<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
FLEXIBLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
issued by
VARIABLE ACCOUNT A
and
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE
READ IN CONJUNCTION WITH THE PROSPECTUS DESCRIBING THE FLEXIBLE PREMIUM DEFERRED
VARIABLE ANNUITY CONTRACTS. THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT
A PROSPECTIVE INVESTOR OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE
PROSPECTUS DATED MAY 1, 1998, CALL OR WRITE: American International Life
Assurance Company of New York; Attention: Variable Products, 80 Pine Street, New
York, New York, 10005, 1-800-255-8402.
DATE OF STATEMENT OF ADDITIONAL INFORMATION: June 25, 1998
<PAGE>
TABLE OF CONTENTS
Page
General Information..................................
The Company....................................
Independent Accountants........................
Legal Counsel..................................
Distributor....................................
Calculation of Performance Related Information.
Annuity Provisions...................................
Variable Annuity Payment Values................
Annuity Unit...................................
Net Investment Factor..........................
Additional Provisions..........................
Financial Statements.................................
<PAGE>
GENERAL INFORMATION
The Company
A description of American International Life Assurance Company of New
York (the "Company"), and its ownership is contained in the Prospectus. The
Company will provide for the safekeeping of the assets of Variable Account A
(the "Variable Account").
Independent Accountants
The audited financial statements of the Company have been audited by
Coopers and Lybrand, L.L.P., independent certified public accountants, whose
offices are located in Philadelphia, Pennsylvania.
Legal Counsel
Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Boros Cicchetti Berenson & Johnson LLP,
Washington, D.C..
Distributor
AIG Equity Sales Corp. ("AIGESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor. Commissions are paid by the Registrant directly to selling dealers
and representatives on behalf of the Distributor. Commissions retained by the
Distributor in 1997 were $37,267.60.
Calculation Of Performance Related Information
A. Yield and Effective Yield Quotations for the
Money Market Subaccount
The yield quotation for the Money Market Subaccount will be for the
seven days ended on the date of the most recent balance sheet of the Variable
Account included in the registration statement, and will be computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Accumulation Unit in
the Money Market Subaccount at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Owner accounts, and dividing the
difference by the value of the account at the beginning of the base period to
obtain the base period return, and multiplying the base period return by (365/7)
with the resulting figure carried to at least the nearest hundredth of one
percent.
Any effective yield quotation for the Money Market Subaccount to be set
forth in the Prospectus will be for the seven days ended on the date of the most
recent balance sheet of the Variable Account included in the registration
statement, and will be carried at least to the nearest hundredth of one percent,
and will be computed by determining the net change, exclusive of capital
changes, in the value of a hypothetical pre-existing account having a balance of
one Accumulation Unit in the Money Market Subaccount at the beginning of the
period, subtracting a hypothetical charge reflecting deductions from Owner
accounts, and dividing the difference by the value of the account at the
beginning of the base period to obtain the base period return, and then
compounding the base period return by adding 1, raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result, according to the
following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1.
For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Owner
accounts in proportion to the length of the base period. For any fees that vary
with the size of the account, the account size is assumed to be the Money Market
Subaccount's mean account size. The yield and effective yield quotations do not
reflect the Surrender Charge that may be assessed at the time of withdrawal in
an amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" of the Prospectus) No deductions or sales loads
are assessed upon annuitization under the Contracts. Realized gains and losses
from the sale of securities and unrealized appreciation and depreciation of the
Money Market Subaccount and the Fund are excluded from the calculation of yield.
B. Total Return Quotations
The total return quotations for all of the Subaccounts will be average
annual total return quotations for the one, five, and ten year periods (or,
where a Subaccount has been in existence for a period of less than one, five or
ten years, for such lesser period) ended on the date of the most recent balance
sheet of the Variable Account and for the period from the date monies were first
placed into the Subaccounts until the aforesaid date. The quotations are
computed by finding the average annual compounded rates of return over the
relevant periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
particular period at the end of the
particular period.
For the purposes of the total return quotations the calculations take
into effect all fees that are charged to all Owner accounts. For any fees that
vary with the size of the account, the account size is assumed to be the
respective Subaccount's mean account size. The calculations also assume a total
withdrawal as of the end of the particular period.
C. Yield Quotations
The yield quotations will be based on the thirty-day period ended on
the date of the most recent balance sheet of the Variable Account included in
the registration statement, and are computed by dividing the net investment
income per Accumulation Unit earned during the period by the maximum offering
price per unit on the last day of the period, according to the following
formula:
Yield = 2[(a - b + 1)6 - 1]
cd
Where: a = net investment income earned during the period by the
corresponding portfolios of the Fund attributable to shares
owned by the Subaccount.
b = expenses accrued for the period(net of
reimbursements).
c = the average daily number of Accumulation Units
outstanding during the period.
d = the maximum offering price per Accumulation Unit on
the last day of the period.
For the purposes of the yield quotations for a Subaccount, the
calculations take into effect all fees that are charged to all Owner accounts.
For any fees that vary with the size of the account, the account size is assumed
to be the respective Subaccount's mean account size. The calculations do not
take into account the Surrender Charge or any transfer charges.
A Surrender Charge may be assessed at the time of withdrawal in an
amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Surrender Charge" of the Prospectus) There is currently a transfer
charge of $10 per transfer after a specified number of transfers in each
Contract Year. (See "Transfers" in the Prospectus).
D. Non - Standardized Performance Data
1. Total Return Quotations
The total return quotations for all of the Subaccounts other than a
Money Market Subaccount will be average annual total return quotations for the
one, five, and ten year periods (or, where a Subaccount has been in existence
for a period of less than one, five or ten years, for such lesser period) ended
on the date of the most recent balance sheet of the Variable Account and for the
period from the date monies were first placed into the Subaccounts until the
aforesaid date. The quotations are computed by finding the average annual
compounded rates of return over the relevant periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the
particular period at the end of the particular
period.
For the purposes of the total return quotations, the calculations take
into effect all fees that are charged to all Owner accounts. For any fees that
vary with the size of the account, the account size is assumed to be the
respective Subaccount's mean account size. The calculations do not, however,
assume a total withdrawal as of the end of the particular period and, therefore,
no Surrender Charge is reflected.
2. Tax Deferred Accumulation
In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax deferred compounding
on the separate account's investment returns or upon returns in general. These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a
tax-deferred basis with the returns on a taxable basis. Different tax rates may
be assumed.
In general, individuals who own annuity contracts are not taxed on
increases in the value under the annuity contract until some form of
distribution is made from the contract. Thus, the annuity contract will benefit
from tax deferral during the Accumulation period, which generally will have the
effect of permitting an investment in an annuity contract to grow more rapidly
than a comparable investment under which increases in value are taxed on a
current basis. The chart shows accumulations on an initial investment or Premium
of a given amount, assuming hypothetical gross annual returns compounded
annually, and a stated assumed rate. The values shown for the taxable investment
do not include any deduction for management fees or other expenses but assume
that taxes are deducted annually from investment returns. The values shown for
the variable annuity in a chart reflect the deduction of contractual expenses
such as the 1.25% mortality and expense risk charge, the 0.15% Administrative
Fee, and the $30 Contract Maintenance Charge, but not the expenses of an
underlying investment vehicle. In addition, these values assume that the Owner
does not surrender the Contract or make any withdrawals until the end of the
period shown. The chart assumes a full withdrawal, at the end of the period
shown, of all contract value and the payment of taxes at the 31% rate on the
amount in excess of the Premium.
In developing tax-deferral charts, the Company will follow these
general principles: (1) the assumed rate of earnings will be realistic; (2) the
chart will (a) depict accurately the effect of all fees and charges, or (b)
provide a narrative that prominently discloses all fees and charges; (3)
comparative charts for accumulation values for tax-deferred and non-tax-deferred
investments will depict the implications of withdrawals and surrenders; and (4)
a narrative accompanying the chart will disclose prominently that there may be a
10% tax penalty on withdrawals by Owners who have not reached age 59 1/2.
The rates of return illustrated are hypothetical and are not an
estimate or guaranty of performance. Actual tax rates may vary for different
taxpayers from that illustrated and withdrawals by Owners who have not reached
age 59 1/2 may be subject to a tax penalty of 10%.
ANNUITY PROVISIONS
Variable Annuity Payments
A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount and (2) will vary in amount with the net
investment results of the applicable Subaccount(s) of the Variable Account. At
the Annuity Date the Contract Value in each Subaccount will be applied to the
applicable Annuity Tables contained in the Contract. The Annuity Table used will
depend upon the payment option chosen. The same Contract Value amount applied to
each payment option may produce a different initial annuity payment. If, as of
the Annuity Date, the then current annuity rates applicable to this class of
contracts will provide a larger income than that guaranteed for the same form of
annuity under the Contracts described herein, the larger amount will be paid.
The first annuity payment for each Subaccount is determined by
multiplying the amount of the Contract Value allocated to that Subaccount by the
factor shown in the table for the option selected, divided by 1000.
The dollar amount of Subaccount annuity payments after the first is
determined as follows:
(a) The dollar amount of the first annuity payment is divided by the
value for the Subaccount Annuity Unit as of the Annuity Date.
This establishes the number of Annuity Units for each monthly
payment. The number of Annuity Units remains fixed during the
Annuity payment period, subject to any transfers.
(b) The fixed number of Annuity Units is multiplied by the Annuity
Unit value for the Valuation Period 14 days prior to the date of
payment.
The total dollar amount of each Variable Annuity payment is the sum of
all Subaccount variable annuity payments less the pro-rata amount of the annual
Administrative Charge.
Annuity Unit
The value of an Annuity Unit for each Subaccount was arbitrarily set
initially at $10. This was done when the first Fund shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:
(a) is the net investment factor for the Valuation Period for which
the Subaccount Annuity Unit value is being determined; and
(b) is the assumed investment factor for such Valuation Period. The
assumed investment factor adjusts for the interest assumed in
determining the first variable annuity payment. Such factor for
any Valuation Period shall be the accumulated value, at the end
of such period, of $1.00 deposited at the beginning of such
period at the assumed investment rate of 5%.
Net Investment Factor
The net investment factor is used to determine how investment results
of the Fund affect the Subaccount Annuity Unit value from one Valuation Period
to the next. The net investment factor for each Subaccount for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:
(a) is equal to:
(i) the net asset value per share of the Fund held in the
Subaccount determined at the end of that Valuation
Period; plus
(ii) the per share amount of any dividend or capital gain
distribution made by the Fund held in the Subaccount if
the "ex-dividend" date occurs during that same
Valuation Period; plus or minus
(iii)a per share charge or credit, which is determined by
the Company, for changes in tax reserves resulting from
investment operations of the Subaccount.
(b) is equal to:
(i) the net asset value per share of the Fund held in the
Subaccount determined as of the end
of the prior Valuation Period; plus or minus
(ii) the per share charge or credit for any change in tax
reserves for the prior Valuation Period.
(c) is equal to:
(i) the percentage factor representing the Mortality and
Expense Risk Charge, plus
(ii) the percentage factor representing the daily
Administrative Charge.
The net investment factor may be greater or less than the assumed
investment factor; therefore, the Subaccount Annuity Unit value may increase or
decrease from Valuation Period to Valuation Period.
Additional Provisions
The Company may require proof of the age of the Annuitant before making
any life annuity payment provided for by the Contract. If the age of the
Annuitant has been misstated the Company will compute the amount payable based
on the correct age. If annuity payments have begun, any underpayments that may
have been made will be paid in full with the next annuity payment, including
interest at the annual rate of 5%. Any overpayments, including interest at the
annual rate of 5%, unless repaid to the Company in one sum, will be deducted
from future annuity payments until the Company is repaid in full.
If a Contract provision requires that a person be alive, the Company
may require due proof that the person is alive before the Company acts under
that provision.
The Company will give the payee under an annuity payment option a
settlement contract for the payment option.
You may assign this Contract prior to the Annuity Date. A written
request, dated and signed by you must be sent to our Administrative Office. A
duly executed copy of any assignment must be filed with our Administrative
Office. We are not responsible for the validity of any assignment.
FINANCIAL STATEMENTS
An audited balance sheet for the Company and statement of assets and
liabilities for the separate account are provided. The financial statements and
schedules of the Company and the Variable Account were filed with the SEC as
part of the Registration Statement on Form N-4.
<PAGE>
<TABLE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(in thousands)
December 31, December 31,
1997 1996
------------ ----------
Assets
- ------
<S> <C> <C>
Investments and cash:
Fixed maturities:
Bonds available for sale, at market value $4,995,019 $4,636,022
(cost: 1997 - $4,712,085: 1996 - $4,456,608)
Equity securities:
Common stock
(cost: 1997 - $13,568: 1996 - $17,906) 27,254 33,099
Non-redeemable preferred stocks
(cost: 1997 - $565: 1996 - $649) 567 590
Mortgage loans on real estate, net 554,521 513,470
Real estate, net of accumulated
depreciation of $6,823 in 1997 and $6,046 in 1996 25,450 26,227
Policy loans 10,682 11,063
Other invested assets 58,048 65,744
Short-term investments 79,893 60,333
Cash 299 1,726
---------- ----------
Total investments and cash 5,751,733 5,348,274
Amounts due from related parties 4,802 4,277
Investment income due and accrued 82,331 77,433
Premium and insurance balances receivable-net 13,459 13,617
Reinsurance assets 20,609 25,211
Deferred policy acquisition costs 39,748 35,754
Separate and variable accounts 241,541 153,678
Other assets 2,020 2,591
---------- ----------
Total assets $6,156,243 $5,660,835
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(in thousands, except share amounts)
December 31, December 31,
1997 1996
----------- ------------
Liabilities
- -----------
<S> <C> <C>
Policyholders' funds on deposit $3,513,621 $3,308,208
Future policy benefits 1,662,751 1,588,162
Reserve for unearned premiums 6,021 8,568
Policy and contract claims 45,195 44,173
Reserve for commissions, expenses and taxes 4,568 4,905
Insurance balances payable 4,624 7,981
Federal income tax payable 3,071 3,758
Deferred income taxes 70,900 43,445
Amounts due to related parties 4,491 5,227
Separate and variable accounts 241,541 153,678
Other liabilities 24,277 22,588
---------- ----------
Total liabilities 5,581,060 5,190,693
---------- ----------
Stockholders' Equity
- --------------------
Common stock, $200 par value; 16,125 shares
authorized, issued and outstanding 3,225 3,225
Additional paid-in capital 197,025 197,025
Unrealized appreciation (depreciation) of investments, net
of future policy benefits and taxes of
$128,504 in 1997 and $72,979 in 1996 184,681 135,431
Retained earnings 190,252 134,461
---------- ----------
Total stockholders' equity 575,183 470,142
---------- ----------
Total liabilities and stockholders' equity $6,156,243 $5,660,835
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK (AI LIFE)
VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments at Market Value:
Alliance Variable Products Series Fund, Inc.:
Shares Cost Market Value
----------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio $10,485,503.650 $ 10,485,504 $ 10,485,504
Premier Growth Portfolio 1,705,702.964 29,342,384 35,802,706
Growth & Income Portfolio 2,298,316.243 37,836,959 45,805,443
International Portfolio 547,179.798 8,056,600 8,218,640
Short-Term Multi-Market Portfolio 83,504.629 883,600 882,644
Global Bond Portfolio 185,701.387 2,138,655 2,061,275
U.S. Government/High Grade
Securities Portfolio 623,968.955 7,043,605 7,443,951
Global Dollar Government Portfolio 199,126.863 2,950,582 2,917,208
North American Government Portfolio 483,756.392 6,034,805 6,274,321
Utility Income Portfolio 334,334.446 4,182,088 5,239,021
Conservative Investors Portfolio 552,161.979 6,439,216 7,233,326
Growth Investors Portfolio 164,957.812 2,076,348 2,372,093
Growth Portfolio 1,722,995.569 27,698,680 38,629,564
Total Return Portfolio 544,578.481 7,784,995 9,214,264
Worldwide Privatization Portfolio 489,862.015 6,725,020 6,956,046
Technology Portfolio 1,008,874.316 12,109,598 11,824,006
Quasar Portfolio 617,928.736 7,154,254 7,792,082
Real Estate Investment Portfolio 182,985.035 2,059,185 2,256,206
High Yield Portfolio 4,104.495 42,068 42,400
----------------- ----------------
Total Investments $181,044,146 211,450,700
---------------
Total Assets $211,450,700
===============
EQUITY:
Contract Owners' Equity $211,450,700
------------------
Total Equity $211,450,700
==================
</TABLE>
See Notes to Financial Statements
<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK (AI LIFE)
VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments at Market Value:
Shares Cost Market Value
----------------------------------------------------------
<S> <C> <C> <C>
Fidelity
Money Market Portfolio 818,331.070 $ 818,331 $ 818,331
Asset Manager Portfolio 35,403.965 580,609 637,625
Growth Portfolio 37,863.872 1,272,353 1,404,753
High Income Portfolio 25,569.020 322,095 347,231
Investment Grade Bond Portfolio 16,330.803 200,349 205,115
Overseas Portfolio 21,076.308 395,300 404,663
Alliance
Conservative Investors Portfolio 9,910.804 122,206 129,832
Growth & Income Portfolio 68,111.805 1,198,820 1,357,469
Growth Investors Portfolio 6,120.984 78,437 88,018
Growth Portfolio 58,397.627 1,110,113 1,309,275
Technology Portfolio 36,222.504 439,762 424,525
Quasar Portfolio 35,963.349 433,616 453,499
Dreyfus
Stock Index Portfolio 42,928.911 1,000,364 1,105,421
Zero Coupon 2000 Portfolio 4,232.807 52,155 52,066
Small Company Stock Portfolio 1,369.266 22,721 22,085
Van Eck
Worldwide Hard Assets Portfolio 6,507.777 105,056 102,236
Worldwide Balanced Portfolio 51,430.375 588,702 618,707
Weiss, Peck & Greer
Tomorrow Short Term Portfolio 32,510.613 309,990 319,252
Tomorrow Medium Term Portfolio 13,311.909 111,608 114,881
Tomorrow Long Term Portfolio 3,948.553 27,974 31,864
------------------ ----------------
Total Investments $ 9,190,561 9,946,848
-----------------
Total Assets $ 9,946,848
=================
EQUITY:
Contract Owners' Equity $ 9,946,848
-----------------
Total Equity $ 9,946,848
=================
</TABLE>
See Notes to Financial Statements
<PAGE>
PART B
STATEMENT OF ADDITIONAL INFORMATION
INDIVIDUAL SINGLE PURCHASE
PAYMENT DEFERRED VARIABLE ANNUITY CONTRACTS
issued by
VARIABLE ACCOUNT A
and
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
THIS IS NOT A PROSPECTUS. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD
BE READ IN CONJUNCTION WITH THE PROSPECTUS FOR THE VARIABLE ANNUITY CONTRACTS
WHICH ARE REFERRED TO HEREIN.
THE PROSPECTUS CONCISELY SETS FORTH INFORMATION THAT A PROSPECTIVE INVESTOR
OUGHT TO KNOW BEFORE INVESTING. FOR A COPY OF THE PROSPECTUS DATED May 1, 1998
CALL OR WRITE: American International Life Assurance Company of New York,
Attention: Variable Products, 80 Pine Street, New York, New York 10005,
1-800-255-8402.
DATE OF STATEMENT OF ADDITIONAL INFORMATION: June 25, 1998
<PAGE>
TABLE OF CONTENTS
Page
General Information..................................
The Company....................................
Independent Accountants........................
Legal Counsel..................................
Distributor....................................
Calculation of Performance Related Information.
Delay of Payments..............................
Transfers......................................
Method of Determining Contract Values................
Annuity Provisions...................................
Annuity Benefits...............................
Annuity Options................................
Variable Annuity Payment Values................
Annuity Unit...................................
Net Investment Factor..........................
Additional Provisions..........................
Financial Statements.................................
<PAGE>
GENERAL INFORMATION
The Company
A description of American International Life Assurance Company of New
York (the "Company"), and its ownership is contained in the Prospectus. The
Company will provide for the safekeeping of the assets of the Variable Account.
Independent Accountants
The audited financial statements of the Company and the Variable
Account have been audited by Coopers and Lybrand, L.L.P., independent certified
public accountants, whose offices are located in Philadelphia, Pennsylvania.
Legal Counsel
Legal matters relating to the Federal securities laws in connection
with the Contracts described herein and in the Prospectus are being passed upon
by the law firm of Jorden Burt Boros Cicchetti Berenson & Johnson, Washington,
D.C..
Distributor
AIG Equity Sales Corp. ("AIGESC"), a wholly owned subsidiary of American
International Group, Inc. and an affiliate of the Company, acts as the
distributor. The offering is on a continuous basis. Commissions in the amount of
$37,267.60 were reatined by the Distributor in 1997.
Calculation Of Performance Related Information
A. Yield and Effective Yield Quotations for the
Money Market Subaccount
The yield quotation for the Money Market Subaccount will be for the
seven days ended on the date of the most recent balance sheet of the Variable
Account included in the registration statement, and will be computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Accumulation Unit in
the Money Market Subaccount at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and multiplying the base period return
by (365/7) with the resulting figure carried to at least the nearest hundredth
of one percent.
Any effective yield quotation for the Money Market Subaccount will be
for the seven days ended on the date of the most recent balance sheet of the
Variable Account included in the registration statement, and will be carried at
least to the nearest hundredth of one percent,and will be computed by
determining the net change, exclusive of capital changes, in the value of a
hypothetical pre-existing account having a balance of one Accumulation Unit in
the Money Market Subaccount at the beginning of the period, subtracting a
hypothetical charge reflecting deductions from Contract Owner accounts, and
dividing the difference by the value of the account at the beginning of the base
period to obtain the base period return, and then compounding the base period
return by adding 1, raising the sum to a power equal to 365 divided by 7 and
subtracting 1 from the result, according to the following formula:
EFFECTIVE YIELD = [(BASE PERIOD RETURN + 1)365/7]-1.
For purposes of the yield and effective yield computations, the
hypothetical charge reflects all deductions that are charged to all Contract
Owner accounts in proportion to the length of the base period. For any fees that
vary with the size of the account, the account size is assumed to be the Money
Market Subaccount's mean account size. The yield and effective yield quotations
do not reflect the Deferred Sales Charge that may be assessed at the time of
withdrawal in an amount ranging up to 6% of the requested withdrawal amount,
with the specific percentage applicable to a particular withdrawal depending on
the length of time the purchase payment was held under the Contract and whether
withdrawals had been previously made during that Contract Year. (See "Charges
and Deductions - Deduction for Deferred Sales Charge" of the Prospectus) No
deductions or sales loads are assessed upon annuitization under the Contracts.
Realized gains and losses from the sale of securities and unrealized
appreciation and depreciation of the Money Market Subaccount and the Fund are
excluded from the calculation of yield.
B. Total Return Quotations
The total return quotations for all of the Subaccounts will be average
annual total return quotations for the one, five, and ten year periods (or,
where a Subaccount has been in existence for a period of less than one, five or
ten years, for such lesser period) ended on the date of the most recent balance
sheet of the Variable Account and for the period from the date monies were first
placed into the Subaccounts until the aforesaid date. The quotations are
computed by finding the average annual compounded rates of return over the
relevant periods that would equate the initial amount invested to the ending
redeemable value, according to the following formula:
P(1+T)to the power of n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a
hypothetical $1,000 payment made at the
beginning of the particular period at the
end of the particular period.
For the purposes of the total return quotations, the calculations take
into effect all fees that are charged to all Contract Owner accounts. For any
fees that vary with the size of the account, the account size is assumed to be
the respective Subaccount's mean account size. The calculations also assume a
total withdrawal as of the end of the particular period.
C. Yield Quotations
Yield quotations will be set forth in the Prospectus will be based on the
thirty-day period ended on the date of the most recent balance sheet of the
Variable Account included in the registration statement, and are computed by
dividing the net investment income per Accumulation Unit earned during the
period by the maximum offering price per unit on the last day of the period,
according to the following formula:
Yield = 2[(a - b + 1)6 - 1]
-----------
cd
Where: a = net investment income earned during the period by the
corresponding portfolios of the Fund attributable to shares
owned by the Subaccount.
b = expenses accrued for the period(net of
reimbursements).
c = the average daily number of Accumulation Units
outstanding during the period.
d = the maximum offering price per Accumulation Unit on
the last day of the period.
For the purposes of yield quotations for the Subaccounts, the
calculations take into effect all fees that are charged to all Contract Owner
accounts. For any fees that vary with the size of the account, the account size
is assumed to be the respective Subaccount's mean account size. The calculations
do not take into account the Deferred Sales Charge or any transfer charges.
A Deferred Sales Charge may be assessed at the time of withdrawal in an
amount ranging up to 6% of the requested withdrawal amount, with the specific
percentage applicable to a particular withdrawal depending on the length of time
the purchase payment was held under the Contract, and whether withdrawals had
been previously made during that Contract Year. (See "Charges and Deductions -
Deduction for Deferred Sales Charge" of the Prospectus) There is currently a
transfer charge of $10 per transfer after a specified number of transfers in
each Contract Year. (See "The Fund, - Transfer of Contract Values" of the
Prospectus)
D. Non - Standardized Performance Data
1. Total Return Quotations
The total return quotations for all of the Subaccounts other than a
Money Market Subaccount, will be average annual total return quotations for the
one, five, and ten year periods (or, where a Subaccount has been in existence
for a period of less than one, five or ten years, for such lesser period) ended
on the date of the most recent balance sheet of the Variable Account and for the
period from the date monies were first placed into the Subaccounts until the
aforesaid date. The quotations are computed by finding the average annual
compounded rates of return over the relevant periods that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)to the power of n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value ofa hypothetical
$1,000 payment made at the beginning of the
particular period at the end of the particular
period.
For the purposes of the total return quotations, the calculations take
into effect all fees that are charged to all Contract Owner accounts. For any
fees that vary with the size of the account, the account size is assumed to be
the respective Subaccount's mean account size. The calculations do not, however,
assume a total withdrawal as of the end of the particular period.
2. Tax Deferred Accumulation
In reports or other communications to You or in advertising or sales
materials, the Company may also describe the effects of tax deferred compounding
on the separate account's investment returns or upon returns in general. These
effects may be illustrated in charts or graphs and may include comparisons at
various points in time of returns under the Contract or in general on a
tax-deferred basis with the returns on a taxable basis. Different tax rates may
be assumed.
In general, individuals who own annuity contracts are not taxed on
inreases in the value under the annuity contract until some form of distribution
is made from the contract. Thus, the annuity contract will benefit from tax
deferral during the accumulation period, which generally will have the effect of
permitting an investment in an annuity contract to grow more rapidly than a
comparable investment under which increases in value are taxed on a current
basis. The charts may show accumulations on an initial investment or Purchase
Payment of a given amount, assuming hypothetical gross annual returns,
compounded annually, and a stated assumed rate. The values shown for the taxable
investment will not include any deduction for management fees or other expenses
but assume that taxes are deducted annually from investment returns. The values
shown for the variable annuity in a chart reflect the deduction of contractual
expenses such as the 1.25% mortality and expense risk charge, the 0.15%
Administrative Fee an dthe $30 Contract Maintenance Charge, but not the expenses
of an underlying investment vehicle, such as the Fund. In addition, these values
assume that the Owner does not surrender the Contract or make any withdrawals
until the end of the period shown. The chart assumes a full withdrawal, at the
end of the period shown, of all contract value and the payment of taxes at the
stated assumed rate on the amount in excess of the Purchase Payment.
In developing tax-deferral charts, the Company will follow these
general principles: (1) the assumed rate of earnings will be realistic; (2) the
chart will (a) depict accurately the effect of all fees and charges, or (b)
provide a narrative that prominently discloses all fees and charges; (3)
comparative charts for accumulation values for tax-deferred and non-tax-deferred
investments will depict the implications of withdrawals and surrenders; and (4)
a narrative accompanying the chart will disclose prominently that there may be a
10% tax penalty on withdrawals by Owners who have not reached age 59 1/2.
The rates of return illustrated in a chart will be hypothetical and not
an estimate or guaranty of performance. Actual tax rates may vary for different
taxpayers from those illustrated in a chart.
Delay of Payments
Any payments due under the Contracts will generally be sent to the
Owner within seven (7) days of a completed request for payment. However, the
Company has reserved the right to postpone any type of payment from the Variable
Account for any period when:
(a) the New York Stock Exchange is closed for other than
customary weekends and holidays;
(b) trading on the Exchange is restricted;
(c) an emergency exists as a result of which it is not
reasonably practicable to dispose of securities held in the
Variable Account or determine their value; or
(d) an order of the Securities and Exchange Commission permits
delay for the protection of security holders.
The applicable rules of the Securities and Exchange Commission shall
govern as to whether the conditions in (b) and (c) exist.
Transfers
A Contract Owner may deposit prior to the Annuity Date, all or part of
his Contract Value into either the Money Market or Short-Term Multi-Market Sub
account (the "Sending Sub-account"), and then automatically transfer those
assets into one or more of the other Sub-accounts on a systematic basis. The
amount transferred to the Sending Sub-account must be at least $12,000 in order
to initiate this option. This process is called Automatic Dollar Cost Averaging.
The Automatic Dollar Cost Averaging option is available for use with
any of the investment options, other than the General Account.
The Automatic Dollar Cost Averaging transfers may occur monthly or
quarterly. The Contract Owner may designate the dollar amount to be transferred
each month or elect to have a percentage transferred each month, up to a maximum
of 60 months.
The Company will make all Automatic Dollar Cost Averaging transfers on
the 15th calendar day of each month, or the next day the New York Stock Exchange
is open for business if the 15th calendar day of hte month should fall on a day
the New York Stock Exchange is closed. In order to process an Automatic Dollar
Cost Averaging transfer, the Company must have received a request in writing by
no later than the 6th calendar day of the month.
The Automatic Dollar Cost Averaging option may be cancelled at any time
by written request or automatically if the value of the Sending Sub-account
subject to the Automatic Dollar Cost Averaging option is less than $1,000.
A Contract Owner may change his Automatic Dollar cost Averaging
investment allocation only once during any 12 month period.
Any transfers made under this section are subject to the conditions of
the section entitled "The Fund - Transfer of Contract Values" of the Prospectus,
except that the Company will not deem the election of the Automatic Dollar Cost
Averaging option to count towards a Contract Owner's twelve (12) free transfers.
METHOD OF DETERMINING CONTRACT VALUES
The Contract Value will fluctuate in accordance with the investment
results of the underlying Portfolio of the Fund held within the Subaccount. In
order to determine how these fluctuations affect Contract Values, Accumulation
Units are utilized. The value of an Accumulation Unit applicable during any
Valuation Period is determined at the end of that period.
When the first shares of the respective Portfolios of the Fund were
purchased for the Subaccounts, the Accumulation Units for the Subaccounts were
valued at $10. The value of an Accumulation Unit for a Subaccount on any
Valuation Date thereafter is determined by dividing (a) by (b), where:
(a) is equal to:
(i) the total value of the net assets attributable to
Accumulation Units in the Subaccount, minus
(ii) the daily charge for assuming the risk of guaranteeing
mortality factors and expense charges which is equal on
an annual basis to 1.25% multiplied by the daily net
asset value of the Subaccount; minus
(iii)the daily charge for providing certain administrative
functions which is equal on an annual basis to 0.15%
multiplied by the daily net asset value of the
Subaccount; minus or plus
(iv) a charge or credit for any tax provision established
for the Subaccount. The Company is not currently making
any provision for taxes.
(b) is the total number of Accumulation Units applicable to
that Subaccount at the end of the Valuation Period.
The resulting value of each Subaccount Accumulation Unit is multiplied
by the respective number of Subaccount Accumulation Units for a Contract. The
Contract Value of the Variable Account is the sum of all Subaccount values for
the Contract.
An Accumulation Unit may increase or decrease in value from Valuation
Date to Valuation Date.
ANNUITY PROVISIONS
Annuity Benefits
If the Annuitant is alive on the Annuity Date the Company will begin
making payments to the Annuitant under the payment option or options selected.
The amount of the annuity payments will depend on the age or sex of the payee at
the time the settlement contract is issued.
Annuity Options
The annuity options are as follows:
Option 1: Life Income. The Company will pay an annuity during the lifetime
of the payee.
Option 2: Income with 10 Years of Payments Guaranteed. The Company will pay
an annuity during the lifetime of the payee. If, at the death of the payee,
payments have been made for less than 10 years:
(a) payments will be continued during the remainder of the
period to the successor payee; or
(b) the sucessor payee may elect to receive in a lump sum the
present value of the remaining payments, commuted at the
interest rate used to create the annuity factor for this
Option.
Option 3: Joint and Last Survivor Income. The Company will pay an annuity
for as long as either payee or a designated second person is alive.
Annuity options are available on a fixed and/or a variable basis. the
Contract Owner may allocate Contract Values to purchase only fixed annuity
payments, or to purchase only variable annuity payments, or to purchase a
combination of the two. Contract Values which purchase fixed annuity payments
will be invested in the General Account. Contract Values which purchase variable
anuuity payments will be invested in the Variable Account. The Contract Owner
may make no transfers between the General Account and the Variable Account after
the Annuity Date. The Company also may offer additional options at its
discretion.
Variable Annuity Payment Values
A Variable Annuity is an annuity with payments which (1) are not
predetermined as to dollar amount and (2) will vary in amount with the net
investment results of the applicable Subaccount(s) of the Variable Account. At
the Annuity Date the Contract Value in each Subaccount will be applied to the
applicable Annuity Tables contained in the Contract. The Annuity Table used will
depend upon the payment option chosen. The same Contract Value amount applied to
each payment option may produce a different initial annuity payment. If, as of
the Annuity Date, the then current annuity rates applicable to this class of
contracts will provide a larger income than that guaranteed for the same form of
annuity under the Contracts described herein, the larger amount will be paid.
The first annuity payment for each Subaccount is determined by
multiplying the amount of the Contract Value allocated to that Subaccount by the
factor shown in the table for the option selected, divided by 1000.
The dollar amount of Subaccount annuity payments after the first is
determined as follows:
(a) The dollar amount of the first annuity payment is divided by
the value for the Subaccount Annuity Unit as of the Annuity
Date. This establishes the number of Annuity Units for each
monthly payment. The number of Annuity Units remains fixed
during the Annuity payment period, subject to any transfers.
(b) The fixed number of Annuity Units is multiplied by the
Annuity Unit value for the Valuation Period 14 days prior to
the date of payment.
The total dollar amount of each Variable Annuity payment is the sum of
all Subaccount variable annuity payments less the pro-rata amount of the annual
Administrative Charge.
Annuity Unit
The value of an Annuity Unit for each Subaccount was arbitrarily set
initially at $10. This was done when the first Fund shares were purchased. The
Subaccount Annuity Unit value at the end of any subsequent Valuation Period is
determined by multiplying the Subaccount Annuity Unit value for the immediately
preceding Valuation Period by the quotient of (a) and (b) where:
(a) is the net investment factor for the Valuation Period for
which the Subaccount Annuity Unit value is being determined;
and
(b) is the assumed investment factor for such Valuation Period.
The assumed investment factor adjusts for the interest
assumed in determining the first variable annuity payment.
Such factor for any Valuation Period shall be the
accumulated value, at the end of such period, of $1.00
deposited at the beginning of such period at the assumed
investment rate of 5%.
Net Investment Factor
The net investment factor is used to determine how investment results
of the Fund affect the Subaccount Annuity Unit value from one Valuation Period
to the next. The net investment factor for each Subaccount for any Valuation
Period is determined by dividing (a) by (b) and subtracting (c) from the result,
where:
(a) is equal to:
(i) the net asset value per share of the Fund held in the
Subaccount determined at the end of that Valuation
Period; plus
(ii) the per share amount of any dividend or capital gain
distribution made by the Fund held in the Subaccount if
the "ex-dividend" date occurs during that same
Valuation Period; plus or minus
(iii)a per share charge or credit, which is determined by
the Company, for changes in tax reserves resulting from
investment operations of the Subaccount.
(b) is equal to:
(i) the net asset value per share of the Fund held in the
Subaccount determined as of the end of the prior
Valuation Period; plus or minus
(ii) the per share charge or credit for any change in tax
reserves for the prior Valuation Period.
(c) is equal to:
(i) the percentage factor representing the Mortality and
Expense Risk Charge, plus
(ii) the percentage factor representing the daily
Administrative Charge.
The net investment factor may be greater or less than the assumed
investment factor; therefore, the Subaccount Annuity Unit value may increase or
decrease from Valuation Period to Valuation Period.
Additional Provisions
The Company may require proof of the age of the Annuitant before making
any life annuity payment provided for by the Contract. If the age of the
Annuitant has been misstated the Company will compute the amount payable based
on the correct age. If annuity payments have begun, any underpayments that may
have been made will be paid in full with the next annuity payment, including
interest at the annual rate of 5%. Any overpayments, including interest at the
annual rate of 5%, unless repaid to the Company in one sum, will be deducted
from future annuity payments until the Company is repaid in full.
If a Contract provision requires that a person be alive, the Company
may require due proof that the person is alive before the Company acts under
that provision.
The Company will give the payee under an annuity payment option a
settlement contract for the payment option.
You may assign this Contract prior to the Annuity Date. A written
request, dated and signed by you must be sent to our Administrative Office. A
duly executed copy of any assignment must be filed with our Administrative
Office. We are not responsible for the validity of any assignment.
FINANCIAL STATEMENTS
An audited balance sheet for the Company and statement of assets and
liabilities for the separate account are provided. The financial statements and
schedules of the Company and the Variable Account were filed with the SEC as
part of the Registration Statement on Form N-4.
<<PAGE>
<TABLE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(in thousands)
December 31, December 31,
1997 1996
------------ ----------
Assets
- ------
<S> <C> <C>
Investments and cash:
Fixed maturities:
Bonds available for sale, at market value $4,995,019 $4,636,022
(cost: 1997 - $4,712,085: 1996 - $4,456,608)
Equity securities:
Common stock
(cost: 1997 - $13,568: 1996 - $17,906) 27,254 33,099
Non-redeemable preferred stocks
(cost: 1997 - $565: 1996 - $649) 567 590
Mortgage loans on real estate, net 554,521 513,470
Real estate, net of accumulated
depreciation of $6,823 in 1997 and $6,046 in 1996 25,450 26,227
Policy loans 10,682 11,063
Other invested assets 58,048 65,744
Short-term investments 79,893 60,333
Cash 299 1,726
---------- ----------
Total investments and cash 5,751,733 5,348,274
Amounts due from related parties 4,802 4,277
Investment income due and accrued 82,331 77,433
Premium and insurance balances receivable-net 13,459 13,617
Reinsurance assets 20,609 25,211
Deferred policy acquisition costs 39,748 35,754
Separate and variable accounts 241,541 153,678
Other assets 2,020 2,591
---------- ----------
Total assets $6,156,243 $5,660,835
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY OF NEW YORK
BALANCE SHEETS
(in thousands, except share amounts)
December 31, December 31,
1997 1996
----------- ------------
Liabilities
- -----------
<S> <C> <C>
Policyholders' funds on deposit $3,513,621 $3,308,208
Future policy benefits 1,662,751 1,588,162
Reserve for unearned premiums 6,021 8,568
Policy and contract claims 45,195 44,173
Reserve for commissions, expenses and taxes 4,568 4,905
Insurance balances payable 4,624 7,981
Federal income tax payable 3,071 3,758
Deferred income taxes 70,900 43,445
Amounts due to related parties 4,491 5,227
Separate and variable accounts 241,541 153,678
Other liabilities 24,277 22,588
---------- ----------
Total liabilities 5,581,060 5,190,693
---------- ----------
Stockholders' Equity
- --------------------
Common stock, $200 par value; 16,125 shares
authorized, issued and outstanding 3,225 3,225
Additional paid-in capital 197,025 197,025
Unrealized appreciation (depreciation) of investments, net
of future policy benefits and taxes of
$128,504 in 1997 and $72,979 in 1996 184,681 135,431
Retained earnings 190,252 134,461
---------- ----------
Total stockholders' equity 575,183 470,142
---------- ----------
Total liabilities and stockholders' equity $6,156,243 $5,660,835
========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK (AI LIFE)
VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments at Market Value:
Alliance Variable Products Series Fund, Inc.:
Shares Cost Market Value
----------------------------------------------------------
<S> <C> <C> <C>
Money Market Portfolio $10,485,503.650 $ 10,485,504 $ 10,485,504
Premier Growth Portfolio 1,705,702.964 29,342,384 35,802,706
Growth & Income Portfolio 2,298,316.243 37,836,959 45,805,443
International Portfolio 547,179.798 8,056,600 8,218,640
Short-Term Multi-Market Portfolio 83,504.629 883,600 882,644
Global Bond Portfolio 185,701.387 2,138,655 2,061,275
U.S. Government/High Grade
Securities Portfolio 623,968.955 7,043,605 7,443,951
Global Dollar Government Portfolio 199,126.863 2,950,582 2,917,208
North American Government Portfolio 483,756.392 6,034,805 6,274,321
Utility Income Portfolio 334,334.446 4,182,088 5,239,021
Conservative Investors Portfolio 552,161.979 6,439,216 7,233,326
Growth Investors Portfolio 164,957.812 2,076,348 2,372,093
Growth Portfolio 1,722,995.569 27,698,680 38,629,564
Total Return Portfolio 544,578.481 7,784,995 9,214,264
Worldwide Privatization Portfolio 489,862.015 6,725,020 6,956,046
Technology Portfolio 1,008,874.316 12,109,598 11,824,006
Quasar Portfolio 617,928.736 7,154,254 7,792,082
Real Estate Investment Portfolio 182,985.035 2,059,185 2,256,206
High Yield Portfolio 4,104.495 42,068 42,400
----------------- ----------------
Total Investments $181,044,146 211,450,700
---------------
Total Assets $211,450,700
===============
EQUITY:
Contract Owners' Equity $211,450,700
------------------
Total Equity $211,450,700
==================
</TABLE>
See Notes to Financial Statements
<PAGE>
AMERICAN INTERNATIONAL LIFE ASSURANCE COMPANY
OF NEW YORK (AI LIFE)
VARIABLE ACCOUNT A
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments at Market Value:
Shares Cost Market Value
----------------------------------------------------------
<S> <C> <C> <C>
Fidelity
Money Market Portfolio 818,331.070 $ 818,331 $ 818,331
Asset Manager Portfolio 35,403.965 580,609 637,625
Growth Portfolio 37,863.872 1,272,353 1,404,753
High Income Portfolio 25,569.020 322,095 347,231
Investment Grade Bond Portfolio 16,330.803 200,349 205,115
Overseas Portfolio 21,076.308 395,300 404,663
Alliance
Conservative Investors Portfolio 9,910.804 122,206 129,832
Growth & Income Portfolio 68,111.805 1,198,820 1,357,469
Growth Investors Portfolio 6,120.984 78,437 88,018
Growth Portfolio 58,397.627 1,110,113 1,309,275
Technology Portfolio 36,222.504 439,762 424,525
Quasar Portfolio 35,963.349 433,616 453,499
Dreyfus
Stock Index Portfolio 42,928.911 1,000,364 1,105,421
Zero Coupon 2000 Portfolio 4,232.807 52,155 52,066
Small Company Stock Portfolio 1,369.266 22,721 22,085
Van Eck
Worldwide Hard Assets Portfolio 6,507.777 105,056 102,236
Worldwide Balanced Portfolio 51,430.375 588,702 618,707
Weiss, Peck & Greer
Tomorrow Short Term Portfolio 32,510.613 309,990 319,252
Tomorrow Medium Term Portfolio 13,311.909 111,608 114,881
Tomorrow Long Term Portfolio 3,948.553 27,974 31,864
------------------ ----------------
Total Investments $ 9,190,561 9,946,848
-----------------
Total Assets $ 9,946,848
=================
EQUITY:
Contract Owners' Equity $ 9,946,848
-----------------
Total Equity $ 9,946,848
=================
</TABLE>
See Notes to Financial Statements
