THE PUTNAM ALLSTATE ADVISOR
Allstate Life Insurance Company
Prospectus dated April 30, 1999
3100 Sanders Road
Northbrook, Illinois 60062
Telephone Number: 1-800/390-1277
Allstate Life Insurance Company ("Allstate") is offering The Putnam Allstate
Advisor, an individual and group flexible premium deferred variable annuity
contract ("Contract"). This prospectus contains information about the Contract
that you should know before investing. Please keep it for future reference.
The Contract currently offers 25 investment alternatives ("investment
alternatives"). The investment alternatives include 3 fixed account options
("Fixed Account Options") and 22 variable sub-accounts ("Variable Sub-Accounts")
of the Allstate Life Insurance Company Separate Account A ("Variable Account").
Each Variable Sub-Account invests exclusively in the class IB shares of one of
the following mutual fund portfolios ("Funds") of Putnam Variable Trust:
<TABLE>
<CAPTION>
<S> <C>
Putnam VT Asia Pacific Growth Fund Putnam VT International New Opportunities Fund
Putnam VT Diversified Income Fund Putnam VT Investors Fund
Putnam VT The George Putnam Fund of Boston Putnam VT Money Market Fund
Putnam VT Global Asset Allocation Fund Putnam VT New Opportunities Fund
Putnam VT Global Growth Fund Putnam VT New Value Fund
Putnam VT Growth and Income Fund Putnam VT OTC & Emerging Growth Fund
Putnam VT Health Sciences Fund Putnam VT Research Fund
Putnam VT High Yield Fund Putnam VT Small Cap Value Fund
Putnam VT Income Fund Putnam VT Utilities Growth and Income Fund
Putnam VT International Growth Fund Putnam VT Vista Fund
Putnam VT International Growth and Income Fund Putnam VT Voyager Fund
</TABLE>
We (Allstate) have filed a Statement of Additional Information, dated April 30 ,
1999, with the Securities and Exchange Commission ("SEC"). It contains more
information about the Contract and is incorporated herein by reference, which
means that it is legally a part of this prospectus. Its table of contents
appears on page 31 of this prospectus. For a free copy, please write or call us
at the address or telephone number above, or go to the SEC's Web site
(http://www.sec.gov). You can find other information and documents about us,
including documents that are legally part of this prospectus, at the SEC's Web
site.
IMPORTANT NOTICES
The Securities and Exchange Commission has not approved or disapproved the
securities described in this prospectus, nor has it passed on the accuracy or
the adequacy of this prospectus. Any one who tells you otherwise is committing a
federal crime.
The Contracts may be distributed through broker-dealers that have relationships
with banks or other financial institutions or by employees of such banks.
However, the Contracts are not deposits, or obligations of, or guaranteed by
such institutions or any federal regulatory agency. Investment in the Contracts
involves investment risks, including possible loss of principal.
The Contracts are not FDIC insured.
<PAGE>
TABLE OF CONTENTS
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Overview Page
Important Terms.................................................... 3
The Contract At A Glance .......................................... 4
How the Contract Works............................................. 6
Expense Table...................................................... 7
Financial Information.............................................. 11
Contract Features
The Contract....................................................... 12
Purchases.......................................................... 13
Contract Value..................................................... 14
Investment Alternatives............................................ 15
The Variable Sub-Accounts................................. 15
The Fixed Account Options................................. 16
Transfers................................................. 16
Expenses........................................................... 18
Access To Your Money............................................... 20
Income Payments.................................................... 21
Death Benefits..................................................... 24
Other Information
More Information................................................... 26
Taxes.............................................................. 28
Performance Information............................................ 30
Statement of Additional Information Table of Contents ............. 31
Appendix A ...........................................................A-1
<PAGE>
IMPORTANT TERMS
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This prospectus uses a number of important terms that you may not be familiar
with. The index below identifies the page that describes each term. The first
use of each term in this prospectus appears in highlights.
Page
Accumulation Phase...................................................... 6
Accumulation Unit ...................................................... 11
Accumulation Unit Value ................................................ 11
Allstate ("We")......................................................... 1
Annuitant............................................................... 12
Automatic Additions Program............................................. 13
Automatic Fund Rebalancing Program...................................... 17
Beneficiary ............................................................ 6
Cancellation Period .................................................... 4
*Contract .............................................................. 1
Contract Anniversary.................................................... 4
Contract Owner ("You") ................................................. 6
Contract Value ......................................................... 14
Contract Year.......................................................... 5
Dollar Cost Averaging Program........................................... 17
Due Proof of Death...................................................... 24
Enhanced Beneficiary Protection Option.................................. 24
Fixed Account Options .................................................. 1
Free Withdrawal Amount ................................................. 19
Funds................................................................... 1
Guarantee Period ...................................................... 16
Income Base............................................................. 23
Income Plan ............................................................ 21
Investment Alternatives ................................................ 1
Issue Date ............................................................. 6
Maximum Anniversary Value............................................... 24
Payout Phase............................................................ 6
Payout Start Date ...................................................... 21
Retirement Income Guarantee Rider....................................... 22
Right to Cancel ........................................................ 13
SEC..................................................................... 1
Settlement Value ...................................................... 25
Systematic Withdrawal Program .......................................... 20
Valuation Date.......................................................... 13
Variable Account ....................................................... 1
Variable Sub-Account ................................................... 1
* In certain states the Contract is available only as a group Contract. In those
states we issue you a certificate that represents your ownership and that
summarizes the provisions of the group Contract. References to "Contract" in
this prospectus include certificates, unless the context requires otherwise.
<PAGE>
THE CONTRACT AT A GLANCE
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The following is a snapshot of the Contract. Please read the remainder of this
prospectus for more information.
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Flexible Payments
You can purchase a Contract with as little as $1,000 ($500 for Qualified
Contracts, which are Contracts issued with a qualified plan). You can add to
your Contract as often and as much as you like, but each payment must be at
least $500 ($50 for automatic payments). We may limit the amount of any
additional purchase payment to a maximum of $1,000,000. You must maintain a
minimum account size of $1,000.
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Right to Cancel
You may cancel your Contract within 20 days of receipt or any longer period as
your state may require ("Cancellation Period"). Upon cancellation, we will
return your purchase payments adjusted, to the extent state law permits, to
reflect the investment experience of any amounts allocated to the Variable
Account.
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Expenses
You will bear the following expenses:
o Mortality and expense risk charge equal to 1.25% of average daily net
assets (a higher amount applies if you select the Enhanced Beneficiary
Protection Option)
o If you select a Retirement Income Guarantee Rider you would pay an
additional fee at the annual rate of 0.05% or 0.30% (depending on the
option you select) of the Income Base in effect on a Contract
anniversary ("Contract Anniversary")
o Annual contract maintenance charge of $30 (waived in certain cases)
o Withdrawal charges ranging from 0% to 7% of purchase payments
withdrawn (with certain exceptions)
o Transfer fee equal to 0.50% of the amount transferred after 12th
transfer in any year
o State premium tax (if your state imposes one)
In addition, each Fund pays expenses that you will bear indirectly if
you invest in a Variable Sub-Account.
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Investment Alternatives
The Contract offers 25 investment alternatives including:
o 3 Fixed Account Options (which credit interest at rates we guarantee)
o 22 Variable Sub-Accounts investing in Funds offering professional
money management by Putnam Investment Management, Inc.
To find out current rates being paid on the Fixed Account Options, or to
find out how the Variable Sub-Accounts have performed, please call us at
1-800/390-1277.
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<PAGE>
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Special Services
For your convenience, we offer these special services:
o Automatic Fund Rebalancing Program
o Automatic Additions Program
o Dollar Cost Averaging Program
o Systematic Withdrawal Program
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Income Payments
You can choose fixed income payments, variable income payments, or a
combination of the two. You can receive your income payments in one of the
following ways:
o life income with guaranteed payments
o a joint and survivor life income with guaranteed payments
o guaranteed payments for a specified period (5 to 30 years)
Allstate also offers 2 Retirement Income Guarantee Riders that allow you to
lock in a dollar amount that you can apply towards fixed income payments.
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Death Benefits
If you die before the Payout Start Date, we will pay the death benefit
described in the Contract. We also offer an Enhanced Beneficiary Protection
Option.
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Transfers
Before the Payout Start Date, you may transfer your Contract value
("Contract Value") among the investment alternatives, with certain
restrictions. The minimum amount you may transfer is $100 or the amount
remaining in the investment alternative, if less.
A charge may apply after the 12th transfer in each Contract year ("Contract
Year"), which we measure from the date we issue your Contract or a Contract
Anniversary.
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Withdrawals
You may withdraw some or all of your Contract Value at anytime prior to the
Payout Start Date. In general, you must withdraw at least $50 at a time. A
10% federal tax penalty may apply if you withdraw before you are 59 1/2
years old. A withdrawal charge also may apply.
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<PAGE>
HOW THE CONTRACT WORKS
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The Contract basically works in two ways.
First, the Contract can help you (we assume you are the "Contract Owner") save
for retirement because you can invest in up to 25 investment alternatives and
pay no federal income taxes on any earnings until you withdraw them. You do this
during what we call the "Accumulation Phase" of the Contract. The Accumulation
Phase begins on the date we issue your Contract (we call that date the "Issue
Date") and continues until the Payout Start Date, which is the date we apply
your money to provide income payments. During the Accumulation Phase, you may
allocate your purchase payments to any combination of the Variable Sub-Accounts
and/or Fixed Account Options. If you invest in any of the Fixed Account Options,
you will earn a fixed rate of interest that we declare periodically. If you
invest in any of the Variable Sub-Accounts, your investment return will vary up
or down depending on the performance of the corresponding Funds.
Second, the Contract can help you plan for retirement because you can use it to
receive retirement income for life and/or for a pre-set number of years, by
selecting one of the income payment options (we call these "Income Plans")
described on page 21. You receive income payments during what we call the
"Payout Phase" of the Contract, which begins on the Payout Start Date and
continues until we make the last payment required by the Income Plan you select.
During the Payout Phase, if you select a fixed income payment option, we
guarantee the amount of your payments, which will remain fixed. If you select a
variable income payment option, based on one or more of the Variable
Sub-Accounts, the amount of your payments will vary up or down depending on the
performance of the corresponding Funds. The amount of money you accumulate under
your Contract during the Accumulation Phase and apply to an Income Plan will
determine the amount of your income payments during the Payout Phase.
The timeline below illustrates how you might use your Contract.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Effective Payout Start
Date Accumulation Phase Date Payout Phase
o-------------------------------------------------------------------------------------------------------------------------->
| You save for retirement | | ?
You buy You start receiving income You can receive Or you can
a Contract payments or receive a lump income payments receive income
sum payment for a set period payments for life
</TABLE>
As the Contract Owner, you exercise all of the rights and privileges provided by
the Contract. If you die, any surviving Contract Owner or, if there is none, the
Beneficiary will exercise the rights and privileges provided by the Contract.
See "The Contract." In addition, if you die before the Payout Start Date, we
will pay a death benefit to any surviving Contract Owner or, if there is none,
to your Beneficiary. See "Death Benefits."
Please call us at 1-800/390-1277 if you have any question about how the Contract
works.
<PAGE>
EXPENSE TABLE
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The table below lists the expenses that you will bear directly or indirectly
when you buy a Contract. The table and the examples that follow do not reflect
premium taxes that may be imposed by the state where you reside. For more
information about Variable Account expenses, see "Expenses," below. For more
information about Fund expenses, please refer to the accompanying prospectus for
the Funds.
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CONTRACT Owner TRANSACTION EXPENSES
Withdrawal Charge (as a percentage of purchase payments withdrawn)*
Number of Complete Years
Since Purchase
Payment Accepted 0 1 2 3 4 5 6 7+
Applicable Charge: 7% 7% 6% 5% 4% 3% 2% 0%
Annual Contract Maintenance Charge...............$30.00**
Transfer Fee.............................0.50% of the amount transferred***
(applied soley to the thirteenth and
subsequent transfers within a Contract Year)
* Each Contract Year, you may withdraw up to the greater of earnings not
previously withdrawn or 15% of your total purchase payments without
incurring a withdrawal charge.
** Waived in certain cases. See "Expenses."
*** Excluding transfers due to dollar cost averaging and automatic fund
rebalancing.
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VARIABLE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net asset value deducted from each
Variable Sub-Account)
Mortality and Expense Risk Charge................................1.25%*
Administrative Charge............................................0.00%
Total Variable Account Annual Expenses...........................1.25%
<PAGE>
-------------------
* If you select the Enhanced Beneficiary Protection Option, the mortality and
expense risk charge will be equal to 1.40% of your Contract's average daily
net assets in the Variable Account.
Retirement Income Guarantee Rider Expenses
If you select a Retirement Income Guarantee Rider, you would pay an additional
fee at the annual rate of 0.05% or 0.30% (depending on the Option you select) of
the Income Base in effect on a Contract Anniversary. See "Retirement Income
Guarantee Riders" for details.
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FUND ANNUAL EXPENSES (After Voluntary Reductions and Reimbursements) (as a
percentage of Fund average daily net assets)(1)
<TABLE>
<CAPTION>
Management 12b-1 Other Total Annual
Fund Fees Fees Expenses Fund Expenses(1)
---- ---- ---- -------- -----------------
<S> <C> <C> <C> <C>
Putnam VT Asia Pacific Growth Fund 0.80% 0.15% 0.32% 1.27%
Putnam VT Diversified Income Fund 0.67% 0.15% 0.11% 0.93%
Putnam VT The George Putnam Fund of Boston(2) 0.65% 0.15% 0.36% 1.16%
Putnam VT Global Asset Allocation Fund 0.65% 0.15% 0.13% 0.93%
Putnam VT Global Growth Fund 0.60% 0.15% 0.12% 0.87%
Putnam VT Growth and Income Fund 0.46% 0.15% 0.04% 0.65%
Putnam VT Health Sciences Fund(2) 0.70% 0.15% 0.34% 1.19%
Putnam VT High Yield Fund 0.64% 0.15% 0.07% 0.86%
Putnam VT Income Fund 0.60% 0.15% 0.07% 0.87%
Putnam VT International Growth Fund 0.80% 0.15% 0.27% 1.22%
Putnam VT International Growth and Income Fund 0.80% 0.15% 0.19% 1.14%
Putnam VT International New Opportunities Fund(2) 1.20% 0.15% 0.68% 2.01%
Putnam VT Investors Fund(2) 0.65% 0.15% 0.33% 1.13%
Putnam VT Money Market Fund 0.45% 0.15% 0.08% 0.68%
Putnam VT New Opportunities Fund 0.56% 0.15% 0.05% 0.76%
Putnam VT New Value Fund 0.70% 0.15% 0.11% 0.96%
Putnam VT OTC & Emerging Growth Fund(2) 0.70% 0.15% 0.34% 1.19%
Putnam VT Research Fund(2) 0.65% 0.15% 0.48% 1.28%
Putnam VT Small Cap Value Fund(3) 0.80% 0.15% 0.59% 1.54%
Putnam VT Utilities Growth and Income Fund 0.65% 0.15% 0.07% 0.87%
Putnam VT Vista Fund 0.65% 0.15% 0.12% 0.92%
Putnam VT Voyager Fund 0.54% 0.15% 0.04% 0.73%
- -------------------
</TABLE>
(1) Since the funds have not offered Class IB shares for a full fiscal year,
figures shown in the table (except for Putnam VT Small Cap Value Fund) are
for the period ended December 31, 1998 and are estimates based on the
corresponding expenses for the fund's Class A shares for the last fiscal
year. Each Fund commenced operations on April 30, 1998, except for the
Putnam VT Diversified Income, Growth and Income, and International Growth
Funds, which commenced operations on April 6, 1998, the Putnam VT Research
Fund, which commenced operations September 30, 1998, and the Putnam VT
Small Cap Fund, which commenced operations on April 30, 1999. Figures shown
in the table include amounts paid through expense offset and brokerage
service arrangements.
(2) Absent voluntary reductions and reimbursements for certain Funds, advisory
fees, other expenses, and total annual fund expenses expressed as a
percentage of average net assets of the Funds would have been as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Putnam VT The George Putnam Fund of Boston 0.65% 0.15% 0.36% 1.16%
Putnam VT Health Sciences Fund 0.70% 0.15% 0.34% 1.19%
Putnam VT International New Opportunities Fund 1.20% 0.15% 0.68% 2.03%
Putnam VT Investors Fund 0.65% 0.15% 0.33% 1.13%
Putnam VT OTC & Emerging Growth Fund 0.70% 0.15% 0.34% 1.19%
Putnam VT Research Fund 0.65% 0.15% 0.48% 1.28%
</TABLE>
(3) Putnam VT Small Cap Value Fund commenced operations on April 30, 1999, the
management fee, other expenses and total annual fund operating expenses are
based on estimates for the fund's first full fiscal year.
<PAGE>
EXAMPLE 1
The example below shows the dollar amount of expenses that you would bear
directly or indirectly if you:
o invested a $1,000 in a Variable Sub-Account,
o earned a 5% annual return on your investment,
o surrendered your Contract, or began receiving income payments for a
specified period of less than 120 months, at the end of each time period;
and
o elect Retirement Income Guarantee Rider 2 (assuming Income Base B).
The example does not include any taxes or tax penalties you may be required to
pay if you surrender your Contract.
SUB-ACCOUNT 1 YEAR 3 YEARS
- ----------- ------ -------
Putnam Asia Pacific Growth $89 $134
Putnam Diversified Income $86 $123
The George Putnam Fund $88 $130
Putnam Global Asset Allocation $86 $123
Putnam Global Growth $85 $121
Putnam Growth and Income $83 $115
Putnam Health Sciences $78 $100
Putnam High Yield $95 $152
Putnam Income $85 $121
Putnam International Growth $89 $132
Putnam International Growth and Income $88 $130
Putnam International New Opportunities $97 $156
Putnam Investors $85 $121
Putnam Money Market $92 $142
Putnam New Opportunities $88 $129
Putnam New Value $83 $116
Putnam OTC & Emerging Growth $89 $134
Putnam Research $84 $118
Putnam Small Cap Value $86 $124
Putnam Utilities Growth and Income $88 $131
Putnam Vista $86 $123
Putnam Voyager $84 $117
<PAGE>
EXAMPLE 2
Same assumptions as Example 1 above, except that you decided not to surrender
your Contract, or you began receiving income payments for at least 120 months if
under an Income Plan for a specified period, at the end of each period.
SUB-ACCOUNT 1 YEAR 3 YEARS
- ----------- ------ -------
Putnam Asia Pacific Growth $30 $ 91
Putnam Diversified Income $26 $ 81
The George Putnam Fund $29 $ 88
Putnam Global Asset Allocation $26 $ 81
Putnam Global Growth $26 $ 79
Putnam Growth and Income $23 $ 72
Putnam Health Sciences $19 $ 58
Putnam High Yield $36 $109
Putnam Income $26 $ 79
Putnam International Growth $29 $ 90
Putnam International Growth and Income $28 $ 87
Putnam International New Opportunities $37 $114
Putnam Investors $26 $ 79
Putnam Money Market $32 $ 99
Putnam New Opportunities $28 $ 87
Putnam New Value $24 $ 73
Putnam OTC & Emerging Growth $30 $ 91
Putnam Research $24 $ 76
Putnam Small Cap Value $26 $ 82
Putnam Utilities Growth and Income $29 $ 89
Putnam Vista $26 $ 80
Putnam Voyager $24 $ 75
Please remember that you are looking at examples and not a representation of
past or future expenses. Your actual expenses may be lower or greater than those
shown above. Similarly, your rate of return may be lower or greater than 5%,
which is not guaranteed. The above examples assume the election of the
Retirement Income Guarantee Rider 2 and that Income Base B is applied. If that
Rider were not elected, the expense figures shown above would be slightly lower.
To reflect the contract maintenance charge in the examples, we estimated an
equivalent percentage charge, based on an assumed average Contract size of
$45,000.
<PAGE>
FINANCIAL INFORMATION
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To measure the value of your investment in the Variable Sub-Accounts during the
Accumulation Phase, we use a unit of measure we call the "Accumulation Unit."
Each Variable Sub-Account has a separate value for its Accumulation Units we
call "Accumulation Unit Value." Accumulation Unit Value is analogous to, but not
the same as, the share price of a mutual fund.
The Variable Account commenced operations as of the date of this prospectus.
Accordingly, there are no Accumulation Unit Values or other financial
information to report for the Variable Account.
The combined statutory basis financial statements of Allstate appear in the
Statement of Additional Information.
<PAGE>
THE CONTRACT
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CONTRACT OWNER
The Putnam Allstate Advisor is a contract between you, the Contract Owner, and
Allstate, a life insurance company. As the Contract Owner, you may exercise all
of the rights and privileges provided to you by the Contract. That means it is
up to you to select or change (to the extent permitted):
o the investment alternatives during the Accumulation and Payout Phases,
o the amount and timing of your purchase payments and withdrawals,
o the programs you want to use to invest or withdraw money,
o the income payment plan you want to use to receive retirement income,
o the Annuitant (either yourself or someone else) on whose life the income
payments will be based,
o the Beneficiary or Beneficiaries who will receive the benefits that the
Contract provides when the last surviving Contract Owner or the Annuitant
dies, and
o any other rights that the Contract provides.
If you die, any surviving joint Contract Owner or, if none, the Beneficiary will
exercise the rights and privileges provided to them by the Contract. The
Contract cannot be jointly owned by both a non-natural person and a natural
person.
You can use the Contract with or without a qualified plan. A qualified plan is a
personal retirement savings plan, such as an IRA or tax-sheltered annuity, that
meets the requirements of the Internal Revenue Code. Qualified plans may limit
or modify your rights and privileges under the Contract. We use the term
"Qualified Contract" to refer to a Contract issued with a qualified plan. See
"Qualified Plans" on page 27.
You may change the Contract Owner at any time. Once we have received a
satisfactory written request for a change of Contract Owner, the change will
take effect as of the date you signed it. We are not liable for any payment we
make or other action we take before receiving any written request for a change
from you.
ANNUITANT
The Annuitant is the individual whose age determines the latest Payout Start
Date and whose life determines the amount and duration of income payments (other
than under Income Plans with guaranteed payments for a specified period). You
may name a new Annuitant only upon the death of the current Annuitant. You may
designate a joint Annuitant, who is a second person on whose life income
payments depend, at the time you select an Income Plan.
If you select an Income Plan that depends on the Annuitant or a joint
Annuitant's life, we may require proof of age and sex before income payments
begin and proof that the Annuitant or joint Annuitant is still alive before we
make each payment.
BENEFICIARY
The Beneficiary is the person who may elect to receive the death benefit or
become the new Contract Owner if the sole surviving Contract Owner dies before
the Payout Start Date. If the sole surviving Contract Owner dies after the
Payout Start Date, the Beneficiary will receive any guaranteed income payments
scheduled to continue.
You may name one or more Beneficiaries when you apply for a Contract. You may
change or add Beneficiaries at any time by writing to us before income payments
begin, unless you have designated an irrevocable Beneficiary. We will provide a
change of Beneficiary form to be signed and filed with us. Any change will be
effective at the time you sign the written notice. Until we receive your written
notice to change a Beneficiary, we are entitled to rely on the most recent
Beneficiary information in our files. We will not be liable as to any payment or
settlement made prior to receiving the written notice. Accordingly, if you wish
to change your Beneficiary, you should deliver your written notice to us
promptly.
If you did not name a Beneficiary or unless otherwise provided in the
Beneficiary designation, if a Beneficiary predeceases the Contract Owner and
there are no other surviving Beneficiaries, the new Beneficiary will be:
o your spouse or, if he or she is no longer alive,
o your surviving children equally, or if you have no surviving children,
o your estate.
If more than one Beneficiary survives you, we will divide the death benefit
among your Beneficiaries according to your most recent written instructions. If
you have not given us written instructions, we will pay the death benefit in
equal amounts to the Beneficiaries. If one of the Beneficiaries dies before you,
we will divide the death benefit among the surviving Beneficiaries.
MODIFICATION OF THE CONTRACT
Only an Allstate officer may approve a change in or waive any provision of the
Contract. Any change or waiver must be in writing. None of our agents has the
authority to change or waive the provisions of the Contract. We may not change
the terms of the Contract without your consent, except to conform the Contract
to applicable law or changes in the law. If a provision of the Contract is
inconsistent with state law, we will follow state law.
ASSIGNMENT
We will not honor an assignment of an interest in a Contract as collateral or
security for a loan. No Beneficiary may assign benefits under the Contract until
they are due. We will not be bound by any assignment until you sign it and file
it with us. We are not responsible for the validity of any assignment. Federal
law prohibits or restricts the assignment of benefits under many types of
retirement plans and the terms of such plans may themselves contain restrictions
on assignments. An assignment may also result in taxes or tax penalties. You
should consult with an attorney before trying to assign your Contract.
<PAGE>
PURCHASES
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MINIMUM PURCHASE PAYMENTS
Your initial purchase payment must be at least $1,000 ($500 for a Qualified
Contract). All subsequent purchase payments must be $500 or more. You may make
purchase payments at any time prior to the Payout Start Date. The most we accept
without our prior approval is $1 million. We reserve the right to limit the
availability of the investment alternatives for additional investments. We also
reserve the right to reject any application.
AUTOMATIC ADDITIONS PROGRAM
You may make subsequent purchase payments of $50 or more per month by
automatically transferring money from your bank account. Please consult with
your sales representative for detailed information.
ALLOCATION OF PURCHASE PAYMENTS
At the time you apply for a Contract, you must decide how to allocate your
purchase payment among the investment alternatives. The allocation you specify
on your application will be effective immediately. All allocations must be in
whole percents that total 100% or in whole dollars. You can change your
allocations by calling 1-800-390-1277.
We will allocate your purchase payments to the investment alternatives according
to your most recent instructions on file with us. Unless you notify us in
writing otherwise, we will allocate subsequent purchase payments according to
the allocation for the previous purchase payment. We will effect any change in
allocation instructions at the time we receive written notice of the change in
good order.
We will credit the initial purchase payment that accompanies your completed
application to your Contract within 2 business days after we receive the payment
at our home office. If your application is incomplete, we will ask you to
complete your application within 5 business days. If you do so, we will credit
your initial purchase payment to your Contract within that 5 business day
period. If you do not, we will return your purchase payment at the end of the 5
business day period unless you expressly allow us to hold it until you complete
the application. We will credit subsequent purchase payments to the Contract at
the close of the business day on which we receive the purchase payment at our
home office.
We use the term "business day" to refer to each day Monday through Friday that
the New York Stock Exchange is open for business. We also refer to these days as
"Valuation Dates." Our business day closes when the New York Stock Exchange
closes, usually 4 p.m. Eastern Time (3 p.m. Central Time). If we receive your
purchase payment after 3 p.m. Central Time on any Valuation Date, we will credit
your purchase payment using the Accumulation Unit Values computed on the next
Valuation Date.
RIGHT TO CANCEL
You may cancel the Contract by returning it to us within the Cancellation
Period, which is the 20 day period after you receive the Contract, or such
longer period that your state may require. You may return it by delivering it or
mailing it to us. If you exercise this "Right to Cancel," the Contract
terminates and we will pay you the full amount of your purchase payments
allocated to the Fixed Account. We also will return your purchase payments
allocated to the Variable Account adjusted, to the extent state law permits, to
reflect investment gain or loss that occurred from the date of allocation
through the date of cancellation. We reserve the right to allocate your purchase
payments to the Putnam Money Market Variable Sub-Account during the Cancellation
Period. See "Distribution" on page 27 for additional amounts to which you may be
entitled.
<PAGE>
CONTRACT VALUE
- -------------------------------------------------------------------------------
Your Contract Value at any time during the Accumulation Phase is equal to the
sum of the value of your Accumulation Units in the Variable Sub-Accounts you
have selected, plus the value of your interest in the Fixed Account Options.
ACCUMULATION UNITS
To determine the number of Accumulation Units of each Variable Sub-Account to
allocate to your Contract, we divide (i) the amount of the purchase payment you
have allocated to a Variable Sub-Account by (ii) the Accumulation Unit Value of
that Variable Sub-Account next computed after we receive your payment. For
example, if we receive a $10,000 purchase payment allocated to a Variable
Sub-Account when the Accumulation Unit Value for the Sub-Account is $10, we
would credit 1,000 Accumulation Units of that Variable Sub-Account to your
Contract.
ACCUMULATION UNIT VALUE
As a general matter, the Accumulation Unit Value for each Variable Sub-Account
will rise or fall to reflect:
o changes in the share price of the Fund in which the Variable Sub-Account
invests, and
o the deduction of amounts reflecting the mortality and expense risk charge
and any provision for taxes that have accrued since we last calculated the
Accumulation Unit Value.
We determine contract maintenance charges, withdrawal charges, Retirement Income
Guarantee charges (if applicable), and transfer fees separately for each
Contract. They do not affect the Accumulation Unit Value. Instead, we obtain
payment of those charges and fees by redeeming Accumulation Units. For details
on how we compute Accumulation Unit Value, please refer to the Statement of
Additional Information.
We determine a separate Accumulation Unit Value for each Variable Sub-Account on
each Valuation Date. We also determine separate sets of Accumulation Unit Values
that reflect the cost of the Enhanced Beneficiary Protection Option described on
page 24 below.
You should refer to the prospectus for the Funds that accompanies this
prospectus for a description of how the assets of each Fund are valued, since
that determination directly bears on the Accumulation Unit Value of the
corresponding Variable Sub-Account and, therefore, your Contract Value.
<PAGE>
INVESTMENT ALTERNATIVES: The Variable Sub-Accounts
- -----------------------------------------------------------------------------
You may allocate your purchase payments to up to 22 Variable Sub-Accounts. Each
Variable Sub-Account invests in the shares of a corresponding Fund. Each Fund
has its own investment objective(s) and policies. We briefly describe the Funds
below.
For more complete information about each Fund, including expenses and risks
associated with the Fund, please refer to the accompanying prospectus for the
Fund. You should carefully review the Fund prospectuses before allocating
amounts to the Variable Sub-Accounts. Putnam Investment Management, Inc.
("Putnam Management") serves as the investment adviser to each Fund.
<TABLE>
<CAPTION>
<S> <C>
Fund: Each Fund Seeks:
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Asia Pacific Growth Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Diversified Income Fund High current income consistent with capital preservation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT The George Putnam Fund of Boston To provide a balanced investment composed of a well
diversified portfolio of stocks and bonds that will produce
both capital growth and current income
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Global Asset Allocation Fund A high level of long-term total return consistent with
preservation of capital
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Global Growth Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Growth and Income Fund Capital growth and current income
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Health Sciences Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT High Yield Fund High current income. Capital growth is a secondary objective
when consistent with high current income.
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Income Fund Current income consistent with preservation of capital
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT International Growth Fund Capital growth
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT International Growth and Income Fund Capital growth. Current income is a secondary objective.
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT International New Opportunities Fund Long-term capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Investors Fund Long-term growth of capital and any increased income that
results from this growth
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Money Market Fund As high a rate of current income as Putnam Management
believes is consistent with preservation of capital
and maintenance of liquidity.
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT New Opportunities Fund Long-term capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT New Value Fund Long-term capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT OTC & Emerging Growth Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Research Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Small Cap Value Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund Capital growth and current income
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Vista Fund Capital appreciation
- ------------------------------------------------------ ---------------------------------------------------------------
Putnam VT Voyager Fund Capital appreciation
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Amounts you allocate to Variable Sub-Accounts may grow in value, decline in
value, or grow less than you expect, depending on the investment performance of
the Funds in which those Variable Sub-Accounts invest. You bear the investment
risk that the Funds might not meet their investment objectives. Shares of the
Funds are not deposits, or obligations of, or guaranteed or endorsed by any bank
and are not insured by the Federal Deposit Insurance Corporation, the Federal
Reserve Board or any other agency.
<PAGE>
INVESTMENT ALTERNATIVES: The Fixed Account Options
- ---------------------------------------------------------------------------
You may allocate all or a portion of your purchase payments to the Fixed
Account. You may choose from among 3 Fixed Account Options including 2 Dollar
Cost Averaging Options, and the Standard Fixed Account Option. We will credit a
minimum annual interest rate of 3% to money you allocate to any of the Fixed
Account Options. The Fixed Account Options may not be available in all states.
Please consult with your sales representative for current information. The Fixed
Account supports our insurance and annuity obligations. The Fixed Account
consists of our general assets other than those in segregated asset accounts. We
have sole discretion to invest the assets of the Fixed Account, subject to
applicable law. Any money you allocate to a Fixed Account Option does not
entitle you to share in the investment experience of the Fixed Account.
DOLLAR COST AVERAGING FIXED ACCOUNT OPTIONS
You may establish a Dollar Cost Averaging Program, as described on page 17, by
allocating purchase payments to the Fixed Account either for up to 6 months (the
"6 Month Dollar Cost Averaging Option") or for up to 12 months (the "12 Month
Dollar Cost Averaging Option"). Your purchase payments will earn interest for
the period you select at the current rates in effect at the time of allocation.
Rates may differ from those available for the Standard Fixed Account Option
described below.
You must transfer all of your money out of the 6 or 12 Month Dollar Cost
Averaging Options to other investment alternatives in equal monthly
installments. At the end of the applicable 6 or 12 month period, we will
transfer any remaining amounts in the 6 or 12 Month Dollar Cost Averaging
Options to the Putnam Money Market Variable Sub-Account unless you request a
different investment alternative. Transfers out of the 6 or 12 Month Dollar Cost
Averaging Options do not count towards the 12 transfers you can make without
paying a transfer fee.
You may not transfer money from other investment alternatives to either the 6 or
12 Month Dollar Cost Averaging Options.
The 6 or 12 Month Dollar Cost Averaging Options may not be available in your
state. Please check with your sales representative for availability.
STANDARD FIXED ACCOUNT OPTION
Each payment or transfer allocated to the Standard Fixed Account Option earns
interest at the current rate in effect at the time of allocation. We guarantee
that rate for a period of years we call Guarantee Periods. We are currently
offering Guarantee Periods of 1 year in length. In the future we may offer
Guarantee Periods of different lengths or stop offering some Guarantee Periods.
You select a Guarantee Period for each purchase or transfer. After the initial
Guarantee Period, we will guarantee a renewal rate.
<PAGE>
INVESTMENT ALTERNATIVES: Transfers
- -----------------------------------------------------------------------------
TRANSFERS DURING THE ACCUMULATION PHASE
During the Accumulation Phase, you may transfer Contract Value among the
investment alternatives. We do not permit transfers into any Dollar Cost
Averaging Fixed Account Option. You may request transfers in writing on a form
that we provided or by telephone according to the procedure described below.
You may make 12 transfers per Contract Year without charge. A transfer fee equal
to 0.50% of the amount transferred applies to each transfer after the 12th
transfer in any Contract Year.
The minimum amount that you may transfer from the Standard Fixed Account Option
or a Variable Sub-Account is $100 or the total remaining balance in the Standard
Fixed Account Option or the Variable Sub-Account, if less. These limitations do
not apply to the 6-Month and 12-Month Dollar Cost Averaging Fixed Account
Options.
The most you can transfer from the Standard Fixed Account Option during any
Contract Year is the greater of (i) 30% of the Standard Fixed Account Option
balance as of the last Contract Anniversary or (ii) the greatest dollar amount
of any prior transfer from the Standard Fixed Account Option. This limitation
does not apply to the Dollar Cost Averaging Program. Also, if the interest rate
on any renewed Guarantee Period is at least one percentage point less than the
previous interest rate, you may transfer up to 100% of the monies receiving that
reduced rate within 60 days of the notification of the interest rate decrease.
We will process transfer requests that we receive before 3:00 p.m. Central Time
on any Valuation Date using the Accumulation Unit Values for that Date. We will
process requests completed after 3:00 p.m. on any Valuation Date using the
Accumulation Unit Values for the next Valuation Date. The Contract permits us to
defer transfers from the Fixed Account Options for up to six months from the
date we receive your request. If we decide to postpone transfers from any Fixed
Account Option for 30 days or more, we will pay interest as required by
applicable law. Any interest would be payable from the date we receive the
transfer request to the date we make the transfer.
We reserve the right to waive any transfer restrictions.
TRANSFERS DURING THE PAYOUT PHASE
During the Payout Phase, you may make transfers among the Variable Sub-Accounts
so as to change the relative weighting of the Variable Sub-Accounts on which
your variable income payments will be based. You may not convert any portion of
your fixed income payments into variable income payments.
You may not make any transfers for the first 6 months after the Payout Start
Date. Thereafter, you may make transfers among the Variable Sub-Accounts or make
transfers from the Variable Sub-Accounts to increase the proportion of your
income payments consisting of fixed income payments if Income Plan 3, described
below, is in effect. Your transfers must be at least 6 months apart.
TELEPHONE TRANSFERS
You may make transfers by telephone by calling 1-800-390-1277. The cut off time
for telephone transfer requests is 3:00 p.m. Central time. In the event that the
New York Stock Exchange closes early, i.e., before 3:00 p.m. Central Time, or in
the event that the Exchange closes early for a period of time but then reopens
for trading on the same day, we will process telephone transfer requests as of
the close of the Exchange on that particular day. We will not accept telephone
requests received from you at any telephone number other than the number that
appears in this paragraph or received after the close of trading on the
Exchange. If you own the Contract with a joint Contract Owner, unless we receive
contrary instructions, we will accept instructions from either you or the other
Contract Owner.
We use procedures that we believe provide reasonable assurance that the
telephone transfers are genuine. For example, we tape telephone conversations
with persons purporting to authorize transfers and request identifying
information. Accordingly, we disclaim any liability for losses resulting from
allegedly unauthorized telephone transfers. However, if we do not take
reasonable steps to help ensure that a telephone authorization is valid, we may
be liable for such losses.
EXCESSIVE TRADING LIMITS
We reserve the right to limit transfers in any Contract Year, or to refuse any
transfer request for a Contract Owner or certain Contract Owners, if:
o we believe, in our sole discretion, that excessive trading by such Contract
Owner or Owners, or a specific transfer request or group of transfer
requests, may have a detrimental effect on the Accumulation Unit Values of
any Variable Sub-Account or the share prices of the corresponding Funds or
would be to the disadvantage of other Contract Owners; or
o we are informed by one or more of the corresponding Funds that they intend
to restrict the purchase or redemption of Fund shares because of excessive
trading or because they believe that a specific transfer or group of
transfers would have a detrimental effect on the prices of Fund shares.
We may apply the restrictions in any manner reasonably designed to prevent
transfers that we consider disadvantageous to other Contract Owners.
DOLLAR COST AVERAGING PROGRAM
You may automatically transfer a set amount from any Variable Sub-Account or
Fixed Account Option to any of the other Variable Sub-Accounts through our
Dollar Cost Averaging Program. The Program is available only during the
Accumulation Phase.
We will not charge a transfer fee for transfers made under this Program, nor
will such transfers count against the 12 transfers you can make each Contract
Year without paying a transfer fee.
The theory of dollar cost averaging is that if purchases of equal dollar amounts
are made at fluctuating prices, the aggregate average cost per unit will be less
than the average of the unit prices on the same purchase dates. However,
participation in this Program does not assure you of a greater profit from your
purchases under the Program nor will it prevent or necessarily reduce losses in
a declining market.
AUTOMATIC FUND REBALANCING PROGRAM
Once you have allocated your money among the Variable Sub-Accounts, the
performance of each Sub-Account may cause a shift in the percentage you
allocated to each Sub-Account. If you select our Automatic Fund Rebalancing
Program, we will automatically rebalance the Contract Value in each Variable
Sub-Account and return it to the desired percentage allocations. Money you
allocate to the Fixed Account will not be included in the rebalancing.
We will rebalance your account quarterly, semi-annually, or annually. We will
measure these periods according to your instructions. We will transfer amounts
among the Variable Sub-Accounts to achieve the percentage allocations you
specify. You can change your allocations at any time by contacting us in writing
or by telephone. The new allocation will be effective with the first rebalancing
that occurs after we receive your written or telephone request. We are not
responsible for rebalancing that occurs prior to receipt of proper notice of
your request.
Example:
Assume that you want your initial purchase payment split among 2
Variable Sub-Accounts. You want 40% to be in the Putnam Income Variable
Sub-Account and 60% to be in the Putnam Global Growth Variable
Sub-Account. Over the next 2 months the bond market does very well
while the stock market performs poorly. At the end of the first
quarter, the Putnam Income Variable Sub-Account now represents 50% of
your holdings because of its increase in value. If you choose to have
your holdings rebalanced quarterly, on the first day of the next
quarter we would sell some of your units in the Putnam Income Variable
Sub-Account and use the money to buy more units in the Putnam Global
Variable Sub-Account so that the percentage allocations would again be
40% and 60% respectively.
The Automatic Fund Rebalancing Program is available only during the Accumulation
Phase. The transfers made under the program do not count towards the 12
transfers you can make without paying a transfer fee, and are not subject to a
transfer fee. We may sometimes refer to this Program as the "Putnam Automatic
Rebalancing Program."
Fund rebalancing is consistent with maintaining your allocation of investments
among market segments, although it is accomplished by reducing your Contract
Value allocated to the better performing segments.
<PAGE>
EXPENSES
- ------------------------------------------------------------------------------
As a Contract Owner, you will bear, directly or indirectly, the charges and
expenses described below.
CONTRACT MAINTENANCE CHARGE
During the Accumulation Phase, on each Contract Anniversary, we will deduct a
$30 contract maintenance charge from your assets invested in the Putnam Money
Market Variable Sub-Account. If there are insufficient assets in that Variable
Sub-Account, we will deduct the charge proportionally from the other Variable
Sub-Accounts. We also will deduct this charge if you withdraw your entire
Contract Value, unless your Contract qualifies for a waiver. During the Payout
Phase, we will deduct the charge proportionately from each income payment.
The charge is to compensate us for the cost of administering the Contracts and
the Variable Account. Maintenance costs include expenses we incur in billing and
collecting purchase payments; keeping records; processing death claims, cash
withdrawals, and policy changes; proxy statements; calculating Accumulation Unit
Values and income payments; and issuing reports to Contract Owners and
regulatory agencies. We cannot increase the charge. We will waive this charge
if:
o your total Contract Value is greater than $50,000 on a Contract Anniversary
or on the Payout Start Date, or
o all of your money is allocated to the Fixed Account Options on a Contract
Anniversary or all income payments are fixed income payments.
We also reserve the right to waive this charge if you own more than one Contract
and the Contracts meet certain minimum dollar amount requirements. In addition,
we reserve the right to waive this charge for all Contracts.
MORTALITY AND EXPENSE RISK CHARGE
We deduct a mortality and expense risk charge daily at an annual rate of 1.25%
of the average daily net assets you have invested in the Variable Sub-Accounts.
The mortality and expense risk charge is for all the insurance benefits
available with your Contract (including our guarantee of annuity rates and the
death benefits), for certain expenses of the Contract, and for assuming the risk
(expense risk) that the current charges will be sufficient in the future to
cover the cost of administering the Contract. If the charges under the Contract
are not sufficient, then Allstate will bear the loss. If you select the Enhanced
Beneficiary Protection Option, Allstate will deduct a mortality and expense risk
charge equal, on an annual basis, to 1.40% of the average daily net assets you
have invested in the Variable Sub-Accounts (1.25% plus 0.15% for the Option).
Allstate reserves the right to raise the Enhanced Beneficiary Protection Option
charge to up to 0.25%. However, once your Option is in effect, Allstate cannot
change the fee that applies to your Contract. We charge the additional fee for
the Enhanced Beneficiary Protection Option to compensate us for the additional
risk that we accept by providing the Option.
We guarantee the mortality and expense risk charge and we cannot increase it. We
assess the mortality and expense risk charge during both the Accumulation Phase
and the Payout Phase.
RETIREMENT INCOME GUARANTEE CHARGE
We impose a separate charge for each Retirement Income Guarantee Rider. The
charges equal, on an annual basis, 0.05% of the income base for Retirement
Income Guarantee Rider 1 and 0.30% of the income base for Retirement Income
Guarantee Rider 2. We reserve the right to change the Rider fee. However, once
we issue your Rider, we cannot change the Rider fee that applies to your
Contract. The Rider 1 fee will never exceed 0.15% and the Rider 2 fee will never
exceed 0.50%. See "Retirement Income Guarantee Riders" for details.
TRANSFER FEE
We impose a fee upon transfers in excess of 12 during any Contract Year. The fee
is equal to 0.50% of the dollar amount transferred. We will not charge a
transfer fee on transfers that are part of a Dollar Cost Averaging Program or
Automatic Fund Rebalancing Program.
WITHDRAWAL CHARGE
We may assess a withdrawal charge of up to 7% of the purchase payment(s) you
withdraw. The charge declines to 0% after 7 complete years from the date we
received the purchase payment being withdrawn. A schedule showing how the charge
declines appears on page 7, above. During each Contract Year, you can withdraw
up to the greater of earnings not previously withdrawn or 15% of your total
purchase payments without paying the charge. Unused portions of this 15% "Free
Withdrawal Amount" are not carried forward to future Contract Years.
We will deduct withdrawal charges, if applicable, from the amount paid. For
purposes of the withdrawal charge, we will treat withdrawals as coming from the
oldest purchase payments first. However, for federal income tax purposes,
earnings are considered to come out first, which means you pay taxes on the
earnings portion of your withdrawal.
We do not apply a withdrawal charge in the following situations:
o on the Payout Start Date (a withdrawal charge may apply if you elect to
receive income payments for a specified period of less than 120 months);
o the death of the Contract Owner or Annuitant;
o withdrawals taken to satisfy IRS minimum distribution rules for the
Contract, or
o withdrawals that qualify for one of the waivers described below.
We use the amounts obtained from the withdrawal charge to pay sales commissions
and other promotional or distribution expenses associated with marketing the
Contracts. To the extent that the withdrawal charge does not cover all sales
commissions and other promotional or distribution expenses, we may use any of
our corporate assets, including potential profit which may arise from the
mortality and expense risk charge or any other charges or fee described above,
to make up any difference.
Withdrawals also may be subject to tax penalties or income tax. You should
consult your own tax counsel or other tax advisers regarding any withdrawals.
Confinement Waiver. We will waive the withdrawal charge on any withdrawal taken
prior to the Payout Start Date under your Contract if the following conditions
are satisfied:
1) you or the Annuitant, if the Contract Owner is not a living individual, are
first confined to a long term care facility or a hospital for at least 90
consecutive days. You or the Annuitant must enter the long term care
facility or hospital at least 30 days after the Issue Date,
2) we receive your request for withdrawal and written proof of the stay no
later than 90 days following the end of your or the Annuitant's stay at the
long term care facility or hospital, and
3) a physician must have prescribed the stay and the stay must be medically
necessary (as defined in the Contract).
Terminal Illness Waiver. We will waive the withdrawal charge on any withdrawal
under your Contract taken prior to the Payout Start Date if:
1) you or the Annuitant, if the Contract Owner is not a living individual, are
diagnosed by a physician as having a terminal illness (as defined in the
Contract) at least 30 days after the Issue Date, and
2) you provide adequate proof of diagnosis to us, or at the time you request
the withdrawal.
Unemployment Waiver. We will waive the withdrawal charge on one partial or full
withdrawal from your Contract, if you meet the following requirements:
1) you or the Annuitant, if the Contract Owner is not a living individual,
become unemployed at least one year after the Issue Date,
2) you or the Annuitant receive unemployment compensation (as defined in the
Contract) for at least 30 days as a result of that unemployment, and
3) you or the Annuitant claim this benefit within 180 days of your or the
Annuitant's initial receipt of unemployment compensation.
You may exercise this benefit once before the Payout Start Date.
Please refer to your Contract for more detailed information about the terms and
conditions of these waivers.
The laws of your state may limit the availability of these waivers and may also
change certain terms and/or benefits available under the waivers. You should
consult your Contract for further details on these variations. Also, even if you
do not need to pay our withdrawal charge because of these waivers, you still may
be required to pay taxes or tax penalties on the amount withdrawn. You should
consult your tax adviser to determine the effect of a withdrawal on your taxes.
PREMIUM TAXES
Some states and other governmental entities (e.g., municipalities) charge
premium taxes or similar taxes. We are responsible for paying these taxes and
will deduct them from your Contract Value. Some of these taxes are due when the
Contract is issued, others are due when income payments begin or upon surrender.
Our current practice is not to charge anyone for these taxes until income
payments begin or when a total withdrawal occurs including payment upon death.
We may some time in the future discontinue this practice and deduct premium
taxes from the purchase payments. Premium taxes generally range from 0% to 4%,
depending on the state.
At the Payout Start Date, we deduct the charge for premium taxes from each
investment alternative in the proportion that the Contract Owner's value in the
investment alternative bears to the total Contract Value.
OTHER EXPENSES
Each Fund deducts advisory fees and other expenses from its assets. You
indirectly bear the charges and expenses of the Fund whose shares are held by
the Variable Sub-Accounts. These fees and expenses are described in the
accompanying prospectus for the Funds. For a summary of current estimates of
those charges and expenses, see page 8 above. We may receive compensation
from the Funds' investment adviser, distributor, or their affiliates for
administrative services we provide to the Funds.
<PAGE>
ACCESS TO YOUR MONEY
- ------------------------------------------------------------------------------
You can withdraw some or all of your Contract Value at any time prior to the
Payout Start Date. Withdrawals also are available under limited circumstances on
or after the Payout Start Date. See "Income Plans" on page 21.
The amount payable upon withdrawal is the Contract Value next computed after we
receive the request for a withdrawal at our home office, less any withdrawal
charges, contract maintenance charges, income tax withholding, and any premium
taxes. We will pay withdrawals from the Variable Account within 7 days of
receipt of the request, subject to postponement in certain circumstances.
You can withdraw money from the Variable Account or the Fixed Account Options.
To complete a partial withdrawal from the Variable Account, we will cancel
Accumulation Units in an amount equal to the withdrawal and any applicable
withdrawal charge and premium taxes.
You must name the investment alternative from which you are taking the
withdrawal. If none is named, then the withdrawal request is incomplete and
cannot be honored.
In general, you must withdraw at least $50 at a time. If you request a total
withdrawal, we may require that you return your Contract to us.
POSTPONEMENT OF PAYMENTS
We may postpone the payment of any amounts due from the Variable Account under
the Contract if:
1) the New York Stock Exchange is closed for other than usual weekends or
holidays, or trading on the Exchange is otherwise restricted,
2) an emergency exists as defined by the SEC, or
3) the SEC permits delay for your protection.
In addition, we may delay payments or transfers from the Fixed Account Options
for up to 6 months or shorter period if required by law. If we delay payment or
transfer for 30 days or more, we will pay interest as required by law.
SYSTEMATIC WITHDRAWAL PROGRAM
You may choose to receive systematic withdrawal payments on a monthly,
quarterly, semi-annual, or annual basis at any time prior to the Payout Start
Date. Please consult your sales representative or call us at 1-800-390-1277 for
more information. Depending on fluctuations in the value of the Variable
Sub-Accounts and the value of the Fixed Account Options, systematic withdrawals
may reduce or even exhaust the Contract Value. Income taxes may apply to
systematic withdrawals. Please consult your tax adviser before taking any
withdrawal.
MINIMUM CONTRACT VALUE
If your request for a partial withdrawal would reduce the Contract Value to less
than $1,000, we may treat it as a request to withdraw your entire Contract
Value. Your Contract will terminate if you withdraw all of your Contract Value.
We will, however, ask you to confirm your withdrawal request before terminating
your Contract. If we terminate your Contract, we will distribute to you its
Contract Value, less withdrawal and other charges and premium taxes.
<PAGE>
INCOME PAYMENTS
- -------------------------------------------------------------------------------
PAYOUT START DATE
The Payout Start Date is the day that income payments start under an Income
Plan. The Payout Start Date must be:
o at least one month after the Issue Date; and
o no later than the day the Annuitant reaches age 90, or the 10th
Contract Anniversary, if later.
You may change the Payout Start Date at any time by notifying us in writing of
the change at least 30 days before the scheduled Payout Start Date. If you do
not select an earlier Payout Start Date, the latest Payout Start Date will
automatically become the Payout Start Date.
INCOME PLANS
You may choose and change your choice of Income Plan until 30 days before the
Payout Start Date. If you do not select an Income Plan, we will make income
payments in accordance with Income Plan 1 with guaranteed payments for 10 years.
Three Income Plans are available under the Contract. Each is available to
provide:
o fixed income payments;
o variable income payments; or
o a combination of the two.
The three Income Plans are:
Income Plan 1 -- Life Income with Guaranteed Payments. Under this plan,
we make periodic income payments for at least as long as the Annuitant
lives. If the Annuitant dies before we have made all of the guaranteed
income payments, we will continue to pay the remainder of the
guaranteed income payments as required by the Contract.
Income Plan 2 -- Joint and Survivor Life Income with Guaranteed
Payments. Under this plan, we make periodic income payments for at
least as long as either the Annuitant or the joint Annuitant, named at
the time the plan was selected, is alive. If both the Annuitant and the
joint Annuitant die before we have made all of the guaranteed income
payments, we will continue to pay the remainder of the guaranteed
income payments as required by the Contract.
Income Plan 3 -- Guaranteed Payments for a Specified Period (5 Years to
30 Years). Under this plan, we make periodic income payments for the
period you have chosen. If the Annuitant dies before we have made all
of the guaranteed income payments, we will continue to pay the
remainder of the guaranteed income payments as required by the
Contract. Income payments for less than 120 months may be subject to a
withdrawal charge. We will deduct the mortality and expense risk charge
from the assets of the Variable Sub-Accounts supporting this Plan even
though we may not bear any mortality risk.
The length of any guaranteed payment period under your selected Income Plan
generally will affect the dollar amount of each income payment. As a general
rule, longer guarantee periods result in lower income payments, all other things
being equal. For example, if you choose an Income Plan with payments that depend
on the life of the Annuitant but with no minimum specified period for guaranteed
payments, the income payments generally will be greater than the income payments
made under the same Income Plan with a minimum specified period for guaranteed
payments.
If you choose Income Plan 1 or 2, or, if available, another Income Plan with
payments that continue for the life of the Annuitant or joint Annuitant, we may
require proof of age and sex of the Annuitant or joint Annuitant before starting
income payments, and proof that the Annuitant or joint Annuitant are alive
before we make each payment. Please note that under such Income Plans, if you
elect to take no minimum guaranteed payments, it is possible that the payee
could receive only 1 income payment if the Annuitant and any joint Annuitant
both die before the second income payment, or only 2 income payments if they die
before the third income payment, and so on.
Generally, you may not make withdrawals after the Payout Start Date. One
exception to this rule applies if you are receiving variable income payments
that do not depend on the life of the Annuitant (such as under Income Plan 3).
In that case you may terminate the Variable Account portion of the income
payments at any time and receive a lump sum equal to the present value of the
remaining variable payments due. A withdrawal charge may apply. We also assess
applicable premium taxes against all income payments.
We may make other Income Plans available. You may obtain information about them
by writing or calling us.
You may apply of your Contract Value to an Income Plan. You must apply at least
the Contract Value in the Fixed Account on the Payout Start Date to fixed income
payments. If you wish to apply any portion of your Fixed Account balance to
provide variable income payments, you should plan ahead and transfer that amount
to the Variable Sub-Accounts prior to the Payout Start Date. If you do not tell
us how to allocate your Contract Value among fixed and variable income payments,
we will apply your Contract Value in the Variable Account to variable income
payments and your Contract Value in the Fixed Account to fixed income payments.
We will apply your Contract Value, less applicable taxes, to your Income Plan on
the Payout Start Date. We can make income payments in monthly, quarterly,
semi-annual or annual installments, as you select. If the amount available to
apply under an Income Plan is less than $2,000, however, and state law permits,
we may pay you the Contract Value, less any applicable taxes, in a lump sum
instead of the periodic payments you have chosen. In addition, if your monthly
payments would be less than $20, and state law permits, we may reduce the
frequency of your payments so that each payment will be at least $20.
VARIABLE INCOME PAYMENTS
The amount of your variable income payments depends upon the investment results
of the Variable Sub-Accounts you select, the premium taxes you pay, the age and
sex of the Annuitant, and the Income Plan you choose. We guarantee that the
payments will not be affected by (a) actual mortality experience and (b) the
amount of our administration expenses.
We cannot predict the total amount of your variable income payments. Your
variable income payments may be more or less than your total purchase payments
because (a) variable income payments vary with the investment results of the
underlying Funds; and (b) the Annuitant could live longer or shorter than we
expect based on the tables we use.
In calculating the amount of the periodic payments in the annuity tables in the
Contract, we assumed an annual investment rate of 3%. (We reserve the right to
offer other assumed investment rates). If the actual net investment return of
the Variable Sub-Accounts you choose is less than this assumed investment rate,
then the dollar amount of your variable income payments will decrease. The
dollar amount of your variable income payments will increase, however, if the
actual net investment return exceeds the assumed investment rate. The dollar
amount of the variable income payments stays level if the net investment return
equals the assumed investment rate. Please refer to the Statement of Additional
Information for more detailed information as to how we determine variable income
payments.
FIXED INCOME PAYMENTS
We guarantee income payment amounts derived from any Fixed Account Option for
the duration of the Income Plan. We calculate the fixed income payments by:
1) deducting any applicable premium tax; and
2) applying the resulting amount to the greater of (a) the appropriate value
from the income payment table in your Contract or (b) such other value as
we are offering at that time.
We may defer making fixed income payments for a period of up to six months or
whatever shorter time state law may require. If we defer payments for 30 days or
more, we will pay interest as required by law from the date we receive the
withdrawal request to the date we make payment.
RETIREMENT INCOME GUARANTEE RIDERS
For Contract Owners up to and including age 75, you have the option to add to
your Contract one of two Retirement Income Guarantee Riders (Rider 1 or Rider
2). Each Rider guarantees a minimum dollar amount (we call the "guaranteed
income benefit") to be applied to an Income Plan. You may elect this benefit up
to your latest Payout Start Date. The Riders may not be available in all states.
Eligibility. To qualify for this benefit, you must meet the following conditions
as of the Payout Start Date:
o You must elect a Payout Start Date that is on or after the 10th anniversary
of the date we issued the Rider (the "Rider Date");
o The Payout Start Date must occur during the 30 day period following a
Contract Anniversary;
o You must elect to receive fixed income payments; and
o The Income Plan you have selected must provide for payments guaranteed for
either a single life or joint lives with a specified period of at least:
o 10 years, if the youngest Annuitant's age is 80 or less on the date the
amount is applied, or
o 5 years, if the youngest Annuitant's age is greater than 80 on the date the
amount is applied.
Retirement Income Guarantee Rider 1. This Rider guarantees that the amount you
apply to an Income Plan will not be less than the total of your purchase
payments less any withdrawals and any applicable taxes.
The current charge for this Rider, on an annual basis, is 0.05% multiplied by
the Income Base in effect on each Contract Anniversary. We deduct the fee only
from your assets in the Variable Sub-Account(s). In the case of a full
withdrawal of the Contract Value on any date other than the Contract
Anniversary, we will deduct the Rider fee from the amount paid upon withdrawal.
In the case of a full withdrawal, the Rider fee is equal to 0.05% multiplied by
the income base immediately prior to the withdrawal.
We calculate the Income Base that we use to determine the value of the
guaranteed income benefit as follows:
1) On the Rider Date, the income base is equal to the Contract Value.
2) After the Rider Date, we recalculate the Income Base when a purchase
payment or withdrawal is made as follows:
(a) For purchase payments, the Income Base is equal to the most recently
calculated Income Base plus the purchase payment.
(b) For withdrawals, the Income Base is equal to the most recently
calculated Income Base reduced by a withdrawal adjustment, described
below.
In the absence of any withdrawals or purchase payments, the Income Base will be
equal to the Contract Value as of the Rider Date.
The withdrawal adjustment is equal to (1) divided by (2), with the result
multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
See Appendix A for an example representative of how the withdrawal adjustment
applies.
The guaranteed income benefit amount is determined by applying the Income Base,
less any applicable taxes, to the guaranteed rates for the Income Plan that you
select. On the Payout Start Date, the income payment will be the greater of (i)
the income payment produced by the guaranteed income benefit and (ii) the income
payment provided in the fixed amount income payment provision of the Contract.
Retirement Income Guarantee Rider 2. This Rider guarantees that the amount you
apply to an Income Plan will not be less than the greater of Income Base A or
Income Base B described below:
The current annual charge for this Rider is 0.30% multiplied by the Income Base
in effect on each Contract Anniversary. We deduct the fee only from the Variable
Sub-Account(s). In the case of a full withdrawal of the Contract Value on any
date other than the Contract Anniversary, we will deduct the Rider fee from the
amount paid upon withdrawal. In the case of a full withdrawal, the Rider fee is
equal to 0.30% multiplied by the income base immediately prior to the
withdrawal.
The Income Base is the greater of Income Base A and Income Base B. We determine
each income base as follows:
Income Base A. On the Rider Date, Income Base A is equal to the Contract Value.
After the Rider Date, we recalculate Income Base A as follows on the Contract
Anniversary and when a purchase payment or withdrawal is made:
1) For purchase payments, Income Base A is equal to the most recently
calculated Income Base plus the purchase payment.
2) For withdrawals, Income Base A is equal to the most recently calculated
Income Base reduced by a withdrawal adjustment.
3) On each Contract Anniversary, Income Base A is equal to the greater of the
Contract Value on that date or the most recently calculated Income Base A.
In the absence of any withdrawals or purchase payments, Income Base A will be
equal to the greatest Contract Value as of the date and all Contract Anniversary
Contract Values between the Rider Date and the Payout Start Date. We will
recalculate Income Base A for purchase payments, for withdrawals and on Contract
Anniversaries until the first Contract Anniversary after the 85th birthday of
the oldest Contract Owner or, if no Contract Owner is a living individual, the
oldest Annuitant. After that date, we will recalculate Income Base A for
purchase payments and withdrawals.
Income Base B. On the Rider Date, Income Base B is equal to the Contract Value.
After the Rider Date, Income Base B, plus any subsequent purchase payments and
less a withdrawal adjustment for any subsequent withdrawals, will accumulate
daily at a rate equal to 6% per year until the first day of the month following
the oldest Contract owner's or, if the Contract Owner is not a living
individual, the Annuitant's 85th birthday.
For purposes of computing Income Base A or B, the withdrawal adjustment is equal
to (1) divided by (2), with the result multiplied by (3), where:
1) = withdrawal amount,
2) = the Contract Value immediately prior to the withdrawal, and
3) = the most recently calculated Income Base.
See Appendix A for an example representative of how the withdrawal adjustment
applies.
We determine the guaranteed income benefit amount by applying the income base,
less any applicable taxes, to the guaranteed rates for the Income Plan that you
select. On the Payout Start Date, the income payment will be the greater of (i)
the income payment provided by the guaranteed income benefit or (ii) the income
payment provided in the fixed amount income payment provision of the Contract.
CERTAIN EMPLOYEE BENEFIT PLANS
The Contracts offered by this prospectus contain income payment tables that
provide for different payments to men and women of the same age, except in
states that require unisex tables. We reserve the right to use income payment
tables that do not distinguish on the basis of sex to the extent permitted by
applicable law. In certain employment-related situations, employers are required
by law to use the same income payment tables for men and women. Accordingly, if
the Contract is to be used in connection with an employment-related retirement
or benefit plan and we do not offer unisex annuity tables in your state, you
should consult with legal counsel as to whether the purchase of a Contract is
appropriate.
<PAGE>
DEATH BENEFITS
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We will pay a death benefit if, prior to the Payout Start Date:
1) any Contract Owner dies, or
2) the Annuitant dies.
We will pay the death benefit to the new Contract Owner as determined
immediately after the death. The new Contract Owner would be a surviving
Contract Owner or, if none, the Beneficiary. In the case of the death of the
Annuitant, we will pay the death benefit to the current Contract Owner.
Death Benefit Amount
Prior to the Payout Start Date, the death benefit is equal to the greatest of
the following death benefit alternatives:
1) the Contract Value as of the date we determine the death benefit, or
2) the sum of all purchase payments made less an adjustment for withdrawals
(see "Withdrawal Adjustment" below), or
3) the most recent Maximum Anniversary Value prior to the date we determine
the death benefit (see "Maximum Anniversary Value" below).
We will determine the value of the death benefit as of the end of the Valuation
Date on which we receive a complete request for payment of the death benefit. If
we receive a request after 3 p.m. Central Time on a Valuation Date, we will
process the request as of the end of the following Valuation Date. A request for
payment of the death benefit must include Due Proof of Death. We will accept the
following documentation as "Due Proof of Death":
o a certified copy of a death certificate,
o a certified copy of a decree of a court of competent jurisdiction as to the
finding of death, or
o other documentation as we may accept in our sole discretion.
Withdrawal Adjustment. The withdrawal adjustment is equal to (a) divided by (b),
with the result multiplied by (c), where:
(a) = the withdrawal amount,
(b) = the Contract Value immediately prior to the withdrawal, and
(c) = the value of the applicable death benefit alternative immediately prior
to the withdrawal.
See Appendix A for an example of a withdrawal adjustment.
Maximum Anniversary Value. On the Issue Date, the Maximum Anniversary Value is
equal to the initial purchase payment. After the Issue Date, we recalculate the
Maximum Anniversary Value when a purchase payment or withdrawal is made or on a
Contract Anniversary as follows:
1) For purchase payments, the Maximum Anniversary Value is equal to the most
recently calculated Maximum Anniversary Value plus the purchase payment.
2) For withdrawals, the Maximum Anniversary Value is equal to the most
recently calculated Maximum Anniversary Value reduced by a withdrawal
adjustment, as defined above.
3) On each Contract Anniversary, the Maximum Anniversary Value is equal to the
greater of the Contract Value or the most recently calculated Maximum
Anniversary Value.
In the absence of any withdrawals or purchase payments, the Maximum Anniversary
Value will be the greatest of all anniversary Contract Values on or prior to the
date we calculate the death benefit.
We will recalculate the Maximum Anniversary Value until the first Contract
Anniversary after the 80th birthday of the oldest Contract Owner or, if no
Contract Owner is a living individual, the Annuitant. After that date, we will
recalculate the Maximum Anniversary Value only for purchase payments and
withdrawals. The Maximum Anniversary Value will never be greater than the
maximum death benefit allowed by any applicable state non-forfeiture laws .
ENHANCED BENEFICIARY PROTECTION OPTION
The Enhanced Beneficiary Protection Option is an optional benefit that you may
elect. If you elect the Option, the death benefit will be the greater of the
death benefit alternatives (1) through (3) listed above, or (4) the Enhanced
Beneficiary Protection Option. The Enhanced Beneficiary Protection Option may
not be available in all states.
We will issue a rider to your Contract if you elect the Option. The Enhanced
Beneficiary Protection Option on the date we issue the Contract rider ("Rider
Date") is equal to the Contract Value on that date. After the Rider Date, the
Enhanced Beneficiary Protection Option, plus any subsequent payments and less a
withdrawal adjustment, will accumulate daily at the rate of 5% per year until
the earlier of:
1) the date we determine the death benefit, or
2) the first Contract Anniversary following the 80th birthday of the oldest
Contract Owner or, if no Contract Owner is a living individual, the 80th
birthday of the oldest Annuitant.
We will determine the death benefit under the Enhanced Beneficiary Protection
Option in the same manner as described under "Death Benefit Amount."
Death Benefit Payments
Death of Contract Owner. Within 180 days of the date of your death, the new
Contract Owner may elect to:
1) receive the death benefit in a lump sum, or
2) apply an amount equal to the death benefit to one of the available Income
Plans described above. Income payments must be:
(a) over the life of the new Contract Owner,
(b) for a guaranteed number of payments from 5 to 30 years but not to
exceed the life expectancy of the new Contract Owner, or
(c) over the life of the new Contract Owner with a guaranteed number of
payments from 5 to 30 years but not to exceed the life expectancy of
the new Contract Owner.
Otherwise, the new Contract Owner will receive the Settlement Value. The
"Settlement Value" is the Contract Value, less any applicable withdrawal charge,
contract maintenance charge, and premium tax. We will calculate the Settlement
Value as of the end of the Valuation Date coinciding with the requested
distribution date for payment or on the mandatory distribution date of 5 years
after the date of your death, whichever is earlier. If we receive a request
after 3 p.m. Central Time on a Valuation Date, we will process the request as of
the end of the following Valuation Date. We are currently waiving the 180 day
limit, but we reserve the right to enforce the limitation in the future.
In any event, the entire value of the Contract must be distributed within 5
years after the date of death unless an Income Plan is elected or a surviving
spouse continues the Contract in accordance with the provisions described below.
If the new Contract Owner is your spouse, then he or she may elect one of the
options listed above or may continue the Contract in the Accumulation Phase as
if the death had not occurred. On the date the Contract is continued, the
Contract Value will equal the amount of the death benefit as determined as of
the Valuation Date on which we received Due Proof of Death (the next Valuation
Date if we receive Due Proof of Death after 3 p.m. Cetnral Time). The Contract
may only be continued once. If the surviving spouse continues the Contract in
the Accumulation Phase, the surviving spouse may make a single withdrawal of any
amount within 1 year of the date of death without incurring a withdrawal charge.
Prior to the Payout start Date, the death benefit for the continued Contract
will be the greater of:
o the sum of all purchase payments reduced by a withdrawal adjustment, as
defined under the "Death Benefit amount" section; or
o the Contract Value on the date we determine the death benefit; or
o the Maximum Anniversary Value as defined in the "Death Benefit Amount"
section, with the following changes:
o "Issue Date" is replaced by the date the Contract is continued,
o "Initial Purchase Payment" is replaced with the death benefit as
described at the end of the Valuation Period during which we received
Due Proof of Death.
For Contracts with the optional Enhanced Beneficiary Protection option.
o the Enhanced Beneficiary Protection value as defined in the Rider, with
the following changes:
o "Rider Date" is replaced by the date the Contract is continued
o "Contract Value" is replaced with the death benefit as described at
the end of the Valuation Period during which we received Due Proof of
Death.
If the new Contract Owner is corporation, trust, or other non-natural person,
then the new Contract Owner may elect, within 180 days of your death, to receive
the death benefit in lump sum or may elect to receive the Settlement Value in a
lump sum within 5 years of death. We are currently waiving the 180 day limit,
but we reserve the right to enforce the limitation in the future.
Death of Annuitant. If the Annuitant who is not also the Contract Owner dies
prior to the Payout Start Date, the Contract Owner must elect one of the
applicable options described below.
If the Contract Owner is a natural person, the Contract Owner may elect to
continue the Contract as if the death had not occurred, or, if we receive Due
Proof of Death within 180 days of the date of the Annuitant's death, the
Contract Owner may choose to:
1) receive the death benefit in a lump sum; or
2) apply the death benefit to an Income Plan that must begin within 1
year of the date of death.
If the Contract Owner elects to continue the Contract or to apply the death
benefit to an Income Plan, the new Annuitant will be the youngest Contract
Owner, unless the Contract Owner names a different Annuitant.
If the Contract Owner is a non-natural person, the non-natural Contract Owner
may elect, within 180 days of the Annuitant's date of death, to receive the
death benefit in a lump sum or may elect to receive the Settlement Value payable
in a lump sum within 5 years of the Annuitant's date of death. If the
non-natural Contract Owner does not make one of the above described elections,
the Settlement Value must be withdrawn by the non-natural Contract Owner on or
before the mandatory distribution date 5 years after the Annuitant's death. We
are currently waiving the 180 day limit, but we reserve the right to enforce the
limitation in the future.
<PAGE>
MORE INFORMATION
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ALLSTATE
Allstate is the issuer of the Contract. Allstate is an Illinois stock life
insurance company organized in 1957.
Allstate is licensed to operate in the District of Columbia, Puerto Rico, and
all states except New York. We intend to offer the Contract in those
jurisdictions in which we are licensed. Our home office is located at 3100
Sanders Road, Northbrook, Illinois, 60062.
Allstate is a wholly owned subsidiary of Allstate Insurance Company, a stock
property-liability insurance company incorporated under the laws of Illinois.
All of the outstanding capital stock of Allstate Insurance Company is owned by
The Allstate Corporation.
Several independent rating agencies regularly evaluate life insurers'
claims-paying ability, quality of investments, and overall stability. A.M. Best
Company assigns A+ (Superior) to Allstate. Standard & Poor's Insurance Rating
Services assigns an AA+ (Very Strong) financial strength rating and Moody's
assigns an Aa2 (Excellent) financial strength rating to Allstate. These ratings
do not reflect the investment performance of the Variable Account. We may from
time to time advertise these ratings in our sales literature.
THE VARIABLE ACCOUNT
Allstate established the Allstate Life Insurance Company Separate Account A on
January 27, 1999. We have registered the Variable Account with the SEC as a unit
investment trust. The SEC does not supervise the management of the Variable
Account or Allstate.
We own the assets of the Variable Account. The Variable Account is a segregated
asset account under Illinois law. That means we account for the Variable
Account's income, gains and losses separately from the results of our other
operations. It also means that only the assets of the Variable Account that are
in excess of the reserves and other Contract liabilities with respect to the
Variable Account are subject to liabilities relating to our other operations.
Our obligations arising under the Contracts are general corporate obligations of
Allstate.
The Variable Account consists of 22 Variable Sub-Accounts, each of which invests
in a corresponding Fund. We may add new Variable Sub-Accounts or eliminate one
or more of them, if we believe marketing, tax, or investment conditions so
warrant. We do not guarantee the investment performance of the Variable Account,
its Sub-Accounts or the Funds. We may use the Variable Account to fund our other
annuity contracts. We will account separately for each type of annuity contract
funded by the Variable Account.
THE FUNDS
Dividends and Capital Gain Distributions. We automatically reinvest all
dividends and capital gains distributions from the Funds in shares of the
distributing Funds at their net asset value.
Voting Privileges. As a general matter, you do not have a direct right to vote
the shares of the Funds held by the Variable Sub-Accounts to which you have
allocated your Contract Value. Under current law, however, you are entitled to
give us instructions on how to vote those shares on certain matters. Based on
our present view of the law, we will vote the shares of the Funds that we hold
directly or indirectly through the Variable Account in accordance with
instructions that we receive from Contract Owners entitled to give such
instructions.
As a general rule, before the Payout Start Date, the Contract Owner or anyone
with a voting interest is the person entitled to give voting instructions. The
number of shares that a person has a right to instruct will be determined by
dividing the Contract Value allocated to the applicable Variable Sub-Account by
the net asset value per share of the corresponding Fund as of the record date of
the meeting. After the Payout Start Date the person receiving income payments
has the voting interest. The payee's number of votes will be determined by
dividing the reserve for such Contract allocated to the applicable Sub-account
by the net asset value per share of the corresponding Fund. The votes decrease
as income payments are made and as the reserves for the Contract decrease.
We will vote shares attributable to Contracts for which we have not received
instructions, as well as shares attributable to us, in the same proportion as we
vote shares for which we have received instructions, unless we determine that we
may vote such shares in our own discretion. We will apply voting instructions to
abstain on any item to be voted upon on a pro-rata basis to reduce the votes
eligible to be cast.
We reserve the right to vote Fund shares as we see fit without regard to voting
instructions to the extent permitted by law. If we disregard voting
instructions, we will include a summary of that action and our reasons for that
action in the next semi-annual financial report we send to you.
Changes in Funds. If the shares of any of the Funds are no longer available for
investment by the Variable Account or if, in our judgment, further investment in
such shares is no longer desirable in view of the purposes of the Contract, we
may eliminate that Fund and substitute shares of another eligible investment
fund. Any substitution of securities will comply with the requirements of the
Investment Company Act of 1940. We also may add new Variable Sub-Accounts that
invest in additional mutual funds. We will notify you in advance of any change.
Conflicts of Interest. The Funds sell their shares to separate accounts
underlying both variable life insurance and variable annuity contracts. It is
conceivable that in the future it may be unfavorable for variable life insurance
separate accounts and variable annuity separate accounts to invest in the same
Fund. The board of directors of the Funds monitors for possible conflicts among
separate accounts buying shares of the Funds. Conflicts could develop for a
variety of reasons. For example, differences in treatment under tax and other
laws or the failure by a separate account to comply with such laws could cause a
conflict. To eliminate a conflict, the Funds' board of directors may require a
separate account to withdraw its participation in a Fund. A Fund's net asset
value could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account withdrawing because of a conflict.
THE CONTRACT
Distribution. Allstate Life Financial Services ("ALFS"), located at 3100 Sanders
Road, Northbrook, IL 60062-7154, serves as principal underwriter of the
Contracts. ALFS is a wholly owned subsidiary of Allstate. ALFS is a registered
broker dealer under the Securities and Exchange Act of 1934, as amended
("Exchange Act"), and is a member of the National Association of Securities
Dealers, Inc. ALFS also is registered as an investment adviser under the
Investment Advisers Act of 1940, as amended. Contracts are sold by registered
representatives of unaffiliated broker-dealers or bank employees who are
licensed insurance agents appointed by Allstate, either individually or through
an incorporated insurance agency and have entered into a selling agreement with
ALFS to sell the Contract.
We will pay commissions to broker-dealers who sell the Contracts. Commissions
paid may vary, but we estimate that the total commission paid on all Contract
sales will not exceed 6% of all purchase payments (on a present value basis).
From time to time, we may pay or permit other promotional incentives, in cash or
credit or other compensation. The commission is intended to cover distribution
expenses. In some states, Contracts may be sold by representatives or employees
of banks which may be acting as broker-dealers without separate registration
under the Exchange Act, pursuant to legal and regulatory exceptions.
Allstate may pay ALFS a commission for distribution of the Contracts. The
underwriting agreement with ALFS provides that we will reimburse ALFS for
expenses incurred in distributing the Contracts, including any liability to
Contract Owners arising out of services rendered or Contracts issued.
For Contracts issued to employees of Allstate and certain other eligible
organizations, and in lieu of Allstate paying any commissions on sales of those
Contracts, the Contract Owner will receive a credit of 6% of the amount of each
purchase payment that will be applied to each purchase payment. Allstate will
allocate this credit in the same allocation as your most recent instruction. If
you exercise your Right to Cancel your Contract as described in this prospectus,
we will return to you the amount you would have received had there been no
credit. Unless we are required by law to return your purchase payments, this
amount also will include any charges deducted that reduced your Contract Value
prior to cancellation, plus any investment gain on the credit. The credit may
not be available in all states. We do not consider the credit to be an
"investment in the contract" for income tax purposes.
Administration. We have primary responsibility for all administration of the
Contracts and the Variable Account.
We provide the following administrative services, among others:
o issuance of the Contracts;
o maintenance of Contract Owner records;
o Contract Owner services;
o calculation of unit values;
o maintenance of the Variable Account; and
o preparation of Contract Owner reports.
We will send you Contract statements and transaction confirmations at least
annually. You should notify us promptly in writing of any address change. You
should read your statements and confirmations carefully and verify their
accuracy. You should contact us promptly if you have a question about a periodic
statement. We will investigate all complaints and make any necessary adjustments
retroactively, but you must notify us of a potential error within a reasonable
time after the date of the questioned statement. If you wait too long, we will
make the adjustment as of the date that we receive notice of the potential
error.
We will also provide you with additional periodic and other reports, information
and prospectuses as may be required by federal securities laws.
QUALIFIED PLANS
If you use the Contract with a qualified plan, the plan may impose different or
additional conditions or limitations on withdrawals, waivers of withdrawal
charges, death benefits, Payout Start Dates, income payments, and other Contract
features. In addition, adverse tax consequences may result if qualified plan
limits on distributions and other conditions are not met. Please consult your
qualified plan administrator for more information.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C., has advised Allstate on
certain federal securities law matters. All matters of Illinois law pertaining
to the Contracts, including the validity of the Contracts and Allstate's right
to issue such Contracts under Illinois insurance law, have been passed upon by
Michael J. Velotta, General Counsel of Allstate.
YEAR 2000
Allstate is heavily dependent upon complex computer systems for all phases of
its operations, including customer service, and policy and contract
administration. Since many of Allstate's older computer software programs
recognize only the last two digits of the year in any date, some software may
fail to operate properly in or after the year 1999, if the software is not
reprogrammed or replaced ("Year 2000 Issue"). Allstate believes that many of its
counterparties and suppliers also have Year 2000 Issues which could affect
Allstate. In 1995, Allstate Insurance Company commenced a plan intended to
mitigate and/or prevent the adverse effects of the Year 2000 Issue. These
strategies include normal development and enhancement of new and existing
systems, upgrades to operating systems already covered by maintenance agreements
and modifications to existing systems to make them Year 2000 compliant. The plan
also includes Allstate actively working with its major external counterparties
and suppliers to assess their compliance efforts and Allstate's exposure to
them. Allstate presently believes that it will resolve the Year 2000 Issue in a
timely manner, and the financial impact will not materially affect its results
of operations, liquidity or financial position. Year 2000 costs are and will be
expensed as incurred.
<PAGE>
TAXES
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The following discussion is general and is not intended as tax advice. Allstate
makes no guarantee regarding the tax treatment of any Contract or transaction
involving a Contract.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on your individual circumstances.
If you are concerned about any tax consequences with regard to your individual
circumstances, you should consult a competent tax adviser.
Taxation of Annuities in General
Tax Deferral. Generally, you are not taxed on increases in the Contract Value
until a distribution occurs. This rule applies only where:
1) the owner is a natural person,
2) the investments of the Variable Account are "adequately diversified"
according to Treasury Department regulations, and
3) Allstate is considered the owner of the Variable Account assets
for federal income tax purposes.
Non-natural Owners. As a general rule, annuity contracts owned by non-natural
persons such as corporations, trusts, or other entities are not treated as
annuity contracts for federal income tax purposes. The income on such contracts
is taxed as ordinary income received or accrued by the owner during the taxable
year. Please see the Statement of Additional Information for a discussion of
several exceptions to the general rule for contracts owned by non-natural
persons.
Diversification Requirements. For a Contract to be treated as an annuity for
federal income tax purposes, the investments in the Variable Account must be
"adequately diversified" consistent with standards under Treasury Department
regulations. If the investments in the Variable Account are not adequately
diversified, the Contract will not be treated as an annuity contract for federal
income tax purposes. As a result, the income on the Contract will be taxed as
ordinary income received or accrued by the owner during the taxable year.
Although Allstate does not have control over the Funds or their investments, we
expect the Funds to meet the diversification requirements.
Ownership Treatment. The IRS has stated that you will be considered the owner of
Variable Account assets if you possess incidents of ownership in those assets,
such as the ability to exercise investment control over the assets. At the time
the diversification regulations were issued, the Treasury Department announced
that the regulations do not provide guidance concerning circumstances in which
investor control of the Variable Account investments may cause an investor to be
treated as the owner of the Variable Account. The Treasury Department also
stated that future guidance would be issued regarding the extent that Owners
could direct sub-account investments without being treated as Owners of the
underlying assets of the separate account.
Your rights under the Contract are different than those described by the IRS in
rulings in which it found that contract Owners were not Owners of separate
account assets. For example, you have the choice to allocate premiums and
Contract Values among more investment alternatives. Also, you may be able to
transfer among investment alternatives more frequently than in such rulings.
These differences could result in you being treated as the owner of the Variable
Account. If this occurs, income and gain from the Variable Account assets would
be includible in your gross income. Allstate does not know what standards will
be set forth in any regulations or rulings which the Treasury Department may
issue. It is possible that future standards announced by the Treasury Department
could adversely affect the tax treatment of your Contract. We reserve the right
to modify the Contract as necessary to attempt to prevent you from being
considered the federal tax owner of the assets of the Variable Account. However,
we make no guarantee that such modification to the Contract will be successful.
Taxation of Partial and Full Withdrawals. If you make a partial withdrawal under
a non-Qualified Contract, amounts received are taxable to the extent the
Contract Value, without regard to surrender charges, exceeds the investment in
the Contract. The investment in the Contract is the gross premium paid for the
contract minus any amounts previously received from the Contract if such amounts
were properly excluded from your gross income. If you make a partial withdrawal
under a Qualified Contract, the portion of the payment that bears the same ratio
to the total payment that the investment in the Contract (i.e., nondeductible
IRA contributions, after tax contributions to qualified plans) bears to the
Contract Value, is excluded from your income. If you make a full withdrawal
under a non-Qualified Contract or a Qualified Contract, the amount received will
be taxable only to the extent it exceeds the investment in the Contract.
"Nonqualified distributions" from Roth IRAs are treated as made from
contributions first and are included in gross income only to the extent that
distributions exceed contributions. "Qualified distributions" from Roth IRAs are
not included in gross income. "Qualified distributions" are any distributions
made more than five taxable years after the taxable year of the first
contribution to any Roth IRA and which are:
o made on or after the date the individual attains age 59 1/2,
o made to a beneficiary after the Contract Owner's death,
o attributable to the Contract Owner being disabled, or
o for a first time home purchase (first time home purchases are subject to a
lifetime limit of $10,000).
If you transfer a non-Qualified Contract without full and adequate consideration
to a person other than your spouse (or to a former spouse incident to a
divorce), you will be taxed on the difference between the Contract Value and the
investment in the Contract at the time of transfer. Except for certain Qualified
Contracts, any amount you receive as a loan under a Contract, and any assignment
or pledge (or agreement to assign or pledge) of the Contract Value is treated as
a withdrawal of such amount or portion.
Taxation of Annuity Payments. Generally, the rule for income taxation of annuity
payments received from a nonqualified contract provides for the return of your
investment in the Contract in equal tax-free amounts over the payment period.
The balance of each payment received is taxable. For fixed annuity payments, the
amount excluded from income is determined by multiplying the payment by the
ratio of the investment in the Contract (adjusted for any refund feature or
period certain) to the total expected value of annuity payments for the term of
the Contract. If you elect variable annuity payments, the amount excluded from
taxable income is determined by dividing the investment in the Contract by the
total number of expected payments. The annuity payments will be fully taxable
after the total amount of the investment in the Contract is excluded using these
ratios. If you die, and annuity payments cease before the total amount of the
investment in the Contract is recovered, the unrecovered amount will be allowed
as a deduction for your last taxable year.
Taxation of Annuity Death Benefits. Death of a Contract Owner, or death of the
Annuitant if the Contract is owned by a non-natural person, will cause a
distribution of death benefits from a Contract. Generally, such amounts are
included in income as follows:
1) if distributed in a lump sum, the amounts are taxed in the same manner as a
full withdrawal, or
2) if distributed under an Income Plan, the amounts are taxed in the same
manner as an income payment. Please see the Statement of Additional
Information for more detail on distribution at death requirements.
Penalty Tax on Premature Distributions. A 10% penalty tax applies to the taxable
amount of any premature distribution from a non-Qualified Contract. The penalty
tax generally applies to any distribution made prior to the date you attain age
59 1/2. However, no penalty tax is incurred on distributions:
1) made on or after the date the Contract Owner attains age 59 1/2,
2) made as a result of the Contract Owner's death or disability,
3) made in substantially equal periodic payments over the Contract Owner's
life or life expectancy,
4) made under an immediate annuity, or
5) attributable to investment in the Contract before August 14, 1982.
You should consult a competent tax advisor to determine if any other exceptions
to the penalty apply to your situation. Similar exceptions may apply to
distributions from Qualified Contracts.
Aggregation of Annuity Contracts. All non-qualified deferred annuity contracts
issued by Allstate (or its affiliates) to the same Conract Owner during any
calendar year will be aggregated and treated as one annuity contract for
purposes of determining the taxable amount of a distribution.
Tax Qualified Contracts
Contracts may be used as investments with certain qualified plans such as:
o Individual Retirement Annuities or Accounts (IRAs) under Section 408 of the
Code;
o Roth IRAs under Section 408A of the Code;
o Simplified Employee Pension Plans under Section 408(k) of the Code;
o Savings Incentive Match Plans for Employees (SIMPLE) Plans under Section
408(p) of the Code;
o Tax Sheltered Annuities under Section 403(b) of the Code;
o Corporate and Self Employed Pension and Profit Sharing Plans; and
o State and Local Government and Tax-Exempt Organization Deferred
Compensation Plans.
In the case of certain qualified plans, the terms of the plans may govern the
right to benefits, regardless of the terms of the Contract.
Restrictions Under Section 403(b) Plans. Section 403(b) of the Tax Code provides
tax-deferred retirement savings plans for employees of certain non-profit and
educational organizations. Under Section 403(b), any contract used for a 403(b)
plan must provide that distributions attributable to salary reduction
contributions made after 12/31/88, and all earnings on salary reduction
contributions, may be made only on or after the date the employee:
o attains age 59 1/2,
o separates from service,
o dies,
o becomes disabled, or
o on account of hardship (earnings on salary reduction contributions may
not be distributed on the account of hardship).
These limitations do not apply to withdrawals where Allstate is directed to
transfer some or all of the contract value to another 403(b) plan.
Income Tax Withholding
Allstate is required to withhold federal income tax at a rate of 20% on all
"eligible rollover distributions" unless you elect to make a "direct rollover"
of such amounts to an IRA or eligible retirement plan. Eligible rollover
distributions generally include all distributions from Qualified Contracts,
excluding IRAs, with the exception of:
(1) required minimum distributions, or
(2) a series of substantially equal periodic payments made over a period of at
least 10 years, or,
(3) over the life (joint lives) of the participant (and beneficiary).
Allstate may be required to withhold federal and state income taxes on any
distributions from non-Qualified Contracts or Qualified Contracts that are not
eligible rollover distributions, unless you notify us of your election to not
have taxes withheld.
<PAGE>
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
We may advertise the performance of the Variable Sub-Accounts, including yield
and total return information. Total return represents the change, over a
specified period of time, in the value of an investment in a Variable
Sub-Account after reinvesting all income distributions. Yield refers to the
income generated by an investment in a Variable Sub-Account over a specified
period. All performance advertisements will include, as applicable, standardized
yield and total return figures that reflect the deduction of insurance charges,
the contract maintenance charge, and withdrawal charge. Performance
advertisements also may include total return figures that reflect the deduction
of insurance charges, but not the contract maintenance or withdrawal charges.
The deduction of such charges would reduce the performance shown. In addition,
performance advertisements may include aggregate, average, year-by-year, or
other types of total return figures.
Performance information for periods prior to the inception date of the Variable
Sub-Accounts will be based on the historical performance of the corresponding
Funds for the periods beginning with the inception dates of the Funds and
adjusted to reflect current Contract expenses. You should not interpret these
figures to reflect actual historical performance of the Variable Account.
We may include in advertising and sales materials tax deferred compounding
charts and other hypothetical illustrations that compare currently taxable and
tax deferred investment programs based on selected tax brackets. Our
advertisements also may compare the performance of our Variable Sub-Accounts
with: (a) certain unmanaged market indices, including but not limited to the Dow
Jones Industrial Average, the Standard & Poor's 500, and the Shearson Lehman
Bond Index; and/or (b) other management investment companies with investment
objectives similar to the underlying funds being compared. In addition, our
advertisements may include the performance ranking assigned by various
publications, including the Wall Street Journal, Forbes, Fortune, Money,
Barron's, Business Week, USA Today, and statistical services, including Lipper
Analytical Services Mutual Fund Survey, Lipper Annuity and Closed End Survey,
the Variable Annuity Research Data Survey, and SEI.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
TABLE OF CONTENTS
Page
ADDITIONS, DELETIONS, OR SUBSTITUTIONS OF INVESTMENTS.................... 2
THE CONTRACT............................................................. 3
PERFORMANCE INFORMATION.................................................. 4
CALCULATION OF ACCUMULATION UNIT VALUES.................................. 9
CALCULATION OF VARIABLE INCOME PAYMENTS.................................. 10
GENERAL MATTERS.......................................................... 11
FEDERAL TAX MATTERS...................................................... 12
QUALIFIED PLANS.......................................................... 13
EXPERTS.................................................................. 15
COMBINED STATUTORY BASIS FINANCIAL STATEMENTS............................ F-1
-----------------------------------------------
This prospectus does not constitute an offering in any jurisdiction in which
such offering may not lawfully be made. We do not authorize anyone to provide
any information or representations regarding the offering described in this
prospectus other than as contained in this prospectus.
<PAGE>
Appendix A
Withdrawal Adjustment Example
Issue Date: January 1, 1999
Initial Purchase Payment: $ 50,000
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Death Benefit Amount
Contract ------------------------------
Type Contract Value Purchase Maximum
of Value Before Transaction After Payment Anniversary
Date Occurrence Occurence Amount Occurrence Value Value
- ------------------------------------------------------------------------------------------------------------------------
1/1/99 Issue Date -- $ 50,000 $ 50,000 $ 50,000 $ 50,000
1/1/00 Contract Anniversary $ 55,000 -- $ 55,000 $ 50,000 $ 55,000
7/1/00 Partial Withdrawal $ 60,000 $ 15,000 $ 45,000 $ 37,500 $ 41,250
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Withdrawal adjustment equals the partial withdrawal amount divided by the
Contract Value immediately prior to the partial withdrawal multiplied by the
value of the applicable death benefit amount alternative immediately prior to
the partial withdrawal.
<TABLE>
<CAPTION>
<S> <C> <C>
Purchase Payment Value Death Benefit
Partial Withdrawal Amount (w) $ 15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $ 60,000
Value of Applicable Death Benefit Amount Immediately Prior to Partial Withdrawal (d) $ 50,000
Withdrawal Adjustment [(w)/(a)]*(d) $ 12,500
Adjusted Death Benefit $ 37,500
Maximum Anniversary Value Death Benefit
Partial Withdrawal Amount (w) $ 15,000
Contract Value Immediately Prior to Partial Withdrawal (a) $ 60,000
Value of Applicable Death Benefit Amount Immediately Prior to Partial Withdrawal (d) $ 55,000
Withdrawal Adjustment [(w)/(a)]*(d) $ 13,750
Adjusted Death Benefit $ 41,250
</TABLE>
This example represents the proportional reduction applicable in all Contracts.
For Contracts with optional riders,
<PAGE>
The Putnam Allstate Advisor
Allstate Life Insurance Company Statement of Additional Information
3100 Sanders Road dated April 30, 1999
Northbrook, Illinois 60062
1-800-390-1277
This Statement of Additional Information supplements the information in the
prospectus for The Putnam Allstate Advisor. This Statement of Additional
Information is not a prospectus. You should read it with the prospectus, dated
April 30, 1999, for the Contract. You may obtain a prospectus by calling or
writing us at the address or telephone number listed above.
Except as otherwise noted, this Statement of Additional Information uses the
same defined terms as the prospectus.
TABLE OF CONTENTS
Description Page
Additions, Deletions or Substitutions of Investments................. 2
The Contract......................................................... 3
Performance Information.............................................. 4
Calculation of Accumulation Unit Values.............................. 9
Calculation of Variable Income Payments.............................. 10
General Matters...................................................... 11
Federal Tax Matters.................................................. 12
Qualified Plans...................................................... 13
Experts.............................................................. 15
Combined Statutory Basis Financial Statements........................ F-1
<PAGE>
ADDITIONS, DELETIONS OR SUBSTITUTIONS OF INVESTMENTS
- -------------------------------------------------------------------------------
We may add, delete, or substitute the Fund shares held by any Variable
Sub-Account to the extent the law permits. We may substitute shares of any Fund
with those of another Fund of the same or different mutual fund if the shares of
the Fund are no longer available for investment, or if we believe investment in
any Fund would become inappropriate in view of the purposes of the Variable
Account.
We will not substitute shares attributable to a Contract Owner's interest in a
Variable Sub-Account until we have notified the Contract Owner of the change,
and until the Securities and Exchange Commission has approved the change, to the
extent such notification and approval are required by law. Nothing contained in
this Statement of Additional Information shall prevent the Variable Account from
purchasing other securities for other series or classes of contracts, or from
effecting a conversion between series or classes of contracts on the basis of
requests made by Contract Owners.
We also may establish additional Variable Sub-Accounts or series of Variable
Sub-Accounts. Each additional Variable Sub-Account would purchase shares in a
new Fund of the same or different mutual fund. We may establish new Variable
Sub-Accounts when we believe marketing needs or investment conditions warrant.
We determine the basis on which we will offer any new Variable Sub-Accounts in
conjunction with the Contract to existing Contract Owners. We may eliminate one
or more Variable Sub-Accounts if, in our sole discretion, marketing, tax or
investment conditions so warrant.
We may, by appropriate endorsement, change the Contract as we believe necessary
or appropriate to reflect any substitution or change in the Funds. If we believe
the best interests of persons having voting rights under the Contracts would be
served, we may operate the Variable Account as a management company under the
Investment Company Act of 1940 or we may withdraw its registration under such
Act if such registration is no longer required.
<PAGE>
THE CONTRACT
- -------------------------------------------------------------------------------
The Contract is primarily designed to aid individuals in long-term financial
planning. You can use it for retirement planning regardless of whether the
retirement plan qualifies for special federal income tax treatment.
PURCHASE OF CONTRACTS
We offer the Contracts to the public through banks as well as brokers licensed
under the federal securities laws and state insurance laws. The principal
underwriter for the Variable Account, Allstate Life Financial Services, Inc.
("ALFS"), distributes the Contracts. ALFS is an affiliate of Allstate. The
offering of the Contracts is continuous. We do not anticipate discontinuing the
offering of the Contracts, but we reserve the right to do so at any time.
TAX-FREE EXCHANGES (1035 EXCHANGES, ROLLOVERS AND TRANSFERS)
We accept purchase payments that are the proceeds of a Contract in a transaction
qualifying for a tax-free exchange under Section 1035 of the Internal Revenue
Code ("Code"). Except as required by federal law in calculating the basis of the
Contract, we do not differentiate between Section 1035 purchase payments and
non-Section 1035 purchase payments.
We also accept "rollovers" and transfers from Contracts qualifying as
tax-sheltered annuities ("TSAs"), individual retirement annuities or accounts
("IRAs"), or any other Qualified Contract that is eligible to "rollover" into an
IRA. We differentiate among non-Qualified Contracts, TSAs, IRAs and other
Qualified Contracts to the extent necessary to comply with federal tax laws. For
example, we restrict the assignment, transfer, or pledge of TSAs and IRAs so the
Contracts will continue to qualify for special tax treatment. A Contract Owner
contemplating any such exchange, rollover or transfer of a Contract should
contact a competent tax adviser with respect to the potential effects of such a
transaction.
<PAGE>
PERFORMANCE INFORMATION
- -------------------------------------------------------------------------------
From time to time we may advertise the "standardized," "non-standardized," and
"adjusted historical" total returns of the Variable Sub-Accounts, as described
below. Please remember that past performance is not an estimate or guarantee of
future performance and does not necessarily represent the actual experience of
amounts invested by a particular Contract Owner.
STANDARDIZED TOTAL RETURNS
A Variable Sub-Account's standardized total return represents the average annual
total return of that Sub-Account over a particular period. We compute
standardized total return by finding the annual percentage rate that, when
compounded annually, will accumulate a hypothetical $1,000 purchase payment to
the redeemable value at the end of the one, five or ten year period, or for a
period from the date of commencement of the Variable Sub-Account's operations,
if shorter than any of the foregoing. We use the following formula prescribed by
the SEC for computing standardized total return:
1000(1 + T)n = ERV
where:
T = average annual total return
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of 1, 5, or 10 year periods or shorter period
n = number of years in the period
1000 = hypothetical $1,000 investment
When factoring in the withdrawal charge assessed upon redemption, we exclude the
Free Withdrawal Amount, which is the amount you can withdraw from the Contract
without paying a withdrawal charge. We also use the withdrawal charge that would
apply upon redemption at the end of each period. Thus, for example, when
factoring in the withdrawal charge for a one year standardized total return
calculation, we would use the withdrawal charge that applies to a withdrawal of
a purchase payment made one year prior.
When factoring in the contract maintenance charge, we pro rate the charge by
dividing (i) the contract maintenance charge by (ii) an assumed contract size of
$45,000. We then multiply the resulting percentage by a hypothetical $1,000
investment.
No standardized total returns are available for the Variable Sub-Accounts, which
commenced operations as of the date of this Statement of Additional Information.
NON-STANDARDIZED TOTAL RETURNS
From time to time, we also may quote average annual total returns that do not
reflect the withdrawal charge. We calculate these "non-standardized total
returns" in exactly the same way as the standardized total returns described
above, except that we replace the ending redeemable value of the hypothetical
account for the period with an ending redeemable value for the period that does
not take into account any charges on amounts surrendered.
In addition, we may advertise the total return over different periods of time by
means of aggregate, average, year-by-year or other types of total return
figures. Such calculations would not reflect deductions for withdrawal charges
which may be imposed on the Contracts which, if reflected, would reduce the
performance quoted. The formula for computing such total return quotations
involves a per unit change calculation. This calculation is based on the
Accumulation Unit Value at the end of the defined period divided by the
Accumulation Unit Value at the beginning of such period, minus 1. The periods
included in such advertisements are "year-to-date" (prior calendar year end to
the day of the advertisement); "year to most recent quarter" (prior calendar
year end to the end of the most recent quarter); "the prior calendar year"; "
'n' most recent Calendar Years"; and "Inception (commencement of the
Sub-account's operation) to date" (day of the advertisement).
No non-standardized total returns are shown for the Variable Sub-Accounts, which
commenced operations on the date of this Statement of Additional Information.
ADJUSTED HISTORICAL TOTAL RETURNS
We may advertise the total return for periods prior to the date that the
Variable Sub-Accounts commenced operations. We will calculate such "adjusted
historical total returns" using the performance of the underlying Funds and
adjusting such performance to reflect the current level of charges that apply to
the Variable Sub-Accounts under the Contract.
The adjusted historical total returns for the Variable Sub-Accounts for the
periods ended December 31, 1998 are set out below. No adjusted historical total
returns are shown for the Putnam VT Small Cap Value Fund, which commenced
operations on April 30, 1998.
(Without the Enhanced Beneficiary Protection Option
or a Retirement Income Guarantee Rider)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ten Years or Since
Variable Sub-Account One Year Five Years Inception of Fund*
Putnam Asia Pacific Growth -12.73 N/A - 5.55
Putnam Diversified Income - 8.84 3.63 3.79
The George Putnam Fund N/A N/A - 4.74
Putnam Global Asset Allocation 6.04 11.87 11.05
Putnam Global Growth 22.01 12.82 11.07
Putnam Growth and Income 7.84 17.13 14.42
Putnam Health Sciences N/A N/A 3.69
Putnam High Yield -13.10 5.37 8.33
Putnam Income 0.83 5.05 7.64
Putnam International Growth 10.98 N/A 13.13
Putnam International Growth and Income 3.80 N/A 11.05
Putnam International New Opportunities 7.96 N/A 2.94
Putnam Investors N/A N/A 14.55
Putnam Money Market - 2.21 2.99 3.82
Putnam New Opportunities 16.66 N/A 21.09
Putnam New Value - 1.24 N/A 7.46
Putnam OTC & Emerging Growth N/A N/A - 8.87
Putnam Research N/A N/A 60.43
Putnam Utilities Growth and Income 7.41 13.61 12.99
Putnam Vista 11.99 N/A 17.23
Putnam Voyager 16.62 18.37 18.24
- -------------------
</TABLE>
<PAGE>
* Each of the above Funds (Class IB) corresponding to the Variable Sub-Accounts
commenced operations on April 30, 1998, except for the Putnam VT Diversified
Income, Growth and Income, and International Growth Funds, which commenced
operations on April 6, 1998, and the Putnam VT Research Fund, which commenced
operations September 30, 1998. For periods prior to the inception dates of the
Funds (Class IB), the performance shown is based on the historical performance
of the Funds (Class IA), adjusted to reflect the current expenses of the Funds
(Class IB). The inception dates for the Funds (Class IA) are as follows:
Global Asset Allocation, Growth and Income, High Yield, Money Market, U.S.
Government and High Quality Bond, Voyager commenced operations on February 1,
1988; Global Growth commenced operations on May 1, 1990; Utilities Growth and
Income commenced operations on May 1, 1992; Diversified Income commenced
operations on September 15, 1993; New Opportunities commenced operations on May
2, 1994; Asia Pacific Growth commenced operations on May 1, 1995; International
Growth, International Growth and Income, International New Opportunities, New
Value and Vista commenced operations on January 2, 1997; The George Putnam Fund
of Boston, Health Sciences, Investors and OTC & Emerging Growth commenced
operations on April 30, 1998.
(With the Enhanced Beneficiary Protection Option)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ten Years or Since
Variable Sub-Account One Year Five Years Inception of Fund**
Putnam Asia Pacific Growth -12.87 N/A - 5.70
Putnam Diversified Income - 8.99 3.47 3.63
The George Putnam Fund N/A N/A - 4.89
Putnam Global Asset Allocation 5.87 11.70 10.88
Putnam Global Growth 21.82 12.64 10.90
Putnam Growth and Income 7.66 16.95 14.25
Putnam Health Sciences N/A N/A 3.52
Putnam High Yield -13.24 5.20 8.17
Putnam Income 0.67 4.89 7.48
Putnam International Growth 12.80 N/A 12.95
Putnam International Growth and Income 3.63 N/A 10.88
Putnam International New Opportunities 7.79 N/A 2.77
Putnam Investors N/A N/A 14.37
Putnam Money Market - 2.37 2.83 3.66
Putnam New Opportunities 16.66 N/A 21.08
Putnam New Value - 1.40 N/A 7.29
Putnam OTC & Emerging Growth N/A N/A - 9.02
Putnam Research N/A N/A 60.17
Putnam Utilities Growth and Income 7.24 13.44 12.82
Putnam Vista 11.81 N/A 17.05
Putnam Voyager 16.44 18.19 18.06
- -------------------
</TABLE>
*Performance figures have been adjusted to reflect the current charge
for the Enhanced Beneficiary Protection Option as if that feature had been
available throughout the periods shown.
** The inception dates for the Funds appear in the first footnote to
the preceding table. For periods prior to the inception dates of the Funds
(Class IB), the performance shown is based on the historical performance of the
Funds (Class IA), adjusted to reflect the current expenses of the Funds (Class
IB). The inception dates for the Funds (Class IA) are shown on the first note to
the preceding table.
<PAGE>
(With Retirement Income Guarantee Rider 1)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ten Years or Since
Variable Sub-Account One Year Five Years Inception of Fund**
Putnam Asia Pacific Growth -12.78 N/A - 5.61
Putnam Diversified Income - 8.89 3.58 3.74
The George Putnam Fund N/A N/A - 4.81
Putnam Global Asset Allocation 5.99 11.82 11.02
Putnam Global Growth 21.96 12.77 11.03
Putnam Growth and Income 7.79 17.09 14.39
Putnam Health Sciences N/A N/A 3.61
Putnam High Yield -13.15 5.32 8.30
Putnam Income 0.78 5.01 7.60
Putnam International Growth 10.93 N/A 13.08
Putnam International Growth and Income 3.75 N/A 11.01
Putnam International New Opportunities 7.91 N/A 2.88
Putnam Investors N/A N/A 14.48
Putnam Money Market - 2.26 2.94 3.77
Putnam New Opportunities 16.61 N/A 21.05
Putnam New Value - 1.29 N/A 7.41
Putnam OTC & Emerging Growth N/A N/A - 8.94
Putnam Research N/A N/A 60.15
Putnam Utilities Growth and Income 7.36 13.57 12.95
Putnam Vista 11.94 N/A 17.18
Putnam Voyager 16.57 18.33 18.22
- -------------------
</TABLE>
*Performance figures have been adjusted to reflect the current charge
for Retirement Income Guarantee Rider 1 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that there were no additional purchase payments or withdrawals, and that
the Contract Issue Date coincided with the inception date of the Fund (Class
IA).
** The inception dates for the Funds appear in the first footnote to
the preceding table. For periods prior to the inception dates of the Funds
(Class IB), the performance shown is based on the historical performance of the
Funds (Class IA), adjusted to reflect the current expenses of the Funds (Class
IB). The inception dates for the Funds (Class IA) are shown on the first note to
the first table above.
<PAGE>
(With Retirement Income Guarantee Rider 2)*
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Ten Years or Since
Variable Sub-Account One Year Five Years Inception of Fund**
Putnam Asia Pacific Growth -13.05 N/A - 5.95
Putnam Diversified Income - 9.16 3.30 3.40
The George Putnam Fund N/A N/A - 5.20
Putnam Global Asset Allocation 5.72 11.56 10.77
Putnam Global Growth 21.70 12.50 10.75
Putnam Growth and Income 7.52 16.85 14.17
Putnam Health Sciences N/A N/A 3.21
Putnam High Yield -13.41 5.05 8.04
Putnam Income 0.51 4.72 7.35
Putnam International Growth 10.06 N/A 12.82
Putnam International Growth and Income 3.48 N/A 10.74
Putnam International New Opportunities 7.64 N/A 2.58
Putnam Investors N/A N/A 14.06
Putnam Money Market - 2.53 2.65 3.47
Putnam New Opportunities 16.34 N/A 20.82
Putnam New Value - 1.55 N/A 7.15
Putnam OTC & Emerging Growth N/A N/A - 9.33
Putnam Research N/A N/A 58.66
Putnam Utilities Growth and Income 7.09 12.68 12.68
Putnam Vista 11.68 16.93 16.93
Putnam Voyager 16.31 18.03 18.03
- -------------------
</TABLE>
*Performance figures have been adjusted to reflect the current charge
for Retirement Income Guarantee Rider 2 as if that feature had been available
throughout the periods shown. For purposes of computing the Rider fee, we
assumed that Income Base B applied, that there were no additional purchase
payments or withdrawals, and that the Contract Issue Date coincided with the
inception date of the Fund (Class IA).
** The inception dates for the Funds appear in the first footnote to
the preceding table. For periods prior to the inception dates of the Funds
(Class IB), the performance shown is based on the historical performance of the
Funds (Class IA), adjusted to reflect the current expenses of the Funds (Class
IB). The inception dates for the Funds (Class IA) are shown on the first note to
the first table above.
<PAGE>
Calculation of Accumulation Unit Values
- -------------------------------------------------------------------------------
The value of Accumulation Units will change each Valuation Period according to
the investment performance of the Fund shares purchased by each Variable
Sub-Account and the deduction of certain expenses and charges. A "Valuation
Period" is the period from the end of one Valuation Date and continues to the
end of the next Valuation Date. A Valuation Date ends at the close of regular
trading on the New York Stock Exchange (currently 3:00 p.m.
Central Time).
The Accumulation Unit Value of a Variable Sub-Account for any Valuation Period
equals the Accumulation Unit Value as of the immediately preceding Valuation
Period, multiplied by the Net Investment Factor (described below) for that
Sub-Account for the current Valuation Period.
NET INVESTMENT FACTOR
The Net Investment Factor for a Valuation Period is a number representing the
change, since the last Valuation Period, in the value of Variable Sub-Account
assets per Accumulation Unit due to investment income, realized or unrealized
capital gain or loss, deductions for taxes, if any, and deductions for the
mortality and expense risk charge and administrative expense charge. We
determine the Net Investment Factor for each Variable Sub-Account for any
Valuation Period by dividing (A) by (B) and subtracting (C) from the result,
where:
(A) is the sum of:
(1) the net asset value per share of the Fund underlying the
Variable Sub-Account determined at the end of the current
Valuation Period; plus,
(2) the per share amount of any dividend or capital gain
distributions made by the Fund underlying the Variable
Sub-Account during the current Valuation Period;
(B) is the net asset value per share of the Fund underlying the Variable
Sub-Account determined as of the end of the immediately preceding
Valuation Period; and
(C) is the mortality and expense risk charge corresponding to the portion
of the current calendar year that is in the current Valuation Period.
<PAGE>
CALCULATION OF VARIABLE INCOME PAYMENTS
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We calculate the amount of the first variable income payment under an Income
Plan by applying the Contract Value allocated to each Variable Sub-Account less
any applicable premium tax charge deducted at the time, to the income payment
tables in the Contract. We divide the amount of the first variable annuity
income payment by the Variable Sub-Account's then current Annuity Unit value to
determine the number of annuity units ("Annuity Units") upon which later income
payments will be based. To determine income payments after the first, we simply
multiply the number of Annuity Units determined in this manner for each Variable
Sub-Account by the then current Annuity Unit value ("Annuity Unit Value") for
that Variable Sub-Account.
CALCULATION OF ANNUITY UNIT VALUES
Annuity Units in each Variable Sub-Account are valued separately and Annuity
Unit Values will depend upon the investment experience of the particular Fund in
which the Variable Sub-Account invests. We calculate the Annuity Unit Value for
each Variable Sub-Account at the end of any Valuation Period by:
o multiplying the Annuity Unit Value at the end of the immediately preceding
Valuation Period by the Variable Sub-Account's Net Investment Factor
(described in the preceding section) for the Period; and then
o dividing the product by the sum of 1.0 plus the assumed investment rate for
the Valuation Period.
The assumed investment rate adjusts for the interest rate assumed in the
income payment tables used to determine the dollar amount of the first variable
income payment, and is at an effective annual rate which is disclosed in the
Contract.
We determine the amount of the first variable income payment paid under an
Income Plan using the income payment tables set out in the Contracts. The
Contracts include tables that differentiate on the basis of sex, except in
states that require the use of unisex tables.
<PAGE>
GENERAL MATTERS
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INCONTESTABILITY
We will not contest the Contract after we issue it.
SETTLEMENTS
The Contract must be returned to us prior to any settlement. We must receive due
proof of the Contract Owner(s) death (or Annuitant's death if there is a
non-natural Contract Owner) before we will settle a death claim.
SAFEKEEPING OF THE VARIABLE ACCOUNT'S ASSETS
We hold title to the assets of the Variable Account. We keep the assets
physically segregated and separate and apart from our general corporate assets.
We maintain records of all purchases and redemptions of the Fund shares held by
each of the Variable Sub-Accounts.
The Funds do not issue stock certificates. Therefore, we hold the Variable
Account's assets in open account in lieu of stock certificates. See the Funds'
prospectuses for a more complete description of the custodian of the Funds.
PREMIUM TAXES
Applicable premium tax rates depend on the Contract Owner's state of residency
and the insurance laws and our status in those states where premium taxes are
incurred. Premium tax rates may be changed by legislation, administrative
interpretations, or judicial acts.
TAX RESERVES
We do not establish capital gains tax reserves for any Variable Sub-Account nor
do we deduct charges for tax reserves because we believe that capital gains
attributable to the Variable Account will not be taxable. However, we reserve
the right to deduct charges to establish tax reserves for potential taxes on
realized or unrealized capital gains.
<PAGE>
FEDERAL TAX MATTERS
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THE FOLLOWING DISCUSSION IS GENERAL AND IS NOT INTENDED AS TAX ADVICE. WE MAKE
NO GUARANTEE REGARDING THE TAX TREATMENT OF ANY CONTRACT OR TRANSACTION
INVOLVING A CONTRACT.
Federal, state, local and other tax consequences of ownership or receipt of
distributions under an annuity contract depend on the individual circumstances
of each person. If you are concerned about any tax consequences with regard to
your individual circumstances, you should consult a competent tax adviser.
TAXATION OF ALLSTATE LIFE INSURANCE COMPANY
Allstate is taxed as a life insurance company under Part I of Subchapter L of
the Internal Revenue Code. Since the Variable Account is not an entity separate
from Allstate, and its operations form a part of Allstate, it will not be taxed
separately as a "Regulated Investment Company" under Subchapter M of the Code.
Investment income and realized capital gains of the Variable Account are
automatically applied to increase reserves under the Contract. Under existing
federal income tax law, Allstate believes that the Variable Account investment
income and capital gains will not be taxed to the extent that such income and
gains are applied to increase the reserves under the Contract. Accordingly,
Allstate does not anticipate that it will incur any federal income tax liability
attributable to the Variable Account, and therefore Allstate does not intend to
make provisions for any such taxes. If Allstate is taxed on investment income or
capital gains of the Variable Account, then Allstate may impose a charge against
the Variable Account in order to make provision for such taxes.
EXCEPTIONS TO THE NON-NATURAL OWNER RULE
There are several exceptions to the general rule that annuity contracts held by
a non-natural owner are not treated as annuity contracts for federal income tax
purposes. Contracts will generally be treated as held by a natural person if the
nominal owner is a trust or other entity which holds the Contract as agent for a
natural person. However, this special exception will not apply in the case of an
employer who is the nominal owner of an annuity contract under a non-qualified
deferred compensation arrangement for its employees. Other exceptions to the
non-natural owner rule are: (1) Contracts acquired by an estate of a decedent by
reason of the death of the decedent; (2) certain Qualified Contracts; (3)
Contracts purchased by employers upon the termination of certain qualified
plans; (4) certain Contracts used in connection with structured settlement
agreements, and (5) Contracts purchased with a single premium when the annuity
starting date is no later than a year from purchase of the annuity and
substantially equal periodic payments are made, not less frequently than
annually, during the annuity period.
IRS REQUIRED DISTRIBUTION AT DEATH RULES
In order to be considered an annuity contract for federal income tax purposes,
the Contract must provide: (1) if any Contract Owner dies on or after the Payout
Start Date but before the entire interest in the Contract has been distributed,
the remaining portion of such interest must be distributed at least as rapidly
as under the method of distribution being used as of the date of the Owner's
death; (2) if any Contract Owner dies prior to the Payout Start Date, the entire
interest in the Contract will be distributed within 5 years after the date of
the Owner's death. These requirements are satisfied if any portion of the
Contract Owner's interest that is payable to (or for the benefit of) a
designated Beneficiary is distributed over the life of such Beneficiary (or over
a period not extending beyond the life expectancy of the Beneficiary) and the
distributions begin within 1 year of the Owner's death. If the Contract Owner's
designated Beneficiary is the surviving spouse of the Owner, the Contract may be
continued with the surviving spouse as the new Contract Owner. If the Contract
Owner is a non-natural person, then the Annuitant will be treated as the
Contract Owner for purposes of applying the distribution at death rules. In
addition, a change in the Annuitant on a Contract owned by a non-natural person
will be treated as the death of the Contract Owner.
<PAGE>
QUALIFIED PLANS
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The Contract may be used with several types of qualified plans. The tax rules
applicable to participants in such qualified plans vary according to the type of
plan and the terms and conditions of the plan itself. Adverse tax consequences
may result from excess contributions, premature distributions, distributions
that do not conform to specified commencement and minimum distribution rules,
excess distributions and in other circumstances. Contract Owners and
participants under the plan and Annuitants and Beneficiaries under the Contract
may be subject to the terms and conditions of the plan regardless of the terms
of the Contract.
INDIVIDUAL RETIREMENT ANNUITIES
Section 408 of the Code permits eligible individuals to contribute to an
individual retirement program known as an Individual Retirement Annuity (IRA).
Individual Retirement Annuities are subject to limitations on the amount that
can be contributed and on the time when distributions may commence. Certain
distributions from other types of qualified plans may be "rolled over" on a
tax-deferred basis into an Individual Retirement Annuity. An IRA generally may
not provide life insurance, but it may provide a death benefit that equals the
greater of the premiums paid and the Contract's Cash Value. The Contract
provides a death benefit that in certain circumstances may exceed the greater of
the payments and the Contract Value. It is possible that the death benefit could
be viewed as violating the prohibition on investment in life insurance contracts
with the result that the Contract would not be viewed as satisfying the
requirements of an IRA.
ROTH INDIVIDUAL RETIREMENT ANNUITIES
Section 408A of the Code permits eligible individuals to make nondeductible
contributions to an individual retirement program known as a Roth Individual
Retirement Annuity. Roth Individual Retirement Annuities are subject to
limitations on the amount that can be contributed and on the time when
distributions may commence. "Qualified distributions" from Roth Individual
Retirement Annuities are not includible in gross income. "Qualified
distributions" are any distributions made more than five taxable years after the
taxable year of the first contribution to the Roth Individual Retirement
Annuity, and which are made on or after the date the individual attains age 59
1/2, made to a beneficiary after the owner's death, attributable to the owner
being disabled or for a first time home purchase (first time home purchases are
subject to a lifetime limit of $10,000). "Nonqualified distributions" are
treated as made from contributions first and are includible in gross income to
the extent such distributions exceed the contributions made to the Roth
Individual Retirement Annuity. The taxable portion of a "nonqualified
distribution" may be subject to the 10% penalty tax on premature distributions.
Subject to certain limitations, a traditional Individual Retirement Account or
Annuity may be converted or "rolled over" to a Roth Individual Retirement
Annuity. The taxable portion of a conversion or rollover distribution is
includible in gross income, but is exempted from the 10% penalty tax on
premature distributions.
SIMPLIFIED EMPLOYEE PENSION PLANS
Section 408(k) of the Code allows employers to establish simplified employee
pension plans for their employees using the employees' individual retirement
annuities if certain criteria are met. Under these plans the employer may,
within specified limits, make deductible contributions on behalf of the
employees to their individual retirement annuities. Employers intending to use
the Contract in connection with such plans should seek competent advice.
SAVINGS INCENTIVE MATCH PLANS FOR EMPLOYEES (SIMPLE PLANS)
Sections 408(p) and 401(k) of the Code allow employers with 100 or fewer
employees to establish SIMPLE retirement plans for their employees. SIMPLE plans
may be structured as a SIMPLE retirement account using an employee's IRA to hold
the assets or as a Section 401(k) qualified cash or deferred arrangement. In
general, a SIMPLE plan consists of a salary deferral program for eligible
employees and matching or nonelective contributions made by employers. Employers
intending to use the Contract in conjunction with SIMPLE plans should seek
competent tax and legal advice.
TAX SHELTERED ANNUITIES
Section 403(b) of the Code permits public school employees and employees of
certain types of tax-exempt organizations (specified in Section 501(c)(3) of the
Code) to have their employers purchase annuity contracts for them, and subject
to certain limitations, to exclude the purchase payments from the employees'
gross income. An annuity contract used for a Section 403(b) plan must provide
that distributions attributable to salary reduction contributions made after
12/31/88, and all earnings on salary reduction contributions, may be made only
on or after the date the employee attains age 59 1/2, separates from service,
dies, becomes disabled or on the account of hardship (earnings on salary
reduction contributions may not be distributed for hardship). These limitations
do not apply to withdrawals where Allstate is directed to transfer some or all
of the Contract Value to another 403(b) plan.
CORPORATE AND SELF-EMPLOYED PENSION AND PROFIT SHARING PLANS
Sections 401(a) and 403(a) of the Code permit corporate employers to establish
various types of tax favored retirement plans for employees. The Self-Employed
Individuals Retirement Act of 1962, as amended, (commonly referred to as "H.R.
10" or "Keogh") permits self-employed individuals to establish tax favored
retirement plans for themselves and their employees. Such retirement plans may
permit the purchase of annuity contracts in order to provide benefits under the
plans.
STATE AND LOCAL GOVERNMENT AND TAX-EXEMPT ORGANIZATION
DEFERRED COMPENSATION PLANS
Section 457 of the Code permits employees of state and local governments and
tax-exempt organizations to defer a portion of their compensation without paying
current taxes. The employees must be participants in an eligible deferred
compensation plan. To the extent the Contracts are used in connection with an
eligible plan, employees are considered general creditors of the employer and
the employer as owner of the Contract has the sole right to the proceeds of the
Contract. Generally, under the non-natural owner rules, such Contracts are not
treated as annuity contracts for federal income tax purposes. Under these plans,
contributions made for the benefit of the employees will not be includible in
the employees' gross income until distributed from the plan. However, under a
Section 457 plan all the compensation deferred under the plan must remain solely
the property of the employer, subject only to the claims of the employer's
general creditors, until such time as made available to the employee or a
beneficiary.
<PAGE>
EXPERTS
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The combined statutory basis financial statements of Allstate appearing in this
Statement of Additional Information (which is incorporated by reference in the
prospectus of Allstate Life Insurance Company Separate Account A of Allstate
Life Insurance Company) have been audited by Deloitte & Touche, LLP, 180 N.
Stetson Avenue, Chicago, Illinois 60601-6710, independent auditors, as stated in
their report appearing herein and are included in reliance upon the report of
such firm given upon their authority as experts in accounting and auditing.
<PAGE>
COMBINED STATUTORY BASIS FINANCIAL STATEMENTS
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The combined statutory basis financial statements of Allstate and the
accompanying Report of Independent Auditors appear on the pages that follow. The
financial statements of Allstate included herein should be considered only as
bearing upon the ability of Allstate to meet its obligations under the
Contracts.
