
death benefit.) We are not a party to the agreement you have with your
investment advisor and do not verify that amounts withdrawn from your Annuity,
including amounts withdrawn to pay for the investment advisor's fee, are
within the terms of your agreement with your investment advisor. You will,
however, receive confirmations of transactions that affect your Annuity. If
your investment advisor has also acted as your Financial Professional with
respect to the sale of your Annuity, he or she may be receiving compensation
for services provided both as a Financial Professional and investment advisor.
Alternatively, the investment advisor may compensate the Financial
Professional from whom you purchased your Annuity for the referral that led
you to enter into your investment advisory relationship with the investment
advisor. If you are interested in the details about the compensation that your
investment advisor and/or your Financial Professional receive in connection
with your Annuity, you should ask them for more details.
We or an affiliate of ours may provide administrative support to licensed,
registered Financial Professionals or Investment advisors who you authorize to
make financial transactions on your behalf. We may require Financial
Professionals or investment advisors, who are authorized by multiple contract
owners to make financial transactions, to enter into an administrative
agreement with American Skandia as a condition of our accepting transactions
on your behalf. The administrative agreement may impose limitations on the
Financial Professional's or investment advisor's ability to request financial
transactions on your behalf. These limitations are intended to minimize the
detrimental impact of a Financial Professional who is in a position to
transfer large amounts of money for multiple clients in a particular Portfolio
or type of portfolio or to comply with specific restrictions or limitations
imposed by a Portfolio(s) of American Skandia
Please Note: Annuities where your Financial Professional or investment advisor
has the authority to forward instruction on financial transactions are also
subject to the restrictions on transfers between investment options that are
discussed in the section entitled "ARE THERE RESTRICTIONS OR CHARGES ON
TRANSFERS BETWEEN INVESTMENT OPTIONS?" Since transfer activity directed by a
Financial Professional or third party investment adviser may result in
unfavorable consequences to all contract owners invested in the affected
options, we reserve the right to limit the investment options available to a
particular Owner where such authority as described above has been given to a
Financial Professional or investment advisor or impose other transfer
restrictions we deem necessary. The administrative agreement may limit the
available investment options, require advance notice of large transactions, or
impose other trading limitations on your Financial Professional. Your
Financial Professional will be informed of all such restrictions on an ongoing
basis. We may also require that your Financial Professional transmit all
financial transactions using the electronic trading functionality available
through our Internet website (www.americanskandia.prudential.com).
Limitations that we may impose on your Financial Professional or investment
advisor under the terms of the administrative agreement do not apply to
financial transactions requested by an Owner on their own behalf, except as
otherwise described in this Prospectus.
HOW DO THE FIXED ALLOCATIONS WORK?
We credit a fixed interest rate to the Fixed Allocation throughout a set
period of time called a "Guarantee Period." Fixed Allocations currently are
offered with Guarantee Periods from 1 to 10 years. We may make Fixed
Allocations of different durations available in the future, including Fixed
Allocations offered exclusively for use with certain optional investment
programs. Fixed Allocations may not be available in all states and may not
always be available for all Guarantee Periods depending on market factors and
other considerations.
The interest rate credited to a Fixed Allocation is the rate in effect when
the Guarantee Period begins and does not change during the Guarantee Period.
The rates are an effective annual rate of interest. We determine the interest
rates for the various Guarantee
29
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. 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. The interest rate that we credit to the Fixed
Allocations may be reduced by an amount that corresponds to the asset-based
charges assessed against 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.
30
.. "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)]/N365/
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)]/N365/
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)]/N365/= [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)]/N365/= [1.055/1.071]/2/ = 0.970345
Interim Value = $57,881.25
Account Value after MVA = Interim Value x MVA Factor = $56,164.78
WHAT HAPPENS WHEN MY GUARANTEE PERIOD MATURES?
The "Maturity Date" for a Fixed Allocation is the last day of the Guarantee
Period. Before the Maturity Date, you may choose to renew the Fixed Allocation
for a new Guarantee Period of the same or different length or you may transfer
all or part of that Fixed Allocation's Account Value to another Fixed
Allocation or to one or more Sub-accounts. We will not charge a MVA if you
choose to renew a Fixed Allocation on its Maturity Date or transfer the
Account Value to one or more Sub-accounts. We will notify you before the end
of the Guarantee Period about the fixed interest rates that we are currently
crediting to all Fixed Allocations that are being offered. The rates being
credited to Fixed Allocations may change before the Maturity Date.
If you do not specify how you want a Fixed Allocation to be allocated on its
Maturity Date, we will then transfer the Account Value of the Fixed Allocation
to the AST Money Market Sub-account. You can then elect to allocate the
Account Value to any of the Sub-accounts or to a new Fixed Allocation.
31
ACCESS TO ACCOUNT VALUE
WHAT TYPES OF DISTRIBUTIONS ARE AVAILABLE TO ME?
During the accumulation period you can access your Account Value through
partial withdrawals, Systematic Withdrawals, and where required for tax
purposes, Minimum Distributions. You can also surrender your Annuity at any
time. We may deduct a portion of the Account Value being withdrawn or
surrendered as a CDSC, if applicable. If you surrender your Annuity, in
addition to any CDSC, we may deduct the Annual Maintenance Fee, any Tax Charge
that applies and the charge for any optional benefits. We may also apply a
Market Value Adjustment to any Fixed Allocations being withdrawn or
surrendered. Certain amounts may be available to you each Annuity Year that
are not subject to a CDSC. These are called "Free Withdrawals." Unless you
notify us differently, withdrawals are taken pro-rata based on the Account
Value in the investment options at the time we receive your withdrawal
request. Each of these types of distributions is described more fully below.
ARE THERE TAX IMPLICATIONS FOR DISTRIBUTIONS?
(For more information, see "Tax Considerations.")
During The Accumulation Period
A distribution during the accumulation period is deemed to come first from any
"gain" in your Annuity and second as a return of your "tax basis", if any.
Distributions from your Annuity are generally subject to ordinary income
taxation on the amount of any investment gain unless the distribution
qualifies as a non-taxable exchange or transfer. If you take a distribution
prior to the taxpayer's age 59 1/2, you may be subject to a 10% penalty in
addition to ordinary income taxes on any gain. You may wish to consult a
professional tax advisor for advice before requesting a distribution.
During The Annuitization Period
During the annuitization period, a portion of each annuity payment is taxed as
ordinary income at the tax rate you are subject to at the time of the payment.
The Code and regulations have "exclusionary rules" that we use to determine
what portion of each annuity payment should be treated as a return of any tax
basis you have in your Annuity. Once the tax basis in your Annuity has been
distributed, the remaining annuity payments are taxable as ordinary income.
The tax basis in your Annuity may be based on the tax-basis from a prior
contract in the case of a 1035 exchange or other qualifying transfer.
CAN I WITHDRAW A PORTION OF MY ANNUITY?
Yes, you can make a withdrawal during the accumulation period.
. To meet liquidity needs, you can withdraw a limited amount from your
Annuity during each Annuity Year without application of any CDSC. We call
this the "Free Withdrawal" amount. The Free Withdrawal amount is not
available if you choose to surrender your Annuity. Amounts withdrawn as a
Free Withdrawal do not reduce the amount of CDSC that may apply upon a
subsequent withdrawal or surrender of your Annuity. The minimum Free
Withdrawal you may request is $100.
. You can also make withdrawals in excess of the Free Withdrawal amount.
The minimum partial withdrawal you may request is $100.
To determine if a CDSC applies to partial withdrawals, we:
1. First determine what, if any, amounts qualify as a Free Withdrawal. These
amounts are not subject to the CDSC.
2. Next determine what, if any, remaining amounts are withdrawals of Purchase
Payments. Amounts in excess of the Free Withdrawal amount will be treated
as withdrawals of Purchase Payments unless all Purchase Payments have been
previously withdrawn. These amounts are subject to the CDSC. Purchase
Payments are withdrawn on a first in, first out basis.
3. Withdraw any remaining amounts from any other Account Value. These amounts
are not subject to the CDSC.
You may request a withdrawal for an exact dollar amount after deduction of any
CDSC that applies (called a "net withdrawal") or request a gross withdrawal
from which we will deduct any CDSC that applies, resulting in less money being
payable to you than the amount you requested. If you request a net withdrawal,
the amount deducted from your Account Value to pay the CDSC may also be
subject to a CDSC.
Partial withdrawals may also be available following annuitization but only if
you choose certain annuity payment options.
To request the forms necessary to make a withdrawal from your Annuity, call
1-800-752-6342 or visit our Internet Website at
www.americanskandia.prudential.com.
HOW MUCH CAN I WITHDRAW AS A FREE WITHDRAWAL?
The maximum Free Withdrawal amount during each Annuity Year is equal to 10% of
all Purchase Payments that are subject to a CDSC. Withdrawals made within an
Annuity Year reduce the Free Withdrawal amount available for the remainder of
the Annuity Year. If you do not make a withdrawal during an Annuity Year, you
are not allowed to carry over the Free Withdrawal amount to the next Annuity
Year.
32
CAN I MAKE PERIODIC WITHDRAWALS FROM MY ANNUITY DURING THE ACCUMULATION PERIOD?
Yes. We call these "Systematic Withdrawals." You can receive Systematic
Withdrawals of earnings only or a flat dollar amount. Systematic Withdrawals
may be subject to a CDSC. We will determine whether a CDSC applies and the
amount in the same way as we would for a partial withdrawal.
Systematic Withdrawals can be made from Account Value allocated to the
Sub-accounts or Fixed Allocations. Generally, Systematic Withdrawals from
Fixed Allocations are limited to earnings accrued after the program of
Systematic Withdrawals begins, or payments of fixed dollar amounts that do not
exceed such earnings. Systematic Withdrawals are available on a monthly,
quarterly, semi-annual or annual basis.
The minimum amount for each Systematic Withdrawal is $100. If any scheduled
Systematic Withdrawal is for less than $100 (which may occur under a program
that provides payment of an amount equal to the earnings in your Annuity for
the period requested), we may postpone the withdrawal and add the expected
amount to the amount that is to be withdrawn on the next scheduled Systematic
Withdrawal.
DO YOU OFFER A PROGRAM FOR WITHDRAWALS UNDER SECTIONS 72(t) OF THE INTERNAL
REVENUE CODE?
Yes. If your Annuity is used as a funding vehicle for certain retirement plans
that receive special tax treatment under Sections 401, 403(b), 408 or 408A of
the Code, Section 72(t) of the Code may provide an exception to the 10%
penalty tax on distributions made prior to age 59 1/2 if you elect to receive
distributions as a series of "substantially equal periodic payments".
Distributions received under these provisions in any Annuity Year that exceed
the maximum amount available as a free withdrawal will be subject to any
applicable CDSC. We may apply a Market Value Adjustment to any Fixed
Allocations. To request a program that complies with Sections 72(t), 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
Sections 72(t). The minimum amount for any such withdrawal is $100 and
payments may be made monthly, quarterly, semi-annually or annually.
You may also annuitize your contract and begin receiving payments for the
remainder of your life (or life expectancy) as a means of receiving income
payments before age 59 1/2 that are not subject to the 10% penalty.
WHAT ARE REQUIRED MINIMUM DISTRIBUTIONS AND WHEN WOULD I NEED TO MAKE THEM?
(See "Tax Considerations" for a further discussion of Required Minimum
Distributions.)
Required Minimum Distributions are a type of Systematic Withdrawal we allow to
meet distribution requirements under Sections 401, 403(b) or 408 of the Code.
Required Minimum Distribution rules do not apply to Roth IRAs during the
Owner's lifetime. Under the Code, you may be required to begin receiving
periodic amounts from your Annuity. In such case, we will allow you to make
Systematic Withdrawals in amounts that satisfy the Required Minimum
Distribution rules under the Code. We do not assess a CDSC on Required Minimum
Distributions from your Annuity if you are required by law to take such
Required Minimum Distributions from your Annuity at the time it is taken.
However, a CDSC (if applicable) may be assessed on that portion of a
Systematic Withdrawal that is taken to satisfy the Required Minimum
Distribution provisions 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 Required Minimum
Distributions paid out monthly, quarterly, semi-annually or annually. The $100
minimum amount that applies to Systematic Withdrawals applies to monthly
Required Minimum Distributions but does not apply to Required 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 continued means of receiving
income payments and satisfying the Required Minimum Distribution provisions
under the Code.
CAN I SURRENDER MY ANNUITY FOR ITS VALUE?
Yes. During the accumulation period you can surrender your Annuity at any
time. Upon surrender, you will receive the Surrender Value. Upon surrender of
your Annuity, you will no longer have any rights under the surrendered Annuity.
For purposes of calculating any applicable CDSC on surrender, the Purchase
Payments being withdrawn may be greater than your remaining Account Value or
the amount of your withdrawal request. This is most likely to occur if you
have made prior withdrawals under the Free Withdrawal provision or if your
Account Value has declined in value due to negative market performance. In
that scenario, we would determine the CDSC amount as the applicable percentage
of the Purchase Payments being
33
withdrawn, rather than as a percentage of the remaining Account Value or
withdrawal request. Thus, the CDSC would be greater than if it were calculated
as a percentage of remaining Account Value or withdrawal amount. We may apply
a Market Value Adjustment to any Fixed Allocations.
Under certain annuity payment options, you may be allowed to surrender your
Annuity for its then current value.
To request the forms necessary to surrender your Annuity, call 1-800-752-6342
or visit our Internet Website at www.americanskandia.prudential.com.
WHAT IS A MEDICALLY-RELATED SURRENDER AND HOW DO I QUALIFY?
Where permitted by law, you may request to surrender all or part of your
Annuity prior to the Annuity Date without application of any otherwise
applicable CDSC upon occurrence of a medically-related "Contingency Event" as
described below. We may apply a Market Value Adjustment to any Fixed
Allocations. If you request a full surrender, the amount payable will be your
Account Value minus, with respect to Optimum Plus, (a) the amount of any
Credits applied within 12 months prior to your request to surrender your
Annuity under this provision; 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 (e.g. Purchase Payments received at
such time pursuant to a salary reduction program). With respect to partial
surrenders, we similarly reserve the right to take back Credits as described
above.
This waiver of any applicable CDSC is subject to our rules, including but not
limited to the following:
. The Annuitant must have been named or any change of Annuitant must have
been accepted by us, prior to the "Contingency Event" described below in
order to qualify for a medically-related surrender;
. the Annuitant must be alive as of the date we pay the proceeds of such
surrender request;
. if the Owner is one or more natural persons, all such Owners must also be
alive at such time;
. we must receive satisfactory proof of the Annuitant's confinement in a
Medical Care Facility or Fatal Illness in writing on a form satisfactory
to us;
. this option is not available if the total Purchase Payments received
exceed $500,000 for all annuities issued by us with this benefit where
the same person is named as Annuitant; and
. no additional Purchase Payments can be made to the Annuity
A "Contingency Event" occurs if the Annuitant is:
. first confined in a "Medical Care Facility" while your Annuity is in
force and remains confined for at least 90 days in a row; or
. first diagnosed as having a "Fatal Illness" while your Annuity is in
force.
The definitions of "Medical Care Facility" and "Fatal Illness," as well as
additional terms and conditions, are provided in your Annuity. Specific
details and definitions in relation to this benefit may differ in certain
jurisdictions.
WHAT TYPES OF ANNUITY OPTIONS ARE AVAILABLE?
We currently make available annuity options that provide fixed annuity
payments, or adjustable annuity payments. Your Annuity provides certain fixed
annuity payment options. We do not guarantee to continue to make available or
any other option other than the fixed annuity payment options set forth in
your Annuity. Fixed options provide the same amount with each payment.
Adjustable options provide a fixed payment that is periodically adjusted based
on current interest rates. Please refer to the "Guaranteed Minimum Income
Benefit," the "Lifetime Five Income Benefit, the Spousal Lifetime Five Income
Benefit and the Highest Daily 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 or under the terms of your
Annuity. 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.
See section below entitled "How and When Do I Choose the Annuity Payment
Option?"
Certain of these annuity options may be available to Beneficiaries who choose
to receive the Death Benefit proceeds as a series of payments instead of a
lump sum payment.
Please note, with respect to Optimum Plus, you may not annuitize within the
first three Annuity Years and with respect to Optimum and Optimum Four, you
may not annuitize within the first Annuity Year.
34
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. 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. 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. Under this option, you cannot
make a partial or full surrender of the annuity.
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.
We may make different annuity payment options available in the future. We do
not guarantee to continue to make available any other option other than the
fixed annuity payment options set forth in your contract.
HOW AND WHEN DO I CHOOSE THE ANNUITY PAYMENT OPTION?
Unless prohibited by law, we require that you elect either a life annuity or
an annuity with a certain period of at least 5 years if any CDSC would apply
were you to surrender your Annuity on the Annuity Date. Certain annuity
payment options may not be available if your Annuity Date occurs during the
period that a CDSC would apply.
You have a right to choose your Annuity Date provided it is no later than the
maximum Annuity Date that may be required by law or under the terms of your
Annuity.
For Annuities issued prior to November 20, 2006:
. if you do not provide us with your Annuity Date, a default date for the
Annuity Date will be the first day of the calendar month following the
later of the Annuitant's 85/th/ birthday or the fifth anniversary of our
receipt of your request to purchase an Annuity; and
. unless you instruct us otherwise, the annuity payments, where allowed by
law, will be calculated on a fixed basis under Option 3, Payments for
Life with 10 years certain.
For Annuities issued on or after November 20, 2006:
. Unless we agree otherwise, the Annuity Date you choose must be no later
than the first day of the calendar month coinciding with or next
following the later of: (a) the oldest Owner's or Annuitant's 95/th/
birthday, whichever occurs first, and (b) the fifth anniversary of the
Issue Date. Certain states may have different requirements based on
applicable laws.
. If you do not provide us with your Annuity Date, the maximum date as
described above will be the default date; and, unless you instruct us
otherwise, we will pay you the annuity payments and the annuity payments,
where allowed by law, will be calculated on a fixed basis under Option 3,
Payments for Life with 10 years certain
If you choose to defer the Annuity Date beyond the default date, the IRS may
not consider your contract to be an annuity under the tax law. If that should
occur, all gain in your Annuity at that time will become immediately taxable
to you. Further, each subsequent year's increase in Account Value would be
taxable in that year. By choosing to continue to defer after the default date,
you will assume the risk that your Annuity will not be considered an annuity
for federal income tax purposes.
Please note that annuitization essentially involves converting your Account
Value to an annuity payment stream, the length of which depends on the terms
of the applicable annuity option. Thus, once annuity payments begin, your
death benefit is determined solely under the terms of the applicable annuity
payment option, and you no longer participate in any optional living benefit
(unless you have annuitized under that benefit).
35
HOW ARE ANNUITY PAYMENTS CALCULATED?
Fixed Annuity Payments
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.
Adjustable Annuity Payments
We may make an adjustable annuity payment option available. Adjustable annuity
payments are calculated similarly to fixed annuity payments except that on
every fifth (5/th/) anniversary of receiving annuity payments, the annuity
payment amount is adjusted upward or downward depending on the rate we are
currently crediting to annuity payments. The adjustment in the annuity payment
amount does not affect the duration of remaining annuity payments, only the
amount of each payment.
36
LIVING BENEFIT PROGRAMS
DO YOU OFFER PROGRAMS DESIGNED TO PROVIDE INVESTMENT PROTECTION FOR OWNERS
WHILE THEY ARE ALIVE?
American Skandia offers different optional benefits, for an additional charge,
that can provide investment protection for Owners while they are alive.
Notwithstanding the additional protection provided under the optional Living
Benefit Programs, the additional cost has the impact of reducing net
performance of the investment options. Each optional benefit offers a distinct
type of guarantee, regardless of the performance of the Sub-accounts, that may
be appropriate for you depending on the manner in which you intend to make use
of your Annuity while you are alive. Depending on which optional benefit you
choose, you can have flexibility to invest in the Sub-accounts while:
.. protecting a principal amount from decreases in value as of specified
future dates due to investment performance;
.. taking withdrawals with a guarantee that you will be able to withdraw not
less than a principal amount over time;
.. guaranteeing a minimum amount of growth will be applied to your principal,
if it is to be used as the basis for certain types of lifetime income
payments; or
.. providing spousal continuation of certain benefits.
The "living benefits" that American Skandia offers are the Guaranteed Return
Option Plus (GRO Plus), the Guaranteed Minimum Withdrawal Benefit (GMWB), the
Guaranteed Minimum Income Benefit (GMIB), the Lifetime Five Income Benefit,
the Spousal Lifetime Five Income Benefit and the Highest Daily Lifetime Five
Income Benefit. Please refer to the benefit descriptions that follow for a
complete description of the terms, conditions and limitations of each optional
benefit. Investment restrictions apply if you elect certain optional living
benefits. You should consult with your Financial Professional to determine if
any of these optional benefits may be appropriate for you based on your
financial needs. There are many factors to consider, but we note that among
them you may want to evaluate the tax implications of these different
approaches to meeting your needs, both between these benefits and in
comparison to other potential solutions to your needs (e.g., comparing the tax
implications of the withdrawal benefit and annuity payments).
GUARANTEED RETURN OPTION PLUS/SM/ (GRO PLUS/SM/)
The Guaranteed Return Option Plus described below is only being offered in
those jurisdictions where we have received regulatory approval, and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. The program can be elected by new
purchasers on the Issue Date of their Annuity, and can be elected by existing
Annuity Owners on either the anniversary of the Issue Date of their Annuity or
on a date other than that anniversary, as described below under "Election of
the Program". The Guaranteed Return Option Plus is not available if you elect
the Guaranteed Return Option program (and it is currently active), the
Guaranteed Minimum Withdrawal Benefit, the Guaranteed Minimum Income Benefit,
the Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit,
the Highest Daily Value Death Benefit, the Highest Daily Lifetime Five Income
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 the Sub-accounts you choose and Fixed
Allocations used to support the Protected Principal Value(s). The program may
be appropriate if you wish to protect a principal amount against market
downturns as of a specific date in the future, but also wish to invest in the
Sub-accounts to participate in market performance. There is an additional
charge if you elect the Guaranteed Return Option Plus program.
The guarantees provided by the program exist only on the applicable maturity
date(s) and on each anniversary of the maturity date(s) thereafter. However,
due to the ongoing monitoring of your Account Value and the transfer of
Account Value between the Sub-accounts and the Fixed Allocations to support
our future guarantees, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
37
Key Feature - Protected Principal
Value/Enhanced Protected Principal Value
The Guaranteed Return Option Plus offers a base guarantee as well as the
option of electing an enhanced guarantee at a later date.
. Base Guarantee: Under the base guarantee, American Skandia guarantees
that on the maturity date and on each anniversary of the maturity date
thereafter that the program remains in effect, your Account Value will be
no less than the Protected Principal Value. On the maturity date and on
each anniversary after the maturity date that the program remains in
effect, if your Account Value is below the Protected Principal Value,
American Skandia will apply additional amounts to your Annuity from its
general account to increase your Account Value to be equal to the
Protected Principal Value.
. Enhanced Guarantee: On any anniversary following commencement of the
program, you can establish an enhanced guaranteed amount based on your
current Account Value. Under the enhanced guarantee, American Skandia
guarantees that at the end of a specified period following the election
of the enhanced guarantee (also referred to as its "maturity date"), and
on each anniversary of the maturity date thereafter that the enhanced
guaranteed amount remains in effect, your Account Value will be no less
than the Enhanced Protected Principal Value. You can elect an enhanced
guarantee more than once; however, a subsequent election supersedes the
prior election of an enhanced guarantee. Election of an enhanced
guarantee does not impact the base guarantee. In addition, you may elect
an "auto step-up" feature that will automatically create an enhanced
guarantee (or increase your enhanced guarantee, if previously elected) on
each anniversary of the program (and create a new maturity period for the
new enhanced guarantee) if the Account Value as of that anniversary
exceeds the Protected Principal Value or Enhanced Protected Principal
Value by 7% or more. You may also elect to terminate an enhanced
guarantee. If you elect to terminate the enhanced guarantee, the base
guarantee will remain in effect. If you have elected the enhanced
guarantee, on the guarantee's maturity date and on each anniversary of
the maturity date thereafter that the enhanced guarantee amount remains
in effect, if your Account Value is below the Enhanced Protected
Principal Value, American Skandia will apply additional amounts to your
Annuity from its general account to increase your Account Value to be
equal to the Enhanced Protected Principal Value.
Any amounts added to your Annuity to support our guarantees under the program
will be applied to any Fixed Allocations first and then to the Sub-accounts
pro-rata, based on your most recent allocation instructions in accordance with
the allocation mechanism we use under the program. We will notify you of any
amounts added to your Annuity under the program. If our assumptions are
correct and the operations relating to the administration of the program work
properly, we do not expect that we will need to add additional amounts to your
Annuity. The Protected Principal Value is referred to as the "Base Guarantee"
and the Enhanced Protected Principal Value is referred to as the "Step-up
Guarantee" in the rider we issue for this benefit.
Withdrawals under your Annuity
Withdrawals from your Annuity, while the program is in effect, will reduce the
base guarantee under the program as well as any enhanced guarantee. Cumulative
annual withdrawals up to 5% of the Protected Principal Value as of the
effective date of the program (adjusted for any subsequent Purchase Payments
and, with respect to Optimum Plus, any Credits applied to such Purchase
Payments) will reduce the applicable guaranteed amount by the actual amount of
the withdrawal (referred to as the "dollar-for-dollar limit"). If the amount
withdrawn is greater than the dollar-for-dollar limit, the portion of the
withdrawal equal to the dollar-for-dollar limit will be treated as described
above, and the portion of the withdrawal in excess of the dollar-for-dollar
limit will reduce the base guarantee and the enhanced guarantee
proportionally, according to the formula as described in the rider for this
benefit (see the examples of this calculation below). Withdrawals other than
Systematic Withdrawals will be taken pro-rata from the Sub-accounts and any
Fixed Allocations. Systematic Withdrawals will be taken pro-rata from the
Sub-accounts and any Fixed Allocations up to growth attributable to the Fixed
Allocations and thereafter pro-rata solely from the Sub-accounts. Withdrawals
will be subject to all other provisions of your Annuity, including any
Contingent Deferred Sales Charge and Market Value Adjustment that would apply.
Charges for other optional benefits under your Annuity that are deducted as an
annual charge in arrears will not reduce the applicable guaranteed amount
under the Guaranteed Return Option Plus program and any third party investment
advisory service will be treated as withdrawals and will reduce the applicable
guaranteed amount.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GRO Plus/SM/ program
are October 13, 2004; 2.) an initial Purchase Payment of $250,000 (includes
any Credits under Optimum Plus); 3.) a base guarantee amount of $250,000; and
4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The values set
forth here are purely hypothetical and do not reflect the charge for GRO Plus
or other fees and charges.
Example 1. Dollar-For-Dollar Reduction
A $10,000 withdrawal is taken on November 29, 2004 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Dollar-for-dollar Limit:
.. The base guarantee amount is reduced by the amount withdrawn (i.e., by
$10,000, from $250,000 to $240,000).
38
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-For-Dollar and Proportional Reductions
A second $10,000 withdrawal is taken on December 18, 2004 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$180,000. As the amount withdrawn exceeds the Remaining Limit of $2,500 from
Example 1:
.. the base guarantee amount is first reduced by the Remaining Limit (from
$240,000 to $237,500);
.. The result is then further reduced by the ratio of A to B, where:
- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
- B is the Account Value less the Remaining Limit ($180,000 - $2,500, or
$177,500).
The resulting base guarantee amount is: $237,500 X (1 - $7,500 / $177,500), or
$227,464.79.
. The Remaining Limit is set to zero (0) for the balance of the first
Annuity Year.
Example 3. Reset of the Dollar-For-Dollar Limit
A $10,000 withdrawal is made on December 19, 2005 (second Annuity Year). The
Remaining Limit has been reset to the dollar-for-dollar limit of $12,500. As
the amount withdrawn is less than the dollar-for-dollar limit:
. The base guarantee amount is reduced by the amount withdrawn (i.e.,
reduced by $10,000, from $227,464.79 to $217,464.79).
. The Remaining Limit for the balance of the second Annuity Year is also
reduced by the amount withdrawn (from $12,500 to $2,500).
Key Feature - Allocation of Account Value
Account Value is transferred to and maintained in Fixed Allocations to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee(s) under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rates on Fixed
Allocations, the remaining duration(s) until the applicable maturity date(s)
and the amount of Account Value allocated to Fixed Allocation(s) relative to a
"reallocation trigger", which determines whether Account Value must be
transferred to or from Fixed Allocation(s). While you are not notified when
your Account Value reaches a reallocation trigger, you will receive a
confirmation statement indicating the transfer of a portion of your Account
Value either to or from Fixed Allocation(s).
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain
allocated according to your most recent instructions. If a portion
of Account Value was previously allocated to a Fixed Allocation to
support the applicable guaranteed amount, all or a portion of those
amounts may be transferred from the Fixed Allocation and
re-allocated to the Sub-accounts pro-rata according to your most
recent allocation instructions (including the model allocations
under any asset allocation program you may have elected). A Market
Value Adjustment will apply when we reallocate Account Value from a
Fixed Allocation to the Sub-accounts, which may result in a decrease
or increase in your Account Value.
. If your Account Value is less than the reallocation trigger, a
portion of your Account Value in the Sub-accounts will be
transferred from the Sub-accounts pro-rata according to your
allocations to a new Fixed Allocation(s) to support the applicable
guaranteed amount. The new Fixed Allocation(s) will have a Guarantee
Period equal to the time remaining until the applicable maturity
date(s). The Account Value allocated to the new Fixed Allocation(s)
will be credited with the fixed interest rate(s) then being credited
to a new Fixed Allocation(s) maturing on the applicable maturity
date(s) (rounded to the next highest yearly duration). The Account
Value will remain invested in each applicable Fixed Allocation until
the applicable maturity date unless, at an earlier date, your
Account Value is greater than or equal to the reallocation trigger
and, therefore, amounts can be transferred to the Sub-accounts while
maintaining the guaranteed protection under the program (as
described above).
If a significant amount of your Account Value is systematically transferred to
Fixed Allocations to support the Protected Principal Value and/or the Enhanced
Protected Principal Value during periods of market declines, low interest
rates, and/or as the program nears its maturity date, less of your Account
Value may be available to participate in the investment experience of the
Sub-accounts if there is a subsequent market recovery. During periods closer
to the maturity date of the base guarantee or any enhanced guarantee, or any
anniversary of such maturity date(s), a significant portion of your Account
Value may be allocated to Fixed Allocations to support any applicable
guaranteed amount(s). If your Account Value is less than the reallocation
trigger and new Fixed Allocations must be established during periods where the
interest rate(s) being credited to such Fixed Allocations is low, a larger
portion of your Account Value may need to be transferred to Fixed Allocations
to support the applicable guaranteed amount(s), causing less of your Account
Value to be available to participate in the investment experience of the
Sub-accounts.
39
Separate Fixed Allocations may be established in support of the Protected
Principal Value and the Enhanced Protected Principal Value (if elected). There
may also be circumstances when a Fixed Allocation will be established only in
support of the Protected Principal Value or the Enhanced Protected Principal
Value. If you elect an enhanced guarantee, it is more likely that a portion of
your Account Value may be allocated to Fixed Allocations and will remain
allocated for a longer period of time to support the Enhanced Protected
Principal Value, even during a period of positive market performance and/or
under circumstances where Fixed Allocations would not be necessary to support
the Protected Principal Value. Further, there may be circumstances where Fixed
Allocations in support of the Protected Principal Value or Enhanced Protected
Principal Value are transferred to the Sub-accounts differently than each
other because of the different guarantees they support.
American Skandia uses an allocation mechanism based on assumptions of expected
and maximum market volatility, interest rates and time left to the maturity of
the program to determine the reallocation trigger. The allocation mechanism is
used to determine the allocation of Account Value between Fixed Allocations
and the Sub-accounts you choose. American Skandia reserves the right to change
the allocation mechanism and the reallocation trigger at its discretion,
subject to regulatory approval where required. Changes to the allocation
mechanism and/or the reallocation trigger may be applied to existing programs
where allowed by law.
Election of the Program
The Guaranteed Return Option Plus program can be elected at the time that you
purchase your Annuity, or on any Valuation Day thereafter (prior to
annuitization). If you elect the program after the Issue Date of your Annuity,
the program will be effective as of the Valuation Day that we receive the
required documentation in good order at our home office, and the guaranteed
amount will be based on your Account Value as of that date. If you previously
elected the Guaranteed Return Option program and wish to elect the Guaranteed
Return Option Plus program, your prior Guaranteed Return Option program will
be terminated. Termination of the Guaranteed Return Option for the purpose of
electing the Guaranteed Return Option Plus will be treated as any other
termination of the Guaranteed Return Option (see below), including the
termination of any guaranteed amount, and application of any applicable Market
Value Adjustment when amounts are transferred to the Sub-accounts as a result
of the termination. The 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 Sub-accounts pro-rata based on the
Account Values in such Sub-accounts, or in accordance with any effective asset
allocation program. A Market Value Adjustment will apply.
The program will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of the
Annuity. If you elect to terminate the program, the Guaranteed Return Option
Plus will no longer provide any guarantees. The surviving spouse may elect the
benefit at any time, subject to the limitations described above, after the
death of the Annuity Owner. The surviving spouse's election will be effective
on the Valuation Day that we receive the required documentation in good order
at our home office, and the Account Value on that Valuation Day will be the
Protected Principal Value.
The charge for the Guaranteed Return Option Plus program will no longer be
deducted from your Account Value upon termination of the program.
Special Considerations under the Guaranteed Return Option Plus
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 100% of your Account Value must be allocated
to the Sub-accounts. No Fixed Allocations may be in effect as of the date
that you elect to participate in the program. However, the reallocation
trigger may transfer Account Value to Fixed Allocations as of the effective
date of the program under some circumstances.
.. You cannot allocate any portion of Purchase Payments (including any Credits
applied to such Purchase Payments under Optimum Plus) or transfer Account
Value to or from a Fixed Allocation while participating in the program;
however, all or a portion of any Purchase Payments (including any Credits
applied to such Purchase Payments under Optimum Plus) may be allocated by
us to Fixed Allocations to support the amount guaranteed. You cannot
participate in any dollar cost averaging program that transfers Account
Value from a Fixed Allocation to a Sub-account.
.. Transfers from Fixed Allocations made as a result of the allocation
mechanism under the program will be subject to the Market Value Adjustment
formula under an Annuity; however, the 0.10% liquidity factor in the
formula will not apply. A Market Value Adjustment may be either positive or
negative. Transfer amounts will be taken from the most recently established
Fixed Allocation.
40
.. Transfers from the Sub-accounts to Fixed Allocations or from Fixed
Allocations to the Sub-accounts under the program will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by American Skandia on the
maturity date or any anniversary of the maturity date will not be treated
as "investment in the contract" for income tax purposes.
.. Low interest rates may require allocation to Fixed Allocations even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to Fixed
Allocations.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We currently 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. 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.
If you elect the Enhanced Guarantee under the program, and on the date you
elect to step-up, the charges under the program have changed for new
purchases, your program may be subject to the new charge level
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, the Guaranteed Minimum Withdrawal
Benefit, the Guaranteed Minimum Income Benefit, the Lifetime Five Income
Benefit, the Spousal Lifetime Five Income Benefit, the Highest Daily Lifetime
Five Income Benefit, the Highest Daily Value Death Benefit, or the Dollar Cost
Averaging program if it involves transfers out of the Fixed Allocations.
We offer a program that, after a seven-year period following commencement of
the program (we refer to the end of that period as the "maturity date")
guarantees your Account Value will not be less than your Account Value on the
effective date of your program (called the "Protected Principal Value").
The program monitors your Account Value daily and, if necessary,
systematically transfers amounts between the Sub-accounts you choose and the
Fixed Allocation used to support the Protected Principal Value. The program
may be appropriate if you wish to protect a principal amount against market
downturns as of a specific date in the future, but also wish to invest in the
Sub-accounts to participate in market performance. There is an additional
charge if you elect the Guaranteed Return Option program.
The guarantee provided by the program exists only on the applicable maturity
date. However, due to the ongoing monitoring of your Account Value and the
transfer of Account Value between the Sub-accounts and the Fixed Allocation to
support our future guarantee, the program may provide some protection from
significant market losses if you choose to surrender your Annuity or begin
receiving annuity payments prior to a maturity date. For this same reason, the
program may limit your ability to benefit from market increases while it is in
effect.
Key Feature - Protected Principal Value
Under the GRO option, American Skandia guarantees that on the maturity date,
your Account Value will be no less than the Protected Principal Value. On the
maturity date if your Account Value is below the Protected Principal Value,
American Skandia will apply additional amounts to your Annuity from its
general account to increase your Account Value to be equal to the Protected
Principal Value. Any amounts added to your Annuity to support our guarantee
under the program will be applied to the Fixed Allocation first and then to
the Sub-accounts pro rata, based on your most recent allocation instructions
in accordance with the allocation mechanism we use under the program. We will
notify you of any amounts added to your Annuity under the program. If our
assumptions are correct and the operations relating to the administration of
the program work properly, we do not expect that we will need to add
additional amounts to an Annuity. The Protected Principal Value is generally
referred to as the "Guaranteed Amount" in the rider we issue for this benefit.
41
Key Feature - Allocation of Account Value
Account Value is transferred to and maintained in a Fixed Allocation to the
extent we, in our sole discretion, deem it is necessary to support our
guarantee under the program. We monitor fluctuations in your Account Value
each Valuation Day, as well as the prevailing interest rate on the Fixed
Allocation, the remaining duration until the applicable maturity date and the
amount of Account Value allocated to the Fixed Allocation relative to a
"reallocation trigger", which determines whether Account Value must be
transferred to or from the Fixed Allocation while you are not notified when
your Account Value reaches a reallocation trigger, you will receive a
confirmation statement indicating the transfer of a portion of your Account
Value either to or from the Fixed Allocation.
. If your Account Value is greater than or equal to the reallocation
trigger, your Account Value in the Sub-accounts will remain allocated
according to your most recent instructions. If a portion of Account Value
was previously allocated to the Fixed Allocation to support the
guaranteed amount, all or a portion of those amounts may be transferred
from the Fixed Allocation and re-allocated to the Sub-accounts pro-rata
according to your most recent allocation instructions (including the
model allocations under any asset allocation program you may have
elected). A Market Value Adjustment will apply when we reallocate Account
Value from the Fixed Allocation to the Sub-accounts, which may result in
a decrease or increase in your Account Value.
. If your Account Value is less than the reallocation trigger, a portion of
your Account Value in the Sub-accounts will be transferred from your
Sub-accounts pro-rata according to your allocations to a new Fixed
Allocation to support the guaranteed amount. The new Fixed Allocation
will have a Guarantee Period equal to the time remaining until the
applicable maturity date. The Account Value allocated to the new Fixed
Allocation will be credited with the fixed interest rate then being
credited to a new Fixed Allocation maturing on the applicable maturity
date (rounded to the next highest yearly duration). The Account Value
will remain invested in the Fixed Allocation until the maturity date
unless, at an earlier date, your Account Value is greater than or equal
to the reallocation trigger and, therefore, amounts can be transferred to
the Sub-accounts while maintaining the guaranteed protection under the
program (as described above).
If a significant amount of your Account Value is systematically transferred to
the Fixed Allocation to support the Protected Principal Value during periods
of market declines, low interest rates, and/or as the program nears its
maturity date, less of your Account Value may be available to participate in
the investment experience of the Sub-accounts if there is a subsequent market
recovery. During periods closer to the maturity date of the guarantee a
significant portion of your Account Value may be allocated to the Fixed
Allocation to support any applicable guaranteed amount. If your Account Value
is less than the reallocation trigger and a new Fixed Allocation must be
established during periods where the interest rate being credited to such
Fixed Allocation is low, a larger portion of your Account Value may need to be
transferred to the Fixed Allocation to support the guaranteed amount, causing
less of your Account Value to be available to participate in the investment
experience of the Sub-accounts.
American Skandia uses an allocation mechanism based on assumptions of expected
and maximum market volatility, interest rates and time left to the maturity of
the program to determine the reallocation trigger. The allocation mechanism is
used to determine the allocation of Account Value between the Fixed Allocation
and the Sub-accounts you choose. American Skandia reserves the right to change
the allocation mechanism and the reallocation trigger at its discretion,
subject to regulatory approval where required. Changes to the allocation
mechanism and/or the reallocation trigger may be applied to existing programs
where allowed by law.
Election of the Program
The Guaranteed Return Option can be elected at the time that you purchase your
Annuity, or on any Valuation Day thereafter (prior to annuitization). If you
elect the program after the Issue Date of your Annuity, the program will be
effective as of the Valuation Day that we receive the required documentation
in good order at our home office, and the Protected Principal Value will be
based on your Account Value as of that date.
Restart of the Program
Once each Annuity Year you may request to restart the Program. Such a request
is an election by you to terminate the existing Program and start a new one.
Restarts only take effect on anniversaries of the Issue Date. To make such a
request for a restart, you must notify us. If we accept your request, we then
terminate the existing Program as of that valuation period, if it is an
anniversary of the Issue Date, or, if not, as of the next following
anniversary of the Issue Date. The new Program starts at that time. The
initial Protected Principal Value for the new Program is the Account Value as
of the effective date of the new Program. Unless you tell us otherwise, the
duration of the new Program will be the same as that for the existing Program.
However, if we do not then make that duration available, you must elect from
those we make available at that time.
As part of terminating the existing Program, we transfer any amounts in Fixed
Allocations, subject to a Market Value Adjustment, to the Sub-accounts on a
pro-rata basis. If your entire Account Value was then in Fixed Allocations,
you must first provide us instructions as to how to allocate the transferred
Account Value among the Sub-accounts.
42
Termination of the Program
The Annuity Owner also can terminate the Guaranteed Return Option program.
Upon termination, any Account Value in the Fixed Allocation will be
transferred to the Sub-accounts pro-rata based on the Account Values in such
Sub-accounts, or in accordance with any effective asset allocation program. A
Market Value Adjustment will apply.
The program will terminate automatically upon: (a) the death of the Owner or
the Annuitant (in an entity owned contract); (b) as of the date Account Value
is applied to begin annuity payments; or (c) upon full surrender of your
Annuity. If you elect to terminate the program, the Guaranteed Return Option
will no longer provide any guarantees. If the surviving spouse assumes your
Annuity, he/ she may re-elect the benefit on any anniversary of the Issue Date
of the Annuity or, if the deceased Owner had not previously elected the
benefit, may elect the benefit at any time. The surviving spouse's election
will be effective on the Valuation Day that we receive the required
documentation in good order at our home office, and the Account Value on that
Valuation Day will be the Protected Principal Value.
The charge for the Guaranteed Return Option program will no longer be deducted
from your Account Value upon termination of the program.
Special Considerations under the Guaranteed Return Option
This program is subject to certain rules and restrictions, including, but not
limited to the following:
.. Upon inception of the program, 100% of your Account Value must be allocated
to the Sub-accounts. The Fixed Allocation may not be in effect as of the
date that you elect to participate in the program. However, the
reallocation trigger may transfer Account Value to the Fixed Allocation as
of the effective date of the program under some circumstances.
.. Annuity Owners cannot allocate any portion of Purchase Payments (including
any Credits applied to such Purchase Payments under Optimum Plus) or
transfer Account Value to or from the Fixed Allocation while participating
in the program; however, all or a portion of any Purchase Payments
(including any Credits applied to such Purchase Payments under Optimum
Plus) may be allocated by us to the Fixed Allocation to support the amount
guaranteed. You cannot participate in any dollar cost averaging program
that transfers Account Value from a Fixed Allocation to a Sub-account.
.. Transfers from the Fixed Allocation made as a result of the allocation
mechanism under the program will be subject to the Market Value Adjustment
formula under an Annuity; however, the 0.10% liquidity factor in the
formula will not apply. A Market Value Adjustment may be either positive or
negative. Transfer amounts will be taken from the most recently established
Fixed Allocation.
.. Transfers from the Sub-accounts to the Fixed Allocation or from the Fixed
Allocation to the Sub-accounts under the program will not count toward the
maximum number of free transfers allowable under an Annuity.
.. Any amounts applied to your Account Value by American Skandia on the
maturity date or any anniversary of the maturity date will not be treated
as "investment in the contract" for income tax purposes.
.. Low interest rates may require allocation to the Fixed Allocation even when
the current Account Value exceeds the guarantee.
.. As the time remaining until the applicable maturity date gradually
decreases the program will become increasingly sensitive to moves to the
Fixed Allocation.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
Charges under the Program
We deduct a charge equal to 0.25% of the average daily net assets of the
Sub-accounts for participation in the Guaranteed Return Option program. The
annual charge is deducted daily. 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
or the Lifetime Five Income Benefit, the Spousal Lifetime Five Income Benefit
or the Highest Daily Lifetime Five Income Benefit.
We offer a program that guarantees your ability to withdraw amounts equal to
an initial principal value (called the "Protected Value"), regardless of the
impact of market performance on your Account Value, subject to our program
rules regarding the timing
43
and amount of withdrawals. The program may be appropriate if you intend to
make periodic withdrawals from your Annuity and wish to ensure that market
performance will not affect your ability to protect your principal. You are
not required to make withdrawals as part of the program - the guarantee is not
lost if you withdraw less than the maximum allowable amount of principal each
year under the rules of the program. There is an additional charge if you
elect the GMWB program; however, the charge may be waived under certain
circumstances described below.
Key Feature - Protected Value
The Protected Value is the total amount that we guarantee will be available to
you through withdrawals from your Annuity and/or benefit payments, regardless
of the impact of market performance on your Account Value. The Protected Value
is reduced with each withdrawal you make until the Protected Value is reduced
to zero. When the Protected Value is reduced to zero due to your withdrawals,
the GMWB program terminates. Additionally, the Protected Value is used to
determine the maximum annual amount that you can withdraw from your Annuity,
called the Protected Annual Withdrawal Amount, without triggering an
adjustment in the Protected Value on a proportional basis. The Protected Value
is referred to as the "Benefit Base" in the rider we issue for this benefit.
The Protected Value is determined as of the date you make your first
withdrawal under your Annuity following your election of the GMWB program. The
initial Protected Value is equal to the greater of (A) the Account Value on
the date you elect the GMWB program, plus any additional Purchase Payments
(plus any Credits applied to such Purchase Payments under Optimum Plus) before
the date of your first withdrawal; or (B) the Account Value as of the date of
the first withdrawal from your Annuity. The Protected Value may be enhanced by
increases in your Account Value due to market performance during the period
between your election of the GMWB program and the date of your first
withdrawal.
.. If you elect the GMWB program at the time you purchase your Annuity, the
Account Value will be your initial Purchase Payment (plus any Credits
applied to such Purchase Payments under Optimum Plus).
.. If we offer the GMWB program to existing Annuity Owners, the Account Value
on the anniversary of the Issue Date of your Annuity following your
election of the GMWB program will be used to determine the initial
Protected Value.
.. If you make additional Purchase Payments after your first withdrawal, the
Protected Value will be increased by the amount of the additional Purchase
Payment (plus any Credits applied to such Purchase Payments under Optimum
Plus).
You may elect to step-up your Protected Value if, due to positive market
performance, your Account Value is greater than the Protected Value. You are
eligible to step-up the Protected Value on or after the 5/th/ Annuity
anniversary following the first withdrawal under the GMWB program. The
Protected Value can be stepped up again on or after the 5/th/ Annuity
anniversary following the preceding step-up. If you elect to step-up the
Protected Value, you must do so during the 30-day period prior to your
eligibility date. If you elect to step-up the Protected Value under the
program, and on the date you elect to step-up, the charges under the GMWB
program have changed for new purchasers, your program may be subject to the
new charge going forward.
Upon election of the step-up, we reset the Protected Value to be equal to the
then current Account Value. For example, assume your initial Protected Value
was $100,000 and you have made cumulative withdrawals of $40,000, reducing the
Protected Value to $60,000. On the date you are eligible to step-up the
Protected Value, your Account Value is equal to $75,000. You could elect to
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.
44
.. Additional Purchase Payments will increase the Protected Annual Withdrawal
Amount by 7% of the applicable Purchase Payment (and any Credits we apply
to such Purchase Payments under Optimum Plus).
.. If the Protected Annual Withdrawal Amount after an adjustment exceeds the
Protected Value, the Protected Annual Withdrawal Amount will be set equal
to the Protected Value.
The following examples of dollar-for-dollar and proportional reductions and
the reset of the Maximum Annual Benefit assume that: 1.) the Issue Date and
the effective date of the GMWB program are October 13, 2005; 2.) an initial
Purchase Payment of $250,000 (includes any Credits in the case of Optimum
Plus); 3.) a Protected Value of $250,000; and 4.) a Protected Annual
Withdrawal Amount of $17,500 (7% of $250,000). The values set forth here are
purely hypothetical and do not reflect the charge for GMWB or any other fees
and charges.
Example 1. Dollar-For-Dollar Reduction
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals have been taken. As the amount withdrawn is less
than the Protected Annual Withdrawal Amount:
.. The Protected Value is reduced by the amount withdrawn (i.e., by $10,000,
from $250,000 to $240,000).
.. The remaining Protected Annual Withdrawal Amount for the balance of the
first Annuity Year is also reduced by the amount withdrawn (from $17,500 to
$7,500).
Example 2. Dollar-For-Dollar and Proportional Reductions
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). The Account Value immediately before the withdrawal is
$220,000. As the amount withdrawn exceeds the remaining Protected Annual
Withdrawal Amount of $7,500 from Example 1:
.. the Protected Value is first reduced by the remaining Protected Annual
Withdrawal Amount (from $240,000 to $232,500);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the remaining Protected Annual Withdrawal
Amount ($10,000 - $7,500, or $2,500).
-- B is the Account Value less the remaining Protected Annual Withdrawal
Amount ($220,000 - $7,500, or $212,500).
The resulting Protected Value is: $232,500 X (1 - $2,500 / $212,500), or
$229,764.71.
.. the Protected Annual Withdrawal Amount is also reduced by the ratio of A to
B: The resulting Protected Annual Withdrawal Amount is: $17,500 X (1 -
$2,500 / $212,500), or $17,294.12.
.. The remaining Protected Annual Withdrawal Amount is set to zero (0) for the
balance of the first Annuity Year.
Example 3. Reset of the Maximum Annual Benefit
A $10,000 withdrawal is made on October 13, 2006 (second Annuity Year). The
remaining Protected Annual Withdrawal Amount has been reset to the Protected
Annual Withdrawal Amount of $17,294.12 from Example 2. As the amount withdrawn
is less than the remaining Protected Annual Withdrawal Amount:
.. the Protected Value is reduced by the amount withdrawn (i.e., reduced by
$10,000, from $229,764.71 to $219,764.71).
.. the remaining Protected Annual Withdrawal Amount for the balance of the
second Annuity Year is also reduced by the amount withdrawn (from
$17,294.12 to $7,294.12).
Benefits under the GMWB Program
.. In addition to any withdrawals you make under the GMWB program, market
performance may reduce your Account Value. If your Account Value is equal
to zero, and you have not received all of your Protected Value in the form
of withdrawals from your Annuity, we will continue to make payments equal
to the remaining Protected Value in the form of fixed, periodic payments
until the remainder of the Protected Value is paid, at which time the rider
terminates. The fixed, periodic payments will each be equal to the
Protected Annual Withdrawal Amount, except for the last payment which may
be equal to the remaining Protected Value. We will determine the duration
for which periodic payments will continue by dividing the Protected Value
by the Protected Annual Withdrawal Amount. You will not have the right to
make additional Purchase Payments or receive the remaining Protected Value
in a lump sum. You can elect the frequency of payments, subject to our
rules then in effect.
.. If the death benefit under your Annuity becomes payable before you have
received all of your Protected Value in the form of withdrawals from your
Annuity, your Beneficiary has the option to elect to receive the remaining
Protected Value as an alternate death benefit payout in lieu of the amount
payable under any other death benefit provided under your Annuity. The
remaining Protected Value will be payable in the form of fixed, periodic
payments. Your beneficiary can elect the frequency of payments, subject to
our rules then in effect. We will determine the duration for which periodic
payments will continue by dividing the Protected Value by the Protected
Annual Withdrawal Amount. The Protected Value is not equal to the Account
Value for purposes of the Annuity's other death benefit options. The GMWB
program does not increase or decrease the amount otherwise payable under
the Annuity's other death benefit options. Generally, the GMWB program
would be of value to your Beneficiary only when the Protected Value at
death exceeds any other amount available as a death benefit.
.. If you elect to begin receiving annuity payments before you have received
all of your Protected Value in the form of withdrawals from your Annuity,
an additional annuity payment option will be available that makes fixed
annuity payments for
45
a certain period, determined by dividing the Protected Value by the
Protected Annual Withdrawal Amount. If you elect to receive annuity
payments calculated in this manner, the assumed interest rate used to
calculate such payments will be 0%, which is less than the assumed interest
rate on other annuity payment options we offer. This 0% assumed interest
rate results in lower annuity payments than what would have been paid if
the assumed interest rate was higher than 0%. You can also elect to
terminate the GMWB program and begin receiving annuity payments based on
your then current Account Value (not the remaining Protected Value) under
any of the available annuity payment options.
Other Important Considerations
.. Withdrawals under the GMWB program are subject to all of the terms and
conditions of your Annuity, including any CDSC and MVA that may apply.
.. Withdrawals made while the GMWB program is in effect will be treated, for
tax purposes, in the same way as any other withdrawals under your Annuity.
.. The GMWB program does not directly affect your Annuity's Account Value or
Surrender Value, but any withdrawal will decrease the Account Value by the
amount of the withdrawal. If you surrender your Annuity, you will receive
the current Surrender Value, not the Protected Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the GMWB program. The GMWB program
provides a guarantee that if your Account Value declines due to market
performance, you will be able to receive your Protected Value in the form
of periodic benefit payments.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
Election of the Program
Currently, the GMWB program can only be elected at the time that you purchase
your Annuity. In the future, we may offer existing Annuity Owners the option
to elect the GMWB program after the Issue Date of their Annuity, subject to
our eligibility rules and restrictions. If you elect the GMWB program after
the Issue Date of your Annuity, the program will be effective as of the next
anniversary date. Your Account Value as of such anniversary date will be used
to calculate the initial Protected Value and the initial Protected Annual
Withdrawal Amount. We reserve the right to restrict the maximum amount of
Protected Value that may be covered under the GMWB program under this Annuity
or any other annuities that you own that are issued by American Skandia or its
affiliated companies.
Termination of the Program
The program terminates automatically when your Protected Value reaches zero
based on your withdrawals. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective. The
program terminates upon your surrender of your Annuity, upon due proof of
death (unless your surviving spouse elects to continue your Annuity and the
GMWB program or your Beneficiary elects to receive the amounts payable under
the GMWB program in lieu of the death benefit) or upon your election to begin
receiving annuity payments.
The charge for the GMWB program will no longer be deducted from your Account
Value upon termination of the program.
Charges under the Program
Currently, we deduct a charge equal to 0.35% of the average daily net assets
of the Sub-accounts per year to purchase the GMWB program. The annual charge
is deducted daily.
.. If, during the seven years following the effective date of the program, you
do not make any withdrawals, and do not make any additional Purchase
Payments after a five-year period following the effective date of the
program, the program will remain in effect; however, we will waive the
annual charge going forward. If you make an additional Purchase Payment
following the waiver of the annual charge, we will begin charging for the
program. After year seven (7) following the effective date of the program,
withdrawals will not cause a charge to be re-imposed.
.. If you elect to step-up the Protected Value under the program, and on the
date you elect to step-up, the charges under the program have changed for
new purchasers, your program may be subject to the new charge level for the
benefit.
Additional Tax Considerations for Qualified Contracts/Arrangements
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5% owner of the
employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the
46
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 required minimum distribution
provisions under the tax law.
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 any other optional living benefit.
We offer a program that, after a seven-year waiting period, guarantees your
ability to begin receiving income from your Annuity in the form of annuity
payments based on a guaranteed minimum value (called the "Protected Income
Value") that increases after the waiting period begins, regardless of the
impact of market performance on your Account Value. The program may be
appropriate for you if you anticipate using your Annuity as a future source of
periodic fixed income payments for the remainder of your life and wish to
ensure that the basis upon which your income payments will be calculated will
achieve at least a minimum amount despite fluctuations in market performance.
There is an additional charge if you elect the GMIB program.
Key Feature - Protected Income Value
The Protected Income Value is the minimum amount that we guarantee will be
available (net of any applicable tax charge), after a waiting period of at
least seven years, as a basis to begin receiving fixed annuity payments. The
Protected Income Value is initially established on the effective date of the
GMIB program and is equal to your Account Value on such date. Currently, since
the GMIB program may only be elected at issue, the effective date is the Issue
Date of your Annuity. The Protected Income Value is increased daily based on
an annual growth rate of 5%, subject to the limitations described below. The
Protected Income Value is referred to as the "Protected Value" in the rider we
issue for this benefit. The 5% annual growth rate is referred to as the
"Roll-Up Percentage" in the rider we issue for this benefit.
The Protected Income Value is subject to a limit of 200% (2X) of the sum of
the Protected Income Value established on the effective date of the GMIB
program, or the effective date of any step-up value, plus any additional
Purchase Payments (and any Credit that is applied to such Purchase Payments in
the case of Optimum Plus) made after the waiting period begins ("Maximum
Protected Income Value"), minus the sum of any reductions in the Protected
Income Value due to withdrawals you make from your Annuity after the waiting
period begins.
.. Subject to the maximum age/durational limits described immediately below,
we will no longer increase the Protected Income Value by the 5% annual
growth rate once you reach the Maximum Protected Income Value. However, we
will increase the Protected Income Value by the amount of any additional
Purchase Payments after you reach the Maximum Protected Income Value.
Further, if you make withdrawals after you reach the Maximum Protected
Income Value, we will reduce the Protected Income Value and the Maximum
Protected Income Value by the proportional impact of the withdrawal on your
Account Value.
.. Subject to the Maximum Protected Income Value, we will no longer increase
the Protected Income Value by the 5% annual growth rate after the later of
the anniversary date on or immediately following the Annuitant's 80/th/
birthday or the 7/th/ anniversary of the later of the effective date of the
GMIB program or the effective date of the most recent step-up. However, we
will increase the Protected Income Value by the amount of any additional
Purchase Payments (and any Credit that is applied to such Purchase Payments
in the case of Optimum Plus). Further, if you make withdrawals after the
Annuitant reaches the maximum age/duration limits, we will reduce the
Protected Income Value and the Maximum Protected Income Value by the
proportional impact of the withdrawal on your Account Value.
.. Subject to the Maximum Protected Income Value, if you make an additional
Purchase Payment, we will increase the Protected Income Value by the amount
of the Purchase Payment (and any Credit that is applied to such Purchase
Payment in the case of Optimum Plus) and will apply the 5% annual growth
rate on the new amount from the date the Purchase Payment is applied.
.. As described below, after the waiting period begins, cumulative withdrawals
each Annuity Year that are up to 5% of the Protected Income Value on the
prior anniversary of your Annuity will reduce the Protected Income Value by
the amount of the withdrawal. Cumulative withdrawals each Annuity Year in
excess of 5% of the Protected Income Value on the prior anniversary of your
Annuity will reduce the Protected Income Value proportionately. All
withdrawals after the Maximum Protected Income Value is reached will reduce
the Protected Income Value proportionately. The 5% annual growth rate will
be applied to the reduced Protected Income Value from the date of the
withdrawal.
Stepping-Up the Protected Income Value - You may elect to "step-up" or "reset"
your Protected Income Value if your Account Value is greater than the current
Protected Income Value. Upon exercise of the step-up provision, your initial
Protected Income Value will be reset equal to your current Account Value. From
the date that you elect to step-up the Protected Income Value, we
47
will apply the 5% annual growth rate to the stepped-up Protected Income Value,
as described above. You can exercise the step-up provision twice while the
GMIB program is in effect, and only while the Annuitant is less than age 76.
.. A new seven-year waiting period will be established upon the effective date
of your election to step-up the Protected Income Value. You cannot exercise
your right to begin receiving annuity payments under the GMIB program until
the end of the new waiting period. In light of this waiting period upon
resets, it is not recommended that you reset your GMIB if the required
beginning date under IRS minimum distribution requirements would commence
during the 7 year waiting period. See "Tax Considerations" section in this
prospectus for additional information on IRS requirements.
.. The Maximum Protected Income Value will be reset as of the effective date
of any step-up. The new Maximum Protected Income Value will be equal to
200% of the sum of the Protected Income Value as of the effective date of
the step-up plus any subsequent Purchase Payments (and any Credit that is
applied to such Purchase Payments in the case of Optimum Plus), minus the
impact of any withdrawals after the date of the step-up.
.. When determining the guaranteed annuity purchase rates for annuity payments
under the GMIB program, we will apply such rates based on the number of
years since the most recent step-up.
.. If you elect to step-up the Protected Income Value under the program, and
on the date you elect to step-up, the charges under the GMIB program have
changed for new purchasers, your program may be subject to the new charge
going forward.
.. A step-up will increase the dollar-for-dollar limit on the anniversary of
the Issue Date of the Annuity following such step-up.
Impact of Withdrawals on the Protected Income Value - Cumulative withdrawals
each Annuity Year up to 5% of the Protected Income Value will reduce the
Protected Income Value on a "dollar-for-dollar" basis (the Protected Income
Value is reduced by the actual amount of the withdrawal). Cumulative
withdrawals in any Annuity Year in excess of 5% of the Protected Income Value
will reduce the Protected Income Value proportionately (see the examples of
this calculation below). The 5% annual withdrawal amount is determined on each
anniversary of the Issue Date (or on the Issue Date for the first Annuity
Year) and applies to any withdrawals during the Annuity Year. This means that
the amount available for withdrawals each Annuity Year on a
"dollar-for-dollar" basis is adjusted on each Annuity anniversary to reflect
changes in the Protected Income Value during the prior Annuity Year.
The following examples of dollar-for-dollar and proportional reductions assume
that: 1.) the Issue Date and the effective date of the GMIB program are
October 13, 2005; 2.) an initial Purchase Payment of $250,000 (includes any
Credits in the case of Optimum Plus); 3.) an initial Protected Income Value of
$250,000; and 4.) a dollar-for-dollar limit of $12,500 (5% of $250,000). The
values set forth here are purely hypothetical and do not reflect the charge
for GMIB or any other fees and charges.
Example 1. Dollar-For-Dollar Reduction
A $10,000 withdrawal is taken on November 13, 2005 (in the first Annuity
Year). No prior withdrawals have been taken. Immediately prior to the
withdrawal, the Protected Income Value is $251,038.10 (the initial value
accumulated for 31 days at an annual effective rate of 5%). As the amount
withdrawn is less than the dollar-for-dollar limit:
.. the Protected Income Value is reduced by the amount withdrawn (i.e., by
$10,000, from $251,038.10 to $241,038.10).
.. The remaining dollar-for-dollar limit ("Remaining Limit") for the balance
of the first Annuity Year is also reduced by the amount withdrawn (from
$12,500 to $2,500).
Example 2. Dollar-For-Dollar and Proportional Reductions
A second $10,000 withdrawal is taken on December 13, 2005 (still within the
first Annuity Year). Immediately before the withdrawal, the Account Value is
$220,000 and the Protected Income Value is $242,006.64. As the amount
withdrawn exceeds the Remaining Limit of $2,500 from Example 1:
.. the Protected Income Value is first reduced by the Remaining Limit (from
$242,006.64 to $239,506.64);
.. The result is then further reduced by the ratio of A to B, where:
-- A is the amount withdrawn less the Remaining Limit ($10,000 - $2,500, or
$7,500).
-- B is the Account Value less the Remaining Limit ($220,000 - $2,500, or
$217,500).
The resulting Protected Income Value is: $239,506.64 X (1 - $7,500 /
$217,500), or $231,247.79.
. The Remaining Limit is set to zero (0) for the balance of the first
Annuity Year.
Example 3. Reset of the Dollar-For-Dollar Limit
A $10,000 withdrawal is made on the first anniversary of the Issue Date,
October 13, 2006 (second Annuity Year). Prior to the withdrawal, the Protected
Income Value is $240,838.37. The Remaining Limit is reset to 5% of this
amount, or $12,041.92. As the amount withdrawn is less than the
dollar-for-dollar limit:
.. the Protected Income Value is reduced by the amount withdrawn (i.e.,
reduced by $10,000, from $240,838.37 to $230,838.37).
.. 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).
48
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 or your 95/th/ birthday or
whichever is sooner, except for Annuities used as a funding vehicle for an
IRA, SEP IRA or 403(b), in which case you must elect one of the GMIB Annuity
Payment Options by the anniversary of the Annuity's Issue Date on or
immediately following the Annuitant's 92/nd/ birthday.
Your Annuity or state law may require you to begin receiving annuity payments
at an earlier date.
The amount of each GMIB Annuity Payment will be determined based on the age
and, where permitted by law, sex of the Annuitant by applying the Protected
Income Value (net of any applicable tax charge that may be due) to the GMIB
Annuity Payment Option you choose. We use special annuity purchase rates to
calculate the amount of each payment due under the GMIB Annuity Payment
Options. These special rates for the GMIB Annuity Payment Options are
calculated using an assumed interest rate factor that provides for lower
growth in the value applied to produce annuity payments than if you elected an
annuity payment option that is not part of the GMIB program. These special
rates also are calculated using other factors such as "age setbacks" (use of
an age lower than the Annuitant's actual age) that result in lower payments
than would result if you elected an annuity payment option that is not part of
the GMIB program. Use of an age setback entails a longer assumed life for the
Annuitant which in turn results in lower annuity payments.
On the date that you elect to begin receiving GMIB Annuity Payments, we
guarantee that your payments will be calculated based on your Account Value
and our then current annuity purchase rates if the payment amount calculated
on this basis would be higher than it would be based on the Protected Income
Value and the special GMIB annuity purchase rates.
GMIB Annuity Payment Option 1 - Payments for Life with a Certain Period
Under this option, monthly annuity payments will be made until the death of
the Annuitant. If the Annuitant dies before having received 120 monthly
annuity payments, the remainder of the 120 monthly annuity payments will be
made to the Beneficiary.
GMIB Annuity Payment Option 2 - Payments for Joint Lives with a Certain Period
Under this option, monthly annuity payments will be made until the death of
both the Annuitant and the Joint Annuitant. If the Annuitant and the Joint
Annuitant die before having received 120 monthly annuity payments, the
remainder of the 120 monthly annuity payments will be made to the Beneficiary.
.. If the Annuitant dies first, we will continue to make payments until the
later of the death of the Joint Annuitant and the end of the period
certain. However, if the Joint Annuitant is still receiving annuity
payments following the end of the certain period, we will reduce the amount
of each subsequent payment to 50% of the original payment amount.
.. If the Joint Annuitant dies first, we will continue to make payments until
the later of the death of the Annuitant and the end of the period certain.
You cannot withdraw your Account Value or the Protected Income Value under
either GMIB Annuity Payment Option once annuity payments have begun. We may
make other payout frequencies available, such as quarterly, semi-annually or
annually.
Other Important Considerations
.. You should note that GMIB is designed to provide a type of insurance that
serves as a safety net only in the event your Account Value declines
significantly due to negative investment performance. If your Account Value
is not significantly affected by negative investment performance, it is
unlikely that the purchase of the GMIB will result in your receiving larger
annuity payments than if you had not purchased GMIB. This is because the
assumptions that we use in computing the GMIB, such as the annuity purchase
rates, (which include assumptions as to age-setbacks and assumed interest
rates), are more conservative than the assumptions that we use in computing
annuity payout options outside of GMIB. Therefore, you may generate higher
income payments if you were to annuitize a lower Account Value at the
current annuity purchase rates, than if you were to annuitize under the
GMIB with a higher Protected Value than your Account Value but, at the
annuity purchase rates guaranteed under the GMIB. The GMIB program does not
directly affect an Annuity's Account Value, Surrender Value or the amount
payable under either the basic Death Benefit provision of the Annuity or
any optional Death Benefit provision. If you surrender your Annuity, you
will receive the current Surrender Value, not the Protected Income Value.
The Protected Income Value is only applicable if you elect to begin
receiving annuity payments under one of the GMIB annuity options after the
waiting period.
.. Each Annuity offers other annuity payment options that you can elect which
do not impose an additional charge, but which do not offer to guarantee a
minimum value on which to make annuity payments.
.. Where allowed by law, we reserve the right to limit subsequent Purchase
Payments if we determine, at our sole discretion, that based on the timing
of your Purchase Payments and withdrawals, your Protected Income Value is
increasing in ways we did not
49
intend. In determining whether to limit Purchase Payments, we will look at
Purchase Payments which are disproportionately larger than your initial
Purchase Payment and other actions that may artificially increase the
Protected Income Value.
.. We currently limit the Sub-accounts in which you may allocate Account Value
if you participate in this program. We reserve the right to transfer any
Account Value in a prohibited investment option to an eligible investment
option. Should we prohibit access to any investment option, any transfers
required to move Account Value to eligible investment options will not be
counted in determining the number of free transfers during an Annuity Year.
We may also require that you allocate your Account Value according to an
asset allocation model.
.. If you change the Annuitant after the effective date of the GMIB program,
the period of time during which we will apply the 5% annual growth rate may
be changed based on the age of the new Annuitant. If the new Annuitant
would not be eligible to elect the GMIB program based on his or her age at
the time of the change, then the GMIB program will terminate.
.. Annuity payments made under the GMIB program are subject to the same tax
treatment as any other annuity payment.
.. At the time you elect to begin receiving annuity payments under the GMIB
program or under any other annuity payment option we make available, the
protection provided by an Annuity's basic Death Benefit or any optional
Death Benefit provision you elected will no longer apply.
Election of the Program
Currently, the GMIB program can only be elected at the time that you purchase
your Annuity. The Annuitant must be age 75 or less as of the effective date of
the GMIB program. In the future, we may offer existing Annuity Owners the
option to elect the GMIB program after the Issue Date of their Annuity,
subject to our eligibility rules and restrictions. If you elect the GMIB
program after the Issue Date of your Annuity, the program will be effective as
of the date of election. Your Account Value as of that date will be used to
calculate the Protected Income Value as of the effective date of the program.
Termination of the Program
The GMIB program cannot be terminated by the Owner once elected. The GMIB
program automatically terminates as of the date your Annuity is fully
surrendered, on the date the Death Benefit is payable to your Beneficiary
(unless your surviving spouse elects to continue your Annuity), or on the date
that your Account Value is transferred to begin making annuity payments. The
GMIB program may also be terminated if you designate a new Annuitant who would
not be eligible to elect the GMIB program based on his or her age at the time
of the change.
Upon termination of the GMIB program we will deduct the charge from your
Account Value for the portion of the Annuity Year since the prior anniversary
of the Annuity's Issue Date (or the Issue Date if in the first Annuity Year).
Charges under the Program
Currently, we deduct a charge equal to 0.50% per year of the average Protected
Income Value for the period the charge applies. Because the charge is
calculated based on the average Protected Income Value, it does not increase
or decrease based on changes to the Annuity's Account Value due to market
performance. The dollar amount you pay each year will increase in any year the
Protected Income Value increases, and it will decrease in any year the
Protected Income Value decreases due to withdrawal, irrespective of whether
your Account Value increases or decreases.
The charge is deducted annually in arrears each Annuity Year on the
anniversary of the Issue Date of an Annuity. We deduct the amount of the
charge pro-rata from the Account Value allocated to the Sub-accounts and the
Fixed Allocations. No MVA will apply to Account Value deducted from a Fixed
Allocation. If you surrender your Annuity, begin receiving annuity payments
under the GMIB program or any other annuity payment option we make available
during an Annuity Year, or the GMIB program terminates, we will deduct the
charge for the portion of the Annuity Year since the prior anniversary of the
Annuity's Issue Date (or the Issue Date if in the first Annuity Year). No
charge applies after the Annuity Date.
LIFETIME FIVE INCOME BENEFIT (LIFETIME FIVE)
The Lifetime Five Income Benefit program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Lifetime Five can be elected only where
the Annuitant and the Owner are the same person or, if the Annuity Owner is an
entity, where there is only one Annuitant. Currently, if you elect Lifetime
Five and subsequently terminate the benefit, there will be a restriction on
your ability to re-elect Lifetime Five and elect Spousal Lifetime Five or
Highest Daily Lifetime Five. The Annuitant must be at least 45 years old when
the program is elected. The Lifetime Five Income Benefit program is not
available if you elect any other optional living benefit. As long as your
Lifetime Five Income Benefit is in effect, you must allocate your Account
Value in accordance with the then permitted and available option(s) with this
program. Currently, you are required to enroll and maintain your Account Value
in the asset allocation program if you elect this benefit.
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
50
rules regarding the timing and amount of withdrawals. There are two options --
one is designed to provide an annual withdrawal amount for life (the "Life
Income Benefit") and the other is designed to provide a greater annual
withdrawal amount as long as there is Protected Withdrawal Value (adjusted as
described below) (the "Withdrawal Benefit"). If there is no Protected
Withdrawal Value, the withdrawal benefit will be zero. You do not choose
between these two options; each option will continue to be available as long
as your Annuity has an Account Value and the Lifetime Five is in effect.
Certain benefits under Lifetime Five may remain in effect even if the Account
Value of your Annuity is zero. The program may be appropriate if you intend to
make periodic withdrawals from your Annuity and wish to ensure that market
performance will not affect your ability to receive annual payments. You are
not required to make withdrawals as part of the program -- the guarantees are
not lost if you withdraw less than the maximum allowable amount each year
under the rules of the program.
Key Feature - Protected Withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Life Income Benefit and the Withdrawal Benefit. The initial
Protected Withdrawal Value is determined as of the date you make your first
withdrawal under your Annuity following your election of Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Lifetime Five, plus any additional Purchase
Payments, as applicable, each growing at 5% per year from the date of your
election of the program, or application of the Purchase Payment to your
Annuity, until the date of your first withdrawal or the 10/th/ anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10th anniversary of the benefit
effective date, if earlier. With respect to (A) and (C) above, after the 10th
anniversary of the benefit effective date, each value is increased by the
amount of any subsequent Purchase Payments. With respect to Optimum Plus,
Credits are added to Purchase Payments for purposes of calculating the
Protected Withdrawal Value, the Annual Income Amount and the Annual Withdrawal
Amount (see below for a description of Annual Income Amount and Annual
Withdrawal Amount).
. If you elect the Lifetime Five program at the time you purchase your
Annuity, the Account Value will be your initial Purchase Payment.
. For existing Owners who are electing the Lifetime Five benefit, the
Account Value on the date of your election of the Lifetime Five program
will be used to determine the initial Protected Withdrawal Value.
. If you make additional Purchase Payments after your first withdrawal, the
Protected Withdrawal Value will be increased by the amount of each
additional Purchase Payment.
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).
Step-Up of the Protected Withdrawal Value
You may elect to step-up your Protected Withdrawal Value if, due to positive
market performance, your Account Value is greater than the Protected
Withdrawal Value.
If you elected the Lifetime Five program on or after March 20, 2006:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 1/st/ anniversary of the first withdrawal under the Lifetime Five
program
. the Protected Withdrawal Value can be stepped up again on or after the
1/st/ anniversary of the preceding step-up
If you elected the Lifetime Five program prior to March 20, 2006 and that
original election remains in effect:
. you are eligible to step-up the Protected Withdrawal Value on or after
the 5/th/ anniversary of the first withdrawal under the Lifetime Five
program
. the Protected Withdrawal Value can be stepped up again on or after the
5/th/ anniversary of the preceding step-up
In either scenario (i.e., elections before or after March 20, 2006) if you
elect to step-up the Protected Withdrawal Value under the program, and on the
date you elect to step-up, the charges under the Lifetime Five program have
changed for new purchasers, your program may be subject to the new charge at
the time of step-up. Upon election of the step-up, we increase the Protected
Withdrawal Value to be equal to the then current Account Value. For example,
assume your initial Protected Withdrawal Value was $100,000 and you have made
cumulative withdrawals of $40,000, reducing the Protected Withdrawal Value to
$60,000. On the date you are eligible to step-up the Protected Withdrawal
Value, your Account Value is equal to $75,000. You could elect to step-up the
Protected Withdrawal Value to $75,000 on the date you are eligible. If your
current Annual Income Amount and Annual Withdrawal Amount are less than they
would be if we did not reflect the step-up in Protected Withdrawal Value, then
we will increase these amounts to reflect the step-up as described below.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force.
51
If you elected the Lifetime Five program on or after March 20, 2006 and have
also elected the Auto Step-Up feature:
. the first Auto Step-Up opportunity will occur on the 1/st/ Annuity
Anniversary that is at least one year after the later of (1) the date of
the first withdrawal under the Lifetime Five program or (2) the most
recent step-up
. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by any amount
. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value is not greater than the Annual Income Amount, an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a
step-up occurs
. once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1/st/ Annuity Anniversary that is at least one year after the most
recent step-up
If you elected the Lifetime Five program prior to March 20, 2006 and have also
elected the Auto Step-Up feature:
. the first Auto Step-Up opportunity will occur on the Annuity Anniversary
that is at least 5 years after the later of (1) the date of the first
withdrawal under the Lifetime Five Program benefit or (2) the most recent
step-up
. your Protected Withdrawal Value will only be stepped-up if 5% of the
Account Value is greater than the Annual Income Amount by 5% or more
. if at the time of the first Auto Step-Up opportunity, 5% of the Account
Value does not exceed the Annual Income Amount by 5% or more, an Auto
Step-Up opportunity will occur on each successive Annuity Anniversary
until a step-up occurs
. once a step-up occurs, the next Auto Step-Up opportunity will occur on
the Annuity Anniversary that is at least 5 years after the most recent
step-up
In either scenario (i.e., elections before or after March 20, 2006), if on the
date that we implement an Auto Step-Up to your Protected Withdrawal Value, the
charge for Lifetime Five has changed for new purchasers, you may be subject to
the new charge at the time of such step-up. Subject to our rules and
restrictions, you will still be permitted to manually step-up the Protected
Withdrawal Value even if you elect the Auto Step-Up feature.
Key Feature - Annual Income Amount under the Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under the Lifetime Five program, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Annual Income Amount ("Excess Income"), your Annual
Income Amount in subsequent years will be reduced (except with regard to
required minimum distributions) by the result of the ratio of the Excess
Income to the Account Value immediately prior to such withdrawal (see examples
of this calculation below). Reductions include the actual amount of the
withdrawal, including any CDSC that may apply. A withdrawal can be considered
Excess Income under the Life Income Benefit even though it does not exceed the
Annual Withdrawal Amount under the Withdrawal Benefit. When you elect a
step-up (or an auto step-up is effected), your Annual Income Amount increases
to equal 5% of your Account Value after the step-up if such amount is greater
than your Annual Income Amount. Your Annual Income Amount also increases if
you make additional Purchase Payments. The amount of the increase is equal to
5% of any additional Purchase Payments (and any associated Credit with respect
to Optimum Plus). 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 (or an auto step-up is effected), your Annual Withdrawal
Amount increases to equal 7% of your Account Value after the step-up if such
amount is greater than your Annual Withdrawal Amount. Your Annual Withdrawal
Amount also increases if you make additional Purchase Payments. The amount of
the increase is equal to 7% of any additional Purchase Payments (and any
associated Credit with respect to Optimum Plus). 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.
52
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.
Examples of Withdrawal
The following examples of dollar-for-dollar and proportional reductions 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; and 4.) the first
withdrawal occurs on March 1, 2006 when the Account Value is equal to
$263,000;. The values set forth here are purely hypothetical, and do not
reflect the charge for Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Withdrawal Amount is equal to $18,550 under the Withdrawal Benefit (7%
of $265,000). The Annual Income Amount is equal to $13,250 under the Life
Income Benefit (5% of $265,000).
Example 1. Dollar-For-Dollar reduction
If $10,000 was withdrawn (less than both the Annual Income Amount and the
Annual Withdrawal Amount) on March 1, 2006, then the following values would
result:
. Remaining Annual Withdrawal Amount for current Annuity Year = $18,550 -
$10,000 = $8,550
Annual Withdrawal Amount for future Annuity Years remains at $18,550
. Remaining Annual Income Amount for current Annuity Year = $13,250 -
$10,000 = $3,250.
. Annual Income Amount for future Annuity Years remains at $13,250
. Protected Withdrawal Value is reduced by $10,000 from $265,000 to $255,000
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
53
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
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. Thus, in that scenario,
the remaining amounts under the Life Income Benefit and the Withdrawal
Benefit would be payable even though your Account Value was reduced to
zero. Once you make this election we will make an additional payment for
that Annuity Year equal to either the remaining Annual Income Amount or
Annual Withdrawal Amount for the Annuity Year, if any, depending on the
option you choose. In subsequent Annuity Years we make payments that
equal either the Annual Income Amount or the Annual Withdrawal Amount as
described in this Prospectus. You will not be able to change the option
after your election and no further Purchase Payments will be accepted
under your Annuity. If you do not make an election, we will pay you
annually under the Life Income Benefit. To the extent that cumulative
withdrawals in the current Annuity Year that reduced your Account Value
to zero are more than the Annual Income Amount but less than or equal to
the Annual Withdrawal Amount and amounts are still payable under the
Withdrawal Benefit, you will receive the payments under the Withdrawal
Benefit. In the year of a withdrawal that reduced your Account Value to
zero, we will make an additional payment to equal any remaining Annual
Withdrawal Amount and make payments equal to the Annual Withdrawal Amount
in each subsequent year (until the Protected Withdrawal Value is
depleted). Once your Account Value equals zero no further Purchase
Payments will be accepted under your Annuity.
. If annuity payments are to begin under the terms of your Annuity or if
you decide to begin receiving annuity payments and there is any Annual
Income Amount due in subsequent Annuity Years or any remaining Protected
Withdrawal Value, you can elect one of the following three options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make annuity
payments each year equal to the Annual Income Amount. We make such annuity
payments until the Annuitant's death; or
(3)request that, as of the date annuity payments are to begin, we pay out any
remaining Protected Withdrawal Value as annuity payments. Each year such
annuity payments will equal the Annual Withdrawal Amount or the remaining
Protected Withdrawal Value if less. We make such annuity payments until the
earlier of the Annuitant's death or the date the Protected Withdrawal Value
is depleted.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a single life fixed annuity with
five payments certain using the greater of the annuity rates then currently
available or the annuity rates guaranteed in your Annuity. The amount that
will be applied to provide such annuity payments will be the greater of:
(1)the present value of future Annual Income Amount payments. Such present
value will be calculated using the greater of the single life fixed annuity
rates then currently available or the single life fixed annuity rates
guaranteed in your Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine a Protected Withdrawal
Value and calculate an Annual Income Amount and an Annual Withdrawal Amount
as if you made your first withdrawal on the date the annuity payments are
to begin.
Other Important Considerations
.. Withdrawals under the Lifetime Five program are subject to all of the terms
and conditions of your Annuity, including any applicable CDSC.
54
.. Withdrawals made while the Lifetime Five program is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under
your Annuity. The Lifetime Five program does not directly affect your
Annuity's Account Value or Surrender Value, but any withdrawal will
decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity, you will receive the
current Surrender Value, not the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Lifetime Five program. The
Lifetime Five program provides a guarantee that if your Account Value
declines due to market performance, you will be able to receive your
Protected Withdrawal Value or Annual Income Amount in the form of periodic
benefit payments.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the benefit. If, subsequent to your election of the benefit,
we change our requirements for how Account Value must be allocated under
the benefit, the new requirement will apply only to new elections of the
benefit, and we will not compel you to re-allocate your Account Value in
accordance with our newly-adopted requirements. Subsequent to any change in
requirements, transfers of Account Value and allocation of additional
Purchase Payments may be subject to the new investment limitations.
Election of the Program
The Lifetime Five program can be elected at the time that you purchase your
Annuity. We also offer existing Owners the option to elect the Lifetime Five
program after the Issue Date of their Annuity, subject to our eligibility
rules and restrictions. Your Account Value as the date of election will be
used as a basis to calculate the initial Protected Withdrawal Value, the
initial Protected Annual Withdrawal Amount, and the Annual Income Amount.
Currently, if you terminate the program, you will only be permitted to
re-elect Lifetime Five or elect Highest Daily Lifetime Five or Spousal
Lifetime Five on any anniversary of the Issue Date that is at least 90
calendar days from the date the benefit was last terminated.
If you elected Lifetime Five prior to March 20, 2006, and you terminate the
program, there will be no waiting period before you can re-elect the program
or elect Highest Daily Lifetime Five or Spousal Lifetime Five provided that
you had not previously elected Lifetime Five after the Issue Date and within
the same Annuity Year that you terminated Lifetime Five. If you had previously
elected Lifetime Five after the Issue Date and within the same Annuity Year
that you terminate Lifetime Five, you will be able to re-elect the program or
elect Highest Daily Lifetime Five or Spousal Lifetime Five on any date on or
after the next anniversary of the Issue Date. However, once you choose to
re-elect/elect, the waiting period described above will apply to subsequent
re-elections. We reserve the right to limit the re-election/election frequency
in the future. Before making any such change to the re-election/election
frequency, we will provide prior notice to Owners who have an effective
Lifetime Five Income Benefit.
Termination of the Program
The program terminates automatically when your Protected Withdrawal Value and
Annual Income Amount equal zero. You may terminate the program at any time by
notifying us. If you terminate the program, any guarantee provided by the
benefit will terminate as of the date the termination is effective and certain
restrictions on re-election of the benefit will apply as described above. The
program terminates upon your surrender of your Annuity, upon the death of the
Annuitant (but your surviving spouse may elect a new Lifetime Five if your
spouse elects the spousal continuance option and your spouse would then be
eligible to elect the benefit if he or she was a new purchaser), upon a change
in ownership of your Annuity that changes the tax identification number of the
Owner, upon change in the Annuitant or upon your election to begin receiving
annuity payments. While you may terminate your program at any time, we may not
terminate the program other than in the circumstances listed above. However,
we may stop offering the program for new elections or re-elections at any time
in the future.
The charge for the Lifetime Five program will no longer be deducted from your
Account Value upon termination of the program.
Additional Tax Considerations
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than five (5) percent
owner of the employer, this required beginning date can generally be deferred
to retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Withdrawal Amount and the Annual Income Amount, which will cause us to
increase the Annual Income Amount and the Annual Withdrawal Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. Any such payments will reduce your Protected
Withdrawal Value. In addition, the amount and duration of payments under the
annuity payment and Death Benefit provisions may be adjusted so that the
payments do not trigger any penalty or excise taxes due to tax considerations
such as Required Minimum Distribution provisions under the tax law.
55
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
SPOUSAL LIFETIME FIVE INCOME BENEFIT (SPOUSAL LIFETIME FIVE)
The Spousal Lifetime Five program described below is only being offered in
those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Currently, if you elect Spousal Lifetime
Five and subsequently terminate the benefit, there will be a restriction on
your ability to re-elect Spousal Lifetime Five or elect Highest Daily Lifetime
Five or Lifetime Five. (See "Election of and Designations under the Program"
below for details) Spousal Lifetime Five must be elected based on two
Designated Lives, as described below. Each Designated Life must be at least 55
years old when the benefit is elected. The Spousal Lifetime Five program is
not available if you elect any other optional living benefit or optional death
benefit. As long as your Spousal Lifetime Five Income Benefit is in effect,
you must allocate your Account Value in accordance with the then permitted and
available option(s) with this program. Currently, you are required to enroll
and maintain your Account Value in the asset allocation program if you elect
this benefit.
We offer a program that guarantees until the later death of two natural
persons that are each other's spouses at the time of election of Spousal
Lifetime Five and at the first death of one of them (the "Designated Lives",
each a "Designated Life") the ability to withdraw an annual amount ("Spousal
Life Income Benefit") equal to a percentage of an initial principal value (the
"Protected Withdrawal Value") regardless of the impact of market performance
on the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The Spousal Life Income Benefit may remain in effect
even if the Account Value of the Annuity is zero. The program may be
appropriate if you intend to make periodic withdrawals from your Annuity, wish
to ensure that market performance will not affect your ability to receive
annual payments, and wish either spouse to be able to continue the Spousal
Life Income Benefit after the death of the first. You are not required to make
withdrawals as part of the program -- the guarantees are not lost if you
withdraw less than the maximum allowable amount each year under the rules of
the program.
Key Feature - Initial Protected withdrawal Value
The Protected Withdrawal Value is used to determine the amount of each annual
payment under the Spousal Life Income Benefit. The initial Protected
Withdrawal Value is determined as of the date you make your first withdrawal
under the Annuity following your election of Spousal Lifetime Five. The
initial Protected Withdrawal Value is equal to the greater of (A) the Account
Value on the date you elect Spousal Lifetime Five, plus any additional
Purchase Payments as applicable, each growing at 5% per year from the date of
your election of the program, or application of the Purchase Payment to your
Annuity, until the date of your first withdrawal or the 10/th/ anniversary of
the benefit effective date, if earlier (B) the Account Value on the date of
the first withdrawal from your Annuity, prior to the withdrawal, and (C) the
highest Account Value on each Annuity anniversary, plus subsequent Purchase
Payments prior to the first withdrawal or the 10th anniversary of the benefit
effective date, if earlier. With respect to (A) and (C) above, after the 10th
anniversary of the benefit effective date, each value is increased by the
amount of any subsequent Purchase Payments. With respect to Optimum Plus,
Credits are added to Purchase Payments for purposes of calculating the
Protected Withdrawal Value and the Annual Income Amount (see below for a
description of Annual Income Amount).
. If you elect the Spousal Lifetime Five program at the time you purchase
your Annuity, the Account Value will be your initial Purchase Payment.
. For existing Owners who are electing the Spousal Lifetime Five benefit,
the Account Value on the date of your election of the Spousal Lifetime
Five program will be used to determine the initial Protected Withdrawal
Value.
Key Feature - Annual Income Amount under the Spousal Life Income Benefit
The initial Annual Income Amount is equal to 5% of the initial Protected
Withdrawal Value. Under the Spousal Lifetime Five program, if your cumulative
withdrawals in an Annuity Year are less than or equal to the Annual Income
Amount, they will not reduce your Annual Income Amount in subsequent Annuity
Years, but any such withdrawals will reduce the Annual Income Amount on a
dollar-for-dollar basis in that Annuity Year. If, cumulatively, you withdraw
an amount less than the Annual Income Amount under the Spousal Life Income
Benefit in any Annuity Year, you cannot carry-over the unused portion of the
Annual Income Amount to subsequent Annuity Years. 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. The Spousal Lifetime Five
program does not affect your ability to make withdrawals under your Annuity or
limit your ability to request withdrawals that exceed the Annual Income Amount.
Step-Up of Annual Income Amount
You may elect to step-up your Annual Income Amount if, due to positive market
performance, 5% of your Account Value is greater than the Annual Income
Amount. You are eligible to step-up the Annual Income Amount on or after the
1/st/ anniversary of
56
the first withdrawal under the Spousal Lifetime Five program. The Annual
Income Amount can be stepped up again on or after the 1/st/ anniversary of the
preceding step-up. If you elect to step-up the Annual Income Amount under the
program, and on the date you elect to step-up, the charges under the Spousal
Lifetime Five program have changed for new purchasers, your program may be
subject to the new charge at the time of such step-up. When you elect a
step-up, your Annual Income Amount increases to equal 5% of your Account Value
after the step-up. Your Annual Income Amount also increases if you make
additional Purchase Payments. The amount of the increase is equal to 5% of any
additional Purchase Payments (plus any Credit with respect to Optimum Plus).
Any increase will be added to your Annual Income Amount beginning on the day
that the step-up is effective or the Purchase Payment is made. A determination
of whether you have exceeded your Annual Income Amount is made at the time of
each withdrawal; therefore a subsequent increase in the Annual Income Amount
will not offset the effect of a withdrawal that exceeded the Annual Income
Amount at the time the withdrawal was made.
An optional automatic step-up ("Auto Step-Up") feature is available for this
benefit. This feature may be elected at the time the benefit is elected or at
any time while the benefit is in force. If you elect this feature, the first
Auto Step-Up opportunity will occur on the 1/st/ Annuity Anniversary that is
at least one year after the later of (1) the date of the first withdrawal
under the Spousal Lifetime Five program or (2) the most recent step-up. At
this time, your Annual Income Amount will be stepped-up if 5% of your Account
Value is greater than the Annual Income Amount by any amount. If 5% of the
Account Value does not exceed the Annual Income Amount, then an Auto Step-Up
opportunity will occur on each successive Annuity Anniversary until a step-up
occurs. Once a step-up occurs, the next Auto Step-Up opportunity will occur on
the 1st Annuity Anniversary that is at least 1 year after the most recent
step-up. If, on the date that we implement an Auto Step-Up to your Annual
Income Amount, the charge for Spousal Lifetime Five has changed for new
purchasers, you may be subject to the new charge at the time of such step-up.
Subject to our rules and restrictions, you will still be permitted to manually
step-up the Annual Income Amount even if you elect the Auto Step-Up feature.
Examples of Withdrawals and Step-Up
The following examples of dollar-for-dollar and proportional reductions and
the step-up of the Annual Income Amount assume:
1)the Issue Date and the Effective Date of the Spousal Lifetime Five program
are February 1, 2005; 2) an initial Purchase Payment of $250,000; 3) the
Account Value on February 1, 2006 is equal to $265,000; 4) the first
withdrawal occurs on March 1, 2006 when the Account Value is equal to
$263,000; and 5) the Account Value on February 1, 2010 is equal to $280,000.
The values set forth here are purely hypothetical, and do not reflect the
charge for the Spousal Lifetime Five or any other fees and charges.
The initial Protected Withdrawal Value is calculated as the greatest of (a),
(b) and (c):
(a)Purchase payment accumulated at 5% per year from February 1, 2005 until
March 1, 2006 (393 days) = $250,000 X 1.05/(393/365)/ = $263,484.33
(b)Account Value on March 1, 2006 (the date of the first withdrawal) = $263,000
(c)Account Value on February 1, 2006 (the first Annuity Anniversary) = $265,000
Therefore, the initial Protected Withdrawal Value is equal to $265,000. The
Annual Income Amount is equal to $13,250 under the Spousal Life Income Benefit
(5% of $265,000).
Example 1. Dollar-For-Dollar Reduction
If $10,000 was withdrawn (less than the Annual Income Amount) on March 1,
2006, then the following values would result:
. Remaining Annual Income Amount for current Annuity Year = $13,250 -
$10,000 = $3,250
. Annual Income Amount for future Annuity Years remains at $13,250
Example 2. Dollar-For-Dollar and Proportional Reductions
(a) If $15,000 was withdrawn (more than the Annual Income Amount) on March 1,
2006, then the following values would result:
. Remaining Annual Income Amount for current Annuity Year = $0 Excess of
withdrawal over the Annual Income Amount ($15,000 - $13,250 = $1,750)
reduces Annual Income Amount for future Annuity Years.
. Reduction to Annual Income Amount = Excess Income/ Account Value before
Excess Income X Annual Income Amount = $1,750 / ($263,000 - $13,250) X
$13,250 = $93
. Annual Income Amount for future Annuity Years = $13,250 - $93 = $13,157
Example 3. Step-Up of the Annual Income Amount
If a step-up of the Annual Income Amount is requested on February 1, 2010 or
the Auto Step-Up feature was elected, the step-up would occur because 5% of
the Account Value, which is $14,000 (5% of $280,000), is greater than the
Annual Income Amount of $13,250. The new Annual Income Amount will be equal to
$14,000.
57
BENEFITS UNDER THE SPOUSAL LIFETIME FIVE PROGRAM
To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Annual Income Amount
and amounts are still payable under the Spousal Life Income Benefit, we will
make an additional payment for that Annuity Year equal to the remaining Annual
Income Amount for the Annuity Year, if any. Thus, in that scenario, the
remaining Annual Income Amount would be payable even though your Account Value
was reduced to zero. In subsequent Annuity Years we make payments that equal
the Annual Income Amount as described in this Prospectus. No further Purchase
Payments will be accepted under your Annuity. We will make payments until the
first of the Designated Lives to die, and will continue to make payments until
the death of the second Designated Life as long as the Designated Lives were
spouses at the time of the first death. To the extent that cumulative
withdrawals in the current Annuity Year that reduced your Account Value to
zero are more than the Annual Income Amount, the Spousal Life Income Benefit
terminates and no additional payments will be made.
.. If annuity payments are to begin under the terms of your Annuity or if you
decide to begin receiving annuity payments and there is any Annual Income
Amount due in subsequent Annuity Years, you can elect one of the following
two options:
(1)apply your Account Value to any annuity option available; or
(2)request that, as of the date annuity payments are to begin, we make
annuity payments each year equal to the Annual Income Amount. We will
make payments until the first of the Designated Lives to die, and
will continue to make payments until the death of the second
Designated Life as long as the Designated Lives were spouses at the
time of the first death.
We must receive your request in a form acceptable to us at our office.
.. In the absence of an election when mandatory annuity payments are to begin,
we will make annual annuity payments as a joint and survivor or single (as
applicable) life fixed annuity with five payments certain using the same
basis that is used to calculate the greater of the annuity rates then
currently available or the annuity rates guaranteed in your Annuity. The
amount that will be applied to provide such annuity payments will be the
greater of:
(1)the present value of future Annual Income Amount payments. Such
present value will be calculated using the same basis that is used to
calculate the single life fixed annuity rates then currently
available or the single life fixed annuity rates guaranteed in your
Annuity; and
(2)the Account Value.
.. If no withdrawal was ever taken, we will determine an initial Protected
Withdrawal Value and calculate an Annual Income Amount as if you made your
first withdrawal on the date the annuity payments are to begin.
Other Important Considerations
.. Withdrawals under the Spousal Lifetime Five program are subject to all of
the terms and conditions of the Annuity, including any CDSC.
.. Withdrawals made while the Spousal Lifetime Five program is in effect will
be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Spousal Lifetime Five program does not directly
affect the Annuity's Account Value or Surrender Value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity, you will receive the
current Surrender Value, not the Protected Withdrawal Value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Spousal Lifetime Five program. The
Spousal Lifetime Five program provides a guarantee that if your Account
Value declines due to market performance, you will be able to receive your
Annual Income Amount in the form of periodic benefit payments.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the benefit. If, subsequent to your election of the benefit,
we change our requirements for how Account Value must be allocated under
the benefit, the new requirement will apply only to new elections of the
benefit, and we will not compel you to re-allocate your Account Value in
accordance with our newly-adopted requirements. Subsequent to any change in
requirements, transfers of Account Value and allocation of additional
Purchase Payments may be subject to the new investment limitations.
.. There may be circumstances where you will continue to be charged the full
amount for the Spousal Lifetime Five program even when the benefit is only
providing a guarantee of income based on one life with no survivorship.
.. In order for the Surviving Designated Life to continue the Spousal Lifetime
Five program upon the death of an owner, the Designated Life must elect to
assume ownership of the Annuity under the spousal continuation option. When
the Annuity is owned by a Custodial Account, in order for Spousal Lifetime
Five to be continued after the death of the first Designated Life (the
Annuitant), the Custodial Account must elect to continue the Annuity and
the second Designated Life (the Contingent Annuitant) will be named as the
new Annuitant. See "Spousal Designations and "Spousal - Assumption of
Annuity" in this Prospectus.
Election of and Designations under the Program
Spousal Lifetime Five can only be elected based on two Designated Lives.
Designated Lives must be natural persons who are each other's spouses at the
time of election of the program and at the death of the first of the
Designated Lives to die.
Currently, the program may only be elected where the Owner, Annuitant and
Beneficiary Designations are as follows:
. One Annuity Owner, where the Annuitant and the Owner are the same person
and the beneficiary is the Owner's spouse. The Owner/Annuitant and the
beneficiary each must be at least 55 years old at the time of election; or
58
. Co-Annuity Owners, where the Owners are each other's spouses. The
Beneficiary Designation must be the surviving spouse. The first named
Owner must be the Annuitant. Both Owners must each be at least 55 years
old at the time of election: or
. One Annuity Owner, where the Owner is a custodial account established to
hold retirement assets for the benefit of the Annuitant pursuant to the
provisions of Section 408(a) of the Internal Revenue Code (or any
successor Code section thereto) ("Custodial Account"), the Beneficiary is
the Custodial Account and the spouse of the Annuitant is the Contingent
Annuitant. Both the Annuitant and Contingent Annuitant must each be at
least 55 years old at the time of election.
No Ownership changes or Annuitant changes will be permitted once this program
is elected. However, if the Annuity is co-owned, the Owner that is not the
Annuitant may be removed without affecting the benefit.
The Spousal Lifetime Five program can be elected at the time that you purchase
your Annuity. We also offer existing Owners the option to elect the Spousal
Lifetime Five program after the Issue Date of their Annuity, subject to our
eligibility rules and restrictions. Your Account Value as the date of election
will be used as a basis to calculate the initial Protected Withdrawal Value
and the Annual Income Amount.
Currently, if you terminate the program, you will only be permitted to
re-elect Spousal Lifetime Five or elect Highest Daily Lifetime Five or
Lifetime Five on any anniversary of the Issue Date that is at least 90
calendar days from the date the benefit was last terminated.
We reserve the right to further limit the election frequency in the future.
Before making any such change to the election frequency, we will provide prior
notice to Owners who have an effective Spousal Lifetime Five Income Benefit.
Termination of the Program
The program terminates automatically when your Annual Income Amount equals
zero. You may terminate the program at any time by notifying us. If you
terminate the program, any guarantee provided by the benefit will terminate as
of the date the termination is effective and certain restrictions on
re-election of the benefit will apply as described above. We reserve the right
to further limit the frequency election in the future. The program terminates
upon your surrender of the Annuity, upon the first Designated Life to die if
the Annuity is not continued, upon the second Designated Life to die or upon
your election to begin receiving annuity payments. The charge for the Spousal
Lifetime Five program will no longer be deducted from your Account Value upon
termination of the program.
Additional Tax Considerations
If you purchase an Annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
an employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your Annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount required under the Code may exceed the Annual
Income Amount, which will cause us to increase the Annual Income Amount in any
Annuity Year that Required Minimum Distributions due from your Annuity are
greater than such amounts. In addition, the amount and duration of payments
under the annuity payment and Death Benefit provisions may be adjusted so that
the payments do not trigger any penalty or excise taxes due to tax
considerations such as Required Minimum Distribution provisions under the tax
law.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit here.
HIGHEST DAILY LIFETIME FIVE INCOME BENEFIT (HIGHEST DAILY LIFETIME FIVE)
The Highest Daily Lifetime Five program described below is only being offered
in those jurisdictions where we have received regulatory approval and will be
offered subsequently in other jurisdictions when we receive regulatory
approval in those jurisdictions. Certain terms and conditions may differ
between jurisdictions once approved. Highest Daily Lifetime Five is offered as
an alternative to Lifetime Five and Spousal Lifetime Five. Currently, if you
elect Highest Daily Lifetime Five and subsequently terminate the benefit, you
will not be able to re-elect Highest Daily Lifetime Five, and will have a
waiting period until you can elect Spousal Lifetime Five or Lifetime Five. See
"Election of and Designations under the Program" below for details. The income
benefit under Highest Daily Lifetime Five currently is based on a single
"designated life" who is at least 55 years old on the date that the benefit is
acquired. The Highest Daily Lifetime Five Benefit is not available if you
elect any other optional living benefit, although you may elect any optional
death benefit (other than the Highest Daily Value Death Benefit). Any DCA
program that transfers Account Value from a Fixed Allocation is also not
available as Fixed Allocations are not permitted with the benefit. As long as
your Highest Daily Lifetime Five Benefit is in effect, you must allocate your
Account Value in accordance with the then-permitted and available investment
option(s) with this program. Currently, you are required to enroll and
maintain your Account Value in the asset allocation program if you elect this
benefit.
59
We offer a benefit that guarantees until the death of the single designated
life the ability to withdraw an annual amount (the "Total Annual Income
Amount") equal to a percentage of an initial principal value (the "Total
Protected Withdrawal Value") regardless of the impact of market performance on
the Account Value, subject to our program rules regarding the timing and
amount of withdrawals. The 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 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 benefit. As discussed below, we require that you
participate in our asset transfer program in order to participate in Highest
Daily Lifetime Five, and in the Appendices to this prospectus, we set forth
the formula under which we make those asset transfers.
As discussed below, a key component of Highest Daily Lifetime Five is the
Total Protected Withdrawal Value, which is an amount that is distinct from
Account Value. Because each of the Total Protected Withdrawal Value and Total
Annual Income Amount is determined in a way that is not solely related to
Account Value, it is possible for Account Value to fall to zero, even though
the Total Annual Income Amount remains. You are guaranteed to be able to
withdraw the Total Annual Income Amount for the rest of your life, provided
that you have not made "excess withdrawals." Excess withdrawals, as discussed
below, will reduce your Total Annual Income Amount. Thus, you could experience
a scenario in which your Account Value was zero, and, due to your excess
withdrawals, your Total Annual Income Amount also was reduced to zero. In that
scenario, no further amount would be payable under Highest Daily Lifetime Five.
Key Feature - Total Protected withdrawal Value
The Total Protected Withdrawal Value is used to determine the amount of the
annual payments under Highest Daily Lifetime Five. The Total Protected
Withdrawal Value is equal to the greater of the Protected Withdrawal Value and
any Enhanced Protected Withdrawal Value that may exist. We describe how we
determine Enhanced Protected Withdrawal Value, and when we begin to calculate
it, below. If you do not meet the conditions described below for obtaining
Enhanced Protected Withdrawal Value then Total Protected Withdrawal Value is
simply equal to Protected Withdrawal Value.
The Protected Withdrawal Value initially is equal to the Account Value on the
date that you elect Highest Daily Lifetime Five. On each Valuation Day
thereafter, until the earlier of the first withdrawal or ten years after the
date of your election of the benefit, we recalculate the Protected Withdrawal
Value. Specifically, on each such Valuation Day (the "Current Valuation Day"),
the Protected Withdrawal Value is equal to the greater of:
. the Protected Withdrawal Value for the immediately preceding Valuation
Day (the "Prior Valuation Day"), appreciated at the daily equivalent of
5% annually during the calendar day(s) between the Prior Valuation Day
and the Current Valuation Day (i.e., one day for successive Valuation
Days, but more than one calendar day for Valuation Days that are
separated by weekends and/or holidays), plus the amount of any Purchase
Payment (including any associated credit) made on the Current Valuation
Day; and
. the Account Value.
If you have not made a withdrawal prior to the tenth anniversary of the date
you elected Highest Daily Lifetime Five (which we refer to as the "Tenth
Anniversary"), we will continue to calculate a Protected Withdrawal Value. On
or after the Tenth Anniversary and up until the date of the first withdrawal,
your Protected Withdrawal Value is equal to the greater of the Protected
Withdrawal Value on the Tenth Anniversary or your Account Value.
The Enhanced Protected Withdrawal Value is only calculated if you do not take
a withdrawal prior to the Tenth Anniversary. Thus, if you do take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive Enhanced
Protected Withdrawal Value. If so, then on or after the Tenth Anniversary up
until the date of the first withdrawal, the Enhanced Protected Withdrawal
Value is equal to the sum of:
(a)200% of the Account Value on the date you elected Highest Daily
Lifetime Five;
(b)200% of all Purchase Payments (and any associated Credits) made
during the one-year period after the date you elected Highest Daily
Lifetime Five; and
(c)100% of all Purchase Payments (and any associated Credits) made more
than one year after the date you elected Highest Daily Lifetime Five,
but prior to the date of your first withdrawal.
We cease these daily calculations of the Protected Withdrawal Value and
Enhanced Protected Withdrawal Value (and therefore, the Total Protected
Withdrawal Value) when you make your first withdrawal. However, as discussed
below, subsequent Purchase Payments (and any associated Credits) will increase
the Total Annual Income Amount, while "excess" withdrawals (as described
below) may decrease the Total Annual Income Amount.
Key Feature - Total Annual Income Amount under the Highest Daily Lifetime Five
Benefit
The initial Total Annual Income Amount is equal to 5% of the Total Protected
Withdrawal Value. For purposes of the asset transfer formula described below,
we also calculate a Highest Daily Annual Income Amount, which is initially
equal to 5% of the Protected Withdrawal Value. Under the Highest Daily
Lifetime Five benefit, if your cumulative withdrawals in an Annuity Year are
less than or equal to the Total Annual Income Amount, they will not reduce
your Total Annual Income Amount in subsequent Annuity
60
Years, but any such withdrawals will reduce the Total Annual Income Amount on
a dollar-for-dollar basis in that Annuity Year. If your cumulative withdrawals
are in excess of the Total Annual Income Amount ("Excess Income"), your Total
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 Purchase Payment that you
make will increase the then-existing Total Annual Income Amount and Highest
Daily Annual Income Amount by an amount equal to 5% of the Purchase Payment
(including the amount of any associated Credits).
An automatic step-up feature ("Highest Quarterly Auto Step-Up") is included as
part of this benefit. As detailed in this paragraph, the Highest Quarterly
Auto Step-Up feature can result in a larger Total Annual Income Amount if your
Account Value increases subsequent to your first withdrawal. We begin
examining the Account Value for purposes of this feature starting with the
anniversary of the Issue Date of the Annuity (the "Annuity Anniversary")
immediately after your first withdrawal under the benefit. Specifically, upon
the first such Annuity Anniversary, we identify the Account Value on the
Valuation Days corresponding to the end of each quarter that (i) is based on
your Annuity Year, rather than a calendar year; (ii) is subsequent to the
first withdrawal; and (iii) falls within the immediately preceding Annuity
Year. If the end of any such quarter falls on a holiday or a weekend, we use
the next Valuation Day. We multiply each of those quarterly Account Values by
5%, adjust each such quarterly value for subsequent withdrawals and Purchase
Payments, and then select the highest of those values. If the highest of those
values exceeds the existing Total Annual Income Amount, we replace the
existing amount with the new, higher amount. Otherwise, we leave the existing
Total Annual Income Amount intact. In later years, (i.e., after the first
Annuity Anniversary after the first withdrawal) we determine whether an
automatic step-up should occur on each Annuity Anniversary, by performing a
similar examination of the Account Values on the end of the four immediately
preceding quarters. If, on the date that we implement a Highest Quarterly Auto
Step-Up to your Total Annual Income Amount, the charge for Highest Daily
Lifetime Five has changed for new purchasers, you may be subject to the new
charge at the time of such step-up. Prior to increasing your charge for
Highest Daily Lifetime Five upon a step-up, we would notify you, and give you
the opportunity to cancel the automatic step-up feature. If you receive notice
of a proposed step-up and accompanying fee increase, you should carefully
evaluate whether the amount of the step-up justifies the increased fee to
which you will be subject.
The Highest Daily Lifetime Five program does not affect your ability to make
withdrawals under your annuity, or limit your ability to request withdrawals
that exceed the Total Annual Income Amount. Under Highest Daily Lifetime Five,
if your cumulative withdrawals in an Annuity Year are less than or equal to
the Total Annual Income Amount, they will not reduce your Total Annual Income
Amount in subsequent Annuity Years, but any such withdrawals will reduce the
Total Annual Income Amount on a dollar-for-dollar basis in that Annuity Year.
If, cumulatively, you withdraw an amount less than the Total Annual Income
Amount in any Annuity Year, you cannot carry-over the unused portion of the
Total Annual Income Amount to subsequent Annuity Years.
Examples of dollar-for-dollar and proportional reductions, and the Highest
Quarterly Auto Step-Up are set forth below. The values depicted here are
purely hypothetical, and do not reflect the charges for the Highest Daily
Lifetime Five benefit or any other fees and charges. Assume the following for
all three examples:
. The Issue Date is December 1, 2006
. The Highest Daily Lifetime Five benefit is elected on March 5, 2007.
Dollar-For-Dollar Reductions
On May 2, 2007, the Total Protected Withdrawal Value is $120,000, resulting in
a Total Annual Income Amount of $6,000 (5% of $120,000). Assuming $2,500 is
withdrawn from the Annuity on this date, the remaining Total Annual Income
Amount for that Annuity Year (up to and including December 1, 2007) is $3,500.
This is the result of a dollar-for-dollar reduction of the Total Annual Income
Amount - $6,000 less $2,500 = $3,500.
Proportional Reductions
Continuing the previous example, assume an additional withdrawal of $5,000
occurs on August 6, 2007 and the Account Value at the time of this withdrawal
is $110,000. The first $3,500 of this withdrawal reduces the Total Annual
Income Amount for that Annuity Year to $0. The remaining withdrawal amount -
$1,500 - reduces the Total Annual Income Amount in future Annuity Years on a
proportional basis based on the ratio of the excess withdrawal to the Account
Value immediately prior to the excess withdrawal. (Note that if there were
other withdrawals in that Annuity Year, each would result in another
proportional reduction to the Total Annual Income Amount).
61
Here is the calculation:
Account Value before withdrawal $110,000.00
Less amount of "non" excess withdrawal $ (3,500.00)
Account Value immediately before excess withdrawal of $1,500 $106,500.00
Excess withdrawal amount $ 1,500.00
Divided by Account Value immediately before excess withdrawal $106,500.00
Ratio 1.41%
Total Annual Income Amount $ 6,000.00
Less ratio of 1.41% $ (84.51)
Total Annual Income Amount for future Annuity Years $ 5,915.49
Highest Quarterly Auto Step-Up
On each Annuity Anniversary date, the Total Annual Income Amount is stepped-up
if 5% of the highest quarterly value since your first withdrawal (or last
Annuity Anniversary in subsequent years), adjusted for withdrawals and
additional Purchase Payments, is higher than the Total Annual Income Amount,
adjusted for excess withdrawals and additional Purchase Payments (plus any
Credit with respect to Optimum Plus).
Continuing the same example as above, the Total Annual Income Amount for this
Annuity Year is $6,000. However, the excess withdrawal on August 6 reduces
this amount to $5,915.49 for future years (see above). For the next Annuity
Year, the Total Annual Income Amount will be stepped-up if 5% of the highest
quarterly Account Value, adjusted for withdrawals, is higher than $5,915.49.
Here are the calculations for determining the quarterly values. Only the
June 1 value is being adjusted for excess withdrawals as the September 1 and
December 1 Valuation Days occur after the excess withdrawal on August 6.
Highest Quarterly Value
(adjusted with Adjusted Total Annual
withdrawal and Income Amount (5% of the
Date* Account value Purchase Payments)** Highest Quarterly Value)
- ----- ------------- ----------------------- ------------------------
June 1, 2007 $118,000.00 $118,000.00 $5,900.00
August 6, 2007 $120,000.00 $112,885.55 $5,644.28
September 1, 2007 $112,000.00 $112,885.55 $5,644.28
December 1, 2007 $119,000.00 $119,000.00 $5,950.00
* In this example, the Annuity Anniversary date is December 1. The
quarterly valuation dates are every three months thereafter -
March 1, June 1, September 1, and December 1. In this example, we do
not use the March 1 date as the first withdrawal took place after
March 1. The Annuity Anniversary Date of December 1 is considered
the fourth and final quarterly valuation date for the year.
** In this example, the first quarterly value after the first
withdrawal is $118,000 on June 1, yielding an adjusted Total Annual
Income Amount of $5,900.00. This amount is adjusted on August 6 to
reflect the $5,000 withdrawal. The calculations for the adjustments
are:
. The Account Value of $118,000 on June 1 is first reduced
dollar-for-dollar by $3,500 ($3,500 is the remaining Total Annual Income
Amount for the Annuity Year), resulting in an adjusted Account Value of
$114,500 before the excess withdrawal.
. This amount ($114,500) is further reduced by 1.41% (this is the ratio in
the above example which is the excess withdrawal divided by the Account
Value immediately preceding the excess withdrawal) resulting in a Highest
Quarterly Value of $112,885.55.
The adjusted Total Annual Income Amount is carried forward to the next
quarterly anniversary date of September 1. At this time, we compare this
amount to 5% of the Account Value on September 1. Since the June 1 adjusted
Total Annual Income Amount of $5,644.28 is higher than $5,600.00 (5% of
$112,000), we continue to carry $5,644.28 forward to the next and final
quarterly anniversary date of December 1. The Account Value on December 1 is
$119,000 and 5% of this amount is $5,950. Since this is higher than $5,644.28,
the adjusted Total Annual Income Amount is reset to $5,950.00.
In this example, 5% of the December 1 value yields the highest amount of $
5,950.00. Since this amount is higher than the current year's Total Annual
Income Amount of $5,915.49 adjusted for excess withdrawals, the Total Annual
Income Amount for the next Annuity Year, starting on December 2, 2007 and
continuing through December 1, 2008, will be stepped-up to $5,950.00.
Benefits under the Highest Daily Lifetime Five Program
.. To the extent that your Account Value was reduced to zero as a result of
cumulative withdrawals that are equal to or less than the Total Annual
Income Amount and amounts are still payable under Highest Daily Lifetime
Five, we will make an additional
62
payment, if any, for that Annuity Year equal to the remaining Total Annual
Income Amount for the Annuity Year. Thus, in that scenario, the remaining
Total Annual Income Amount would be payable even though your Account Value
was reduced to zero. In subsequent Annuity Years we make payments that
equal the Total Annual Income Amount as described in this section. We will
make payments until the death of the single designated life. To the extent
that cumulative withdrawals in the current Annuity Year that reduced your
Account Value to zero are more than the Total Annual Income Amount, the
Highest Daily Lifetime Five benefit terminates, and no additional payments
will be made.
.. If Annuity payments are to begin under the terms of your Annuity, or if you
decide to begin receiving Annuity payments and there is a Total Annual
Income Amount due in subsequent Annuity Years, you can elect one of the
following two options:
(1)apply your Account Value to any Annuity option available; or
(2)request that, as of the date Annuity payments are to begin, we make
Annuity payments each year equal to the Total Annual Income Amount.
We will make payments until the death of the single designated life.
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 in the form of a single life fixed
annuity with ten payments certain, by applying 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 the future Total 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 calculate the Total Annual Income
Amount as if you made your first withdrawal on the date the annuity
payments are to begin.
.. Please note that if your Annuity has a maximum Annuity Date requirement,
payments that we make under this benefit as of that date will be treated as
annuity payments.
Other Important Considerations
.. Withdrawals under the Highest Daily Lifetime Five benefit are subject to
all of the terms and conditions of the Annuity, including any CDSC.
.. Withdrawals made while the Highest Daily Lifetime Five Benefit is in effect
will be treated, for tax purposes, in the same way as any other withdrawals
under the Annuity. The Highest Daily Lifetime Five Benefit does not
directly affect the Account Value or surrender value, but any withdrawal
will decrease the Account Value by the amount of the withdrawal (plus any
applicable CDSC). If you surrender your Annuity you will receive the
current surrender value.
.. You can make withdrawals from your Annuity while your Account Value is
greater than zero without purchasing the Highest Daily Lifetime Five
benefit. The Highest Daily Lifetime Five benefit provides a guarantee that
if your Account Value declines due to market performance, you will be able
to receive your Total Annual Income Amount in the form of periodic benefit
payments.
.. upon inception of the benefit, 100% of your Account Value must be allocated
to the permitted sub-accounts. However, the asset transfer component of the
benefit as described below may transfer Account Value to the Benefit Fixed
Rate Account as of the effective date of the benefit in some circumstances.
.. you cannot allocate Purchase Payments or transfer Account Value to a Fixed
Allocation if you elect this benefit.
.. transfers to and from the Sub-accounts and the Benefit Fixed Rate Option
triggered by the asset transfer component of the benefit will not count
toward the maximum number of free transfers allowable under an Annuity.
.. In general, you must allocate your Account Value in accordance with the
then available investment option(s) that we may prescribe in order to elect
and maintain the Highest Daily Lifetime Five benefit. If, subsequent to
your election of the benefit, we change our requirements for how Account
Value must be allocated under the benefit, the new requirement will apply
only to new elections of the benefit, and we will not compel you to
re-allocate your Account Value in accordance with our newly-adopted
requirements. Subsequent to any change in requirements, transfers of
Account Value and allocation of additional Purchase Payments may be subject
to the new investment limitations.
Election of and Designations under the Program
For Highest Daily Lifetime Five, there must be either a single Owner who is
the same as the Annuitant, or if the Annuity is entity-owned, there must be a
single natural person Annuitant. In either case, the Annuitant must be at
least 55 years old.
Any change of the Annuitant under the Annuity will result in cancellation of
Highest Daily Lifetime Five. Similarly, any change of Owner will result in
cancellation of Highest Daily Lifetime Five, except if (a) the new Owner has
the same taxpayer identification number as the previous owner (b) both the new
Owner and previous Owner are entities or (c) the previous Owner is a natural
person and the new Owner is an entity.
63
Highest Daily Lifetime Five can be elected at the time that you purchase your
Annuity. However, with respect to Optimum Plus, you may elect this benefit at
the time you purchase your Annuity only if the CDSC schedule for Optimum Plus
Annuities issued on or after November 20, 2006 applies. (See "Summary of
Contract Fees and Charges" section of the Prospectus). We also offer existing
owners (i.e., those who have already acquired their Annuity) the option to
elect Highest Daily Lifetime Five after the Issue Date, subject to our
eligibility rules and restrictions. However, for existing Owners of Optimum
Plus whose Annuities are subject to the CDSC schedule for Annuities issued
prior to November 20, 2006, this benefit may only be elected on or after the
first anniversary of the Issue Date.
Currently, if you terminate the Highest Daily Lifetime Five benefit, you will
(a) not be permitted to re-elect the benefit and (b) will be allowed to elect
the Spousal Lifetime Five Benefit or the Lifetime Five Income Benefit on any
anniversary of the Issue Date that is at least 90 calendar days from the date
the Highest Daily Lifetime Five Benefit was terminated. We reserve the right
to further limit the election frequency in the future. Before making any such
change to the election frequency, we will provide prior notice to Owners who
have an effective Highest Daily Lifetime Five Benefit.
Termination of the Program
You may terminate the benefit at any time by notifying us. If you terminate
the benefit, any guarantee provided by the benefit will terminate as of the
date the termination is effective, and certain restrictions on re-election
will apply as described above. The benefit terminates: (i) upon your
termination of the benefit (ii) upon your surrender of the Annuity (iii) upon
your election to begin receiving annuity payments (iv) upon the death of the
Annuitant (v) if both the Account Value and Total Annual Income Amount equal
zero or (vi) if you fail to meet our requirements for issuing the benefit.
Upon termination of Highest Daily Lifetime Five, we cease deducting the charge
for the benefit. With regard to your investment allocations, upon termination
we will: (i) leave intact amounts that are held in the variable investment
options, and (ii) transfer all amounts held in the Benefit Fixed Rate Account
(as defined below) to your variable investment options, based on your existing
allocation instructions or (in the absence of such existing instructions) pro
rata (i.e. in the same proportion as the current balances in your variable
investment options). Upon termination, we may limit or prohibit investment in
the Fixed Allocations.
Return of Principal Guarantee
If you have not made a withdrawal before the Tenth Anniversary, we will
increase your Account Value on that Tenth Anniversary (or the next Valuation
Day, if that anniversary is not a Valuation Day), if the requirements set
forth in this paragraph are met. On the Tenth Anniversary, we add:
(a)your Account Value on the day that you elected Highest Daily Lifetime
Five; and
(b)the sum of each Purchase Payment you made (including any Credits with
respect to Optimum Plus) during the one-year period after you elected
the benefit.
If the sum of (a) and (b) is greater than your Account Value on the Tenth
Anniversary, we increase your Account Value to equal the sum of (a) and (b),
by contributing funds from our general account. If the sum of (a) and (b) is
less than or equal to your Account Value on the Tenth Anniversary, we make no
such adjustment. The amount that we add to your Account Value under this
provision will be allocated to each of your variable investment options and
the Benefit Fixed Rate Account (described below), in the same proportion that
each such investment option bears to your total Account Value, immediately
prior to the application of the amount. Any such amount will not be considered
a Purchase Payment when calculating your Total Protected Withdrawal Value,
your death benefit, or the amount of any other or optional benefit that you
may have selected, and therefore will have no direct impact on any such values
at the time we add this amount. This potential addition to Account Value is
available only if you have elected Highest Daily Lifetime Five and if you meet
the conditions set forth in this paragraph. Thus, if you take a withdrawal
prior to the Tenth Anniversary, you are not eligible to receive the Return of
Principal Guarantee.
Asset Transfer Component of Highest Daily Lifetime Five
As indicated above, we limit the sub-accounts to which you may allocate
Account Value if you elect Highest Daily Lifetime Five. For purposes of this
benefit, we refer to those permitted sub-accounts as the "Permitted
Sub-accounts". As a requirement of participating in Highest Daily Lifetime
Five, we require that you participate in our specialized asset transfer
program, under which we may transfer Account Value between the Permitted
Sub-accounts and a fixed interest rate account that is part of our general
account (the "Benefit Fixed Rate Account"). We determine whether to make a
transfer, and the amount of any transfer, under a non-discretionary formula,
discussed below. The Benefit Fixed Rate Account is available only with this
benefit, and thus you may not allocate Purchase Payments to the Benefit Fixed
Rate Account. The interest rate that we pay with respect to the Benefit Fixed
Rate Account is reduced by an amount that corresponds generally to the charge
that we assess against your variable Sub-accounts for Highest Daily Lifetime
Five. The Benefit Fixed Rate Account is not subject to the Investment Company
Act of 1940 or the Securities Act of 1933.
Under the asset transfer component of Highest Daily Lifetime Five, we monitor
your Account Value daily and, if necessary, systematically transfer amounts
between the Permitted Sub-accounts you have chosen and the Benefit Fixed Rate
Account. Any
64
transfer would be made in accordance with a formula, which is set forth in the
schedule supplement to the endorsement for this benefit (and also appears in
the Appendices to this prospectus). Speaking generally, the formula, which we
apply each Valuation Day, operates as follows. The formula starts by
identifying your Protected Withdrawal Value for that day and then multiplies
that figure by 5%, to produce a projected (i.e., hypothetical) Highest Daily
Annual Income Amount. Then, using our actuarial tables, we produce an estimate
of the total amount we would target in our allocation model, based on the
projected Highest Daily Annual Income Amount each year for the rest of your
life. In the formula, we refer to that value as the "Target Value" or "L". If
you have already made a withdrawal, your projected Highest Daily Annual Income
Amount (and thus your Target Value) would take into account any automatic
step-up that was scheduled to occur according to the step-up formula described
above. Next, the formula subtracts from the Target Value the amount held
within the Benefit Fixed Rate Account on that day, and divides that difference
by the amount held within the Permitted Sub-accounts. That ratio, which
essentially isolates the amount of your Target Value that is not offset by
amounts held within the Benefit Fixed Rate Account, is called the "Target
Ratio" or "r". If the Target Ratio exceeds a certain percentage, (currently
83%) it means essentially that too much Target Value is not offset by assets
within the Benefit Fixed Rate Account, and therefore we will transfer an
amount from your Permitted Sub-accounts to the Benefit Fixed Rate Account.
Conversely, if the Target Ratio falls below a certain percentage, (currently
77%) then a transfer from the Benefit Fixed Rate Account to the Permitted
Sub-accounts would occur. Note that the formula is calculated with reference
to the Highest Daily Annual Income Amount, rather than with reference to the
Annual Income Amount.
As you can glean from the formula, a downturn in the securities markets (i.e.,
a reduction in the amount held within the Permitted Sub-accounts) may cause us
to transfer some of your variable Account Value to the Benefit Fixed Rate
Account, because such a reduction will tend to increase the Target Ratio.
Moreover, certain market return scenarios involving "flat" returns over a
period of time also could result in the transfer of money to the Benefit Fixed
Rate Account. In deciding how much to transfer, we use another formula, which
essentially seeks to re-balance amounts held in the Permitted Sub-accounts and
the Benefit Fixed Rate Account so that the Target Ratio meets a target, which
currently is equal to 80%. Once you elect Highest Daily Lifetime Five, the
ratios we use will be fixed. For newly issued annuities that elect Highest
Daily Lifetime Five and existing annuities that elect Highest Daily Lifetime
Five, however, we reserve the right to change the ratios.
While you are not notified when your Annuity 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 Benefit Fixed Rate Account. The
formula by which the reallocation triggers operate is designed primarily to
mitigate the financial risks that we incur in providing the guarantee under
Highest Daily Lifetime Five.
Depending on the results of the calculation relative to the reallocation
triggers, we may, on any day:
. Not make any transfer; or
. If a portion of your Account Value was previously allocated to the
Benefit Fixed Rate Account, transfer all or a portion of those amounts to
the Permitted Sub-accounts, based on your existing allocation
instructions or (in the absence of such existing instructions) pro rata
(i.e., in the same proportion as the current balances in your variable
investment options). Amounts taken out of the Benefit Fixed Rate Account
will be withdrawn for this purpose on a last-in, first-out basis (an
amount renewed into a new guarantee period under the Benefit Fixed Rate
Account will be deemed a new investment for purposes of this last-in,
first-out rule); or
. Transfer all or a portion of your Account Value in the Permitted
Sub-accounts pro-rata to the Benefit Fixed Rate Account. The interest
that you earn on such transferred amount will be equal to the annual rate
that we have set for that day, and we will credit the daily equivalent of
that annual interest until the earlier of one year from the date of the
transfer or the date that such amount in the Benefit Fixed Rate Account
is transferred back to the Permitted Sub-accounts.
If a significant amount of your Account Value is systematically transferred to
the Benefit Fixed Rate Account during periods of market declines or low
interest rates, less of your Account Value may be available to participate in
the investment experience of the Permitted Sub-accounts if there is a
subsequent market recovery. Under the reallocation formula that we employ, it
is possible that over time a significant portion, and under certain
circumstances all, of your Account Value may be allocated to the Benefit Fixed
Rate Account. Note that if your entire Account Value is transferred to the
Benefit Fixed Rate Account, then based on the way the formula operates, that
value would remain in the Benefit Fixed Rate Account unless you made
additional Purchase Payments to the Permitted Sub-Accounts, which could cause
Account Value to transfer out of the Benefit Fixed Rate Account.
Additional Tax Considerations
If you purchase an annuity as an investment vehicle for "qualified"
investments, including an IRA, SEP-IRA, Tax Sheltered Annuity (or 403(b)) or
employer plan under Code Section 401(a), the Required Minimum Distribution
rules under the Code provide that you begin receiving periodic amounts from
your annuity beginning after age 70 1/2. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
owner's lifetime. The amount required under the Code may exceed the Total
Annual Income Amount, which will cause us to increase the Total Annual Income
Amount in any Annuity Year that Required Minimum Distributions due from your
Annuity that are greater than such amounts. In addition, the amount and
duration of payments under the annuity payment and death benefit provisions
may be adjusted so that the payments do not trigger any penalty or excise
taxes due to tax considerations such as Required Minimum Distribution
provisions
65
under the tax law. Please note, however, that any withdrawal you take prior to
the Tenth Anniversary, even if withdrawn to satisfy required minimum
distribution rules, will cause you to lose the ability to receive Enhanced
Protected Withdrawal Value and an amount under the Return of Principal
Guarantee.
As indicated, withdrawals made while this Benefit is in effect will be
treated, for tax purposes, in the same way as any other withdrawals under the
Annuity. Please see the Tax Considerations section of the prospectus for a
detailed discussion of the tax treatment of withdrawals. We do not address
each potential tax scenario that could arise with respect to this Benefit
here. However, we do note that if you participate in Highest Daily Lifetime
Five through a non-qualified annuity, and your annuity has received Enhanced
Protected Withdrawal Value and/or an additional amount under the Return of
Principal Guarantee, as with all withdrawals, once all Purchase Payments are
returned under the Annuity, all subsequent withdrawal amounts will be taxed as
ordinary income.
66
DEATH BENEFIT
WHAT TRIGGERS THE PAYMENT OF A DEATH BENEFIT?
Each Annuity provides a Death Benefit during its accumulation period. If an
Annuity is owned by one or more natural persons, the Death Benefit is payable
upon the first death of an Owner. If an Annuity is owned by an entity, the
Death Benefit is payable upon the Annuitant's death, if there is no Contingent
Annuitant. Generally, if a Contingent Annuitant was designated before the
Annuitant's death and the Annuitant dies, then the Contingent Annuitant
becomes the Annuitant and a Death Benefit will not be paid at that time. The
person upon whose death the Death Benefit is paid is referred to below as the
"decedent."
BASIC DEATH BENEFIT
Each Annuity provides a basic Death Benefit at no additional charge. The
Insurance Charge we deduct daily from your Account Value allocated to the
Sub-accounts is used, in part, to pay us for the risk we assume in providing
the basic Death Benefit guarantee under an Annuity. Each Annuity also offers
four different optional Death Benefits that can be purchased for an additional
charge. The additional charge is deducted to compensate American Skandia for
providing increased insurance protection under the optional Death Benefits.
Notwithstanding the additional protection provided under the optional Death
Benefits, the additional cost has the impact of reducing the net performance
of the investment options. In addition, with respect to Optimum Plus, under
certain circumstances, your Death Benefit may be reduced by the amount of any
Credits we applied to your Purchase Payments. (See "How are Credits Applied to
My Account Value".)
The basic Death Benefit is the greater of:
. The sum of all Purchase Payments (not including any Credits) less the sum
of all proportional withdrawals.
. The sum of your Account Value in the Sub-accounts and your Interim Value
in the Fixed Allocations.
With respect to Optimum Plus, the basic Death Benefit is reduced by the amount
of any Credits applied within 12 months prior to the date of death.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments for purposes of calculating the basic Death
Benefit.
OPTIONAL DEATH BENEFITS
Four optional Death Benefits are offered for purchase with your Annuity to
provide an enhanced level of protection for your beneficiaries.
Currently, these benefits are only offered in those jurisdictions where we
have received regulatory approval and must be elected at the time that you
purchase your Annuity. We may, at a later date, allow existing Annuity Owners
to purchase an optional Death Benefit subject to our rules and any changes or
restrictions in the benefits. Certain terms and conditions may differ between
jurisdictions once approved and if you purchase your Annuity as part of an
exchange, replacement or transfer, in whole or in part, from any other Annuity
we issue. The "Combination 5% Roll-up and Highest Anniversary Value" Death
Benefit may only be elected individually, and cannot be elected in combination
with any other optional Death Benefit. If you elect Spousal Lifetime Five, you
are not permitted to elect an optional Death Benefit. With respect to Optimum
Plus, under certain circumstances, each Optional Death Benefit that you elect
may be reduced by the amount of Credits applied to your Purchase Payments.
Investment Restrictions may apply if you elect certain optional death benefits.
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 and certain other
optional death benefits you may elect in conjunction with this benefit.
If the Annuity has one Owner, the Owner must be age 75 or less at the time the
benefit is purchased. If an Annuity has joint Owners, the oldest Owner must be
age 75 or less. If an Annuity is owned by an entity, the Annuitant must be age
75 or less.
67
Calculation Of Enhanced Beneficiary Protection Optional Death Benefit
If you purchase the Enhanced Beneficiary Protection Optional Death Benefit,
the Death Benefit is calculated as follows:
1. the basic Death Benefit described above;
PLUS
2. 40% of your "Growth" under an Annuity, as defined below.
"Growth" means the sum of your Account Value in the Sub-accounts and your
Interim Value in the Fixed Allocations, minus the total of all Purchase
Payments (less the amount of any Credits applied within 12-months prior to the
date of death, with respect to Optimum Plus) reduced by the sum of all
proportional withdrawals.
"Proportional withdrawals" are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn. For
example, a withdrawal of 50% of Account Value would be considered as a 50%
reduction in Purchase Payments.
The Enhanced Beneficiary Protection Optional Death Benefit is subject to a
maximum of 100% of all Purchase Payments applied to an Annuity at least 12
months prior to the death of the decedent that triggers the payment of the
Death Benefit.
The Enhanced Beneficiary Protection Optional Death Benefit is being offered in
those jurisdictions where we have received regulatory approval. Certain terms
and conditions may differ between jurisdictions once approved. Please refer to
the section entitled "Tax Considerations" for a discussion of special tax
considerations for purchasers of this benefit. The Enhanced Beneficiary
Protection Death Benefit is not available if you elect the "Combination 5%
Roll-up and Highest Anniversary Value" Death Benefit or the Spousal Lifetime
Five Income Benefit.
See Appendix B for examples of how the Enhanced Beneficiary Protection
Optional Death Benefit is calculated.
Highest Anniversary Value Death Benefit ("HAV")
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Highest Anniversary Value Optional Death Benefit is purchased. If an Annuity
has joint Owners, the oldest Owner must be age 79 or less. If an Annuity is
owned by an entity, the Annuitant must be age 79 or less. Certain of the
Portfolios offered as Sub-accounts under the Annuity are not available if you
elect the Highest Anniversary Value Death Benefit. In addition, we reserve the
right to require you to use certain asset allocation model(s) if you elect
this death benefit.
Calculation of Highest Anniversary Value Death Benefit
The HAV Death Benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value as of the Owner's date of death.
If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value on the Death Benefit Target Date plus
the sum of all Purchase Payments (including any Credits applied to
such Purchase Payments more than twelve (12) months prior to date of
death in the case of Optimum Plus) less the sum of all proportional
withdrawals since the Death Benefit Target Date.
The amount determined by this calculation is increased by any Purchase
Payments received after the Owner's date of death and decreased by any
proportional withdrawals since such date.
The Highest Anniversary Value Death Benefit described above is currently
being offered in those jurisdictions where we have received regulatory
approval. Certain terms and conditions may differ between jurisdictions
once approved. The Highest Anniversary Value Death Benefit is not
available if you elect "Combination 5% Roll-up and Highest Anniversary
Value" or the "Highest Daily Value" Death Benefit. It is also not
available with Spousal Lifetime Five.
68
Please refer to the definition of Death Benefit Target Date below. This death
benefit may not be an appropriate feature where the Owner's age is near the
age specified in the Death Benefit Target Date. This is because the benefit
may not have the same potential for growth as it otherwise would, since there
will be fewer contract anniversaries before the death benefit target date is
reached. The death benefit target date under this death benefit is earlier
than the death benefit target date under the Combination 5% Roll-up and
Highest Anniversary Value Death Benefit for Owners who are age 76 or older
when an Annuity is issued, which may result in a lower value on the death
benefit, since there will be fewer contract anniversaries before the death
benefit target date is reached.
See Appendix B for examples of how the Highest Anniversary Value Death Benefit
is calculated.
Combination 5% Roll-up and Highest Anniversary Value Death Benefit
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Combination 5% Roll-up and HAV Optional Death Benefit is purchased. If an
Annuity has joint Owners, the oldest Owner must be age 79 or less. If the
Annuity is owned by an entity, the Annuitant must be age 79 or less.
If you elect this benefit, you must allocate your Account Value in accordance
with the then permitted and available option(s) with this benefit. In
addition, we reserve the right to require you to use certain asset allocation
model(s) if you elect this Death Benefit.
Calculation of the Combination 5% Roll-up and Highest Anniversary Value Death
Benefit
The Combination 5% Roll-up and HAV Death Benefit equals the greatest of:
1. the basic Death Benefit described above; and
2. the Highest Anniversary Value Death Benefit described above; and
3. 5% Roll-up described below.
The calculation of the 5% Roll-up depends on whether death occurs before
or after the Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date the 5% Roll up is
equal to:
. all Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to date of
death in the case of Optimum Plus) increasing at an annual effective
interest rate of 5% starting on the date that each Purchase Payment
is made and ending on the Owner's date of death;
MINUS
. the sum of all withdrawals, dollar for dollar up to 5% of the Death
Benefit's value as of the prior contract anniversary (or Issue Date
if the withdrawal is in the first contract year). Any withdrawals in
excess of the 5% dollar for dollar limit are proportional.
If the Owner dies on or after the Death Benefit Target Date the 5%
Roll-up is equal to:
. the 5% Roll-up value as of the Death Benefit Target Date increased
by total Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to date of
death in the case of Optimum Plus) made after the Death Benefit
Target Date;
MINUS
. the sum of all withdrawals which reduce the 5% Roll-up
proportionally.
In the case of Optimum Plus, as indicated, the amounts calculated in Items 1,
2 and 3 above (before, on or after the Death Benefit Target Date) may be
reduced by any Credits under certain circumstances. Please refer to the
definitions of Death Benefit Target Date below. This Death Benefit may not be
an appropriate feature where the Owner's age is near the age specified in the
Death Benefit Target Date. This is because the benefit may not have the same
potential for growth as it otherwise would, since there will be fewer Annuity
anniversaries before the Death Benefit Target Date is reached.
The "Combination 5% Roll-up and Highest Anniversary Value" Death Benefit
described above is currently being offered in those jurisdictions where we
have received regulatory approval. Certain terms and conditions may differ
between jurisdictions once approved. The "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is not available if you elect any other
optional Death Benefit or elect Spousal Lifetime Five.
69
See Appendix B for examples of how the "Combination 5% Roll-up and Highest
Anniversary Value" Death Benefit is calculated.
Key Terms Used with the Highest Anniversary Value Death Benefit and the
Combination 5% Roll-up and Highest Anniversary Value Death Benefit:
.. The Death Benefit Target Date for the Highest Anniversary Value Death
Benefit is the contract anniversary on or after the 80/th/ birthday of the
current Owner, the oldest of either joint Owner or the Annuitant, if entity
owned.
.. The Death Benefit Target Date for the Combination 5% Roll-up and HAV Death
Benefit is the later of the contract anniversary on or after the 80/th/
birthday of the current Owner, the oldest of either joint Owner or the
Annuitant, if entity owned, or five years after the Issue Date of an
Annuity.
.. The Highest Anniversary Value equals the highest of all previous
"Anniversary Values" less proportional withdrawals since such anniversary
and plus any Purchase Payments (including any Credits applied to such
Purchase Payments more than twelve (12) months prior to the date of death
in the case of Optimum Plus) since such anniversary.
.. The Anniversary Value is the Account Value as of each anniversary of the
Issue Date of an Annuity. The Anniversary Value on the Issue Date is equal
to your Purchase Payment. (including any Credits applied to such Purchase
Payments more than twelve (12) months prior to the date of death in the
case of Optimum Plus)
.. Proportional withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Anniversary
Value or 5% Roll-up value by reducing such value in the same proportion as
the Account Value was reduced by the withdrawal as of the date the
withdrawal occurred. For example, if your Highest Anniversary Value or 5%
Roll-up value is $125,000 and you subsequently withdraw $10,000 at a time
when your Account Value is equal to $100,000 (a 10% reduction), when
calculating the optional Death Benefit we will reduce your Highest
Anniversary Value ($ 125,000) by 10% or $12,500.
Highest Daily Value Death Benefit ("HDV")
If an Annuity has one Owner, the Owner must be age 79 or less at the time the
Highest Daily Value Death Benefit is elected. If an Annuity has joint Owners,
the older Owner must be age 79 or less. If there are joint Owners, death of
the Owner refers to the first to die of the joint Owners. If an Annuity is
owned by an entity, the Annuitant must be age 79 or less and death of the
Owner refers to the death of the Annuitant.
If you elect this benefit, you must allocate your Account Value in accordance
with the then permitted and available option(s) with this benefit. Currently,
you are required to enroll and maintain your Account Value in the asset
allocation program if you elect this benefit.
The HDV Death Benefit depends on whether death occurs before or after the
Death Benefit Target Date.
If the Owner dies before the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above (including any Credits
applied to such Purchase Payments more than twelve (12) months prior
to the date of death in the case of Optimum Plus); and
2. the HDV as of the Owner's date of death.
If the Owner dies on or after the Death Benefit Target Date, the Death
Benefit equals the greater of:
1. the basic Death Benefit described above; and
2. the HDV on the Death Benefit Target Date plus the sum of all Purchase
Payments (including any Credits applied to such Purchase Payments
more than twelve (12) months prior to the date of death in the case
of Optimum Plus) less the sum of all proportional withdrawals since
the Death Benefit Target Date.
The amount determined by this calculation is increased by any Purchase
Payments received after the Owner's date of death and decreased by any
proportional withdrawals since such date.
The Highest Daily Value Death Benefit described above is currently being
offered in those jurisdictions where we have received regulatory
approval. Certain terms and conditions may differ between jurisdictions
once approved. The Highest Daily Value Death Benefit is not available if
you elect the Guaranteed Return Option, Guaranteed Return Option Plus,
Spousal Lifetime Five, Highest Daily Lifetime Five, the "Combination 5%
Roll-up and Highest Anniversary Value" Death Benefit, or the Highest
Anniversary Value Death Benefit.
Key Terms Used with the Highest Daily Value Death Benefit:
.. The Death Benefit Target Date for the Highest Daily Value Death Benefit is
the later of an Annuity anniversary on or after the 80/th/ birthday of the
current Owner, or the older of either the joint Owner or the Annuitant, if
entity owned, or five years after the Issue Date of an Annuity.
70
.. The Highest Daily Value equals the highest of all previous "Daily Values"
less proportional withdrawals since such date and plus any Purchase
Payments (plus associated Credits in the case of Optimum Plus) since such
date.
.. The Daily Value is the Account Value as of the end of each Valuation Day.
The Daily Value on the Issue Date is equal to your Purchase Payment (plus
associated Credits applied more than twelve (12) months prior to the date
of death in the case of Optimum Plus).
.. Proportional withdrawals are determined by calculating the percentage of
your Account Value that each prior withdrawal represented when withdrawn.
Proportional withdrawals result in a reduction to the Highest Daily Value
by reducing such value in the same proportion as the Account Value was
reduced by the withdrawal as of the date the withdrawal occurred. For
example, if your Highest Daily Value is $125,000 and you subsequently
withdraw $10,000 at a time when your Account Value is equal to $100,000 (a
10% reduction), when calculating the optional Death Benefit we will reduce
your Highest Daily Value ($125,000) by 10% or $12,500.
Please see Appendix B to this prospectus for a hypothetical example of how the
HDV Death Benefit is calculated.
Annuities with Joint Owners
For Annuities with joint Owners, the Death Benefits are calculated as shown
above except that the age of the oldest of the joint Owners is used to
determine the Death Benefit Target Date. NOTE: If you and your spouse own your
Annuity jointly, we will pay the Death Benefit to the Beneficiary. If the sole
primary Beneficiary is the surviving spouse, then the surviving spouse can
elect to assume ownership of your Annuity and continue the Annuity instead of
receiving the Death Benefit.
Annuities Owned by Entities
For Annuities owned by an entity, the Death Benefits are calculated as shown
above except that the age of the Annuitant is used to determine the Death
Benefit Target Date. Payment of the Death Benefit is based on the death of the
Annuitant (or Contingent Annuitant, if applicable).
Can I Terminate the Optional Death Benefits? Do the Optional Death Benefits
Terminate under other Circumstances?
You can terminate the Enhanced Beneficiary Protection Death Benefit and the
Highest Anniversary Value Death Benefit at any time. The "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit may not be terminated
once elected. The optional Death Benefits will terminate automatically on the
Annuity Date. We may also terminate any optional Death Benefit if necessary to
comply with our interpretation of the Code and applicable regulations.
What are the Charges for the Optional Death Benefits?
We deduct a charge equal to 0.25% per year of the average daily net assets of
the Sub-accounts for each of the Highest Anniversary Value Death Benefit and
the Enhanced Beneficiary Protection Death Benefit and 0.50% per year of the
average daily net assets of the Sub-accounts for each of the "Combination 5%
Roll-up and HAV Death Benefit" and the HDV Death Benefit. We deduct the charge
for each of these benefits to compensate American Skandia for providing
increased insurance protection under the optional Death Benefits. The
additional annual charge is deducted daily against your Account Value
allocated to the Sub-accounts.
Please refer to the section entitled "Tax Considerations" for additional
considerations in relation to the optional Death Benefit.
AMERICAN SKANDIA'S ANNUITY REWARDS
What is the Annuity Rewards Benefit?
The Annuity Rewards Benefit offers Owners the ability to capture any market
gains since the Issue Date of their Annuity as an enhancement to their current
Death Benefit so their Beneficiaries will not receive less than an Annuity's
value as of the effective date of the benefit. Under the Annuity Rewards
Benefit, American Skandia guarantees that the Death Benefit will not be less
than:
. your Account Value in the Sub-accounts plus the Interim Value in any
Fixed Allocations as of the effective date of the benefit
. MINUS any proportional withdrawals following the effective date of
the benefit
. PLUS any additional Purchase Payments applied to your Annuity
following the effective date of the benefit.
The Annuity Rewards Death Benefit enhancement does not affect the calculation
of the basic Death Benefit or any Optional Death Benefits available under an
Annuity. If the Death Benefit amount payable under your Annuity's basic Death
Benefit or any Optional Death Benefits you purchase is greater than the
enhanced Death Benefit under the Annuity Rewards Benefit on the date the Death
Benefit is calculated, your Beneficiary will receive the higher amount.
71
Who is Eligible for the Annuity Rewards Benefit?
Owners can elect the Annuity Rewards Death Benefit enhancement when there is
no longer a CDSC associated with your Annuity. However, the Account Value on
the date that the Annuity Rewards benefit is effective, must be greater than
the amount that would be payable to the Beneficiary under the Death Benefit
(including any amounts payable under any Optional Death Benefit then in
effect). The effective date must occur before annuity payments begin. There
can only be one effective date for the Annuity Rewards Death Benefit
enhancement. There is no additional charge for electing the Annuity Rewards
Death Benefit enhancement.
PAYMENT OF DEATH BENEFITS
Alternative Death Benefit Payment Options - Annuities owned by Individuals
(not associated with Tax-Favored Plans)
Except in the case of a spousal assumption as described below, 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.
In the event of your death before the Annuity Date, the Death Benefit must be
distributed:
. within five (5) years of the date of death; or
. as a series of 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 under the
Beneficiary Continuation Option as described below in the section entitled
"Beneficiary Continuation Option," as a series of annuity payments.
Upon our receipt of proof of death, we will send to the beneficiary materials
that list these payment options.
Alternative Death Benefit Payment Options - Annuities held by Tax-Favored Plans
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 your death under an IRA, 403(b) or other
"qualified investment", the designated Beneficiary may generally elect to
continue the Annuity and receive Required Minimum Distributions under the
Annuity instead of receiving the death benefit in a single payment. The
available payment options will depend on whether you die before the date
Required Minimum Distributions under the Code were to begin, whether you have
named a designated beneficiary and whether the Beneficiary is your surviving
spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including the
five year anniversary of the date of death, or as periodic payments not
extending beyond the life expectancy of the designated beneficiary
(provided such payments begin by December 31/st/ of the year following
the year of death). However, if your surviving spouse is the beneficiary,
the death benefit can be paid out over the life expectancy of your spouse
with such payments beginning no later than December 31/st/ of the year
following the year of death or December 31/st/ of the year in which you
would have reached age 70 1/2, which ever is later. Additionally, 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.
. If you die before a designated beneficiary is named and before the date
Required Minimum Distributions must begin under the Code, the death
benefit must be paid out by December 31/st/ of the year including the
five year anniversary of the date of death. For contracts where multiple
beneficiaries have been named and at least one of the beneficiaries does
not qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year following
the year of death, such contract is deemed to have no designated
beneficiary.
. If you die before a designated beneficiary is named and after the date
Required 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. For contracts where multiple beneficiaries have been named and at
least one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate accounts
by December 31/st/ of the year following the year of death, such contract
is deemed to have no designated beneficiary.
A beneficiary has the flexibility to take out more each year than mandated
under the Required 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 Required Minimum Distribution
rules, are subject to tax. You may wish to consult a professional tax advisor
for tax advice as to your particular situation.
72
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date Required Minimum Distributions must begin under
the Code.
The tax consequences to the beneficiary may vary among the different death
benefit payment options. See the Tax Considerations section of this
prospectus, and consult your tax advisor.
Beneficiary Continuation Option
Instead of receiving the death benefit in a single payment, or under an
Annuity Option, a beneficiary may take the death benefit under an alternative
death benefit payment option, as provided by the Code and described above
under the sections entitled "Payment of Death Benefits" and "Alternative Death
Benefit Payment Options - Annuities Held by Tax-Favored Plans." This
"Beneficiary Continuation Option" is described below and is available for both
qualified Annuities (i.e. annuities sold to an IRA, Roth IRA, SEP IRA, or
403(b)) and non-qualified Annuities.
Under the Beneficiary Continuation Option:
. The Owner's Annuity will be continued in the Owner's name, for the
benefit of the beneficiary.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur a Settlement Service Charge which is an annual charge assessed on a
daily basis against the average assets allocated to the Sub-accounts. For
non-qualified Annuities the charge is 1.00% per year, and for qualified
Annuities the charge is 1.40% per year.
. Beginning on the date we receive an election by the beneficiary to take
the death benefit in a form other than a lump sum, the beneficiary will
incur an annual maintenance fee equal to the lesser of $30 or 2% of
Account Value. For non-qualified annuities, the fee will only apply if
the Account Value is less than $25,000 at the time the fee is assessed.
The fee will not apply if it is assessed 30 days prior to a surrender
request.
. The initial Account Value will be equal to any death benefit (including
any optional death benefit) that would have been payable to the
beneficiary if the beneficiary had taken a lump sum distribution.
. The available Sub-accounts will be among those available to the Owner at
the time of death, however certain Sub-Accounts may not be available.
. The beneficiary may request transfers among Sub-accounts, subject to the
same limitations and restrictions that applied to the Owner. Transfers in
excess of 20 per year will incur a $10 transfer fee.
. No Fixed Allocations or fixed interest rate options will be offered for
the non-qualified Beneficiary Continuation Options. However, for
qualified Annuities, the Fixed Allocations will be those offered at the
time the Beneficiary Continuation Option is elected.
. No additional Purchase Payments can be applied to the Annuity.
. The basic death benefit and any optional 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, unless the Beneficiary Continuation Option was
the payout predetermined by the Owner and the Owner restricted the
beneficiary's withdrawal rights.
. Withdrawals are not subject to 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 (successor),
unless the successor chooses to continue receiving payments.
Currently only Investment Options corresponding to Portfolios of the Advanced
Series Trust and the ProFund VP are available under the Beneficiary
Continuation Option.
In addition to the materials referenced above, the Beneficiary will be
provided with a prospectus and a settlement agreement describing the
Beneficiary Continuation Option. We may pay compensation to the broker-dealer
of record on the Annuity based on amounts held in the Beneficiary Continuation
Option. Please contact us for additional information on the availability,
restrictions and limitations that will apply to a beneficiary under the
Beneficiary Continuation Option.
Spousal Assumption of Annuity
You may name your spouse as your Beneficiary. If you and your spouse own your
Annuity jointly, we assume that the sole primary Beneficiary will be the
surviving spouse unless you elect an alternative Beneficiary Designation.
Unless you elect an alternative Beneficiary Designation, the spouse
Beneficiary may elect to assume ownership of the Annuity instead of taking the
Death Benefit payment. Any Death Benefit (including any optional Death
Benefits) that would have been payable to the Beneficiary will become the new
Account Value as of the date we receive due proof of death and any required
proof of a spousal relationship. As of the date the assumption is effective,
the surviving spouse will have all the rights and benefits that would be
available under the Annuity to a new purchaser of the same attained age. For
purposes of determining any future Death Benefit for the surviving spouse, the
new Account Value will be considered as the initial Purchase Payment. No CDSC
will apply to the new Account Value. However, any additional Purchase Payments
applied after the date the assumption is effective will be subject to all
provisions of the Annuity, including any CDSC that may apply to the additional
Purchase Payments.
73
See the section entitled "Managing Your Annuity" - "Spousal Designations" and
"Contingent Annuitant" for a discussion of the treatment of a spousal
Contingent Annuitant in the case of the death of the Annuitant in an Annuity
owned by a Custodial Account.
Are there any Exceptions to these Rules for Paying the Death Benefit?
Yes, there are exceptions that apply no matter how your Death Benefit is
calculated. There are exceptions to the Death Benefit if the decedent was not
the Owner or Annuitant as of the Issue Date (or within 60 days thereafter) and
did not become the Owner or Annuitant due to the prior Owner's or Annuitant's
death. Any Death Benefit (including any optional Death Benefit) that applies
will be suspended for a two-year period from the date he or she first became
Owner or Annuitant. After the two-year suspension period is completed, the
Death Benefit is the same as if this person had been an Owner or Annuitant on
the Issue Date.
When do you determine the Death Benefit?
We determine the amount of the Death Benefit as of the date we receive "due
proof of death" (and in certain limited circumstances as of the date of
death), any instructions we require to determine the method of payment and any
other written representations we require to determine the proper payment of
the Death Benefit to all Beneficiaries. "Due proof of death" may include a
certified copy of a death certificate, a certified copy of a decree of a court
of competent jurisdiction as to the finding of death or other satisfactory
proof of death. Upon our receipt of "due proof of death" we automatically
transfer the Death Benefit to the AST Money Market Sub-account until we
further determine the universe of eligible Beneficiaries. Once the universe of
eligible Beneficiaries has been determined each eligible Beneficiary may
allocate his or her eligible share of the Death Benefit to an eligible annuity
payment option.
Each Beneficiary must make an election as to the method they wish to receive
their portion of the Death Benefit. Absent an election of a Death Benefit
payment method, no Death Benefit can be paid to the Beneficiary. We may
require written acknowledgment of all named Beneficiaries before we can pay
the Death Benefit. During the period from the date of death until we receive
all required paper work, the amount of the Death Benefit may be subject to
market fluctuations.
74
VALUING YOUR INVESTMENT
HOW IS MY ACCOUNT VALUE DETERMINED?
During the accumulation period, your Annuity has an Account Value. The Account
Value is determined separately for each Sub-account allocation and for each
Fixed Allocation. The Account Value is the sum of the values of each
Sub-account allocation and the value of each Fixed Allocation. For Annuities
with a Highest Daily Lifetime Five election, Account Value also includes the
value of any allocation to the Benefit Fixed Rate Account. See the "Living
Benefit Programs - Highest Daily Lifetime Five" section of the Prospectus for
a description of the Benefit Fixed Rate Account. The Account Value does not
reflect any CDSC that may apply to a withdrawal or surrender. With respect to
Optimum and Optimum Four, the Account Value includes any Loyalty Credit we
apply. With respect to Optimum Plus, the Account Value includes any Credits we
applied to your Purchase Payments which we are entitled to take back under
certain circumstances. When determining the Account Value on a day more than
30 days prior to a Fixed Allocation's Maturity Date, the Account Value may
include any Market Value Adjustment that would apply to a Fixed Allocation (if
withdrawn or transferred) on that day.
WHAT IS THE SURRENDER VALUE OF MY ANNUITY?
The Surrender Value of your Annuity is the value available to you on any day
during the accumulation period. The Surrender Value is defined under "Glossary
of Terms" above.
HOW AND WHEN DO YOU VALUE THE SUB-ACCOUNTS?
When you allocate Account Value to a Sub-account, you are purchasing units of
the Sub-account. Each Sub-account invests exclusively in shares of an
underlying Portfolio. The value of the Units fluctuates with the market
fluctuations of the Portfolios. The value of the Units also reflects the daily
accrual for the Insurance Charge, the Distribution Charge (if applicable), and
if you elected one or more optional benefits whose annual charge is deducted
daily, the additional charge made for such benefits. There may be several
different Unit Prices for each Sub-account to reflect the Insurance Charge,
any Distribution Charge and the charges for any optional benefits. The Unit
Price for the Units you purchase will be based on the total charges for the
benefits that apply to your Annuity. See the section entitled "What Happens to
My Units When There is a Change in Daily Asset-Based Charges?" for a detailed
discussion of how Units are purchased and redeemed to reflect changes in the
daily charges that apply to your Annuity.
Each Valuation Day, we determine the price for a Unit of each Sub-account,
called the "Unit Price." The Unit Price is used for determining the value of
transactions involving Units of the Sub-accounts. We determine the number of
Units involved in any transaction by dividing the dollar value of the
transaction by the Unit Price of the Sub-account as of the Valuation Day.
Example
Assume you allocate $5,000 to a Sub-account. On the Valuation Day you make the
allocation, the Unit Price is $14.83. Your $5,000 buys 337.154 Units of the
Sub-account. Assume that later, you wish to transfer $3,000 of your Account
Value out of that Sub-account and into another Sub-account. On the Valuation
Day you request the transfer, the Unit Price of the original Sub-account has
increased to $16.79 and the Unit Price of the new Sub-account is $17.83. 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).
Generally, 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-Valuation 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.
75
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) Valuation Days after we receive all
of our requirements at our office to issue an Annuity. If we do not have all
the required information to allow us to issue your Annuity, we may retain the
Purchase Payment while we try to reach you or your representative to obtain
all of our requirements. If we are unable to obtain all of our required
information within five (5) Valuation 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
any associated Credits with respect to Optimum Plus) and issue an Annuity
within two (2) Valuation Days. With respect to both your initial Purchase
Payment and any subsequent Purchase Payment that is pending investment in our
separate account, we may hold the amount temporarily in our general account
and may earn interest on such amount. You will not be credited with interest
during that period.
Additional Purchase Payments: We will apply any additional Purchase Payments
(and any associated Credit with respect to Optimum Plus) on the Valuation Day
that we receive the Purchase Payment at our office with satisfactory
allocation instructions.
Scheduled Transactions: Scheduled transactions include transfers made in
connection with dollar cost averaging, the asset allocation program,
auto-rebalancing, systematic withdrawals, systematic investments, required
minimum distributions, substantially equal periodic payments under
Section 72(t) of the Code, or annuity payments. Scheduled transactions are
processed and valued as of the date they are scheduled, unless the scheduled
day is not a Valuation Day. In that case, the transaction will be processed
and valued on the next Valuation Day, unless (with respect to required minimum
distributions, substantially equal periodic payments under Section 72(t) of
the Code, systematic withdrawals and annuity payments only), 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 Applicable to Optimum and Optimum Plus: At the end of the
Period during which the Distribution Charge applies, your Annuity will become
subject to a different daily asset-based charge. We will process a transaction
where your Account Value allocated to the Sub-accounts will be used to
purchase new Units of the Sub-accounts that reflect the Insurance Charge (and
the charge for any optional benefits you have elected) but not the
Distribution Charge. The number of Units attributed to your Annuity will be
decreased and the Unit Price of each unit of the Sub-accounts in which you
invested will be increased. The adjustment in the number of Units and Unit
Price will not affect your Account Value. Beginning on that date, your Account
Value will be determined based on the change 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, generally 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).
76
TAX CONSIDERATIONS
The tax considerations associated with each Annuity vary depending on whether
the contract is (i) owned by an individual and not associated with a
tax-favored retirement plan (including contracts held by a non-natural person,
such as a trust acting as an agent for a natural person), or (ii) held under a
tax-favored retirement plan. We discuss the tax considerations for these
categories of contracts below. The discussion is general in nature and
describes only federal income tax law (not state or other tax laws). It is
based on current law and interpretations, which may change. The discussion
includes a description of certain spousal rights under the contract and under
tax-qualified plans. Our administration of such spousal rights and related tax
reporting accords with our understanding of the Defense of Marriage Act (which
defines a "marriage" as a legal union between a man and a woman and a "spouse"
as a person of the opposite sex). The information provided is not intended as
tax advice. You should consult with a qualified tax advisor for complete
information and advice. References to Purchase Payments below relates to your
cost basis in your contract. Generally, your cost basis in a contract not
associated with a tax-favored retirement plan is the amount you pay into your
contract, or into annuities exchanged for your contract, on an after-tax basis
less any withdrawals of such payments.
Each Annuity may also be purchased as a non-qualified annuity by a 401(a)
trust or custodial IRA or Roth IRA account, which can hold other permissible
assets other than the annuity. The terms and administration of the trust or
custodial account in accordance with the laws and regulations for 401(a)
plans, IRAs or Roth IRAs, as applicable, are the responsibility of the
applicable trustee or custodian.
Contracts Owned by Individuals (not Associated with Tax-Favored Retirement
Plans)
Taxes Payable by You
We believe each Annuity is an annuity contract for tax purposes. Accordingly,
as a general rule, you should not pay any tax until you receive money under
the contract.
Generally, annuity contracts issued by the same company (and affiliates) to
you during the same calendar year must be treated as one annuity contract for
purposes of determining the amount subject to tax under the rules described
below.
Charges for investment advisory fees that are taken from the contract are
treated as a partial withdrawal from the contract and will be reported as such
to the contract owner.
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.
Once all gain has been withdrawn, payments will be treated as a nontaxable
return of Purchase Payments until all Purchase Payments have been returned.
After all Purchase Payments are returned, all subsequent amounts will be taxed
as ordinary income. You will generally be taxed on any withdrawals from the
contract while you are alive even if the withdrawal is paid to someone else.
Withdrawals under any of the optional living benefit programs or as a
systematic payment are taxed under these rules.
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.
77
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.
Tax Penalty on withdrawals and Annuity Payments
Any taxable amount you receive under your contract may be subject to a 10% tax
penalty. Amounts are not subject to this tax penalty if:
. the amount is paid on or after you reach age 59 1/2 or die;
. the amount received is attributable to your becoming disabled;
. generally the amount paid or received is in the form of substantially
equal payments not less frequently than annually (Please note that
substantially equal payments must continue until the later of reaching
age 59 1/2 or 5 years. Modification of payments during that time period
will result in retroactive application of the 10% tax penalty.); or
. the amount received is paid under an immediate annuity contract (in which
annuity payments begin within one year of purchase).
Special Rules in Relation to Tax-Free Exchanges under Section 1035
Section 1035 of the Internal Revenue Code of 1986, as amended (Code) permits
certain tax-free exchanges of a life insurance, annuity or endowment contract
for an annuity. If an Annuity is purchased through a tax-free exchange of a
life insurance, annuity or endowment contract that was purchased prior to
August 14, 1982, then any Purchase Payments made to the original contract
prior to August 14, 1982 will be treated as made to the new contract prior to
that date. (See Federal Tax Status section in the Statement of Additional
Information.)
Partial surrenders may be treated in the same way as tax-free 1035 exchanges
of entire contracts, therefore avoiding current taxation of any gains in the
contract as well as the 10% tax penalty on pre-age 59 1/2 withdrawals. The IRS
has reserved the right to treat transactions it considers abusive as
ineligible for this favorable partial 1035 exchange treatment. We do not know
what transactions may be considered abusive. For example we do not know how
the IRS may view early withdrawals or annuitizations after a partial exchange.
In addition, it is unclear how the IRS will treat a partial exchange from a
life insurance, endowment, or annuity contract into an immediate annuity. As
of the date of this prospectus, we will accept a partial 1035 exchange from a
non-qualified annuity into an immediate annuity as a "tax-free" exchange for
future tax reporting purposes, except to the extent that we, as a reporting
and withholding agent, believe that we would be expected to deem the
transaction to be abusive. However, some insurance companies may not recognize
these partial surrenders as tax-free exchanges and may report them as taxable
distributions to the extent of any gain distributed as well as subjecting the
taxable portion of the distribution to the 10% tax penalty. We strongly urge
you to discuss any transaction of this type with your tax advisor before
proceeding with the transaction.
Taxes Payable by Beneficiaries
The Death Benefit options are subject to income tax to the extent the
distribution exceeds the cost basis in the contract. The value of the Death
Benefit, as determined under federal law, is also included in the owner's
estate.
Generally, the same tax rules described above would also apply to amounts
received by your beneficiary. Choosing any option other than a lump sum Death
Benefit may defer taxes. Certain minimum distribution requirements apply upon
your death, as discussed further below.
Tax consequences to the beneficiary vary among the Death Benefit payment
options.
. Choice 1: the beneficiary is taxed on earnings in the contract.
. Choice 2: the beneficiary is taxed as amounts are withdrawn (in this case
earnings are treated as being distributed first).
. Choice 3: the beneficiary is taxed on each payment (part will be treated
as earnings and part as return of Purchase Payments).
Considerations for Contingent Annuitants: There may be adverse tax
consequences if a Contingent Annuitant succeeds an Annuitant when an Annuity
is owned by a trust that is neither tax exempt nor qualifies for preferred
treatment under certain sections of the Code. In general, the Code is designed
to prevent indefinite deferral of tax. Continuing the benefit of tax deferral
by naming one or more Contingent Annuitants when an Annuity is owned by a
non-qualified trust might be deemed an attempt to extend the tax deferral for
an indefinite period. Therefore, adverse tax treatment may depend on the terms
of the trust, who is named as Contingent Annuitant, as well as the particular
facts and circumstances. You should consult your tax advisor before naming a
Contingent Annuitant if you expect to use an Annuity in such a fashion.
78
Reporting and Withholding on Distributions
Taxable amounts distributed from an Annuity 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.
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.
Where a contract is issued to a trust, and such trust is characterized as a
grantor trust under the Internal Revenue Code, such contract shall not be
considered to be held by a non-natural person and will be subject to the tax
reporting and withholding requirements for contracts not held by tax favored
plans.
Annuity Qualification
Diversification And Investor Control. In order to qualify for the tax rules
applicable to annuity contracts described above, the assets underlying the
Sub-accounts of an Annuity must be diversified, according to certain rules
under the Internal Revenue Code.
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, where applicable. We believe
the portfolios underlying the variable investment options of the Annuities
meet these diversification requirements.
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 reserve the right
to take any action, including modifications to your Annuity or the investment
options, required to comply with such guidelines if promulgated. Any such
changes will apply uniformly to affected owners and will be made with such
notice to affected owners as is feasible under the circumstances.
Required Distributions Upon Your Death for Annuities Owned by Individuals (Not
Associated with Tax-Favored Plans). 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 five (5) years after the date of death or as periodic
payments over a period not extending beyond the life or life expectancy of
such designated beneficiary (provided such payments begin within one year of
your death). 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.
79
Additionally, if the Annuity is payable to (or for the benefit of) your
surviving spouse, that portion of the contract may be continued with your
spouse as the owner.
Changes In Your Annuity. We reserve the right to make any changes we deem
necessary to assure that your Annuity qualifies as an annuity contract for tax
purposes. Any such changes will apply to all contract owners and you will be
given notice to the extent feasible under the circumstances.
Additional Information
You should refer to the Statement of Additional Information if:
.. Your contract was issued in exchange for a contract containing Purchase
Payments made before August 14, 1982.
.. You transfer your contract to, or designate, a beneficiary who is either
37 1/2 years younger than you or a grandchild.
Contracts held by Tax-Favored Plans
The following discussion covers annuity contracts held under tax-favored
retirement plans.
Currently, an Annuity may be purchased for use in connection with individual
retirement accounts and annuities (IRAs) which are subject to Sections 408(a)
and 408(b) of the Code and Roth IRAs under Section 408A of the Code. In
addition, each Annuity may be purchased for use in connection with a corporate
Pension or Profit-sharing plan (subject to 401(a) of the Code), H.R. 10 plans
(also known as Keogh Plans, subject to 401(a) of the Code), Tax Sheltered
Annuities (subject to 403(b) of the Code, also known as Tax Deferred Annuities
or TDAs), and Section 457 plans (subject to 457 of the Code). This description
assumes that you have satisfied the requirements for eligibility for these
products.
Each Annuity may also be purchased as a non-qualified annuity by a 401(a)
trust or custodial IRA or Roth IRA account, which can hold other permissible
assets other than the annuity. The terms and administration of the trust or
custodial account in accordance with the laws and regulations for 401(a)
plans, IRAs or Roth IRAs, as applicable, are the responsibility of the
applicable trustee or custodian.
You should be aware that tax favored plans such as IRAs generally provide
income tax deferral regardless of whether they invest in annuity contracts.
This means that when a tax favored plan invests in an annuity contract, it
generally does not result in any additional tax benefits (such as income tax
deferral and income tax free transfers).
Types of Tax-Favored Plans
IRAs. If you buy an Annuity for use as an IRA, we will provide you a copy of
the prospectus and contract. The "IRA Disclosure Statement" contains
information about eligibility, contribution limits, tax particulars, and other
IRA information. In addition to this information (some of which is summarized
below), the IRS requires that you have a "free look" after making an initial
contribution to the contract. During this time, you can cancel the Annuity by
notifying us in writing, and we will refund all of the Purchase Payments under
the Annuity (or, if provided by applicable state law, the amount credited
under the Annuity, if greater), less any applicable federal and state income
tax withholding.
Contributions Limits/Rollovers. Because of the way each Annuity is designed,
you may purchase an Annuity for an IRA in connection with a "rollover" of
amounts from a qualified retirement plan or as a transfer from another IRA, as
a current contribution in the case of Optimum, or if your are age 50 or older
by making a single contribution consisting of your IRA contributions and
catch-up contributions attributable to the prior year and the current year
from January 1 to April 15 of the current year in the case of Optimum Plus and
Optimum Four. For 2007 the contribution limit is $4,000; increasing to $5,000
in 2008. After 2008 the contribution amount will be indexed for inflation. The
tax law also provides for a catch-up provision for individuals who are age 50
and above, permitting them to contribute an additional $1,000 each year.
The "rollover" rules under the Code are fairly technical; however, an
individual (or his or her surviving spouse) may generally "roll over" certain
distributions from tax favored retirement plans (either directly or within 60
days from the date of these distributions) if he or she meets the requirements
for distribution. Once you buy an Annuity, you can make regular IRA
contributions under the Annuity (to the extent permitted by law). However, if
you make such regular IRA contributions, you should note that you will not be
able to treat the contract as a "conduit IRA," which means that you will not
retain possible favorable tax treatment if you subsequently "roll over" the
contract funds originally derived from a qualified retirement plan or TDA into
another Section 401(a) plan or TDA.
Required Provisions. Contracts that are IRAs (or endorsements that are part of
the contract) must contain certain provisions:
. You, as owner of the contract, must be the "annuitant" under the contract
(except in certain cases involving the division of property under a
decree of divorce);
. Your rights as owner are non-forfeitable;
. You cannot sell, assign or pledge the contract;
. The annual contribution you pay cannot be greater than the maximum amount
allowed by law, including catch-up contributions if applicable (which
does not include any rollover amounts);
80
. The date on which required minimum distributions must begin cannot be
later than April 1st of the calendar year after the calendar year you
turn age 70 1/2; and
. Death and annuity payments must meet "minimum distribution requirements"
described below.
Usually, the full amount of any distribution from an IRA (including a
distribution from this contract) which is not a rollover is taxable. As
taxable income, these distributions are subject to the general tax withholding
rules described earlier. In addition to this normal tax liability, you may
also be liable for the following, depending on your actions:
. A 10% "early distribution penalty" described below;
. Liability for "prohibited transactions" if you, for example, borrow
against the value of an IRA; or
. Failure to take a minimum distribution also described below.
SEPs. SEPs are a variation on a standard IRA, and contracts issued to a SEP
must satisfy the same general requirements described under IRAs (above). There
are, however, some differences:
. If you participate in a SEP, you generally do not include in income any
employer contributions made to the SEP on your behalf up to the lesser of
(a) $45,000 in 2007 ($44,000 in 2006) or (b) 25% of your taxable
compensation paid by the contributing employer (not including the
employer's SEP contribution as "compensation" for these purposes).
However, for these purposes, compensation in excess of certain limits
established by the IRS will not be considered. In 2007, this limit is
$225,000 ($220,000 for 2006);
. SEPs must satisfy certain participation and nondiscrimination
requirements not generally applicable to IRAs; and
. SEPs that contain a salary reduction or "SARSEP" provision prior to 1997
may permit salary deferrals up to $15,500 in 2007 with the employer
making these contributions to the SEP. However, no new "salary reduction"
or "SARSEPs" can be established after 1996. Individuals participating in
a SARSEP who are age 50 or above by the end of the year will be permitted
to contribute an additional $5,000 in 2007. Thereafter, the amount is
indexed for inflation. These Annuities are not available for SARSEPs.
You will also be provided the same information, and have the same "free look"
period, as you would have if you purchased the contract for a standard IRA.
ROTH IRAs. The "Roth IRA Disclosure Statement" contains information about
eligibility, contribution limits, tax particulars and other Roth IRA
information. Like standard IRAs, income within a Roth IRA accumulates
tax-free, and contributions are subject to specific limits. Roth IRAs have,
however, the following differences:
. Contributions to a Roth IRA cannot be deducted from your gross income;
. "Qualified distributions" from a Roth IRA are excludable from gross
income. A "qualified distribution" is a distribution that satisfies two
requirements: (1) the distribution must be made (a) after the owner of
the IRA attains age 59 1/2; (b) after the owner's death; (c) due to the
owner's disability; or (d) for a qualified first time homebuyer
distribution within the meaning of Section 72(t)(2)(F) of the Code; and
(2) the distribution must be made in the year that is at least five tax
years after the first year for which a contribution was made to any Roth
IRA established for the owner or five years after a rollover, transfer,
or conversion was made from a traditional IRA to a Roth IRA.
Distributions from a Roth IRA that are not qualified distributions will
be treated as made first from contributions and then from earnings, and
earnings will be taxed generally in the same manner as distributions from
a traditional IRA.
. If eligible (including meeting income limitations and earnings
requirements), you may make contributions to a Roth IRA after attaining
age 70 1/2, and distributions are not required to begin upon attaining
such age or at any time thereafter.
Because of the way each Annuity is designed, if you meet certain income
limitations you may purchase an Annuity for a Roth IRA, as a current
contribution in the case of Optimum or if you are age 50 or older by making a
single contribution consisting of your Roth IRA contributions and catch-up
contributions attributable to the prior year and the current year from
January 1 to April 15 of the current year in the case of Optimum Plus and
Optimum Four. The Code permits persons who meet certain income limitations
(generally, adjusted gross income under $100,000), who are not married filing
a separate return and who receive certain qualifying distributions from such
non-Roth IRAs, to directly rollover or make, within 60 days, a "rollover" of
all or any part of the amount of such distribution to a Roth IRA which they
establish. Beginning January 2008, an individual receiving an eligible
rollover distribution from a Qualified Plan can directly rollover
contributions to a Roth IRA, subject to the same income limits. This
conversion triggers current taxation (but is not subject to a 10% early
distribution penalty). Once an Annuity has been purchased, regular Roth IRA
contributions will be accepted to the extent permitted by law. As of
January 1, 2006, an individual receiving an eligible rollover distribution
from a designated Roth account under an employer plan may roll over the
distribution to a Roth IRA even if the individual is not eligible to make
regular or conversion contributions to a Roth IRA. If you are considering
rolling over funds from your Roth account under an employer plan, please
contact your Financial Professional prior to purchase to confirm whether such
rollovers are being accepted.
TDAs. You may own a TDA generally if you are either an employer or employee of
a tax-exempt organization (as defined under Code Section 501(c)(3)) or a
public educational organization, and you may make contributions to a TDA so
long as the employee's rights to the annuity are nonforfeitable. Contributions
to a TDA, and any earnings, are not taxable until distribution. You may also
81
make contributions to a TDA under a salary reduction agreement, generally up
to a maximum of $15,500 in 2007. Individuals participating in a TDA who are
age 50 or above by the end of the year will be permitted to contribute an
additional $5,000 in 2007. This 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, not including earnings attributable to these amounts).
In any event, you must begin receiving distributions from your TDA by
April 1/st/ of the calendar year after the calendar year you turn age 70 1/2
or retire, whichever is later.
These distribution limits do not apply either to transfers or exchanges of
investments under the contract, or to any "direct transfer" of your interest
in the contract to another TDA or to a mutual fund "custodial account"
described under Code Section 403(b)(7).
Employer contributions to TDAs are subject to the same general contribution,
nondiscrimination, and minimum participation rules applicable to "qualified"
retirement plans.
Required Minimum Distributions and Payment Options
If you hold the contract under an IRA (or other tax-favored plan), IRS minimum
distribution requirements must be satisfied. This means that generally
payments must start by April 1 of the year after the year you reach age 70 1/2
and must be made for each year thereafter. For a Tax Sheltered Annuity or a
401(a) plan for which the participant is not a greater than 5 percent owner of
the employer, this required beginning date can generally be deferred to
retirement, if later. Roth IRAs are not subject to these rules during the
Owner's lifetime. The amount of the payment must at least equal the minimum
required under the IRS rules. Several choices are available for calculating
the minimum amount. More information on the mechanics of this calculation is
available on request. Please contact us at a reasonable time before the IRS
deadline so that a timely distribution is made. Please note that there is a
50% tax penalty on the amount of any minimum distribution not made in a timely
manner.
Effective in 2006, in accordance with recent changes in laws and regulations,
required minimum distributions will be calculated based on the sum of the
account 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 account value only, which may in turn result in
an earlier (but not before the required beginning date) distribution of
amounts under the Annuity and an increased amount of taxable income
distributed to the Annuity owner, and a reduction of death benefits and the
benefits of any optional riders.
You can use the Minimum Distribution option to satisfy the IRS minimum
distribution requirements for an Annuity without either beginning annuity
payments or surrendering the Annuity. We will distribute to you this minimum
distribution amount, less any other partial withdrawals that you made during
the year.
Although the IRS rules determine the required amount to be distributed from
your IRA each year, certain payment alternatives are still available to you.
If you own more than one IRA, you can choose to satisfy your minimum
distribution requirement for each of your IRAs by withdrawing that amount from
any of your IRAs. If you inherit more than one Roth IRA from the same owner,
similar rules apply.
Required Distributions upon your Death for Qualified Contracts held by
Tax-Favored Plans
Upon your death under an IRA, 403(b) or other "qualified investment", the
designated beneficiary may generally elect to continue the contract and
receive required minimum distributions under the contract instead of receiving
the death benefit in a single payment. The available payment options will
depend on whether you die before the date required minimum distributions under
the Code were required to begin, whether you have named a designated
beneficiary and whether that beneficiary is your surviving spouse.
. If you die after a designated beneficiary has been named, the death
benefit must be distributed by December 31/st/ of the year including
the five year anniversary of the date of death, or as periodic
payments not extending beyond 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 your surviving
spouse is the beneficiary, the death benefit can be paid out over
the life or life expectancy of your spouse with such payments
beginning no later than December 31st of the year following the year
of death or December 31st of the year in which you would have
reached age 70 1/2, which ever is later. Additionally, 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.
82
. If you die before a designated beneficiary is named and before the
date required minimum distributions must begin under the Code, the
death benefit must be paid out by December 31/st/ of the year
including the five year anniversary of the date of death. For
contracts where multiple beneficiaries have been named and at least
one of the beneficiaries does not qualify as a designated
beneficiary and the account has not been divided into separate
accounts by December 31/st/ of the year following the year of death,
such contract is deemed to have no designated beneficiary,
. If you die before a designated beneficiary is named and after the
date required 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. For contracts where multiple beneficiaries
have been named and at least one of the beneficiaries does not
qualify as a designated beneficiary and the account has not been
divided into separate accounts by December 31/st/ of the year
following the year of death, such contract is deemed to have no
designated beneficiary,
A beneficiary has the flexibility to take out more each year than mandated
under the required minimum distribution rules.
Until withdrawn, amounts in an IRA, 403(b) or other "qualified investment"
continue to be tax deferred. Amounts withdrawn each year, including amounts
that are required to be withdrawn under the minimum distribution rules, are
subject to tax. You may wish to consult a professional tax advisor for tax
advice as to your particular situation.
For a Roth IRA, if death occurs before the entire interest is distributed, the
death benefit must be distributed under the same rules applied to IRAs where
death occurs before the date required minimum distributions must begin under
the Code.
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 Requirements
ERISA (the "Employee Retirement Income Security Act of 1974") and the Code
prevents a fiduciary and other "parties in interest" with respect to a plan
(and, for these purposes, an IRA would also constitute a "plan") from
receiving any benefit from any party dealing with the plan, as a result of the
sale of the contract. Administrative exemptions under ERISA generally permit
the sale of insurance/annuity products to plans, provided that certain
information is disclosed to the person purchasing the contract. This
information has to do primarily with the fees, charges, discounts and other
costs related to the contract, as well as any commissions paid to any agent
selling the contract.
Information about any applicable fees, charges, discounts, penalties or
adjustments may be found in the applicable sections of this Prospectus.
Information about sales representatives and commissions may be found in the
sections of this Prospectus addressing distribution of the Annuities.
83
Other relevant information required by the exemptions is contained in the
contract and accompanying documentation.
Please consult with your tax advisor if you have any questions about ERISA and
these disclosure requirements.
Spousal Consent Rules for Retirement Plans -- Qualified Contracts
If you are married at the time your payments commence, you may be required by
federal law to choose an income option that provides survivor annuity income
to your spouse, unless your spouse waives that right. Similarly, if you are
married at the time of your death, federal law may require all or a portion of
the Death Benefit to be paid to your spouse, even if you designated someone
else as your beneficiary. A brief explanation of the applicable rules follows.
For more information, consult the terms of your retirement arrangement.
Defined Benefit Plans and Money Purchase Pension Plans. If you are married at
the time your payments commence, federal law requires that benefits be paid to
you in the form of a "qualified joint and survivor annuity" (QJSA), unless you
and your spouse waive that right, in writing. Generally, this means that you
will receive a reduced payment during your life and, upon your death, your
spouse will receive at least one-half of what you were receiving for life. You
may elect to receive another income option if your spouse consents to the
election and waives his or her right to receive the QJSA. If your spouse
consents to the alternative form of payment, your spouse may not receive any
benefits from the plan upon your death. Federal law also requires that the
plan pay a Death Benefit to your spouse if you are married and die before you
begin receiving your benefit. This benefit must be available in the form of an
annuity for your spouse's lifetime and is called a "qualified pre-retirement
survivor annuity" (QPSA). If the plan pays Death Benefits to other
beneficiaries, you may elect to have a beneficiary other than your spouse
receive the Death Benefit, but only if your spouse consents to the election
and waives his or her right to receive the QPSA. If your spouse consents to
the alternate beneficiary, your spouse will receive no benefits from the plan
upon your death. Any QPSA waiver prior to your attaining age 35 will become
null and void on the first day of the calendar year in which you attain age
35, if still employed.
Defined Contribution Plans (including 401(k) Plans and ERISA 403(b)
Annuities). Spousal consent to a distribution is generally not required. Upon
your death, your spouse will receive the entire Death Benefit, even if you
designated someone else as your beneficiary, unless your spouse consents in
writing to waive this right. Also, if you are married and elect an annuity as
a periodic income option, federal law requires that you receive a QJSA (as
described above), unless you and your spouse consent to waive this right.
IRAs, non-ERISA 403(b) Annuities, and 457 Plans. Spousal consent to a
distribution usually is not required. Upon your death, any Death Benefit will
be paid to your designated beneficiary.
Additional Information
For additional information about federal tax law requirements applicable to
IRAs and Roth IRAs, see the IRA Disclosure Statement or Roth IRA Disclosure
Statement, as applicable.
84
GENERAL INFORMATION
HOW WILL I RECEIVE STATEMENTS AND REPORTS?
We send any statements and reports required by applicable law or regulation to
you at your last known address of record. You should therefore give us prompt
notice of any address change. We reserve the right, to the extent permitted by
law and subject to your prior consent, to provide any prospectus, prospectus
supplements, confirmations, statements and reports required by applicable law
or regulation to you through our Internet Website at
www.americanskandia.prudential.com or any other electronic means, including
diskettes or CD ROMs. We send a confirmation statement to you each time a
transaction is made affecting Account Value, such as making additional
Purchase Payments, transfers, exchanges or withdrawals. We may also send
quarterly statements detailing the activity affecting your Annuity during the
calendar quarter. We may confirm regularly scheduled transactions, including,
but not limited to, the Annual Maintenance Fee, Systematic Withdrawals
(including 72(t) payments and required minimum distributions), electronic
funds transfers, Dollar Cost Averaging, and static rebalancing, in quarterly
statements instead of confirming them immediately. You should review the
information in these statements carefully. You may request additional reports.
We reserve the right to charge up to $50 for each such additional report. We
may also send an annual report and a semi-annual report containing applicable
financial statements for the Separate Account and the Portfolios, as of
December 31 and June 30, respectively, to Owners or, with your prior consent,
make such documents available electronically through our Internet Website or
other electronic means.
WHO IS AMERICAN SKANDIA?
American Skandia Life Assurance Corporation, a Prudential Financial Company,
("American Skandia") is a stock life insurance company domiciled in
Connecticut with licenses in all 50 states, the District of Columbia and
Puerto Rico. American Skandia is a wholly-owned subsidiary of Prudential
Annuities, Inc. (formerly, American Skandia, Inc., whose ultimate parent is
Prudential Financial, Inc. American Skandia markets its products to
broker-dealers and financial planners through an internal field marketing
staff. In addition, American Skandia markets through and in conjunction with
financial institutions such as banks that are permitted directly, or through
affiliates, to sell annuities.
American Skandia offers a wide array of annuities, including (1) deferred
variable annuities that are registered with the SEC, including fixed interest
rate annuities that are offered as a companion to certain of our variable
annuities and are registered because of their market value adjustment feature
and (2) fixed annuities that are not registered with the SEC. In addition,
American Skandia has in force a relatively small block of variable life
insurance policies and immediate variable annuities, but it no longer actively
sells such policies.
Effective May 1, 2003, Skandia U.S. Inc., the sole shareholder of Prudential
Annuities, Inc., which is the parent of American Skandia, was purchased by
Prudential Financial, Inc. Prudential Financial, Inc. is a New Jersey
insurance holding company whose subsidiary companies serve individual and
institutional customers worldwide and include The Prudential Insurance Company
of America, one of the largest life insurance companies in the U.S. These
companies offer a variety of products and services, including life insurance,
mutual funds, annuities, pension and retirement related services and
administration, asset management, securities brokerage, banking and trust
services, real estate brokerage franchises, and relocation services. Under the
terms of the above-referenced acquisition, Prudential Financial, Inc. may not
use the "American Skandia" name in any context after May 1, 2008. Therefore,
Prudential Financial has begun a "rebranding" project that involves renaming
certain American Skandia legal entities. As pertinent to this annuity: 1)
American Skandia Life Assurance Corporation will be renamed Prudential
Annuities Life Assurance Corporation; 2) American Skandia Marketing, Inc. will
be renamed Prudential Annuities Distributors, Inc.; 3) American Skandia
Investment Services, Inc. has been renamed AST Investment Services, Inc.; and
4) American Skandia Trust has been renamed Advanced Series Trust. These name
changes will not impact the manner in which customers do business with
Prudential.
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.
85
Separate Account B
During the accumulation period, the assets supporting obligations based on
allocations to the Sub-accounts are held in Sub-accounts of American Skandia
Life Assurance Corporation Variable Account B, also referred to as "Separate
Account B". Separate Account B was established by us pursuant to Connecticut
law on November 25, 1987. Separate Account B also holds assets of other
annuities issued by us with values and benefits that vary according to the
investment performance of Separate Account B. Separate Account B consists of
multiple Sub-accounts. Each Sub-account invests only in a single mutual fund
or mutual fund portfolio. The name of each Sub-account generally corresponds
to the name of the underlying Portfolio. Each Sub-account in Separate Account
B may have several different Unit Prices to reflect the Insurance Charge,
Distribution Charge (when applicable) and the charges for any optional
benefits that are offered under the Annuities issued by us through Separate
Account B. Separate Account B is registered with the SEC under the Investment
Company Act of 1940 ("Investment Company Act") as a unit investment trust,
which is a type of investment company. The SEC does not supervise investment
policies, management or practices of Separate Account B.
We reserve the right to make changes to the Sub-accounts available under the
Annuities as we determine appropriate. We may offer new Sub-accounts,
eliminate Sub-accounts, or combine Sub-accounts at our sole discretion. We may
also close Sub-accounts to additional Purchase Payments on existing Annuities
or close Sub-accounts for Annuities purchased on or after specified dates. We
may also substitute an underlying mutual fund or portfolio of an underlying
mutual fund for another underlying mutual fund or portfolio of an underlying
mutual fund, subject to our receipt of any exemptive relief that we are
required to obtain under the Investment Company Act. We will notify Owners of
changes we make to the Sub-accounts available under their Annuity.
Values and benefits based on allocations to the Sub-accounts will vary with
the investment performance of the underlying mutual funds or fund portfolios,
as applicable. We do not guarantee the investment results of any Sub-account.
Your Account Value allocated to the Sub-accounts may increase or decrease. You
bear the entire investment risk. There is no assurance that the Account Value
of your Annuity will equal or be greater than the total of the Purchase
Payments you make to us.
Separate Account D
During the accumulation period, assets supporting our obligations based on
Fixed Allocations are held in American Skandia Life Assurance Corporation
Separate Account D, also referred to as "Separate Account D". Such obligations
are based on the fixed interest rates we credit to Fixed Allocations and the
terms of the Annuities. These obligations do not depend on the investment
performance of the assets in Separate Account D. Separate Account D was
established by us pursuant to Connecticut law.
There are no units in Separate Account D. The Fixed Allocations are guaranteed
by our general account. An Annuity Owner who allocates a portion of their
Account Value to Separate Account D does not participate in the investment
gain or loss on assets maintained in Separate Account D. Such gain or loss
accrues solely to us. We retain the risk that the value of the assets in
Separate Account D may drop below the reserves and other liabilities we must
maintain. Should the value of the assets in Separate Account D drop below the
reserve and other liabilities we must maintain in relation to the annuities
supported by such assets, we will transfer assets from our general account to
Separate Account D to make up the difference. We have the right to transfer to
our general account any assets of Separate Account D in excess of such
reserves and other liabilities. We maintain assets in Separate Account D
supporting a number of annuities we offer.
We may employ investment managers to manage the assets maintained in Separate
Account D. Each manager we employ is responsible for investment management of
a different portion of Separate Account D. From time to time additional
investment managers may be employed or investment managers may cease being
employed. We are under no obligation to employ or continue to employ any
investment manager(s) and have sole discretion over the investment managers we
retain. We are not obligated to invest according to specific guidelines or
strategies except as may be required by Connecticut and other state insurance
laws.
WHAT IS THE LEGAL STRUCTURE OF THE UNDERLYING FUNDS?
Each underlying mutual fund is registered as an open-end management investment
company under the Investment Company Act. Shares of the underlying mutual fund
portfolios are sold to separate accounts of life insurance companies offering
variable annuity and variable life insurance products. The shares may also be
sold directly to qualified pension and retirement plans.
Voting Rights
We are the legal owner of the shares of the underlying mutual funds in which
the Sub-accounts invest. However, under SEC rules, you have voting rights in
relation to Account Value maintained in the Sub-accounts. If an underlying
mutual fund portfolio requests a vote of shareholders, we will vote our shares
based on instructions received from Owners with Account Value allocated to
that Sub-account. Owners have the right to vote an amount equal to the number
of shares attributable to their contracts. If we do not receive voting
instructions in relation to certain shares, we will vote those shares in the
same manner and proportion as the shares for which we have received
instructions. This voting procedure is sometimes referred to as "mirror
voting" because, as indicated in the immediately preceding sentence, we mirror
the votes that are actually cast, rather than decide on our own how to vote.
In addition, because all the shares of a given mutual fund held within our
separate account are legally owned by us, we intend
86
to vote all of such shares when that underlying fund seeks a vote of its
shareholders. As such, all such shares will be counted towards whether there
is a quorum at the underlying fund's shareholder meeting and towards the
ultimate outcome of the vote. Thus, under "mirror voting," it is possible that
the votes of a small percentage of contractholders who actually vote will
determine the ultimate outcome. We will furnish those Owners who have Account
Value allocated to a Sub-account whose underlying mutual fund portfolio has
requested a "proxy" vote with proxy materials and the necessary forms to
provide us with their voting instructions. Generally, you will be asked to
provide instructions for us to vote on matters such as changes in a
fundamental investment strategy, adoption of a new investment advisory
agreement, or matters relating to the structure of the underlying mutual fund
that require a vote of shareholders.
Advanced Series Trust (the "Trust") has obtained an exemption from the
Securities and Exchange Commission that permits its co-investment advisers,
AST Investment Services, Inc. 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 AST Investment Services,
Inc., 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, or our affiliates may provide
administrative and support services to the Portfolios for which it receives a
fee of up to 0.75% (currently) of the average assets allocated to the
Portfolios under each Annuity from the investment adviser, distributor and/or
the fund. These agreements may be different for each underlying mutual fund
whose portfolios are offered as Sub-accounts.
In addition, an investment adviser, sub-adviser or distributor of the
underlying Portfolios may also compensate us by providing reimbursement,
defraying the costs of, or paying directly for, among other things, marketing
and/or administrative services and/or other services they provide in
connection with the Annuity. These services may include, but are not limited
to: sponsoring or co-sponsoring various promotional, educational or marketing
meetings and seminars attended by distributors, wholesalers, and/or broker
dealer firms' registered representatives, and creating marketing material
discussing the contract, available options, and underlying Portfolios. The
amounts paid depend on the nature of the meetings, the number of meetings
attended by the adviser, sub-adviser, or distributor, the number of
participants and attendees at the meetings, the costs expected to be incurred,
and the level of the adviser's, sub-adviser's or distributor's participation.
These payments or reimbursements may not be offered by all advisers,
sub-advisers, or distributor and the amounts of such payments may vary between
and among each adviser, sub-adviser and distributor depending on their
respective participation.
During 2006, with regard to amounts that were paid under these kinds of
arrangements, the amounts ranged from approximately $53 to approximately
$190,514. These amounts may have been paid to one or more
Prudential-affiliated insurers issuing individual variable annuities.
WHO DISTRIBUTES ANNUITIES OFFERED BY AMERICAN SKANDIA?
American Skandia Marketing, Incorporated ("ASM"), a wholly-owned subsidiary of
Prudential Annuities, 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
Advanced Series Trust.
ASM's principal business address is One Corporate Drive, Shelton, Connecticut
06484. ASM is registered as broker-dealer under the Securities Exchange Act of
1934 ("Exchange Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD").
87
Each Annuity is offered on a continuous basis. ASM enters into distribution
agreements with broker-dealers who are registered under the Exchange Act and
with entities that may offer the Annuities but are exempt from registration
("firms"). Applications for each Annuity are solicited by registered
representatives of those firms. Such representatives will also be our
appointed insurance agents under state insurance law. In addition, ASM may
offer the Annuities directly to potential purchasers.
Commissions are paid to firms on sales of the Annuities according to one or
more schedules. The individual representative will receive a portion of the
compensation, depending on the practice of his or her firm. Commissions are
generally based on a percentage of Purchase Payments made, up to a maximum of
7.0% for Optimum, 6.0% for Optimum Plus and 5.5% for Optimum Four. Alternative
compensation schedules are available that provide a lower initial commission
plus ongoing annual compensation based on all or a portion of the Account
Value. We may also provide compensation to the distributing firm for providing
ongoing service to you in relation to your Annuity. Commissions and other
compensation paid in relation to your Annuity do not result in any additional
charge to you or to the Separate Account.
In addition, in an effort to promote the sale of our products (which may
include the placement of American Skandia and/or the Annuities on a preferred
or recommended company or product list and/or access to the firm's registered
representatives), we or ASM may enter into compensation arrangements with
certain broker-dealer firms (including Linsco/Private Ledger, Corp.) with
respect to certain or all registered representatives of such firms under which
such firms may receive separate compensation or reimbursement for, among other
things, training of sales personnel and/or marketing and/or administrative
services and/or other services they provide. These services may include, but
are not limited to: educating customers of the firm on the Annuitys' features;
conducting due diligence and analysis, providing office access, operations and
systems support; holding seminars intended to educate the firm's registered
representatives and make them more knowledgeable about the Annuities;
providing a dedicated marketing coordinator; providing priority sales desk
support; and providing expedited marketing compliance approval. To the extent
permitted by NASD rules and other applicable laws and regulations, ASM may pay
or allow other promotional incentives or payments in the form of cash or
non-cash compensation. These arrangements may not be offered to all firms and
the terms of such arrangements may differ between firms. A list of the firms
to whom American Skandia pays an amount of greater than $10,000 under these
arrangements is provided in the Statement of Additional Information, which is
available upon request. You should note that firms and individual registered
representatives and branch managers within some firms participating in one of
these compensation arrangements might receive greater compensation for selling
the Annuities than for selling a different annuity that is not eligible for
these compensation arrangements. While compensation is generally taken into
account as an expense in considering the charges applicable to an annuity
product, any such compensation will be paid by us or ASM and will not result
in any additional charge to you. Overall compensation paid to the distributing
firm does not 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. Further information about the firms that are part of these
compensation arrangements appears in the Statement of Additional Information,
which is available without charge upon request.
On July 1, 2003, Prudential Financial combined its retail securities brokerage
and clearing operations with those of Wachovia Corporation ("Wachovia") and
formed Wachovia Securities Financial Holdings, LLC ("Wachovia Securities"), a
joint venture headquartered in Richmond, Virginia. Prudential Financial has a
38% ownership interest in the joint venture, while Wachovia owns the remaining
62%. Wachovia and Wachovia Securities are key distribution partners for
certain products of Prudential Financial affiliates, including mutual funds
and individual annuities that are distributed through their financial
advisors, bank channel and independent channel. In addition, Prudential
Financial is a service provider to the managed account platform and certain
wrap-fee programs offered by Wachovia Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
American Skandia publishes annual and quarterly reports that are filed with
the SEC. These reports contain financial information about American Skandia
that is annually audited by an independent registered public accounting firm.
American Skandia's annual report for the year ended December 31, 2006,
together with subsequent periodic reports that American Skandia files with the
SEC, are incorporated by reference into this prospectus. You can obtain
copies, at no cost, of any and all of this information, including the American
Skandia annual report that is not ordinarily mailed to contract owners, the
more current reports and any subsequently filed documents at no cost by
contacting us at American Skandia -- Variable Annuities; P.O. Box 7960,
Philadelphia, PA 19176 (Telephone: 203-926-1888). The SEC file number for
American Skandia is 33-44202. You may read and copy any filings made by
American Skandia with the SEC at the SEC's Public Reference Room at 100 F
Street, N.E. Washington, D.C. 20549. You can obtain information on the
operation of the Public Reference Room by calling (202) 551-8090. The SEC
maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC at http://www.sec.gov.
FINANCIAL STATEMENTS
The financial statements of the separate account and American Skandia Life
Assurance Corporation are included in the Statement of Additional Information.
88
HOW TO CONTACT US
You can contact us by:
. calling our Customer Service Team at 1-800-752-6342 during our normal
business hours, Monday through Friday, or Skandia's telephone automated
response system at 1-800-766-4530.
. writing to us via regular mail at American Skandia -- Variable Annuities,
P.O. Box 7960, Philadelphia, PA 19176 OR for express mail American
Skandia -- Variable Annuities, 2101 Welsh Road, Dresher, PA 19025. NOTE:
Failure to send mail to the proper address may result in a delay in our
receiving and processing your request.
. sending an email to customerservice@prudential.com or visiting our
Internet Website at www.americanskandia.prudential.com.
. accessing information about your Annuity through our Internet Website at
www.americanskandia.prudential.com.
You can obtain account information by calling our automated response system
and at www.americanskandia.prudential.com, our Internet Website. Our Customer
Service representatives are also available during business hours to provide
you with information about your account. You can request certain transactions
through our telephone voice response system, our Internet Website or through a
customer service representative. You can provide authorization for a third
party, including your attorney-in-fact acting pursuant to a power of attorney
or your Financial Professional, to access your account information and perform
certain transactions on your account. You will need to complete a form
provided by us which identifies those transactions that you wish to authorize
via telephonic and electronic means and whether you wish to authorize a third
party to perform any such transactions. Please note that unless you tell us
otherwise, we deem that all transactions that are directed by your Financial
Professional with respect to your Annuity have been authorized by you. We
require that you or your representative provide proper identification before
performing transactions over the telephone or through our Internet Website.
This may include a Personal Identification Number (PIN) that will be provided
to you upon issue of your Annuity or you may establish or change your PIN by
calling our automated response system and at
www.americanskandia.prudential.com, our Internet Website. Any third party that
you authorize to perform financial transactions on your account will be
assigned a PIN for your account.
Transactions requested via telephone are recorded. To the extent permitted by
law, we will not be responsible for any claims, loss, liability or expense in
connection with a transaction requested by telephone or other electronic means
if we acted on such transaction instructions after following reasonable
procedures to identify those persons authorized to perform transactions on
your Annuity using verification methods which may include a request for your
Social Security number, PIN or other form of electronic identification. We may
be liable for losses due to unauthorized or fraudulent instructions if we did
not follow such procedures.
American Skandia does not guarantee access to telephonic, facsimile, Internet
or any other electronic information or that we will be able to accept
transaction instructions via such means at all times. Regular and/or express
mail will be the only means by which we will accept transaction instructions
when telephonic, facsimile, Internet or any other electronic means are
unavailable or delayed. American Skandia reserves the right to limit, restrict
or terminate telephonic, facsimile, Internet or any other electronic
transaction privileges at any time.
INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities Act of
1933 (the "Securities Act") may be permitted to directors, officers or persons
controlling the registrant pursuant to the foregoing provisions, the
registrant has been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
LEGAL PROCEEDINGS
American Skandia is subject to legal and regulatory actions in the ordinary
course of its businesses, including class action lawsuits. American Skandia's
pending legal and regulatory actions include proceedings specific to the
company and proceedings generally applicable to business practices in the
industry in which we operate. American Skandia is subject to class action
lawsuits and other litigation alleging, among other things, that we made
improper or inadequate disclosures in connection with the sale of annuity
products or charged excessive or impermissible fees on these products,
recommended unsuitable products to customers, mishandled customer accounts or
breached fiduciary duties to customers. American Skandia also is subject to
litigation arising out of its general business activities, such as its
investments, contracts, leases and labor and employment relationships,
including claims of discrimination and harassment, and could be exposed to
claims or litigation concerning certain business or process patents. In some
of American Skandia's pending legal and regulatory actions, parties are
seeking large and/or indeterminate amounts, including punitive or exemplary
damages. Finally, American Skandia is periodically subject to examinations and
audits by federal and state regulators, and also on occasion, receives and
addresses complaints from customers. The following is a summary of certain
pending proceedings.
American Skandia commenced a remediation program to correct errors in the
administration of approximately 11,000 annuity contracts issued by the
company. The owners of these contracts did not receive notification that the
contracts were approaching or past their designated annuitization date or
default annuitization date (both dates referred to as the "contractual annuity
date") and the contracts were not annuitized at their contractual annuity
dates. Some of these contracts also were affected by data integrity errors
resulting in incorrect contractual annuity dates. The lack of notice and the
data integrity errors, as reflected on the annuities
89
administrative system, all occurred before the acquisition of American Skandia
by Prudential Financial, Inc. The remediation and administrative costs of the
remediation program are subject to the indemnification provisions of the
agreement pursuant to which Prudential Financial, Inc. acquired American
Skandia (the "Acquisition Agreement") from Skandia Insurance Company Ltd.
(publ).
Commencing in 2003, American Skandia received formal requests for information
from the SEC and the New York Attorney General ("NYAG") relating to market
timing in variable annuities by American Skandia and certain affiliated
companies. In connection with these investigations, with the approval of
Skandia Insurance Company Ltd. (publ), an offer was made by American Skandia
to the authorities investigating its companies, the SEC and NYAG, to settle
these matters by paying restitution and a civil penalty of $95 million in the
aggregate. While not assured, American Skandia believes these discussions are
likely to lead to settlements with these authorities. Any regulatory
settlement involving American Skandia and certain affiliates would be subject
to the indemnification provisions of the Acquisition Agreement. If achieved,
settlement of the matters relating to American Skandia and certain affiliates
also could involve continuing monitoring, changes to and/or supervision of
business practices, findings that may adversely affect existing or cause
additional litigation, adverse publicity and other adverse impacts to American
Skandia's businesses.
During the third quarter of 2004, American Skandia identified a
system-generated calculation error in its annuity contract administration
system that existed prior to the acquisition of American Skandia by Prudential
Financial, Inc. This error related to the calculation of amounts due to
customers for certain transactions subject to a market value adjustment upon
the surrender or transfer of monies out of their annuity contract's fixed
allocation options. The error resulted in an underpayment to policyholders, as
well as additional anticipated costs to American Skandia associated with
remediation, breakage and other costs. Recently, American Skandia retained a
consultant to assist it with the systems modifications needed to implement the
remediation plan currently in place. American Skandia has advised Skandia
Insurance Company Ltd. (publ) that a portion of the remediation and related
administrative costs are subject to the indemnification provisions of the
Acquisition Agreement.
American Skandia's litigation and regulatory matters are subject to many
uncertainties, and given their complexity and scope, the outcomes cannot be
predicted. It is possible that the results of operations or the cash flow of
American Skandia in a particular quarterly or annual period could be
materially affected by an ultimate unfavorable resolution of pending
litigation and regulatory matters depending, in part, upon the results of
operations or cash flow for such period. Management believes, however, that
the ultimate outcome of all pending litigation and regulatory matters, after
consideration of applicable reserves and rights to indemnification, should not
have a material adverse effect on American Skandia's financial position.
It should be noted that the judgments, settlements and expenses associated
with many of these lawsuits, administrative and regulatory matters, and
contingencies, including certain claims described above, may, in whole or in
part, after satisfaction of certain retention requirements, fall within the
indemnification obligations of Skandia Insurance Company Ltd. (publ) to
Prudential Financial, Inc. and its subsidiaries under the terms of the
Acquisition Agreement. Those obligations of Skandia Insurance Company Ltd.
(publ) provide for indemnification of certain judgments, settlements, and
costs and expenses associated with lawsuits and other claims against American
Skandia ("matters"), and apply only to matters, or groups of related matters,
for which the costs and expenses exceed $25,000 individually. Additionally,
those obligations only apply to such otherwise indemnifiable losses that
exceed $10 million in the aggregate, subject to reduction for insurance
proceeds, certain accruals and any realized tax benefit applicable to such
amounts, and those obligations do not apply to the extent that such aggregate
exceeds $1 billion. American Skandia is in discussions with Skandia Insurance
Company Ltd. (publ) regarding the satisfaction of the $10 million deductible.
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
How the Unit Price is Determined
Additional Information on Fixed Allocations
. How We Calculate the Market Value Adjustment
Other Tax Rules
90
General Information
. Voting Rights
. Modification
. Deferral of Transactions
. Misstatement of Age or Sex
. Ending the Offer
Annuitization
Experts
Legal Experts
Financial Statements
91
APPENDIX A - CONDENSED FINANCIAL INFORMATION ABOUT SEPARATE ACCOUNT B
Separate Account B consists of multiple Sub-accounts that are available as
investment options for the American Skandia Annuities. Each Sub-account
invests only in a single mutual fund or mutual fund portfolio. All or some of
these Sub-accounts are available as investment options for other variable
annuities we offer pursuant to different prospectuses.
Unit Prices And Numbers Of Units: The following tables show for each Annuity:
(a) the historical Unit Price, corresponding to the Annuity features bearing
the highest and lowest combinations of asset-based charges*, as of the dates
shown, for Units in each of the Sub-accounts of Separate Account B that are
being offered pursuant to this Prospectus**; and (b) the number of Units
outstanding for each such Sub-account as of the dates shown. In the tables,
"BOP" refers to Beginning of Period and "EOP" refers to End of Period. The
period for each year begins on January 1 and ends on December 31. Since
November 18, 2002, we have been determining, on a daily basis, multiple Unit
Prices for each Sub-account of Separate Account B. We compute multiple Unit
Prices because several of our variable annuities invest in the same
Sub-accounts, and these annuities deduct varying charges that correspond to
each combination of the applicable Insurance Charge, Distribution Charge (when
applicable) and the charges for each optional benefit. Where an asset-based
charge corresponding to a particular Sub-account within a new annuity product
is identical to that in the same Sub-account within an existing annuity, the
Unit Price for the new annuity will be identical to that of the existing
annuity. In such cases, we will for reference purposes depict, in the
condensed financial information for the new annuity, Unit Prices of the
existing annuity. The year in which operations commenced in each such
Sub-account is noted in parentheses. To the extent a Sub-account commenced
operations during a particular calendar year, the Unit Price as of the end of
the period reflects only the partial year results from the commencement of
operations until December 31/st/ of the applicable year. When a Unit Price was
first calculated for a particular Sub-account, we set the price of that Unit
at $10.00 per Unit. Thereafter, Unit Prices vary based on market performance.
Unit Prices and Units are provided for Sub-accounts that commenced operations
prior to January 1, 2007.
* Note: While a unit price is reflected for the maximum combination of asset
based charges for each Sub-account, not all Sub-accounts are available if
you elect certain optional benefits.
** The remaining unit values appear in the Statement of Additional
Information, which you may obtain free of charge by sending in the request
form at the end of the Prospectus or contacting us at 1-800-752-6342.
OPTIMUM - Prospectus
- --------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------
AST JP Morgan International Equity
Portfolio
With No Optional Benefits
BOP Unit Value $9.04 $8.24 $7.13 $5.53 6.86 8.99
EOP Unit Value $10.96 $9.04 $8.24 $7.13 5.53 6.86 8.99
Number of Units 1,002,727 1,051,557 553,542 362,254 153,652 136,976 33,897
With LT5, HDV, and EBP
BOP Unit Value $10.57 - - - - -
EOP Unit Value $12.64 $10.57 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair
International Growth (1997)
With No Optional Benefits
BOP Unit Value $18.90 $16.42 $14.32 $10.35 14.1 18.68
EOP Unit Value $22.58 $18.90 $16.42 $14.32 10.35 14.1 18.68
Number of Units 1,664,525 2,113,594 1,953,908 1,166,396 7,064 5,277 6,782
With LT5, HDV, and EBP
BOP Unit Value $11.20 - - - - -
EOP Unit Value $13.19 $11.20 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International
Value
With No Optional Benefits
BOP Unit Value $7.87 $7.01 $5.86 $4.43 5.41 8.08
EOP Unit Value $9.90 $7.87 $7.01 $5.86 4.43 5.41 8.08
Number of Units 593,098 402,497 233,045 91,736 32,967 29,954 20,311
With LT5, HDV, and EBP
BOP Unit Value $10.62 - - - - -
EOP Unit Value $13.19 $10.62 - - - - -
Number of Units - - - - - - -
A-1
- ------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $16.00 $15.97 $17.38 $12.12 18.7 20.25
EOP Unit Value $17.80 $16.00 $15.97 $17.38 12.12 18.7 20.25
Number of Units 111,114 126,824 107,136 145,364 6,331 2,439 978
With LT5, HDV, and EBP
BOP Unit Value $10.35 - - - - -
EOP Unit Value $11.35 $10.35 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap
Growth
formerly, AST DeAM Small-Cap
Growth (1999)
With No Optional Benefits
BOP Unit Value $7.35 $7.41 $6.86 $4.71 6.48 9.17
EOP Unit Value $7.82 $7.35 $7.41 $6.86 4.71 6.48 9.17
Number of Units 344,893 267,925 293,384 258,089 44,611 41,602 35,743
With LT5, HDV, and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $10.74 $10.23 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------
AST Federated Aggressive Growth
(2000)
With No Optional Benefits
BOP Unit Value $10.94 $10.12 $8.33 $4.98 7.12 9.08
EOP Unit Value $12.20 $10.94 $10.12 $8.33 4.98 7.12 9.08
Number of Units 1,165,926 1,386,930 1,169,995 859,909 25,040 10,912 243
With LT5, HDV, and EBP
BOP Unit Value $10.87 - - - - -
EOP Unit Value $11.96 $10.87 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $17.52 $16.64 $14.47 $10.79 12.06 11.41
EOP Unit Value $20.77 $17.52 $16.64 $14.47 10.79 12.06 11.41
Number of Units 1,198,255 1,484,712 1,293,786 962,965 66,744 33,608 15,339
With LT5, HDV, and EBP
BOP Unit Value $10.56 - - - - -
EOP Unit Value $12.35 $10.56 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap Growth
(2000)
With No Optional Benefits
BOP Unit Value $4.60 $4.44 $3.87 $2.98 4.15 7.03
EOP Unit Value $4.83 $4.60 $4.44 $3.87 2.98 4.15 7.03
Number of Units 2,231,991 2,666,933 2,232,502 1,535,565 28,812 17,882 2,473
With LT5, HDV, and EBP
BOP Unit Value $10.49 - - - - -
EOP Unit Value $10.86 $10.49 - - - - -
Number of Units - - - - - - -
- ------------------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap Value
(1993)
With No Optional Benefits
BOP Unit Value $18.55 $16.76 $13.82 $10.26 11.62 12.13
EOP Unit Value $20.28 $18.55 $16.76 $13.82 10.26 11.62 12.13
Number of Units 1,086,861 1,303,740 1,116,503 781,348 69,657 56,219 16,574
With LT5, HDV, and EBP
BOP Unit Value $10.80 - - - - -
EOP Unit Value $11.65 $10.80 - - - - -
Number of Units - - - - - - -
A-2
- --------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- --------------------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap
Growth
With No Optional Benefits
BOP Unit Value $7.12 $6.19 $5.93 $4.86 7.12 8.46
EOP Unit Value $7.43 $7.12 $6.19 $5.93 4.86 7.12 8.46
Number of Units 608,747 512,012 326,194 263,698 106,056 106,762 97,356
With LT5, HDV, and EBP
BOP Unit Value $12.02 - - - - -
EOP Unit Value $12.37 $12.02 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $7.39 $7.04 $6.44 $5.31 7.48 9.68
EOP Unit Value $8.01 $7.39 $7.04 $6.44 5.31 7.48 9.68
Number of Units 758,550 1,025,239 791,823 893,170 112,701 47,656 3,089
With LT5, HDV, and EBP
BOP Unit Value $10.67 - - - - -
EOP Unit Value $11.40 $10.67 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST Marsico Capital Growth (1997)
With No Optional Benefits
BOP Unit Value $10.20 $9.67 $8.46 $6.50 7.8 10.09
EOP Unit Value $10.80 $10.20 $9.67 $8.46 6.5 7.8 10.09
Number of Units 5,983,458 7,048,021 5,717,404 4,075,719 228,033 182,904 114,992
With LT5, HDV, and EBP
BOP Unit Value $10.82 - - - - -
EOP Unit Value $11.30 $10.82 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST AllianceBernstein Core Value
(2001)
With No Optional Benefits
BOP Unit Value $12.79 $12.28 $10.91 $8.61 10.05 -
EOP Unit Value $15.33 $12.79 $12.28 $10.91 8.61 10.05 -
Number of Units 815,109 635,232 603,508 453,569 82,054 18,453 -
With LT5, HDV, and EBP
BOP Unit Value $10.23 - - - - -
EOP Unit Value $12.09 $10.23 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST AllianceBernstein Growth &
Income (1992)
With No Optional Benefits
BOP Unit Value $11.63 $11.24 $10.25 $7.84 10.35 10.53
EOP Unit Value $13.46 $11.63 $11.24 $10.25 7.84 10.35 10.53
Number of Units 3,863,961 5,200,126 4,119,501 3,076,626 142,152 205,232 34,439
With LT5, HDV, and EBP
BOP Unit Value $10.18 - - - - -
EOP Unit Value $11.63 $10.18 - - - - -
Number of Units - - - - - - -
- --------------------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $10.77 $10.25 $8.99 $7.59 9.31 10.32
EOP Unit Value $12.60 $10.77 $10.25 $8.99 7.59 9.31 10.32
Number of Units 680,203 694,885 417,314 204,589 44,419 44,212 8,596
With LT5, HDV, and EBP
BOP Unit Value $10.47 - - - - -
EOP Unit Value $12.08 $10.47 - - - - -
Number of Units - - - - - - -
A-3
- ---------------------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
- ---------------------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond
(1994)
With No Optional Benefits
BOP Unit Value $13.89 $14.73 $13.73 $12.32 10.84 10.7
EOP Unit Value $14.58 $13.89 $14.73 $13.73 12.32 10.84 10.7
Number of Units 836,914 938,585 657,913 289,862 36,987 16,390 -0-
With LT5, HDV, and EBP
BOP Unit Value $9.37 - - - - -
EOP Unit Value $9.70 $9.37 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------------------
AST Lord Abbett Bond-Debenture
(2000)
With No Optional Benefits
BOP Unit Value $12.69 $12.71 $11.98 $10.22 10.3 10.13
EOP Unit Value $13.76 $12.69 $12.71 $11.98 10.22 10.3 10.13
Number of Units 1,196,608 1,294,706 1,012,739 814,135 43,077 16,628 425
With LT5, HDV, and EBP
BOP Unit Value $9.87 - - - - -
EOP Unit Value $10.56 $9.87 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
(1994)
With No Optional Benefits
BOP Unit Value $13.88 $13.72 $13.23 $12.72 11.8 10.97
EOP Unit Value $14.22 $13.88 $13.72 $13.23 12.72 11.8 10.97
Number of Units 2,004,498 1,924,370 3,074,732 2,301,863 362,294 275,317 37,918
With LT5, HDV, and EBP
BOP Unit Value $10.07 - - - - -
EOP Unit Value $10.17 $10.07 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity Bond
(1995)
With No Optional Benefits
BOP Unit Value $12.22 $12.18 $12.08 $10.09 11.29 10.59
EOP Unit Value $12.53 $12.22 $12.18 $12.08 10.09 11.29 10.59
Number of Units 2,687,532 2,996,257 2,189,975 956,856 38,260 112,948 1,940
With LT5, HDV, and EBP
BOP Unit Value $9.98 - - - - -
EOP Unit Value $10.09 $9.98 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $10.62 $10.46 $10.51 $10.57 10.57 10.32
EOP Unit Value $10.96 $10.62 $10.46 $10.51 10.57 10.57 10.32
Number of Units 3,505,960 3,179,376 1,663,940 1,245,396 403,604 179,509 29,567
With LT5, HDV, and EBP
BOP Unit Value $10.02 - - - - -
EOP Unit Value $10.21 $10.02 - - - - -
Number of Units - - - - - - -
- ---------------------------------------------------------------------------------------------------------
Evergreen VA - International Equity
(2000)
With No Optional Benefits
BOP Unit Value $14.10 $12.31 $10.46 - - -
EOP Unit Value $17.15 $14.10 $12.31 $10.46 - - -
Number of Units 182,002 130,750 62,400 24,847 - - -
With LT5, HDV, and EBP
BOP Unit Value $10.92 - - - - -
EOP Unit Value $13.09 $10.92 - - - - -
Number of Units - - - - - - -
A-4
---------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002 2001 2000
---------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $10.00 $9.75 $9.21 - 9.04 -
EOP Unit Value $10.47 $10.00 $9.75 $9.21 - 9.04 -
Number of Units 19,700 18,356 26,849 15,743 - -0- -
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - - - -
EOP Unit Value $10.87 $10.53 - - - - -
Number of Units - - - - - - -
OPTIMUM FOUR - Prospectus
- -----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------
AST JP Morgan International
Equity Portfolio
With No Optional Benefits
BOP Unit Value $13.84 $12.67 $11.00 $8.56
EOP Unit Value $16.71 $13.84 $12.67 $11.00 $8.56
Number of Units 4,715,269 5,621,836 3,227,381 2,415,394 2,569,506
With LT5, HDV and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.55 $10.53 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair
International Growth (1997)
With No Optional Benefits
BOP Unit Value $17.54 $15.30 $13.39 $9.72
EOP Unit Value $20.87 $17.54 $15.30 $13.39 $9.72
Number of Units 9,628,446 12,141,522 11,265,469 5,547,558 835,523
With LT5, HDV and EBP
BOP Unit Value $11.16 - - -
EOP Unit Value $13.10 $11.16 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International
Value
With No Optional Benefits
BOP Unit Value $14.36 $12.84 $10.79 $8.19
EOP Unit Value $18.00 $14.36 $12.84 $10.79 $8.19
Number of Units 3,305,620 2,013,544 1,897,469 1,201,268 269,995
With LT5, HDV and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $13.09 $10.59 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $9.04 $9.05 $9.89 $6.92
EOP Unit Value $10.01 $9.04 $9.05 $9.89 $6.92
Number of Units 1,867,490 2,134,730 2,242,129 3,292,593 1,970,250
With LT5, HDV and EBP
BOP Unit Value $10.31 - - -
EOP Unit Value $11.27 $10.31 - - -
Number of Units - - - - -
A-5
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap
Growth
formerly, AST DeAM Small-Cap
Growth (1999)
With No Optional Benefits
BOP Unit Value $11.83 $11.98 $11.13 $7.67
EOP Unit Value $12.53 $11.83 $11.98 $11.13 $7.67
Number of Units 1,174,654 1,385,430 1,618,719 1,682,193 639,695
With LT5, HDV and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.66 $10.20 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Federated Aggressive Growth
(2000)
With No Optional Benefits
BOP Unit Value $16.60 $15.42 $12.74 $7.64
EOP Unit Value $18.43 $16.60 $15.42 $12.74 $7.64
Number of Units 4,641,175 5,464,856 4,808,453 3,085,373 1,255,415
With LT5, HDV and EBP
BOP Unit Value $10.84 - - -
EOP Unit Value $11.87 $10.84 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $14.91 $14.22 $12.42 $9.30
EOP Unit Value $17.61 $14.91 $14.22 $12.42 $9.30
Number of Units 9,098,178 11,285,282 10,785,030 10,183,346 6,141,523
With LT5, HDV and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.26 $10.53 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap
Growth (2000)
With No Optional Benefits
BOP Unit Value $12.16 $11.80 $10.31 $7.97
EOP Unit Value $12.71 $12.16 $11.80 $10.31 $7.97
Number of Units 4,189,111 5,391,424 4,375,813 3,027,057 1,273,118
With LT5, HDV and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.78 $10.46 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap
Value (1993)
With No Optional Benefits
BOP Unit Value $15.99 $14.51 $12.01 $8.96
EOP Unit Value $17.42 $15.99 $14.51 $12.01 $8.96
Number of Units 9,574,218 12,260,007 11,461,684 8,530,129 5,118,558
With LT5, HDV and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $11.56 $10.76 - - -
Number of Units - - - - -
A-6
- --------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap
Growth
With No Optional Benefits
BOP Unit Value $10.81 $9.44 $9.08 $7.46
EOP Unit Value $11.23 $10.81 $9.44 $9.08 $7.46
Number of Units 4,132,529 3,925,740 2,378,881 2,098,873 1,869,353
With LT5, HDV and EBP
BOP Unit Value $11.98 - - -
EOP Unit Value $12.28 $11.98 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $10.43 $9.97 $9.16 $7.58
EOP Unit Value $11.25 $10.43 $9.97 $9.16 $7.58
Number of Units 4,572,301 5,915,443 4,529,834 4,784,269 2,930,432
With LT5, HDV and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.32 $10.64 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Marsico Capital Growth
(1997)
With No Optional Benefits
BOP Unit Value $12.88 $12.26 $10.78 $8.32
EOP Unit Value $13.59 $12.88 $12.26 $10.78 $8.32
Number of Units 26,497,526 32,140,125 28,117,310 20,138,164 10,144,317
With LT5, HDV and EBP
BOP Unit Value $10.78 - - -
EOP Unit Value $11.21 $10.78 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST AllianceBernstein Core
Value (2001)
With No Optional Benefits
BOP Unit Value $12.86 $12.39 $11.06 $8.76
EOP Unit Value $15.34 $12.86 $12.39 $11.06 $8.76
Number of Units 5,318,094 4,311,857 4,643,022 3,621,862 6,005,922
With LT5, HDV and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $12.00 $10.20 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST AllianceBernstein Growth
& Income (1992)
With No Optional Benefits
BOP Unit Value $11.81 $11.46 $10.50 $8.06
EOP Unit Value $13.62 $11.81 $11.46 $10.50 $8.06
Number of Units 23,350,650 31,190,346 25,850,506 21,264,670 6,667,373
With LT5, HDV and EBP
BOP Unit Value $10.15 - - -
EOP Unit Value $11.55 $10.15 - - -
Number of Units - - - - -
A-7
- --------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $11.69 $11.17 $9.83 $8.34
EOP Unit Value $13.62 $11.69 $11.17 $9.83 $8.34
Number of Units 5,568,043 5,245,455 3,717,848 2,647,064 2,110,071
With LT5, HDV and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.99 $10.44 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond
(1994)
With No Optional Benefits
BOP Unit Value $12.64 $13.45 $12.59 $11.34
EOP Unit Value $13.21 $12.64 $13.45 $12.59 $11.34
Number of Units 6,093,700 6,261,824 4,717,822 2,962,471 1,739,313
With LT5, HDV and EBP
BOP Unit Value $9.34 - - -
EOP Unit Value $9.63 $9.34 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Lord Abbett
Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.20 $12.26 $11.61 $9.94
EOP Unit Value $13.17 $12.20 $12.26 $11.61 $9.94
Number of Units 10,147,675 12,427,806 8,369,008 7,751,236 4,146,530
With LT5, HDV and EBP
BOP Unit Value $9.84 - - -
EOP Unit Value $10.48 $9.84 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
(1994)
With No Optional Benefits
BOP Unit Value $11.40 $11.31 $10.95 $10.57
EOP Unit Value $11.63 $11.40 $11.31 $10.95 $10.57
Number of Units 21,700,661 22,436,395 33,208,757 26,287,388 20,544,075
With LT5, HDV and EBP
BOP Unit Value $10.04 - - -
EOP Unit Value $10.10 $10.04 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity
Bond (1995)
With No Optional Benefits
BOP Unit Value $10.54 $10.55 $10.51 $10.34
EOP Unit Value $10.76 $10.54 $10.55 $10.51 $10.34
Number of Units 22,394,558 28,031,653 21,299,789 15,242,856 11,274,642
With LT5, HDV and EBP
BOP Unit Value $9.94 - - -
EOP Unit Value $10.01 $9.94 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $9.88 $9.78 $9.86 $9.96
EOP Unit Value $10.16 $9.88 $9.78 $9.86 $9.96
Number of Units 46,325,237 42,442,274 29,870,585 32,730,501 36,255,772
With LT5, HDV and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $10.13 $9.99 - - -
Number of Units - - - - -
A-8
- -----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------
Evergreen VA - International Equity (2000)
With No Optional Benefits
BOP Unit Value $15.59 $13.66 $11.65 $8.15
EOP Unit Value $18.88 $15.59 $13.66 $11.65 $8.15
Number of Units 1,081,552 689,816 414,631 189,143 113,389
With LT5, HDV and EBP
BOP Unit Value $10.88 - - -
EOP Unit Value $13.00 $10.88 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $11.53 $11.29 $10.71 $7.78
EOP Unit Value $12.03 $11.53 $11.29 $10.71 $7.78
Number of Units 241,307 281,775 570,123 404,789 39,943
With LT5, HDV and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $10.79 $10.50 - - -
Number of Units - - - - -
OPTIMUM PLUS - Prospectus
- -----------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- -----------------------------------------------------------------------------------------
AST JP Morgan International
Equity Portfolio
With No Optional Benefits
BOP Unit Value $13.84 $12.67 $11.00 $8.56
EOP Unit Value $16.71 $13.84 $12.67 $11.00 $8.56
Number of Units 4,715,269 5,621,836 3,227,381 2,415,394 2,569,506
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.55 $10.53 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST International Growth
formerly, AST William Blair
International Growth (1997)
With No Optional Benefits
BOP Unit Value $17.54 $15.30 $13.39 $9.72
EOP Unit Value $20.87 $17.54 $15.30 $13.39 $9.72
Number of Units 9,628,446 12,141,522 11,265,469 5,547,558 835,523
With LT5, HDV, and EBP
BOP Unit Value $11.16 - - -
EOP Unit Value $13.10 $11.16 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST International Value
formerly, AST LSV International
Value
With No Optional Benefits
BOP Unit Value $14.36 $12.84 $10.79 $8.19
EOP Unit Value $18.00 $14.36 $12.84 $10.79 $8.19
Number of Units 3,305,620 2,013,544 1,897,469 1,201,268 269,995
With LT5, HDV, and EBP
BOP Unit Value $10.59 - - -
EOP Unit Value $13.09 $10.59 - - -
Number of Units - - - - -
- -----------------------------------------------------------------------------------------
AST Small Cap Growth
With No Optional Benefits
BOP Unit Value $9.04 $9.05 $9.89 $6.92
EOP Unit Value $10.01 $9.04 $9.05 $9.89 $6.92
Number of Units 1,867,490 2,134,730 2,242,129 3,292,593 1,970,250
With LT5, HDV, and EBP
BOP Unit Value $10.31 - - -
EOP Unit Value $11.27 $10.31 - - -
Number of Units - - - - -
A-9
- ------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------
AST Neuberger Berman Small-Cap
Growth
formerly, AST DeAM Small-Cap
Growth (1999)
With No Optional Benefits
BOP Unit Value $11.83 $11.98 $11.13 $7.67
EOP Unit Value $12.53 $11.83 $11.98 $11.13 $7.67
Number of Units 1,174,654 1,385,430 1,618,719 1,682,193 639,695
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $10.66 $10.20 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Federated Aggressive Growth
(2000)
With No Optional Benefits
BOP Unit Value $16.60 $15.42 $12.74 $7.64
EOP Unit Value $18.43 $16.60 $15.42 $12.74 $7.64
Number of Units 4,641,175 5,464,856 4,808,453 3,085,373 1,255,415
With LT5, HDV, and EBP
BOP Unit Value $10.84 - - -
EOP Unit Value $11.87 $10.84 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Small-Cap Value (1997)
With No Optional Benefits
BOP Unit Value $14.91 $14.22 $12.42 $9.30
EOP Unit Value $17.61 $14.91 $14.22 $12.42 $9.30
Number of Units 9,098,178 11,285,282 10,785,030 10,183,346 6,141,523
With LT5, HDV, and EBP
BOP Unit Value $10.53 - - -
EOP Unit Value $12.26 $10.53 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Goldman Sachs Mid-Cap
Growth (2000)
With No Optional Benefits
BOP Unit Value $12.16 $11.80 $10.31 $7.97
EOP Unit Value $12.71 $12.16 $11.80 $10.31 $7.97
Number of Units 4,189,111 5,391,424 4,375,813 3,027,057 1,273,118
With LT5, HDV, and EBP
BOP Unit Value $10.46 - - -
EOP Unit Value $10.78 $10.46 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST Neuberger Berman Mid-Cap
Value (1993)
With No Optional Benefits
BOP Unit Value $15.99 $14.51 $12.01 $8.96
EOP Unit Value $17.42 $15.99 $14.51 $12.01 $8.96
Number of Units 9,574,218 12,260,007 11,461,684 8,530,129 5,118,558
With LT5, HDV, and EBP
BOP Unit Value $10.76 - - -
EOP Unit Value $11.56 $10.76 - - -
Number of Units - - - - -
- ------------------------------------------------------------------------------------------
AST T. Rowe Price Large-Cap
Growth
With No Optional Benefits
BOP Unit Value $10.81 $9.44 $9.08 $7.46
EOP Unit Value $11.23 $10.81 $9.44 $9.08 $7.46
Number of Units 4,132,529 3,925,740 2,378,881 2,098,873 1,869,353
With LT5, HDV, and EBP
BOP Unit Value $11.98 - - -
EOP Unit Value $12.28 $11.98 - - -
Number of Units - - - - -
A-10
- --------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
AST MFS Growth (1999)
With No Optional Benefits
BOP Unit Value $10.43 $9.97 $9.16 $7.58
EOP Unit Value $11.25 $10.43 $9.97 $9.16 $7.58
Number of Units 4,572,301 5,915,443 4,529,834 4,784,269 2,930,432
With LT5, HDV, and EBP
BOP Unit Value $10.64 - - -
EOP Unit Value $11.32 $10.64 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Marsico Capital Growth
(1997)
With No Optional Benefits
BOP Unit Value $12.88 $12.26 $10.78 $8.32
EOP Unit Value $13.59 $12.88 $12.26 $10.78 $8.32
Number of Units 26,497,526 32,140,125 28,117,310 20,138,164 10,144,317
With LT5, HDV, and EBP
BOP Unit Value $10.78 - - -
EOP Unit Value $11.21 $10.78 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST AllianceBernstein Core
Value (2001)
With No Optional Benefits
BOP Unit Value $12.86 $12.39 $11.06 $8.76
EOP Unit Value $15.34 $12.86 $12.39 $11.06 $8.76
Number of Units 5,318,094 4,311,857 4,643,022 3,621,862 6,005,922
With LT5, HDV, and EBP
BOP Unit Value $10.20 - - -
EOP Unit Value $12.00 $10.20 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST AllianceBernstein
Growth & Income (1992)
With No Optional Benefits
BOP Unit Value $11.81 $11.46 $10.50 $8.06
EOP Unit Value $13.62 $11.81 $11.46 $10.50 $8.06
Number of Units 23,350,650 31,190,346 25,850,506 21,264,670 6,667,373
With LT5, HDV, and EBP
BOP Unit Value $10.15 - - -
EOP Unit Value $11.55 $10.15 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Large Cap Value
With No Optional Benefits
BOP Unit Value $11.69 $11.17 $9.83 $8.34
EOP Unit Value $13.62 $11.69 $11.17 $9.83 $8.34
Number of Units 5,568,043 5,245,455 3,717,848 2,647,064 2,110,071
With LT5, HDV, and EBP
BOP Unit Value $10.44 - - -
EOP Unit Value $11.99 $10.44 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST T. Rowe Price Global Bond
(1994)
With No Optional Benefits
BOP Unit Value $12.64 $13.45 $12.59 $11.34
EOP Unit Value $13.21 $12.64 $13.45 $12.59 $11.34
Number of Units 6,093,700 6,261,824 4,717,822 2,962,471 1,739,313
With LT5, HDV, and EBP
BOP Unit Value $9.34 - - -
EOP Unit Value $9.63 $9.34 - - -
Number of Units - - - - -
A-11
- --------------------------------------------------------------------------------------------
Sub-account 2006 2005 2004 2003 2002
- --------------------------------------------------------------------------------------------
AST Lord Abbett
Bond-Debenture (2000)
With No Optional Benefits
BOP Unit Value $12.20 $12.26 $11.61 $9.94
EOP Unit Value $13.17 $12.20 $12.26 $11.61 $9.94
Number of Units 10,147,675 12,427,806 8,369,008 7,751,236 4,146,530
With LT5, HDV, and EBP
BOP Unit Value $9.84 - - -
EOP Unit Value $10.48 $9.84 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST PIMCO Total Return Bond
(1994)
With No Optional Benefits
BOP Unit Value $11.40 $11.31 $10.95 $10.57
EOP Unit Value $11.63 $11.40 $11.31 $10.95 $10.57
Number of Units 21,700,661 22,436,395 33,208,757 26,287,388 20,544,075
With LT5, HDV, and EBP
BOP Unit Value $10.04 - - -
EOP Unit Value $10.10 $10.04 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST PIMCO Limited Maturity
Bond (1995)
With No Optional Benefits
BOP Unit Value $10.54 $10.55 $10.51 $10.34
EOP Unit Value $10.76 $10.54 $10.55 $10.51 $10.34
Number of Units 22,394,558 28,031,653 21,299,789 15,242,856 11,274,642
With LT5, HDV, and EBP
BOP Unit Value $9.94 - - -
EOP Unit Value $10.01 $9.94 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
AST Money Market (1992)
With No Optional Benefits
BOP Unit Value $9.88 $9.78 $9.86 $9.96
EOP Unit Value $10.16 $9.88 $9.78 $9.86 $9.96
Number of Units 46,325,237 42,442,274 29,870,585 32,730,501 36,255,772
With LT5, HDV, and EBP
BOP Unit Value $9.99 - - -
EOP Unit Value $10.13 $9.99 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
Evergreen VA - International
Equity (2000)
With No Optional Benefits
BOP Unit Value $15.59 $13.66 $11.65 $8.15
EOP Unit Value $18.88 $15.59 $13.66 $11.65 $8.15
Number of Units 1,081,552 689,816 414,631 189,143 113,389
With LT5, HDV, and EBP
BOP Unit Value $10.88 - - -
EOP Unit Value $13.00 $10.88 - - -
Number of Units - - - - -
- --------------------------------------------------------------------------------------------
Evergreen VA - Omega (2000)
With No Optional Benefits
BOP Unit Value $11.53 $11.29 $10.71 $7.78
EOP Unit Value $12.03 $11.53 $11.29 $10.71 $7.78
Number of Units 241,307 281,775 570,123 404,789 39,943
With LT5, HDV, and EBP
BOP Unit Value $10.50 - - -
EOP Unit Value $10.79 $10.50 - - -
Number of Units - - - - -
A-12
APPENDIX B - CALCULATION OF OPTIONAL DEATH BENEFITS
Examples of Enhanced Beneficiary Protection Optional Death Benefit Calculation
The following are examples of how the Enhanced Beneficiary Protection Optional
Death Benefit is calculated. Each example assumes that a $50,000 initial
Purchase Payment is made. Each example assumes that there is one Owner who is
age 50 on the Issue Date and that all Account Value is maintained in the
variable investment options. The formula for determining the Enhanced
Beneficiary Protection Optional Death Benefit is as follows:
Growth = Account Value of variable investment minus Purchase Payments -
options plus Interim Value of Fixed proportional withdrawals
Allocations (no MVA applies)
Example with market increase
Assume that the Owner has made no withdrawals and that the Account Value has
been increasing due to positive market performance. On the date we receive due
proof of death, the Account Value is $75,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$75,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($75,000) PLUS 40% of the
"Growth" under the Annuity.
Growth =$75,000 - [$50,000 - $0]
=$25,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
=$25,000 * 0.40
=$10,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$85,000
Examples with market decline
Assume that the Owner has made no withdrawals and that the Account Value has
been decreasing due to declines in market performance. On the date we receive
due proof of death, the Account Value is $45,000. The basic Death Benefit is
calculated as Purchase Payments minus proportional withdrawals, or Account
Value, which ever is greater. Therefore, the basic Death Benefit is equal to
$50,000. The Enhanced Beneficiary Protection Optional Death Benefit is equal
to the amount payable under the basic Death Benefit ($50,000) PLUS the
"Growth" under the Annuity.
Growth =$45,000 - [$50,000 - $0]
=$-5,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
NO BENEFIT IS PAYABLE
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$50,000
In this example you would receive no additional benefit from purchasing the
Enhanced Beneficiary Protection Optional Death Benefit.
B-1
Example with market increase and withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 5 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $90,000. The basic Death Benefit is calculated as Purchase
Payments minus proportional withdrawals, or Account Value, which ever is
greater. Therefore, the basic Death Benefit is equal to $90,000. The Enhanced
Beneficiary Protection Optional Death Benefit is equal to the amount payable
under the basic Death Benefit ($90,000) PLUS 40% of the "Growth" under the
Annuity.
Growth =$90,000 - [$50,000 - ($50,000 * $15,000/$75,000)]
=$90,000 - [$50,000 - $10,000]
=$90,000 - $40,000
=$50,000
Benefit Payable under Enhanced Beneficiary Protection Optional Death
Benefit = 40% of Growth
=$50,000 * 0.40
=$20,000
Benefit Payable under Basic Death Benefit PLUS Enhanced Beneficiary
Protection Optional Death Benefit
=$110,000
Examples of Highest Anniversary Value Death Benefit Calculation
The following are examples of how the Highest Anniversary Value Death Benefit
is calculated. Each example assumes an initial Purchase Payment of $50,000.
Each example assumes that there is one Owner who is age 70 on the Issue Date
and that all Account Value is maintained in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
date we receive due proof of death, the Account Value is $75,000; however, the
Anniversary Value on the 5/th/ anniversary of the Issue Date was $90,000.
Assume as well that the Owner has died before the Death Benefit Target Date.
The Death Benefit is equal to the greater of the Highest Anniversary Value or
the basic Death Benefit. The Death Benefit would be the Highest Anniversary
Value ($90,000) because it is greater than the amount that would have been
payable under the basic Death Benefit ($75,000).
Example with withdrawals
Assume that the Account Value has been increasing due to positive market
performance and the Owner made a withdrawal of $15,000 in Annuity Year 7 when
the Account Value was $75,000. On the date we receive due proof of death, the
Account Value is $80,000; however, the Anniversary Value on the 5/th/
anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Death Benefit is equal to the
greater of the Highest Anniversary Value or the basic Death Benefit.
Highest Anniversary Value =$90,000 - [$90,000 * $15,000/$75,000]
=$90,000 - $18,000
=$72,000
Basic Death Benefit =max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
=max [$80,000, $40,000]
=$80,000
The Death Benefit therefore is $80,000.
B-2
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) * $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) * $5,000/$70,000}]
=max [$75,000, $60,357]
=$75,000
The Death Benefit therefore is $88,214.
Examples of Combination 5% Roll-up and Highest Anniversary Value Death Benefit
Calculation
The following are examples of how the Combination 5% Roll-Up and Highest
Anniversary Value Death Benefit are calculated. Each example assumes an
initial Purchase Payment of $50,000. Each example assumes that there is one
Owner who is age 70 on the Issue Date and that all Account Value is maintained
in the variable investment options.
Example with market increase and death before Death Benefit Target Date
Assume that the Owner's Account Value has generally been increasing due to
positive market performance and that no withdrawals have been made. On the
7/th/ anniversary of the Issue Date we receive due proof of death, at which
time the Account Value is $75,000; however, the Anniversary Value on the 5/th/
anniversary of the Issue Date was $90,000. Assume as well that the Owner has
died before the Death Benefit Target Date. The Roll-Up Value is equal to
initial Purchase Payment accumulated at 5% for 6 years, or $67,005. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit. The Death Benefit would be the Highest
Anniversary Value ($90,000) because it is greater than both the Roll-Up Value
($67,005) and the amount that would have been payable under the basic Death
Benefit ($75,000).
Example with withdrawals
Assume that the Owner made a withdrawal of $5,000 on the 6/th/ anniversary of
the Issue Date when the Account Value was $45,000. The Roll-Up Value on the
6/th/ anniversary of the Issue Date is equal to initial Purchase Payment
accumulated at 5% for 6 years, or $67,005. The 5% Dollar-for-Dollar Withdrawal
Limit for the 7/th/ annuity year is equal to 5% of the Roll-Up Value as of the
6/th/ anniversary of the Issue Date, or $3,350. Therefore, the remaining
$1,650 of the withdrawal results in a proportional reduction to the Roll-Up
Value. On the 7/th/ anniversary of the Issue Date we receive due proof of
death, at which time the Account Value is $43,000; however, the Anniversary
Value on the 2/nd/ anniversary of the Issue Date was $70,000. Assume as well
that the Owner has died before the Death Benefit Target Date. The Death
Benefit is equal to the greatest of the Roll-Up Value, Highest Anniversary
Value or the basic Death Benefit.
Roll-Up Value ={(67,005 - $3,350) - [($67,005 - $3,350) * $1,650/($45,000 - $3,350)]} * 1.05
=($63,655 - $2,522) * 1.05
=$64,190
Highest Anniversary Value =$70,000 - [$70,000 * $5,000/$45,000]
=$70,000 - $7,778
=$62,222
Basic Death Benefit =max [$43,000, $50,000 - ($50,000 * $5,000/$45,000)]
=max [$43,000, $44,444]
=$44,444
The Death Benefit therefore is $64,190.
B-3
Example with death after Death Benefit Target Date
Assume that the Owner has not made any withdrawals prior to the Death Benefit
Target Date. Further assume that the Owner dies after the Death Benefit Target
Date, when the Account Value is $75,000. The Roll-Up Value on the Death
Benefit Target Date (the contract anniversary on or following the Owner's
80/th/ birthday) is equal to initial Purchase Payment accumulated at 5% for 10
years, or $81,445. The Highest Anniversary Value on the Death Benefit Target
Date was $85,000; however, following the Death Benefit Target Date, the Owner
made a Purchase Payment of $15,000 and later had taken a withdrawal of $5,000
when the Account Value was $70,000. The Death Benefit is equal to the greatest
of the Roll-Up Value, Highest Anniversary Value or the basic Death Benefit as
of the Death Benefit Target Date; each increased by subsequent Purchase
Payments and reduced proportionally for subsequent withdrawals.
Roll-Up Value =$81,445 + $15,000 - [($81,445 + 15,000) * $5,000/$70,000]
=$81,445 + $15,000 - $6,889
=$89,556
Highest Anniversary Value =$85,000 + $15,000 - [($85,000 + 15,000) * $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) * $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 * $15,000/$75,000]
=$90,000 - $18,000
=$72,000
Basic Death Benefit =max [$80,000, $50,000 - ($50,000 * $15,000/$75,000)]
=max [$80,000, $40,000]
=$80,000
The Death Benefit therefore is $80,000.
B-4
APPENDIX C - ADDITIONAL INFORMATION ON ASSET ALLOCATION PROGRAMS
PROGRAM RULES
. You can elect an asset allocation program provided by Linsco/Private
Ledger, Corp, ("LPL"), the firm selling the Annuity. Under the program,
the Sub-accounts for each asset class in each model portfolio are
designated based on LPL's evaluation of available Sub-accounts. If you
elect the Highest Daily Lifetime Five Benefit ("HD5"), the Lifetime Five
Benefit ("LT5"), Spousal Lifetime Five Benefit ("SLT5") or the Highest
Daily Value Death Benefit ("HDV"), you must enroll in one of the eligible
model portfolios. Asset allocation is a sophisticated method of
diversification that allocates assets among asset classes in order to
manage investment risk and potentially enhance returns over the long
term. However, asset allocation does not guarantee a profit or protect
against a loss.
. American Skandia does not design the program or the models, and it is not
responsible for the program or the models. American Skandia does not
provide investment advice and is responsible only for administering the
model you select.
. Please see your program materials for a detailed description of LPL's
asset allocation program including the available model portfolios. You
can obtain these materials from your LPL Financial Professional.
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 with your LPL Financial Professional. 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.
. Owner Changes in Choice of Model Portfolio: Generally, 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. Restrictions and limitations may apply, see LPL
program materials for details.
TERMINATION OR MODIFICATION OF THE ASSET ALLOCATION PROGRAM:
. You may request to terminate your asset allocation program at any time
unless you have elected an optional benefit that requires that you
maintain your Account Value in the asset allocation program. Any
termination will be effective on the date that American Skandia receives
your termination request in good order. If you move your account from LPL
to another service provider and decide to terminate your asset allocation
and you have elected HD5, LT5, SLT5 or HDV, termination of your asset
allocation program must coincide with enrollment in a then currently
available and approved asset allocation program or other approved option.
LPL reserves the right to terminate or modify the asset allocation
program at any time. American Skandia reserves the right to change the
way in which we administer the program and to terminate our
administration of the program.
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
APPENDIX D - SELECTING THE VARIABLE ANNUITY THAT'S RIGHT FOR YOU
American Skandia Life Assurance Corporation offers several deferred variable
annuity products. Each annuity has different features and benefits that may be
appropriate for you based on your individual financial situation and how you
intend to use the annuity. Not all of these annuities may be available to you,
depending on your state of residence and/or the broker-dealer through which
your annuity was sold. You can verify which of these annuities is available to
you by speaking to your Financial Professional or calling 1-800-752-6342.
The different features and benefits may include variations on your ability to
access funds in your annuity without the imposition of a withdrawal charge as
well as different ongoing fees and charges you pay to stay in the contract.
Additionally, differences may exist on various optional benefits such as
guaranteed living benefits or death benefit protection.
Among the factors you should consider when choosing which annuity product may
be most appropriate for your individual needs are the following:
.. Your age;
.. The amount of your investment and any planned future deposits into the
annuity;
.. How long you intend to hold the annuity (also referred to as investment
time horizon);
.. Your desire to make withdrawals from the annuity; and the timing thereof;
.. Your investment return objectives;
.. The effect of optional benefits that may be elected,
.. The value of being able to "lock-in" growth in your annuity after the
initial withdrawal charge period for purposes of calculating the death
benefit payable from the annuity; and
.. Your desire to minimize costs and/or maximize return associated with the
annuity.
The following chart outlines some of the different features for each actively
sold American Skandia Annuity offered exclusively through Linsco/Private
Ledger. The availability of optional features, such as those noted in the
chart, may increase the cost of the annuity. Therefore you should carefully
consider which features you plan to use when selecting your annuity. You
should also consider the investment objectives, risks, charges and expenses of
an investment carefully before investing.
In addition, the hypothetical illustrations below reflect the account value
and surrender value of each variable annuity over a variety of holding
periods. These charts are meant to reflect how your annuities can grow or
decrease depending on market conditions and the comparable value of each of
the annuities (which reflects the charges associated with the annuities) under
the assumptions noted.
AMERICAN SKANDIA ANNUITY PRODUCT COMPARISON
Below is a summary of American Skandia's actively sold annuity products
offered exclusively through Linsco/Private Ledger. You should consider the
investment objectives, risks, charges and expenses of an investment in any
Annuity carefully before investing. The prospectus for the Annuities as well
as the underlying portfolio prospectuses contain this and other information
about the variable annuities and underlying investment options. Your
registered Financial Professional can provide you with prospectuses for the
Annuities and the underlying portfolios and can guide you through Selecting
the Variable Annuity That's Right for You, and help you decide upon the
Annuity that would be most advantageous for you given your individual needs.
Please read the prospectuses carefully before investing.
D-1
- ----------------------------------------------------------------------------------------------------------------
OPTIMUM FOUR OPTIMUM OPTIMUM PLUS
- ----------------------------------------------------------------------------------------------------------------
Minimum Investment $10,000 $1,000 $10,000
- ----------------------------------------------------------------------------------------------------------------
Maximum Issue Age 85 80 75
- ----------------------------------------------------------------------------------------------------------------
Contingent Deferred Sales 4 Years 8 Years 10 Years
Charge Schedule (8.5%, 8%, 7%, 6%) (7.5%, 7%, 6.5%, 6%, (9%, 9%, 8%, 7%, 6%,
5%, 4%, 3%, 2%) 5%, 4%, 3%, 2%, 1%)
- ----------------------------------------------------------------------------------------------------------------
Insurance and Distribution 1.65% 1.25% years 1-8; 0.65% 1.65% years 1-10; 0.65%
Charge years 9+ years 11+
- ----------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee Lesser of $35 or Lesser of $35 or Lesser of $35 or
2% of Account Value* 2% of Account Value* 2% of Account Value
- ----------------------------------------------------------------------------------------------------------------
Contract Credit Yes. Generally, we apply Yes. Generally, we apply Yes. The amount of the
a Loyalty Credit to your a Loyalty Credit to your credit applied to a
Annuity's Account Annuity's Account Purchase Payment is
Value at the end of your Value at the end of your based on the year the
fifth contract year (i.e., fifth contract year (i.e., Purchase Payment is
on your fifth Contract on your fifth Contract received, for the first 6
Anniversary). The Anniversary). The years of the contract as
Loyalty Credit is equal Loyalty Credit is equal follows:
to 2.75% of total to 0.50% of total the credit percentages for
Purchase Payments made Purchase Payments made each year, starting with
during the first four during the first four the first, are 6.50%,
contract years less the contract years less the 5.00%, 4.00%, 3.00%,
cumulative amount of cumulative amount of 2.00%, and 1.00%.
withdrawals made withdrawals made Recaptured in certain
(including the deduction (including the deduction circumstances
of any CDSC amounts) of any CDSC amounts)
through the fifth through the fifth
Contract Anniversary Contract Anniversary
- ----------------------------------------------------------------------------------------------------------------
Fixed Allocation (early Fixed Allocation Fixed Allocation Fixed Allocation
withdrawals are subject to a Available (currently Available (currently Available (currently
Market Value Adjustment) offering durations of: offering durations of: offering durations of:
1,2,3,5,7,10 years) 1,2,3,5,7,10 years) 1,2,3,5,7,10 years)
- ----------------------------------------------------------------------------------------------------------------
Variable Investment Options See "Investment See "Investment See "Investment
Options" section of Options" section of Options" section of
Prospectus. Not all Prospectus. Not all Prospectus. Not all
options available with options available with options available with
certain optional benefits. certain optional benefits. certain optional benefits.
- ----------------------------------------------------------------------------------------------------------------
Basic Death Benefit The greater of: Purchase The greater of: Purchase The greater of: Purchase
Payments less Payments less Payments less
proportional withdrawals proportional withdrawals proportional withdrawals
or account value (no or account value (no or account value (no
MVA Applied). MVA Applied). MVA Applied) less an
amount equal to the
credits applied within the
12 months prior to date
of death.
- ----------------------------------------------------------------------------------------------------------------
Optional Death Benefits (for an Enhanced Beneficiary EBP II, HDV, HAV, EBP II, HDV, HAV,
additional cost)/ 1/ Protection (EBPII) Combo 5% Combo 5%
Highest Daily Value Roll-up/HAV Roll-up/HAV
(HDV)
Highest Anniversary
Value (HAV)
Combo 5% Roll
Up/HAV
- ----------------------------------------------------------------------------------------------------------------
Living Benefits (for an GRO/ GRO Plus, GRO/ GRO Plus, GRO/ GRO Plus,
additional cost)/ 2/ GMWB, GMIB, GMWB, GMIB, GMWB, GMIB,
Lifetime Five, Spousal Lifetime Five, Spousal Lifetime Five, Spousal
Lifetime Five, Highest Lifetime Five, Highest Lifetime Five, Highest
Daily Lifetime Five Daily Lifetime Five Daily Lifetime Five
- ----------------------------------------------------------------------------------------------------------------
Annuity Rewards/ 3/ Available after initial Available after initial Available after initial
withdrawal period withdrawal period withdrawal period
D-2
HYPOTHETICAL ILLUSTRATION
The following examples outline the value of each annuity as well as the amount
that would be available to an investor as a result of full surrender at the
end of each of the Annuity. The values shown below are based on the following
assumptions:
An initial investment of $100,000 is made into each Annuity earning a gross
rate of return of 0% and 6% respectively.
.. No subsequent deposits or withdrawals are made from the Annuity.
.. The hypothetical gross rates of return are reduced by the arithmetic
average of the fees and expenses of the underlying portfolios and the
charges that are deducted from the Annuity at the Separate Account level as
follows/4/:
.. 0.94% based on the fees and expenses of the underlying portfolios as of
December 31, 2006. The arithmetic average of all fund expenses is computed
by adding portfolio management fees, 12b-1 fees and other expenses of all
of the underlying portfolios and then dividing by the number of portfolios.
For purposes of the illustrations, we do not reflect any expense
reimbursements or expense waivers that might apply and are described in the
prospectus fee table.
.. The Separate Account level charges include the Insurance Charge and
Distribution Charge (as applicable).
.. The Account Value and Surrender Value are further reduced by the annual
maintenance fee. For Optimum Plus, Optimum Four, and Optimum, the Account
Value and Surrender Value also reflect the addition of any applicable
credits.
The Account Value assumes no surrender, while the Surrender Value assumes a
100% surrender two days prior to the anniversary of the Issue Date of the
Annuity ("Annuity Anniversary"), therefore reflecting the withdrawal charge
applicable to that Annuity year. Note that a withdrawal on the Annuity
Anniversary would be subject to the withdrawal charge applicable to the next
Annuity year, which usually is lower. The values that you actually experience
under an Annuity will be different than what is depicted here if any of the
assumptions we make here differ from your circumstances, however the relative
values for each product reflected below will remain the same. (We will provide
you with a personalized illustration upon request). Shaded cells represent the
product with the highest customer Surrender Value for the Annuity year.
Multiple shaded cells represent a tie between two or more annuities.
0% Gross Rate of Return
- -----------------------------------------------------------------------------------
Optimum Four Optimum Optimum Plus
- ------------------- ---------------------------- ------------------------------
Net rate of return Net rate of return Net rate of return
- ------------------- ---------------------------- ------------------------------
All years -2.57% Yrs 1-8 Yrs 9+ -2.18% -1.58% Yrs 1-10 Yrs 11+ -2.57% -1.58%
- --------- --------- -------------- ------------- ---------------- -------------
CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER
VALUE VALUE VALUE VALUE VALUE VALUE
- --------- --------- -------------- ------------- ---------------- -------------
1 97,432 88,932 97,828 90,328 103,766 94,766
2 94,890 86,890 95,662 88,662 101,060 92,060
3 92,413 85,413 93,544 87,044 98,424 90,424
4 90,000 84,000 91,473 85,473 95,856 88,856
5 87,649 87,649 89,446 84,446 93,354 87,354
6 88,037 88,037 87,952 83,952 90,917 85,917
7 85,737 85,737 86,002 83,002 88,542 84,542
8 83,495 83,495 84,095 82,095 86,228 83,228
9 81,312 81,312 82,727 82,727 83,974 81,974
10 79,184 79,184 81,382 81,382 81,778 80,778
11 77,112 77,112 80,059 80,059 80,446 80,446
12 75,092 75,092 78,756 78,756 79,138 79,138
13 73,125 73,125 77,474 77,474 77,850 77,850
14 71,208 71,208 76,213 76,213 76,582 76,582
15 69,341 69,341 74,971 74,971 75,335 75,335
16 67,522 67,522 73,749 73,749 74,107 74,107
17 65,749 65,749 72,547 72,547 72,899 72,899
18 64,022 64,022 71,363 71,363 71,710 71,710
19 62,340 62,340 70,199 70,199 70,540 70,540
20 60,701 60,701 69,052 69,052 69,388 69,388
21 59,104 59,104 67,924 67,924 68,254 68,254
22 57,548 57,548 66,814 66,814 67,139 67,139
23 56,033 56,033 65,721 65,721 66,041 66,041
24 54,556 54,556 64,646 64,646 64,961 64,961
25 53,117 53,117 63,587 63,587 63,897 63,897
- -----------------------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses =0.94%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days prior to Annuity anniversary
D-3
6% Gross Rate of Return
Optimum Four Optimum Optimum Plus
- ------------------- --------------------------- ----------------------------
Net rate of return Net rate of return Net rate of return
- ------------------- --------------------------- ----------------------------
All years 3.27% Yrs 1-8 Yrs 9+ -2.18% 4.32% Yrs 1-10 Yrs 11+ 3.27% 4.32%
- --------- --------- -------------- ------------ ---------------- -----------
CONTRACT SURRENDER CONTRACT SURRENDER CONTRACT SURRENDER
VALUE VALUE VALUE VALUE VALUE VALUE
- --------- --------- -------------- ------------ ---------------- -----------
1 103,262 94,762 103,681 96,181 109,974 100,974
2 106,640 98,640 107,508 100,508 113,535 104,535
3 110,128 103,128 111,476 104,976 117,213 109,213
4 113,730 107,730 115,590 109,590 121,011 114,011
5 117,450 117,450 119,857 114,857 124,933 118,933
6 124,132 124,132 124,799 120,799 128,983 123,983
7 128,192 128,192 129,406 126,406 133,166 129,166
8 132,386 132,386 134,182 132,182 137,486 134,486
9 136,716 136,716 139,978 139,978 141,947 139,947
10 141,188 141,188 146,027 146,027 146,554 145,554
11 145,806 145,806 152,336 152,336 152,846 152,846
12 150,576 150,576 158,919 158,919 159,414 159,414
13 155,501 155,501 165,786 165,786 166,266 166,266
14 160,588 160,588 172,950 172,950 173,414 173,414
15 165,840 165,840 180,423 180,423 180,871 180,871
16 171,265 171,265 188,219 188,219 188,650 188,650
17 176,867 176,867 196,352 196,352 196,765 196,765
18 182,653 182,653 204,837 204,837 205,231 205,231
19 188,627 188,627 213,688 213,688 214,063 214,063
20 194,797 194,797 222,922 222,922 223,276 223,276
21 201,169 201,169 232,554 232,554 232,887 232,887
22 207,750 207,750 242,603 242,603 242,914 242,914
23 214,545 214,545 253,086 253,086 253,374 253,374
24 221,563 221,563 264,022 264,022 264,286 264,286
25 228,811 228,811 275,431 275,431 275,670 275,670
- --------------------------------------------------------------------------------
Assumptions:
a. $100,000 initial investment
b. Fund Expenses = 0.94%
c. No optional death benefits or living benefits elected
d. Annuity was issued on or after November 20, 2006
e. Surrender value assumes surrender 2 days prior to Annuity anniversary
D-4
In addition, the following charts indicate the days (measured from the Issue
Date) in which each annuity product would have the highest Surrender Value
amongst the products listed given the above assumptions.
0% Gross Rate Of Return
Over 30 Years, days
won Total Days Year Actual Days
------------------------------------------------------
OPTIMUM FOUR 1459 4 1460
5 1461-1824
6-8 1826-2919
------------------------------------------------------
OPTIMUM 572 9 2974-3284
10 3389-3649
------------------------------------------------------
OPTIMUM PLUS 8919 1-4 1-1459
5 1825
8 2920
9 2921-2974, 3285
10 3286-3388, 3650
11-30 3651-10950
------------------------------------------------------
6% Gross Rate of Return
Over 30 Years, days
won Total Days Year Actual Days
--------------------------------------------------
OPTIMUM FOUR 364 6 1826-2189
--------------------------------------------------
OPTIMUM 129 9 3276-3284
10 3530-3649
--------------------------------------------------
OPTIMUM PLUS 10457 1-5 1-1825
6-9 2190-3275
9-10 3285-3529
10-30 3650-10950
--------------------------------------------------
Days listed assume 365 days per year and do not account for Leap Years.
* Annual maintenance fee is waived for account values of $100,000 or more.
1) For more information on these benefits, refer to the "Death Benefit"
section in the Prospectus.
2) For more information on these benefits, refer to the "Living Benefit
Programs" section in the Prospectus.
3) The Annuity Rewards benefit offers Owners an ability to increase the
guaranteed death benefit so that the death benefit will at least equal the
Annuity's account value on the effective date of the Annuity Rewards
benefits, if the terms of the Annuity Rewards benefit are met.
4) These reductions result in hypothetical net rates of return corresponding
to the 0% and 6% gross rates of return, respectively as follows: Optimum
Four -2.57% and 3.27%; Optimum -2.18% and -2.18% in years 1-8 and -1.58%
and 4.32% in years 9+, Optimum Plus -2.57% and 3.27% in years 1-10 and
-1.58% and 4.32% in years 11+.
D-5
APPENDIX E - ASSET TRANSFER FORMULA UNDER HIGHEST DAILY LIFETIME FIVE INCOME
BENEFIT
We set out below the current formula under which we may transfer amounts
between the variable investment options and the Benefit Fixed Rate Account.
Upon your election of Highest Daily Lifetime Five, we will not alter the asset
transfer formula that applies to your Annuity. However, as discussed in the
"Living Benefits" section, we reserve the right to modify this formula with
respect to those who elect Highest Daily Lifetime Five in the future.
TERMS AND DEFINITIONS REFERENCED IN THE CALCULATION FORMULA:
. C\\u\\ - the upper target is established on the effective date of the
Highest Daily Lifetime Five benefit (the "Effective Date") and is not
changed for the life of the guarantee. Currently, it is 83%.
. C\\t\\ - the target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 80%.
. C\\l\\ - the lower target is established on the Effective Date and is not
changed for the life of the guarantee. Currently, it is 77%.
. L - the target value as of the current Valuation Day.
. r - the target ratio.
. a - the factors used in calculating the target value. These factors are
established on the Effective Date and are not changed for the life of the
guarantee. The factors that we use currently are derived from the a2000
Individual Annuity Mortality Table with an assumed interest rate of 3%.
Each number in the table "a" factors (which appears below) represents a
factor, which when multiplied by the Highest Daily Annual Income Amount,
projects our total liability for the purpose of asset transfers under the
guarantee.
. Q - age based factors used in calculating the target value. These factors
are established on the Effective Date and are not changed for the life of
the guarantee. The factor is currently set equal to 1.
. V - the total value of all Permitted Sub-accounts in the Annuity.
. F - the total value of all Benefit Fixed Rate Account allocations.
. I - the income value prior to the first withdrawal. The income value is
equal to what the Highest Daily Annual Income Amount would be if the
first withdrawal were taken on the date of calculation. After the first
withdrawal the income value equals the greater of the Highest Daily
Annual Income Amount, the quarterly step-up amount times the annual
income percentage, and the Account Value times the annual income
percentage.
. T - the amount of a transfer into or out of the Benefit Fixed Rate
Account.
. I% - annual income amount percentage. This factor is established on the
Effective Date and is not changed for the life of the guarantee.
Currently, this percentage is equal to 5%
TARGET VALUE CALCULATION:
On each Valuation Day, a target value (L) is calculated, according to the
following formula. If the variable Account Value (V) is equal to zero, no
calculation is necessary.
L = I * Q * a
Transfer Calculation:
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines when a transfer is required:
Target Ratio r = (L - F) / V.
. If r (greater than) C\\u\\, assets in the Permitted Sub-accounts are
transferred to Benefit Fixed Rate Account.
. If r (less than) C\\l\\, and there are currently assets in the
Benefit Fixed Rate Account (F (greater than) 0), assets in the
Benefit Fixed Rate Account are transferred to the Permitted
Sub-accounts.
E-1
The following formula, which is set on the Effective Date and is not changed
for the life of the guarantee, determines the transfer amount:
T ={Min(V, [L - F - V * Ct] / (1-Ct))} T(greater than)0, Money moving from
the Permitted Sub-accounts to the
Benefit Fixed Rate Account
T ={Min(F, [L - F - V * C\\t\\] / T(less than)0, Money moving from the
(1-C\\t\\))} Benefit Fixed Rate Account to the
Permitted Sub-accounts]
Example:
Male age 65 contributes $100,000 into the Permitted Sub accounts and the value
drops to $92,300 during year one, end of day one. A table of values for "a"
appears below.
Target Value Calculation:
L = I * Q * a
= 5000.67 * 1 * 15.34
= 76,710.28
Target Ratio:
r = (L - F) / V
= (76,710.28 - 0) / 92,300.00
= 83.11%
Since r (greater than) Cu ( because 83.11% (greater than) 83%) a transfer into
the Benefit Fixed rate Account occurs.
T = { Min ( V, [ L - F - V * Ct] /
( 1 - Ct))}
= { Min ( 92,300.00, [ 76,710.28
- 0 - 92,300.00 * 0.80] / ( 1 -
0.80))}
= { Min ( 92,300.00, 14,351.40 )}
= 14,351.40
E-2
Age 65 "a" Factors for Liability Calculations
(in Years and Months since Benefit Effective Date)*
Months
Years 1 2 3 4 5 6 7 8 9 10 11 12
----- ------ ----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
1... 15.34 15.31 15.27 15.23 15.20 15.16 15.13 15.09 15.05 15.02 14.98 14.95
2... 14.91 14.87 14.84 14.80 14.76 14.73 14.69 14.66 14.62 14.58 14.55 14.51
3... 14.47 14.44 14.40 14.36 14.33 14.29 14.26 14.22 14.18 14.15 14.11 14.07
4... 14.04 14.00 13.96 13.93 13.89 13.85 13.82 13.78 13.74 13.71 13.67 13.63
5... 13.60 13.56 13.52 13.48 13.45 13.41 13.37 13.34 13.30 13.26 13.23 13.19
6... 13.15 13.12 13.08 13.04 13.00 12.97 12.93 12.89 12.86 12.82 12.78 12.75
7... 12.71 12.67 12.63 12.60 12.56 12.52 12.49 12.45 12.41 12.38 12.34 12.30
8... 12.26 12.23 12.19 12.15 12.12 12.08 12.04 12.01 11.97 11.93 11.90 11.86
9... 11.82 11.78 11.75 11.71 11.67 11.64 11.60 11.56 11.53 11.49 11.45 11.42
10.. 11.38 11.34 11.31 11.27 11.23 11.20 11.16 11.12 11.09 11.05 11.01 10.98
11.. 10.94 10.90 10.87 10.83 10.79 10.76 10.72 10.69 10.65 10.61 10.58 10.54
12.. 10.50 10.47 10.43 10.40 10.36 10.32 10.29 10.25 10.21 10.18 10.14 10.11
13.. 10.07 10.04 10.00 9.96 9.93 9.89 9.86 9.82 9.79 9.75 9.71 9.68
14.. 9.64 9.61 9.57 9.54 9.50 9.47 9.43 9.40 9.36 9.33 9.29 9.26
15.. 9.22 9.19 9.15 9.12 9.08 9.05 9.02 8.98 8.95 8.91 8.88 8.84
16.. 8.81 8.77 8.74 8.71 8.67 8.64 8.60 8.57 8.54 8.50 8.47 8.44
17.. 8.40 8.37 8.34 8.30 8.27 8.24 8.20 8.17 8.14 8.10 8.07 8.04
18.. 8.00 7.97 7.94 7.91 7.88 7.84 7.81 7.78 7.75 7.71 7.68 7.65
19.. 7.62 7.59 7.55 7.52 7.49 7.46 7.43 7.40 7.37 7.33 7.30 7.27
20.. 7.24 7.21 7.18 7.15 7.12 7.09 7.06 7.03 7.00 6.97 6.94 6.91
21.. 6.88 6.85 6.82 6.79 6.76 6.73 6.70 6.67 6.64 6.61 6.58 6.55
22.. 6.52 6.50 6.47 6.44 6.41 6.38 6.36 6.33 6.30 6.27 6.24 6.22
23.. 6.19 6.16 6.13 6.11 6.08 6.05 6.03 6.00 5.97 5.94 5.92 5.89
24.. 5.86 5.84 5.81 5.79 5.76 5.74 5.71 5.69 5.66 5.63 5.61 5.58
25.. 5.56 5.53 5.51 5.48 5.46 5.44 5.41 5.39 5.36 5.34 5.32 5.29
26.. 5.27 5.24 5.22 5.20 5.18 5.15 5.13 5.11 5.08 5.06 5.04 5.01
27.. 4.99 4.97 4.95 4.93 4.91 4.88 4.86 4.84 4.82 4.80 4.78 4.75
28.. 4.73 4.71 4.69 4.67 4.65 4.63 4.61 4.59 4.57 4.55 4.53 4.51
29.. 4.49 4.47 4.45 4.43 4.41 4.39 4.37 4.35 4.33 4.32 4.30 4.28
30.. 4.26 4.24 4.22 4.20 4.18 4.17 4.15 4.13 4.11 4.09 4.07 4.06
31.. 4.04 4.02 4.00 3.98 3.97 3.95 3.93 3.91 3.90 3.88 3.86 3.84
32.. 3.83 3.81 3.79 3.78 3.76 3.74 3.72 3.71 3.69 3.67 3.66 3.64
33.. 3.62 3.61 3.59 3.57 3.55 3.54 3.52 3.50 3.49 3.47 3.45 3.44
34.. 3.42 3.40 3.39 3.37 3.35 3.34 3.32 3.30 3.29 3.27 3.25 3.24
35.. 3.22 3.20 3.18 3.17 3.15 3.13 3.12 3.10 3.08 3.07 3.05 3.03
36.. 3.02 3.00 2.98 2.96 2.95 2.93 2.91 2.90 2.88 2.86 2.85 2.83
37.. 2.81 2.79 2.78 2.76 2.74 2.73 2.71 2.69 2.68 2.66 2.64 2.62
38.. 2.61 2.59 2.57 2.56 2.54 2.52 2.51 2.49 2.47 2.45 2.44 2.42
39.. 2.40 2.39 2.37 2.35 2.34 2.32 2.30 2.29 2.27 2.25 2.24 2.22
40.. 2.20 2.19 2.17 2.15 2.14 2.12 2.11 2.09 2.07 2.06 2.04 2.02
41.. 2.01 1.84 1.67 1.51 1.34 1.17 1.00 0.84 0.67 0.50 0.33 0.17
* The values set forth in this table are applied to all ages.
E-3
APPENDIX F - ANNUITIES APPROVED FOR SALE BY THE NEW YORK STATE INSURANCE
DEPARTMENT
- ---------------------------------------------------------------------------------------------------
Optimum Four NY Optimum NY Optimum Plus NY
- ---------------------------------------------------------------------------------------------------
Minimum Investment $10,000 $1,000 $10,000
- ---------------------------------------------------------------------------------------------------
Maximum Issue Age Annuitant 85 Annuitant 85 Annuitant 85
Oldest Owner 85 Oldest Owner 80 Oldest Owner 75
- ---------------------------------------------------------------------------------------------------
Contingent Deferred Sales 4 Years 7 Years 10 Years
Charge Schedule (7%, 6%, 5%, 4%) (7%, 6%, 5%, 4%, (9%, 9%, 8%, 7%,
(Applied to Purchase 3%, 2%, 1%) 6%, 5%, 4%, 3%,
Payments based on (Applied to Purchase 2%, 1%)
the inception date of Payments based on (Applied to Purchase
the Annuity) the inception date of Payments based on
the Annuity) the inception date of
the Annuity)
- ---------------------------------------------------------------------------------------------------
Insurance Charge 1.65% 0.65% 0.65%
- ---------------------------------------------------------------------------------------------------
Distribution Charge N/A 0.60% annuity 1.00% annuity
years 1-7 years 1-10
0.0% annuity years 8+ 0.00% annuity
years 11+
- ---------------------------------------------------------------------------------------------------
Annual Maintenance Fee Lesser of $30 or Lesser of $30 or Lesser of $30 or
2% of Account Value 2% of Account Value 2% of Account Value
Waived for Account Waived for Account
Values exceeding Values exceeding
$100,000 $100,000
- ---------------------------------------------------------------------------------------------------
Transfer Fee $10 after twenty in $10 after twenty in $10 after twenty in
any annuity year. any annuity year. May any annuity year
be increased to $15
after eight in any
annuity year
- ---------------------------------------------------------------------------------------------------
Contract Credit Yes. Effective for Yes. Effective for Yes The amount of
Contracts issued on or Contracts issued on or the credit applied to a
after June 20, 2005. after July 24, 2006. Purchase Payment is
Generally we apply a Generally we apply a based on the year the
Loyalty Credit to your Loyalty Credit to your Purchase Payment is
Annuity's Account Annuity's Account received, for the first
Value at the end of Value at the end of 6 years of the
your fifth contract your fifth contract contract. Currently the
year (i.e. on your fifth year (i.e. on your fifth credit percentages for
Contract Contract each year starting with
Anniversary). Anniversary). the first year are:
Currently the Loyalty Currently the Loyalty 6.50%, 5.00%, 4.00%,
Credit is equal to Credit is equal to 3.00%, 2.00%, and
2.75% of total 0.50% of total 1.00%.
Purchase Payments Purchase Payments
made during the first made during the first
four contract years four contract years
less the cumulative less the cumulative
amount of amount of
withdrawals made withdrawals made
(including the (including the
deduction of any deduction of any
CDSC amounts) CDSC amounts)
through the fifth through the fifth
Contract Anniversary Contract Anniversary.
F-1
- -------------------------------------------------------------------------------------------------------
Optimum Four NY Optimum NY Optimum Plus NY
- -------------------------------------------------------------------------------------------------------
Fixed Allocation (If Fixed Allocations Fixed Allocations No
available, early Available (Currently Available (Currently
withdrawals are subject offering durations of: offering durations of:
to a Market Value 5, 7, and 10 years) 2, 3, 5, 7, and 10
Adjustment) ("MVA") The MVA formula for years) The MVA
NY is [(1+I)/(1+J)] formula for NY is
N/365 [(1+I)/(1+J)] N/365
The MVA formula The MVA formula
does not apply during does not apply during
the 30 day period the 30 day period
immediately before immediately before
the end of the the end of the
Guarantee Period. Guarantee Period.
- -------------------------------------------------------------------------------------------------------
Variable Investment All options generally All options generally All options generally
Options available except available except available except
where restrictions where restrictions where restrictions
apply when certain apply when certain apply when certain
riders are purchased. riders are purchased. riders are purchased.
- -------------------------------------------------------------------------------------------------------
Basic Death Benefit The greater of: The greater of: The greater of:
Purchase Payments Purchase Payments Purchase Payments
less proportional less proportional less proportional
withdrawals or withdrawals or withdrawals or
Account Value Account Value Account Value
(variable) plus Interim (variable) plus Interim (variable) (No MVA
Value (fixed). (No Value (fixed). (No applied) (No recapture
MVA applied) MVA applied) of credits applied
within 12 months
prior to the date of
death)
- -------------------------------------------------------------------------------------------------------
Optional Death Benefits HAV HAV HAV
(for an additional cost)/ (1)/
- -------------------------------------------------------------------------------------------------------
Optional Living Benefits GRO/GRO Plus GRO/GRO Plus GRO/GRO Plus
(for an additional cost)/ (2)/ GMWB, GMIB, GMWB, GMIB, GMWB, GMIB,
Lifetime Five, Lifetime Five, Lifetime Five,
Spousal Lifetime Five Spousal Lifetime Five Spousal Lifetime Five
- -------------------------------------------------------------------------------------------------------
Annuity Rewards /(3)/ Available after initial Available after initial Available after initial
CDSC period CDSC period CDSC period
- -------------------------------------------------------------------------------------------------------
Annuitization Options Fixed option only Fixed option only Fixed option only
Annuity date cannot Annuity date cannot Annuity date cannot
exceed the first day of exceed the first day of exceed the first day of
the calendar month the calendar month the calendar month
following Annuitant's following Annuitant's following Annuitant's
90/th/ birthday The 90/th/ birthday The 90/th/ birthday The
maximum Annuity maximum Annuity maximum Annuity
Date is based on the Date is based on the Date is based on the
first Owner or first Owner or first Owner or
Annuitant to reach the Annuitant to reach the Annuitant to reach the
maximum age, as maximum age, as maximum age, as
indicated in your indicated in your indicated in your
Annuity. Annuity. Annuity.
(1)For more information on these benefits, refer to the "Death Benefit"
section in the Prospectus.
(2)For more information on these benefits, refer to the "Living Benefit
Programs" section in the Prospectus.
(3)The Annuity rewards benefit offers Owners an ability to increase the
guaranteed death benefit so that the death benefit will at least equal the
Annuity's Account Value on the effective date of the Annuity Rewards
benefits, if the terms of the Annuity Rewards benefit are met.
F-2
PLEASE SEND ME A STATEMENT OF ADDITIONAL INFORMATION THAT CONTAINS
FURTHER DETAILS ABOUT THE AMERICAN SKANDIA ANNUITY DESCRIBED IN
PROSPECTUS (PLEASE CHECK ONE) OPTIMUM (05/2007),
OPTIMUM FOUR (05/2007), OPTIMUM PLUS (05/2007).
------------------------
(print your name)
------------------------
(address)
------------------------
(city/state/zip code)
[LOGO]
The Prudential Insurance Company of America
751 Broad Street
Newark, NJ 07102-3777
Variable Annuity Issued by: Variable Annuity Distributed by:
AMERICAN SKANDIA LIFE ASSURANCE AMERICAN SKANDIA MARKETING,
CORPORATION 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
PRSRT STD
U.S. POSTAGE
PAID
LANCASTER, PA
PERMIT NO. 1793
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution: Not Applicable.
Item 15. Indemnification of Directors and Officers: Under Section 33-320a of
the Connecticut General Statutes, the Registrant must indemnify a director or
officer against judgments, fines, penalties, amounts paid in settlement and
reasonable expenses including attorneys' fees, for actions brought or
threatened to be brought against him in his capacity as a director or officer
when certain disinterested parties determine that he acted in good faith and in
a manner he reasonably believed to be in the best interests of the Registrant.
In any criminal action or proceeding, it also must be determined that the
director or officer had no reason to believe his conduct was unlawful. The
director or officer must also be indemnified when he is successful on the
merits in the defense of a proceeding or in circumstances where a court
determines that he is fairly and reasonable entitled to be indemnified, and the
court approves the amount. In shareholder derivative suits, the director or
officer must be finally adjudged not to have breached this duty to the
Registrant or a court must determine that he is fairly and reasonably entitled
to be indemnified and must approve the amount. In a claim based upon the
director's or officer's purchase or sale of the Registrants' securities, the
director or officer may obtain indemnification only if a court determines that,
in view of all the circumstances, he is fairly and reasonably entitled to be
indemnified and then for such amount as the court shall determine. The By-Laws
of American Skandia Life Assurance Corporation ("ASLAC") also provide directors
and officers with rights of indemnification, consistent with Connecticut Law.
The foregoing statements are subject to the provisions of Section 33-320a.
Directors and officers of ASLAC and American Skandia Marketing, Inc. ("ASM")
can also be indemnified pursuant to indemnity agreements between each director
and officer and American Skandia, Inc., a corporation organized under the laws
of the state of Delaware. The provisions of the indemnity agreement are
governed by Section 45 of the General Corporation Law of the State of Delaware.
The directors and officers of ASLAC and ASM are covered under a directors and
officers liability insurance policy. Such policy will reimburse ASLAC or ASM,
as applicable, for any payments that it shall make to directors and officers
pursuant to law and, subject to certain exclusions contained in the policy,
will pay any other costs, charges and expenses, settlements and judgments
arising from any proceeding involving any director or officer of ASLAC or ASM,
as applicable, in his or her past or present capacity as such.
Item 16. Exhibits:
Exhibits Page
-------------------------------------------- ------------------------
1 Underwriting agreement incorporated by
reference to Post Effective Amendment No. 1
to Registration Statement No. 333-25733,
filed via EDGAR March 2, 1998.
2 Plan of acquisition, reorganization, Not applicable
arrangement, liquidation or succession
3 Articles of incorporation and by-laws
incorporated by reference to Post-Effective
Amendment No. 6 to Registration Statement
No. 33-87010, filed via EDGAR March 2, 1998.
4 Instruments defining the rights of security
holders, including indentures, incorporated
by reference to Post-Effective Amendment No.
3 to Registration Statement No. 33-87010,
filed via EDGAR April 25, 1996.
5 Opinion re legality (included as Exhibit 23b)
6 - 9 Not applicable
10 Material contracts (Investment Management
Agreement):
(a) Agreement with Alliance Capital
Management L.P. incorporated by
reference to Post- Effective No. 3 to
Registration Statement No. 33-53507,
filed via EDGAR April 26, 2002.
(b) Agreement with Blackrock Financial
Management, Inc. incorporated by
reference to Post-Effective No. 3 to
Registration Statement No. 33-53507,
filed via EDGAR April 26, 2002.
11 - 22 Not applicable
23a Consent of PricewaterhouseCoopers LLP FILED HEREWITH
23b Opinion & Consent of Counsel Filed via EDGAR with
Post Effective
Amendment No. 5 to
this Registration
Statement
No. 333-04989 filed
April 20, 2004.
24 (a) Powers of Attorney for Directors James J. Avery, Helen M. Galt,
Ronald P. Joelson, Andrew J. Mako, C. Edward Chaplin and Bernard J.
Jacob, David R. Odenath, Chief Executive Officer, President and
Director, and Michael Bohm, Executive Vice President and Chief
Financial Officer filed with Post-Effective Amendment No. 11 to
Registration Statement No. 333-24989.
24 (b) Powers of Attorney for Directors James J. Avery, Ronald P.
Joelson, Helen M. Galt, Kenneth Y. Tanji, and Bernard J. Jacob, David
R. Odenath, Chief Executive Officer, President and Director, and
Michael Bohm, Executive Vice President and Chief Financial
Officer filed with Post-Effective Amendment No. 1 to Registration
Statement No. 333-136996.
25 - 28 Not applicable
An index to the financial statement schedules is omitted because it is not
required or is not applicable.
Item 17. Undertakings: The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
post-effective amendments to this registration statement:
(i) To include any prospectus required by section 10 (a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
LEGAL EXPERTS: The Counsel of American Skandia Life Assurance Corporation has
passed on the legal matters with respect to Federal laws and regulations
applicable to the issue and sale of the Annuities and with respect to
Connecticut law.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf on the 20th day of April, 2007.
AMERICAN SKANDIA LIFE ASSURANCE CORPORATION
Depositor
/s/ Laura Kealey
- --------------------------
Laura Kealey, Vice
President, Corporate
Counsel
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities and on the date indicated.
Signature Title Date
- --------- ---------------------------------- --------------------
(Principal Executive Officer)
David R. Odenath* Chief Executive Officer and April 20, 2007
- -------------------- President
David R. Odenath
(Principal Financial Officer and
Principal Accounting Officer)
Michael Bohm* Executive Vice President and
- -------------------- Chief Financial Officer
Michael Bohm
(Board of Directors)
James Avery* Kenneth Y. Tanji* Helen Galt*
- -------------------- ------------------------------ --------------------
James Avery Kenneth Y. Tanji Helen Galt
David R. Odenath* Ronald Joelson* Bernard J. Jacob*
- -------------------- ------------------------------ --------------------
David R. Odenath Ronald Joelson Bernard J. Jacob
By: /s/ Laura Kealey
------------------------------
Laura Kealey
- --------
* Executed by Laura Kealey on behalf of those indicated pursuant to Power of
Attorney
Exhibits
Exhibit 23a Consent of PricewaterhouseCoopers LLP. FILED HEREWITH